AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 2001
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NUMBER 1-12356
------------------------
DAIMLERCHRYSLER AG
(Exact name of Registrant as specified in its charter)
DAIMLERCHRYSLER AG
(Translation of Registrant's name into English)
FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)
EPPLESTRASSE 225, 70567 STUTTGART, GERMANY
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Ordinary Shares, no par value Frankfurt Stock Exchange
New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
American Depositary Notes representing 5 3/4% Subordinated New York Stock Exchange
Mandatory Convertible Notes Due June 14, 2002
GUARANTEE OF THE FOLLOWING SECURITIES OF:
DaimlerChrysler North America Holding Corporation New York Stock Exchange
7 3/8% Notes Due September 15, 2006
--------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
(Title of Class)
------------------------
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
(Title of Class)
------------------------
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
Ordinary Shares, no par value . . . . . . . . . 1,003,271,911
(as of December 31, 2000)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 / / Item 18 /X/
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TABLE OF CONTENTS
PAGE
--------
PART I
Item 1. Identity of Directors, Senior Management and Advisers....... 2
Item 2. Offer Statistics and Expected Timetable..................... 2
Item 3. Key Information............................................. 2
Selected Financial Data................................. 3
Risk Factors............................................ 5
Item 4. Information on the Company.................................. 7
Introduction............................................ 7
Description of Business Segments........................ 10
Mercedes-Benz Passenger Cars & smart................ 10
Chrysler Group...................................... 14
Commercial Vehicles................................. 18
Services............................................ 22
Aerospace........................................... 25
Other............................................... 28
Supplies and Raw Materials.............................. 29
Government Regulation and Environmental Matters......... 30
Introduction of the Euro................................ 33
Description of Property................................. 34
Item 5. Operating and Financial Review and Prospects................ 37
Accounting Principles................................... 37
Inflation............................................... 38
Operating Results....................................... 38
2000 Compared With 1999............................. 39
1999 Compared With 1998............................. 44
Liquidity and Capital Resources......................... 49
Research and Development................................ 51
Outlook................................................. 52
Item 6. Directors, Senior Management and Employees.................. 54
Supervisory Board....................................... 54
Board of Management..................................... 57
Compensation............................................ 59
Employees and Labor Relations........................... 61
Share Ownership......................................... 62
Item 7. Major Shareholders and Related Party Transactions........... 62
Item 8. Financial Information....................................... 63
Consolidated Financial Statements....................... 63
Other Financial Information............................. 63
Export Sales........................................ 63
Legal Proceedings................................... 64
Dividend Policy..................................... 65
Significant Changes..................................... 65
Item 9. The Offer and Listing....................................... 66
Item 10. Additional Information...................................... 69
Options to Purchase Securities from Registrant or
Subsidiaries.......................................... 69
Memorandum and Articles of Association.................. 69
Material Contracts...................................... 73
Exchange Controls....................................... 74
Taxation................................................ 74
Documents on Display.................................... 78
Item 11. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 78
Exchange Rate Risk...................................... 79
Interest Rate Risk and Equity Price Risk................ 82
Item 12. Description of Securities Other than Equity Securities...... 82
i
PAGE
--------
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies............. 83
Item 14. Material Modifications to the Rights of Security Holders and
Use of Proceeds........................................... 83
Item 15. [Reserved].................................................. 83
Item 16. [Reserved].................................................. 83
PART III
Item 17. Financial Statements........................................ 83
Item 18. Financial Statements........................................ 83
Item 19. Exhibits.................................................... 83
ii
U.S. GAAP
DaimlerChrysler has prepared the consolidated financial statements included
in this Annual Report (the "Consolidated Financial Statements") in accordance
with U.S. GAAP, United States generally accepted accounting principles, except
for the use of the proportionate method of consolidation for a material joint
venture in 1998 and prior years. Under U.S. GAAP, joint ventures would be
accounted for using the equity method of accounting. DaimlerChrysler AG received
permission from the United States Securities and Exchange Commission to prepare
its consolidated financial statements with this departure from U.S. GAAP. See
Note 3 to the Consolidated Financial Statements.
CURRENCY TRANSLATION
Effective January 1, 1999, Germany and ten other member states of the
European Union adopted the euro of the European Monetary Union as their common
currency. They also established fixed conversion rates between their existing
sovereign currencies and the euro. The official fixed conversion rate for marks
is [EURO]1 = DM 1.95583 (the "Official Fixed Conversion Rate"). DaimlerChrysler
has translated financial statements and other financial information for periods
prior to January 1, 1999 from marks into euros using the Official Fixed
Conversion Rate. In this Annual Report, references to "euros" or "[EURO]" are to
European Monetary Union euros and references to "marks" or "DM" are to German
marks.
For the reader's convenience, some financial information has been translated
from euros into United States dollars ("dollars" or "$") at an assumed rate of
[EURO]1 = $0.9388. This rate represents the noon buying rate for euros on
December 29, 2000 in New York City as certified by the Federal Reserve Bank of
New York. The convenience translations do not mean that the euro amounts
actually represent the corresponding dollar amounts stated or could be converted
into dollars at the assumed rate. The assumed rate also differs from the rates
used in the preparation of the consolidated financial statements as of and for
the year ended December 31, 2000. Further information about rates of exchange
between euros and dollars appears in "Item 3. Key Information."
FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements and information
relating to the DaimlerChrysler Group that are based on beliefs of its
management as well as assumptions made by and information currently available to
DaimlerChrysler AG. When used in this document, the words "anticipate,"
"believe," "estimate," "expect," "intend," "may," "plan," "project" and "should"
and similar expressions, as they relate to the DaimlerChrysler Group or its
management, are intended to identify forward-looking statements. Such statements
reflect the current views and assumptions of DaimlerChrysler with respect to
future events and are subject to risks and uncertainties. Many factors could
cause the actual results, performance or achievements of the DaimlerChrysler
Group to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward-looking
statements, including, among others, changes in general economic and business
conditions, changes in currency exchange rates and interest rates, introduction
of competing products by other companies, lack of acceptance of new products or
services by the Group's targeted customers, inability to meet efficiency and
cost reduction objectives, changes in business strategy and various other
factors, both referenced and not referenced in this Annual Report. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected, intended,
planned or projected. DaimlerChrysler AG does not intend or assume any
obligation to update these forward-looking statements.
REFERENCES
In this Annual Report, "DaimlerChrysler," the "DaimlerChrysler Group" or the
"Group" refers to DaimlerChrysler AG and its consolidated subsidiaries.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.
Not applicable.
ITEM 3. KEY INFORMATION.
The selected consolidated financial data presented below as of December 31,
2000, 1999, 1998 and 1997, and for the years ended December 31, 2000, 1999,
1998, 1997 and 1996 have been taken or are derived from the audited consolidated
financial statements of DaimlerChrysler for the relevant periods. The selected
consolidated financial data as of December 31, 1996 are derived from the
combined financial statements of Daimler-Benz AG and Chrysler Corporation. The
selected consolidated financial data have been prepared in accordance with U.S.
GAAP except for the use of the proportionate method of consolidation for a
material joint venture in 1998, 1997 and 1996. The business combination of
Chrysler and Daimler-Benz was treated as a "pooling of interests" for accounting
purposes. Consequently, DaimlerChrysler restated the results of both companies
as if they had been combined for all periods presented. See Note 1 to the
Consolidated Financial Statements.
The financial information presented below is only a summary and should be
read together with the Consolidated Financial Statements.
2
SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
2000(1) 2000 1999 1998(2) 1997(2) 1996(2)
--------- ----------------- ----------------- ------------------ ----------------- -----------------
(IN MILLIONS, EXCEPT FOR ORDINARY SHARE AMOUNTS)
INCOME STATEMENT
DATA:
Revenues............ $ 152,446 [EURO]162,384 [EURO]149,985 [EURO]131,782 [EURO]117,572 [EURO]101,415
Income before
financial
income............ 4,056 4,320 9,324 7,330 5,512 5,285
Income before
extraordinary
items and
cumulative effects
of changes in
accounting
principles........ 2,314 2,465 5,106 4,949 6,547(3) 4,169
Basic earnings per
ordinary
share........... 2.31 2.46 5.09 5.16 6.90(3) 4.24
Diluted earnings
per ordinary
share........... 2.30 2.45 5.06 5.04 6.78(3) 4.20
Net income.......... 7,411 7,894(4) 5,746 4,820 6,547(3) 4,022
Basic earnings per
ordinary
share........... 7.39 7.87(4) 5.73 5.03 6.90(3) 4.09
Diluted earnings
per ordinary
share........... 7.32 7.80(4) 5.69 4.91 6.78(3) 4.05
BALANCE SHEET DATA
(END OF PERIOD):
Total assets........ $ 187,078 [EURO]199,274 [EURO]174,667 [EURO]136,149 [EURO]124,831 [EURO]101,294
Short-term financial
liabilities....... 33,646 35,840 36,721 20,475 17,341 12,855
Long-term financial
liabilities....... 45,948 48,943 27,767 19,955 17,034 11,788
Capital stock....... 2,449 2,609 2,565 2,561 2,391 2,444
Stockholders'
equity............ 39,814 42,409 36,060 30,367 27,960 22,355
OTHER DATA:
Weighted average
number of shares
outstanding
Basic............. 1,003.2 1,003.2 1,002.9 959.3 949.3 981.6
Diluted........... 1,013.9 1,013.9 1,013.6 987.1 968.2 994.0
- ------------------------------
(1) Amounts in this column are unaudited and have been converted from euros into
dollars solely for the convenience of the reader at an exchange rate of
[EURO]1 = $0.9388, the noon buying rate for euros on December 29, 2000.
(2) The consolidated financial statements as of December 31, 1998, 1997 and 1996
and for the years then ended have been prepared in marks and were translated
into euros at the Official Fixed Conversion Rate.
(3) Income before extraordinary items and net income for 1997 include
[EURO]2,490 million of special non-recurring tax benefits. These tax
benefits resulted partially from a special distribution which Daimler-Benz
AG, the predecessor of DaimlerChrysler AG, paid to holders of its ordinary
shares and American Depositary Shares on June 15, 1998, and partially from
the reversal of valuation allowances previously established on deferred tax
assets. The valuation allowances resulted primarily from net operating loss
carryforwards of the Daimler-Benz group's German companies that filed a
combined tax return (ORGANSCHAFT). The tax benefit resulting from the
special distribution was [EURO]1,487 million and the tax benefit resulting
from the reversal of the valuation allowances was [EURO]1,003 million.
Without these tax benefits, the basic earnings per ordinary share in 1997
were [EURO]4.28 and the diluted earnings per ordinary share were [EURO]4.21.
(4) Net income for 2000 includes [EURO]5,516 million of gains from the disposals
of businesses. Without these gains, the basic earnings per ordinary share in
2000 were [EURO]2.37 and the diluted earnings per ordinary share were
[EURO]2.36.
DIVIDENDS
The following table sets forth the annual dividends paid per DaimlerChrysler
ordinary share for the year 1998 and 1999 and the annual dividends paid per
Daimler-Benz ordinary share for the years 1996 and 1997. The table also
discloses the dividend amount per DaimlerChrysler ordinary share for 2000
proposed by the Supervisory Board and the Board of Management for approval at
the annual general meeting of stockholders to be held on April 11, 2001. The
table shows the dividend amounts in euro, together with the dollar equivalent,
for each of the years indicated.
3
The table does not reflect the related tax credits available to German
taxpayers who receive dividend payments. Owners of DaimlerChrysler ordinary
shares who are United States residents should be aware that they will be subject
to German withholding tax on dividends received. See "Taxation" in "Item 10.
Additional Information."
DIVIDEND PAID
YEAR ENDED PER ORDINARY
DECEMBER 31, SHARE(1, 2)
- ------------ -----------------
1996 .............................. [EURO]0.55 $0.75
1997 .............................. 0.80 0.87
1998 .............................. 2.35 2.50
1999 .............................. 2.35 2.22
- ---------------------------------------------------------------------
2000 (proposed) .............................. [EURO] 2.35 $2.15
- ------------------------------
(1) The dividend amounts shown for the years 1996 and 1997 are the dividend
amounts paid by Daimler-Benz AG, adjusted for the special distribution
Daimler-Benz AG paid to holders of its ordinary shares and American
Depositary Shares on June 15, 1998. The special distribution amount per
Daimler-Benz ordinary share was [EURO]10.23. After taking into account the
approximately 20% discount to market value at which Daimler-Benz AG sold
ordinary shares in its rights offering following the special distribution,
the special distribution amount was [EURO]10.04.
(2) The dividend amounts for the years 1996, 1997 and 1998 were declared in
marks. The mark dividend amounts for the years 1996 and 1997 were converted
into euros at the Official Fixed Conversion Rate and translated into dollars
at the noon buying rate for marks on the dividend payment date. The mark
dividend amount for 1998 was converted into euros at the Official Fixed
Conversion Rate and translated into dollars at the noon buying rate for
euros on the dividend payment date. The euro dividend amount shown for 1999
was translated into dollars at the noon buying rate for euros on the
dividend payment date. The euro amount shown for 2000 was translated into
dollars at an exchange rate of [EURO]1 = $0.9162, the noon buying rate for
euros on February 16, 2001.
------------------------------
See also "Dividend Policy" in "Item 8. Financial Information."
EXCHANGE RATE INFORMATION
The following table sets forth, for periods after the introduction of the
euro on January 1, 1999, the average, high, low and period-end noon buying rates
for the euro expressed as dollars per [EURO]1. For 1996 through 1998 the table
reflects the average, high, low and period-end noon buying rates for the mark,
shown after conversion into euros at the Official Fixed Conversion Rate and
expressed as dollars per [EURO]1.
YEAR AVERAGE(1) HIGH LOW PERIOD-END
- ---- ---------- ---------- ---------- ----------
1996 ..................................... $ 1.2978 $ 1.3626 $ 1.2493 $ 1.2711
1997 ..................................... 1.1244 1.2689 1.0398 1.0871
1998 ..................................... 1.1120 1.2178 1.0548 1.1733
1999 ..................................... 1.0588 1.1812 1.0016 1.0070
2000 ..................................... 0.9207 1.0335 0.8270 0.9388
2000
July............................... 0.9548 0.9237 0.9266
August............................. 0.9228 0.8878 0.8878
September.......................... 0.8993 0.8462 0.8837
October............................ 0.8806 0.8270 0.8486
November........................... 0.8694 0.8382 0.8694
December........................... 0.9388 0.8755 0.9388
2001
January............................ 0.9535 0.9181 0.9308
February (through February 16,
2001)............................ 0.9395 0.9057 0.9162
- ------------------------------
(1) The average of the noon buying rates on the last business day of each month
during the relevant period.
4
On February 16, 2001, the noon buying rate for euros was [EURO]1 = $0.9162.
The prices of shares on German stock exchanges have been quoted in euros
since January 4, 1999. Fluctuations in the exchange rate between the euro and
the dollar will affect the dollar equivalent of the euro price of
DaimlerChrysler ordinary shares reported for trades on the German stock
exchanges. For this reason, exchange rate fluctuations are likely to affect the
market price of the ordinary shares on the New York Stock Exchange, as well as
the dollar amounts received upon conversion of cash dividends paid by
DaimlerChrysler AG in euros.
For a discussion of the effect exchange rate fluctuations have on the
business and operations of DaimlerChrysler as well as the hedging techniques
used to manage the Group's exposure to such fluctuations, see "Item 5. Operating
and Financial Review and Prospects" and "Item 11. Quantitative and Qualitative
Disclosures About Market Risk."
RISK FACTORS
DaimlerChrysler is subject to various risks resulting from changing
economic, political, social, industry, business and financial conditions,
particularly in its principal markets, North America and Europe. These risks are
described below:
ECONOMIC
- DaimlerChrysler's profitability would be significantly adversely affected
by a prolonged economic slowdown in the United States or Western Europe
because DaimlerChrysler derives a substantial portion of its revenues from
sales in those markets. A recession or sustained loss of consumer
confidence in the U.S. economy could trigger a significant industry-wide
decline in vehicle sales in the U.S. automotive market, and could also
lead to slower economic growth and a corresponding significant reduction
in vehicle demand in Western Europe.
- An economic decline in Asia, particularly in Japan and Korea, could delay
DaimlerChrysler's strategic expansion in emerging Asian markets, as well
as decrease the carrying value of its investments in Mitsubishi Motors
Corporation and in Hyundai Motor Company.
INDUSTRY AND BUSINESS
- A significant economic downturn in North America or Europe would intensify
competitive pricing pressure because of overcapacity within the automotive
industry, and manufacturers of passenger cars and commercial vehicles
could be forced to decrease production, reduce capacity and increase sales
incentives. Industry-wide sales are expected to decline in North America
from prior year levels, and competition in North America is expected to
intensify further over the near term. DaimlerChrysler Corporation's
financial performance will depend, in large part, on the success of its
recently announced turnaround plan in addressing these possible
developments. DaimlerChrysler's profitability would be adversely affected
if such program could not be implemented promptly and successfully.
- The price transparency and harmonization resulting from the introduction
of the euro and the development of alternative distribution channels, for
example the internet, could contribute to further pricing pressure within
the automotive industry. A decision of the European Commission not to
extend the "block exemption" regulation (GRUPPENFREISTELLUNGSVERORDNUNG)
which allows automobile manufacturers to use selective distribution
networks until 2002 may also negatively affect automobile manufacturers.
- Meeting consumer demand with new vehicles developed over increasingly
shorter product development cycle times is critical to the success of
automobile manufacturers. DaimlerChrysler's ability to strengthen its
position within its traditional product and market segments while
expanding into additional market segments with innovative new products
will play a key role in determining its future success. A general shift in
consumer preferences towards smaller, low-margin vehicles which could be
caused by government
5
regulations, environmental issues or increasing fuel prices, would have a
negative impact on DaimlerChrysler's profitability. In addition, potential
delays in bringing new vehicles to market and lack of market acceptance of
its models would adversely affect DaimlerChrysler's financial results.
- In response to an increasingly competitive environment, DaimlerChrysler
and other automobile manufacturers may be forced to increase efficiency by
further reducing costs along the automotive value chain including their
suppliers. Pricing pressure on suppliers, however, could result in
additional quality risks.
- Government regulation of the automotive industry is extensive. Laws in
various jurisdictions regulate the emission levels, fuel economy, noise,
and safety of vehicles, as well as the levels of pollutants generated by
the plants that produce them. The cost of complying with these regulations
can be significant, and DaimlerChrysler expects to incur significant
compliance costs in the future. New legislation, such as the TREAD Act in
the United States, will also subject DaimlerChrysler to additional
expense, which could be significant.
- In 2000, a decline of resale prices of used vehicles in the NAFTA and U.K.
markets forced DaimlerChrysler to adjust downward the carrying values of
leased vehicles. If resale prices of used vehicles continue to decline in
these markets and further adjustments of carrying values prove necessary,
management expects a negative impact on future operating profit of the
Services segment. To the extent that sales incentives remain an integral
part of sales promotion, resale prices of used vehicles and,
correspondingly, the carrying value of Services' leased vehicles could
experience further downward pressure. Financial services offered in
connection with the sale of vehicles also involve risks relating to
increased cost of capital and consumer and dealer insolvencies.
FINANCIAL
- DaimlerChrysler holds an equity interest of approximately 33% in the
European Aeronautic Defence and Space Company (EADS). The carrying value
of DaimlerChrysler's investment is dependent on EADS' ability to compete
successfully with its Airbus aircraft in the commercial aircraft industry
in terms of price, product quality and market acceptance of new models.
The commercial aircraft industry is highly cyclical and aircraft orders
depend significantly on the profitability and fleet renewal cycles of
airlines worldwide.
- DaimlerChrysler holds a variety of interest rate sensitive assets and
liabilities to manage the liquidity and cash needs of its day-to-day
operations. These interest rate sensitive assets and liabilities are
subject to interest rate risk which is, to some extent, reduced by the use
of derivative financial instruments. In addition, the Group is exposed to
equity price risk resulting from investments in various marketable equity
securities.
- On December 1, 2000, Moody's Investors Service lowered its ratings for
senior unsecured long-term debt issued or guaranteed by DaimlerChrysler AG
from A1 to A2 and announced that such ratings remain on review for further
possible downgrade. On December 4, 2000, Standard & Poor's Ratings
Services lowered its ratings for senior unsecured long-term debt issued or
guaranteed by DaimlerChrysler AG from A+ to A and announced that the
current outlook in respect of such ratings is negative. The downgrades
primarily resulted from the decline in earnings at the Chrysler Group, the
need to comprehensively restructure this segment, and lower expectations
for vehicle unit sales in North America. Additional downgrades by the
ratings agencies would increase further DaimlerChrysler's cost of capital
and could negatively affect its continuing expansion, particularly in the
lease and sales financing business which is typically financed with a high
proportion of debt.
- DaimlerChrysler is subject to risks associated with cross-border
transactions, including foreign currency exchange rate risks and risks
relating to delayed payments from customers in certain countries or
difficulties in the collection of receivables generally. Changes in
regulatory requirements, tariffs and other
6
trade barriers and price or exchange controls could limit operations and
make the repatriation of profits difficult. In addition, the uncertainty
of the legal environment could limit DaimlerChrysler's ability to enforce
effectively its rights in certain markets.
LEGAL
- DaimlerChrysler received a "statement of objections" from the European
Commission on April 1, 1999, which alleged that it violated antitrust
rules by impeding cross-border sales of Mercedes-Benz passenger cars to
final customers in the European Economic Area. DaimlerChrysler denies
these charges and is defending itself vigorously in the Commission's
pending investigation. If the Commission rules that DaimlerChrysler
violated antitrust rules by impeding sales, it is reasonably possible that
the Commission may fine DaimlerChrysler in an amount that management
believes could have a significant effect on the Group's consolidated
operating results for a particular reporting period, but should not
materially affect its consolidated financial position.
- A number of lawsuits are pending against DaimlerChrysler which seek
substantial money damages, including products liability lawsuits and
shareholder lawsuits alleging violations of U.S. securities law and fraud
in connection with the approval of the business combination between
Chrysler and Daimler-Benz AG in 1998. See "Legal Proceedings" in "Item 8.
Financial Information."
See also "Government Regulation and Environmental Matters" and "Introduction
of the Euro" in "Item 4. Information on the Company," "Item 5. Operating and
Financial Review and Prospects" and "Item 11. Quantitative and Qualitative
Disclosures About Market Risk."
ITEM 4. INFORMATION ON THE COMPANY.
INTRODUCTION
ORGANIZATION
DaimlerChrysler AG is a stock corporation organized under the laws of the
Federal Republic of Germany. It was incorporated in Germany on May 6, 1998 in
the course of the business combination of Daimler-Benz Aktiengesellschaft and
Chrysler Corporation. DaimlerChrysler AG's registered office is located at
Epplestrasse 225, 70567 Stuttgart, Germany, telephone +49-711-17-0. Its agent
for U.S. federal securities law purposes is DaimlerChrysler North America
Holding Corporation, located at 1000 Chrysler Drive, Auburn Hills, MI
48326-2766.
HISTORY
On May 7, 1998, Daimler-Benz Aktiengesellschaft and Chrysler Corporation
entered into a business combination agreement, which their stockholders approved
on September 18, 1998. Chrysler became a wholly owned subsidiary of
DaimlerChrysler AG through a merger transaction completed on November 12, 1998
in which its shareholders received DaimlerChrysler ordinary shares. Following an
exchange offer in which more than 98% of Daimler-Benz stockholders exchanged
their Daimler-Benz ordinary shares for ordinary shares of DaimlerChrysler AG,
Daimler-Benz was merged into DaimlerChrysler AG on December 21, 1998.
Accordingly, DaimlerChrysler AG is the successor corporation to Daimler-Benz
Aktiengesellschaft and comprises the respective businesses, stockholder groups,
managements and other constituencies of Chrysler and Daimler-Benz.
7
BUSINESS SUMMARY AND DEVELOPMENTS
DaimlerChrysler AG is the ultimate parent company of the DaimlerChrysler
Group. The Group is engaged in the development, manufacture, distribution and
sale of a wide range of automotive and transportation products, primarily
passenger cars and commercial vehicles. It also provides a variety of financial
and other services relating to the automotive value-added chain. The
DaimlerChrysler Group has six business segments:
- MERCEDES-BENZ PASSENGER CARS & SMART
- CHRYSLER GROUP
- COMMERCIAL VEHICLES
- SERVICES
- AEROSPACE
- OTHER
The DaimlerChrysler Group is active primarily in Europe and in the United
States, Canada and Mexico, commonly referred to as the NAFTA region. Through its
alliance with Mitsubishi Motors Corporation, the Group expects to increase its
presence in the Asian market. It is also a leading commercial vehicle
manufacturer in South America. In 2000, more than 90% of the Group's revenues
relate to the automotive business including financial services. Approximately
52% of DaimlerChrysler's revenues was derived from sales in the United States,
16% from sales in Germany and 15% from sales in other countries of the European
Union. See "Operating Results" in "Item 5. Operating and Financial Review and
Prospects."
DaimlerChrysler's aggregate capital expenditures for property, plant and
equipment were [EURO]10.4 billion in 2000, [EURO]9.5 billion in 1999, and
[EURO]8.2 billion in 1998. The United States accounted for 51% and Germany for
28% of DaimlerChrysler's capital expenditures in 2000. In addition, as a result
of the continuing growth of the leasing and sales financing business,
expenditures for equipment on operating leases in 2000 amounted to
[EURO]19.1 billion (1999: [EURO]19.3 billion; 1998: [EURO]10.2 billion). See
also "Description of Business Segments" for capital expenditures by business
segment.
In July 2000, DaimlerChrysler, the French Lagardere Group, the French
government and the Spanish Sociedad Estatal de Participaciones Industriales
(SEPI) combined their respective aerospace and defense activities consisting of
Aerospatiale Matra S.A., DaimlerChrysler Aerospace AG and Construcciones
Aeronauticas S.A. (CASA) in a new company called the European Aeronautic Defence
and Space Company EADS N.V. (EADS). The transaction did not include
DaimlerChrysler's aero engines business. As part of the transaction,
DaimlerChrysler exchanged its controlling interest in DaimlerChrysler Aerospace
for a 33% equity interest in EADS for which it accounts using the equity method
of accounting.
In October 2000, DaimlerChrysler and Mitsubishi Motors Corporation formed an
alliance regarding the design, development, production and distribution of
passenger cars and light commercial vehicles, but excluding medium and heavy
trucks and other commercial vehicles. DaimlerChrysler acquired a 34% equity
interest in Mitsubishi Motors Corporation for approximately [EURO]2.2 billion.
DaimlerChrysler also purchased convertible bonds of Mitsubishi Motors
Corporation for approximately [EURO]0.2 billion, which are convertible into
shares of Mitsubishi Motors Corporation stock. The bonds are only convertible by
DaimlerChrysler in the event that its ownership percentage would be diluted
below 34%.
On October 1, 2000, DaimlerChrysler and Deutsche Telekom combined their
information technology activities in a joint venture. As part of the
transaction, Deutsche Telekom contributed [EURO]4.6 billion in cash to
DaimlerChrysler's information technology subsidiary debis Systemhaus in return
for which Deutsche Telekom received a 50.1% interest in debis Systemhaus. The
agreement between DaimlerChrysler and Deutsche Telekom provides Deutsche Telekom
with an option to purchase from DaimlerChrysler, and DaimlerChrysler with an
option to sell to Deutsche Telekom, the Group's remaining 49.9% interest in
debis Systemhaus.
8
See also "Material Contracts" in "Item 10. Additional Information." For
additional information and a description of other acquisitions and dispositions
of businesses during the last three years see Notes 3, 5 and 11 to the
Consolidated Financial Statements. For a description of pending transactions see
Note 35 to the Consolidated Financial Statements.
In October 2000, DaimlerChrysler founded DCX.NET Holding GmbH (DCX.NET) to
consolidate its e-business activities. DCX.NET forms the nucleus of the
group-wide DCX.NET Initiative which aims at the transformation of
DaimlerChrysler into a fully networked automotive company along its entire value
chain. The DCX.NET Initiative covers DaimlerChrysler's B2C
(business-to-customer), B2B (business-to-business), B2E (business-to-employee)
and telematics (traffic routing activities through combined application of
TELEcommunications technology and inforMATICS) activities.
Net income of DaimlerChrysler increased from [EURO]5.7 billion in 1999 to
[EURO]7.9 billion in 2000. Net income includes net gains on dispositions of
[EURO]5.5 billion (1999: [EURO]0.6 billion) which have been classified as
extraordinary and primarily resulted from the exchange of the Group's
controlling interest in DaimlerChrysler Aerospace for a 33% interest in EADS
([EURO]3.0 billion) and from the disposition of the Group's controlling interest
in debis Systemhaus ([EURO]2.3 billion). Net income also contains a net expense
of [EURO]0.1 billion from cumulative effects of changes in accounting
principles. Net income before extraordinary items and cumulative effects of
changes in accounting principles decreased by [EURO]2.6 billion to
[EURO]2.5 billion. Basic and diluted earnings per ordinary share (before
extraordinary items and cumulative effects of changes in accounting principles)
were [EURO]2.46 and [EURO]2.45 in 2000, compared to [EURO]5.09 and [EURO]5.06 in
1999, respectively. After extraordinary items and cumulative effects of changes
in accounting principles, basic and diluted earnings per ordinary share were
[EURO]7.87 and [EURO]7.80 in 2000, higher than in 1999 when they reached
[EURO]5.73 and [EURO]5.69, respectively. See "Item 3. Key Information" and
"Item 5. Operating and Financial Review and Prospects."
As of December 31, 2000, DaimlerChrysler AG had 1,003,271,911 shares
outstanding and approximately 1.9 million stockholders. Its ordinary shares are
traded on various stock exchanges throughout the world, including the Frankfurt
Stock Exchange and the New York Stock Exchange.
TURNAROUND PLAN FOR THE CHRYSLER GROUP
In response to an increasingly competitive and weakening U.S. automotive
market, the Chrysler Group has announced measures designed to improve its
financial performance and market position, including:
- NEW LEADERSHIP -- Dieter Zetsche, a member of the Board of Management
formerly responsible for DaimlerChrysler's Commercial Vehicles business
segment, now leads the Chrysler Group as President and Chief Executive
Officer. Wolfgang Bernhard, formerly Managing Director of Mercedes-AMG,
serves as Chief Operating Officer. Mr. Bernhard has joined the Board of
Managment as a deputy member.
- SUPPLIER COST REDUCTION INITIATIVE -- Suppliers are being requested to
voluntarily reduce by 5% the prices charged for materials and services
effective January 1, 2001. The Chrysler Group has also advised suppliers
that it intends to work with them to identify an additional 10% cost
reduction for the period 2001 through 2002.
- DEALER COST REDUCTION INITIATIVE -- The Chrysler Group plans to replace
certain dealer programs with a new performance-based incentive program for
2001 under which a dealer may earn cash payments based on its level of
achievement of pre-assigned monthly retail sales objectives.
- WORKFORCE REDUCTION -- In January 2001, the Chrysler Group began planning
for workforce reductions of approximately 20% over the next three years,
with 75% of the reduction expected in 2001. This reduction, which will
affect about 26,000 employees, is intended to be achieved through a
combination of retirements, special programs, attrition and layoffs.
- MANUFACTURING EFFICIENCIES -- In order to reduce excess production
capacity and adjust production volumes, the Chrysler Group began planning
in January 2001 to idle six manufacturing facilities over the next two
9
years, to eliminate shifts and reduce line speeds at various facilities
and to adjust component, stamping and power train volumes accordingly. In
addition, the Chrysler Group plans to establish new quality and
productivity targets at all facilities.
By adjusting its cost structure, workforce and production capacity, while
continuing to develop exciting products, the Chrysler Group expects to position
itself for profitable growth in the world automotive markets. DaimlerChrysler
expects to record restructuring charges of approximately $3 to $4 billion in
connection with the implementation of this turnaround plan, most of which will
be recorded in 2001.
SIGNIFICANT SUBSIDIARIES
The following table sets forth the significant subsidiaries owned, directly
or indirectly, by DaimlerChrysler AG:
PERCENTAGE
NAME OF COMPANY OWNED
- --------------- ----------
DaimlerChrysler North America Holding Corporation, Auburn
Hills, MI, a Delaware corporation........................... 100.0
DaimlerChrysler Corporation, Auburn Hills, MI, a
Delaware corporation.................................... 100.0
Chrysler Financial Company L.L.C., Southfield, MI, a
Michigan limited liability company.................. 100.0
Mercedes-Benz Credit Corporation, Norwalk, CT,
a Delaware corporation......................... 100.0
DaimlerChrysler Motors Corporation, Auburn Hills,
MI, a Delaware corporation.......................... 100.0
DaimlerChrysler Services AG, registered in Berlin,
Germany..................................................... 100.0
Micro Compact Car smart GmbH, registered in Renningen,
Germany..................................................... 100.0
DaimlerChrysler AG owns 100% of DaimlerChrysler North America Holding
Corporation, DaimlerChrysler Services AG, and Micro Compact Car smart GmbH.
DaimlerChrysler North America Holding Corporation owns 100% of DaimlerChrysler
Corporation. DaimlerChrysler Corporation owns 100% of Chrysler Financial Company
L.L.C. and DaimlerChrysler Motors Corporation. Chrysler Financial Company L.L.C.
owns 100% of Mercedes-Benz Credit Corporation.
DESCRIPTION OF BUSINESS SEGMENTS
MERCEDES-BENZ PASSENGER CARS & SMART
Mercedes-Benz passenger cars are world renowned for their innovative
technology, highest levels of comfort, quality and safety, and pioneering
design. The smart, a micro compact passenger car, offers a trend-setting
response to the challenges of urban mobility and optimum use of resources.
Mercedes-Benz Passenger Cars & smart contributed approximately 25% of the
Group's revenues in 2000.
PRODUCTS
MERCEDES-BENZ. The Mercedes-Benz passenger car product range consists of
the following series:
THE S-CLASS. The S-Class is a line of full-size luxury sedans ranging from
the S 320 to the S 600. It has been one of the main contributors over the years
to the strength of the Mercedes-Benz brand and its reputation for innovative
high-quality luxury automobiles with an uncompromised emphasis on operator and
passenger safety and superior resale value.
The CL, the top-of-the-line coupe, represents a unique combination of
driving performance, comfort and state-of-the-art technology. The car celebrated
its world premiere at the Geneva Auto Show in March 1999. Customers can choose
among three models, the CL 500, the CL 600 and the CL 55 AMG.
10
The SL roadster has been a tradition for Mercedes-Benz since the
introduction of the famous 300 SL in 1954. The present line consists of four
models ranging from the SL 280 to the SL 600. DaimlerChrysler plans to introduce
a redesigned SL model in the fall of 2001.
THE E-CLASS. The E-Class represents a line of luxury sedans and station
wagons. The E-Class sedans are available in six gasoline engine versions ranging
from the E 200 to the E 55 AMG and four diesel engine versions with common-rail
technology.
THE C-CLASS. The C-Class is a line of compact luxury sedans and station
wagons. Four gasoline engine versions, ranging from the C 180 to the C 320, and
three diesel engine versions are available. A new C-Class sedan with an all-new
body style and more than 20 technological innovations was introduced in Europe
in May 2000 and in the United States in September 2000. It has been very well
received in the market. A redesigned C-Class station wagon and a new C-Class
sports coupe are scheduled for market launch in Europe in March 2001 and in the
United States in September 2001. The SLK, a two-seat roadster, the CLK coupe and
the CLK convertible complement the C-Class product family.
DaimlerChrysler began producing right-hand drive versions of the C-Class
sedan in East London, South Africa, in September 2000. Since January 2001, it
has been assembling C-Class passenger cars in Juiz de Fora, Brazil.
THE A-CLASS. The A-Class is a four-door hatchback with front-wheel drive
that is available in three gasoline engine versions and two diesel engine
versions with common-rail technology. DaimlerChrysler manufactures the A-Class
in Rastatt, Germany, and, since February 1999, in Juiz de Fora, Brazil, for the
South American market. A stretched version of the A-Class is expected to become
available in the summer of 2001. The A-Class is not offered in the United
States.
THE M-CLASS. The M-Class is a line of four-by-four sport-utility vehicles
ranging from the ML 270 CDI to the ML 55 AMG. It combines off-road capabilities
with the comfort of a passenger car. M-Class production facilities are located
in Tuscaloosa, Alabama, and, since May 1999, in Graz, Austria.
THE G-CLASS. The G-Class is a four-wheel drive cross-country vehicle that
comes in a short and long wheel-base version and also as a convertible. Two
gasoline engine models and one diesel engine model are currently available. The
G-Class is not presently offered in the United States for private use.
DaimlerChrysler is developing a high-end luxury limousine under the name
"Mercedes-Benz Maybach" which it expects to introduce to the market in 2002. In
1999, DaimlerChrysler entered into an agreement with McLaren Cars Ltd., a
wholly-owned subsidiary of TAG McLaren Holding Ltd., for the design and
production of a new high-performance sports car, the SLR. The market launch of
the SLR is scheduled for 2003. In January 2000, DaimlerChrysler also acquired a
40% interest in TAG McLaren Holding Ltd.
SMART. In October 1998, DaimlerChrysler introduced a new micro compact car,
the smart City coupe. The smart cdi, a diesel version of the smart, and the
smart convertible, which was launched in March 2000, complement the smart
product family. The two-seat smart offers a trend-setting response to the
challenges of urban mobility and optimum use of resources. In New European
Driving Cycle (NEDC) tests, the smart cdi achieved a fuel efficiency performance
of 3.4 liter per 100 km (approximately 69 miles per gallon). The smart is not
offered in the United States.
DaimlerChrysler plans to expand the smart product line by adding a roadster
model and, beginning in 2004, a four-seater model, the so-called Z car. The Z
car will be developed together with Mitsubishi Motors Corporation. Mitsubishi
plans to offer a vehicle under its own brand name using the same platform and
major components.
MARKETS, SALES AND COMPETITION
In 2000, the most important markets for the Mercedes-Benz Passenger Cars &
smart segment were Germany (38% of unit sales), the remaining European Union
(28% of unit sales), the United States (18% of unit sales) and
11
Japan (4% of unit sales). In Germany, new car registrations for all
manufacturers were at 3.4 million units, 11% less than in the previous year. In
the European Union (excluding Germany) new registrations of passenger cars
increased 2% to 10.9 million units.
The following table sets forth the distribution of revenues and unit sales
for this segment by geographic market since 1998:
REVENUES AND UNIT SALES
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2000 % CHANGE 1999 % CHANGE 1998
--------- -------- --------- ----------- --------
REVENUES(1)
European Union...................... 25,560 +10 23,191 +15 20,218
Germany......................... 15,661 +8 14,506 +14 12,670
Other........................... 9,899 +14 8,685 +15 7,548
NAFTA region........................ 11,112 +21 9,180 +28 7,199
United States................... 10,303 +21 8,519 +27 6,730
Canada and Mexico............... 809 +22 661 +41 469
Asia................................ 3,886 +25 3,101 +14 2,724
Japan........................... 2,154 +10 1,951 +19 1,646
Other........................... 1,732 +51 1,150 +7 1,078
Other markets....................... 3,142 +20 2,628 +7 2,446
--------- --------- -------
World........................... 43,700 +15 38,100 +17 32,587
========= ========= =======
UNITS
European Union...................... 761,700 +6 715,700 +17 610,200
Germany......................... 440,000 +6 416,800 +17 355,200
Other........................... 321,700 +8 298,900 +17 255,000
NAFTA region........................ 220,600 +4 212,100 +16 182,900
United States................... 205,700 +4 197,200 +14 172,300
Canada and Mexico............... 14,900 0 14,900 +41 10,600
Asia................................ 84,100 +12 75,000 +13 66,600
Japan........................... 43,000 -13 49,500 +23 40,200
Other........................... 41,100 +61 25,500 -3 26,400
Other markets....................... 88,500 +14 77,500 +23 63,100
--------- --------- -------
World........................... 1,154,900 +7 1,080,300 +17 922,800
========= ========= =======
- --------------------------
(1) [EURO] in millions.
--------------------------
Both unit sales and revenues of Mercedes-Benz Passenger Cars & smart reached
new record levels in 2000. Passenger car unit sales rose 7% to 1,154,900
vehicles, primarily as a result of the strong performance of the M-Class and the
S-Class, the successful introduction of the new C-Class, and the higher demand
for the smart. In Germany, the division was able to post a 6% increase in unit
sales in an overall declining market. Mercedes-Benz passenger cars had a market
share of 12% compared to 10% in 1999. In the other member states of the European
Union, unit sales reached 321,700, 8% more than in 1999. This was mainly due to
higher demand for passenger cars in Italy, France, Spain and Belgium. At
205,700, unit sales in the United States, the most important non-European market
for Mercedes-Benz passenger cars, were up 4%. This increase was the result of
continued strong demand, particularly for the S-Class and the M-Class. Unit
sales decreased in Japan (-13% to 43,000) but developed very positively in Asia
excluding Japan (+61% to 41,100). For a discussion of changes in revenues see
"Item 5. Operating and Financial Review and Prospects."
12
In Western Europe, the principal competitors of Mercedes-Benz passenger cars
are Audi and BMW and, depending on the market segment, Jaguar, Lexus, Porsche,
Rolls Royce, Rover, Volkswagen, Volvo and certain models of Ford, General
Motors, PSA (Peugeot/Citroen), Renault and Saab. In the United States, the
principal competitors include Acura, Audi, BMW, Ford, Infiniti, Jaguar, Lexus,
Lincoln, Porsche, Rolls Royce, Saab and Volvo and, depending on the market
segment, Nissan, Toyota and certain models produced by General Motors, Mazda and
Mitsubishi Motors. Principal competitors of the smart are Volkswagen, Fiat,
Ford, Peugeot, Renault, Seat, Daewoo, Daihatsu and Suzuki.
The following table sets forth, by vehicle line, the number of units sold
since 1998:
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
--------- --------- --------
UNITS
S-Class (including CL and SL)......................... 108,500 98,300 58,300
E-Class............................................... 246,900 246,500 259,400
C-Class (including CLK and SLK)....................... 389,400 354,300 384,400
A-Class............................................... 198,400 206,900 136,100
M-Class............................................... 105,700 90,000 63,700
G-Class............................................... 3,900 4,400 3,800
smart................................................. 102,100 79,900 17,100
--------- --------- -------
Total............................................. 1,154,900 1,080,300 922,800
========= ========= =======
DISTRIBUTION
DaimlerChrysler distributes Mercedes-Benz passenger cars through a worldwide
distribution system covering 173 countries and customs areas. Sales
organizations differ in the various sales regions according to local needs and
requirements. In Germany, the Group operates a wholesale and a retail network
for Mercedes-Benz passenger cars. In other major European markets and in the
United States, Canada and Japan, Mercedes-Benz passenger cars are sold through a
Group subsidiary to an independent dealer network. In other markets, including
South America and South East Asia, Mercedes-Benz passenger cars are sold through
independent general distributors. In 2000, DaimlerChrysler was able to increase
further the number of smart sales locations through continued cooperation with
the Mercedes-Benz retail network.
CAPITAL EXPENDITURES; RESEARCH AND DEVELOPMENT
The Mercedes-Benz Passenger Cars & smart segment had [EURO]2.1 billion of
capital expenditures for fixed assets in 2000. Principal areas of investment
were the preparation for production of the upcoming successor models of the
E-Class sedan and the SL, including new paint shop and stamping facilities, and
the new technology center in Sindelfingen, Germany.
In 2000, research and development projects of the division included
primarily the development of new models, namely the Maybach, the SLR and the
smart roadster, and the upcoming successor models of the E-Class, the A-Class
and the M-Class.
The capital expenditures for fixed assets and the research and development
expenditures of the Mercedes-Benz Passenger Cars & smart segment during the last
three years are shown below:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Capital expenditures for fixed assets.................. 2,096 2,228 1,995
Research and development............................... 2,241 2,043 1,930
13
CHRYSLER GROUP
DaimlerChrysler Corporation manufactures, assembles and sells cars and
trucks under the brand names Chrysler, Jeep-Registered Trademark-, Dodge and,
through the end of the 2001 model year, Plymouth. Its automotive design and
development activities are organized into cross-functional product development
groups called "platform teams." The platform team system seeks to share
information more efficiently in order to improve product quality and reduce the
time and expense involved in bringing new products to market. The Chrysler Group
segment contributed approximately 42% of DaimlerChrysler's revenues in 2000.
In response to an increasingly competitive and weakening U.S. automotive
market, the Chrysler Group has announced measures designed to improve its
financial performance and market position. For a detailed description see
"Introduction -- Turnaround Plan for the Chrysler Group."
PRODUCTS
The Chrysler Group offers the following vehicles:
NEON. Neon is a subcompact four-door front-wheel drive sedan sold under the
Plymouth and Dodge brand names in the U.S. market and under the Chrysler brand
name in Canada and most export markets. Neon is generally available with a
choice of two 2.0-liter four-cylinder engines and a five-speed manual or
three-speed automatic transmission. For the 2001 models, a 1.6-liter
four-cylinder engine with a five-speed manual transmission and a 2.0-liter
four-cylinder engine with a four-speed automatic transmission are available in
selected markets outside of the NAFTA region.
SEBRING AND STRATUS SEDANS. The Chrysler Sebring (formerly Cirrus) and
Dodge Stratus, redesigned in 2000, are mid-size front-wheel drive four-door
sedans offering contemporary cab-forward styling. Both sedans are offered in the
NAFTA region in two models and are powered by either a 2.4-liter four-cylinder
or a 2.7-liter aluminum V-6 engine. The Sebring is also available in other
markets with a 2.0-liter four-cylinder or a 2.7-liter aluminum V-6 engine.
INTREPID, CONCORDE, LHS AND 300M. Dodge Intrepid is a mid-size front-wheel
drive four-door sedan offered with a 2.7-liter, 3.2-liter or 3.5-liter aluminum
V-6 engine. The Intrepid is available only in the NAFTA region. The Concorde is
a full-size front-wheel drive sedan available in two models and powered by
either a 2.7-liter or 3.2-liter aluminum V-6 engine. The LHS is a full-size
front-wheel drive luxury sedan powered by a 3.5-liter aluminum V-6 engine. The
300M is a front-wheel drive sport sedan designed for international markets and
powered by a 2.7-liter or a 3.5-liter aluminum V-6. Concorde, LHS and 300M
models are available in the NAFTA region and in other selected markets.
OTHER CARS. Other cars include the Viper models, a two-seat sport roadster
and a sport coupe with a high performance V-10 powertrain; the Prowler, a sport
roadster with retro styling cues; and the newly redesigned Dodge Stratus and
Chrysler Sebring, two-door coupes produced by Mitsubishi Motor Manufacturing of
America in its Normal, Illinois, assembly plant. Other cars also include the
newly redesigned front-wheel drive four-passenger mid-size Chrysler Sebring
convertible with a power top. It is available in the NAFTA region with a
2.7-liter aluminum V-6 engine and in other markets (where it was previously
known as Stratus Cabrio) with a 2.0-liter four-cylinder engine or a 2.7-liter
aluminum V-6 engine. Lastly, the Dodge Atos, produced by Hyundai and sold
exclusively in Mexico, is a sub-compact monovolume vehicle equipped with a
1.0-liter four-cylinder engine.
MINIVANS. Chrysler and Dodge minivans were completely redesigned for the
2001 model year. The all-new minivans are offered in either long or short
wheelbase versions. Dodge Grand Caravan and Chrysler Town & Country are equipped
with either front-wheel or all-wheel drive. Dodge Caravan and Chrysler Voyager
are equipped with front-wheel drive. Gasoline engines available on minivans
include a 2.4-liter four-cylinder and a 3.3-liter, 3.5-liter and 3.8-liter V-6.
For selected markets, a common rail diesel engine is also available. In 2000,
the Chrysler and Dodge minivans continued to lead the market as the best-selling
minivans in the world.
14
PT CRUISER. PT Cruiser is an all-new vehicle sold under the Chrysler brand
that combines the functionality of a sport-utility vehicle with the size of a
small car. Launched in February 2000, PT Cruiser is available with a front-
wheel drive 2.4-liter four-cylinder engine and either a five-speed manual or a
four-speed automatic transmission.
RAM PICKUP. Ram pickup trucks are available in standard cab and quad cab
body styles. A chassis cab variant is also offered in three wheelbases for
various work applications. The gasoline engine lineup includes a 3.9-liter V-6,
a 5.2-liter V-8, a 5.9-liter V-8, and an 8.0-liter V-10. A 5.9-liter I-6 diesel
is available with a five-speed manual or four-speed automatic transmission, and
a diesel high output version is available with a six-speed manual transmission.
DAKOTA. The Dakota pickup truck is available in standard, club and quad cab
body styles. Dakota competes in the compact pickup truck segment and is the
largest compact pickup truck available. The engine lineup consists of a
2.5-liter I-4, a 3.9-liter V-6, a 4.7-liter V-8 and a 5.9-liter V-8. Dakota is
the only competitor in the segment to offer a V-8.
DURANGO. The Dodge Durango, an eight-passenger sport-utility vehicle, was
derived from the Dakota platform and competes in the upper-middle sport-utility
market. The Durango is available with a 4.7-liter or 5.9-liter V-8 engine,
packaged in the bold, Dodge Ram-inspired exterior.
RAM VAN AND WAGON. The Ram Van and Wagon are Dodge's entry in the full-size
van/wagon market and are available in two wheelbases and three body
configurations. Dodge builds cargo vans, conversion vans and wagons up to
15-passenger capacity. Several tradesman packages, crew vans and small school
buses are available.
JEEP-REGISTERED TRADEMARK- GRAND CHEROKEE. The Grand Cherokee exemplifies
four-wheel drive leadership and style with an exceptional balance of power,
performance, on-road handling, security and luxury. Grand Cherokee is available
in a four-door body style in both two- and four-wheel drive configurations. In
the NAFTA region it is offered with a 4.0-liter I-6 or 4.7-liter V-8 engine.
Vehicles for the NAFTA region are produced in Detroit, Michigan, and vehicles
for sale outside of the NAFTA region are produced in Graz, Austria, and are also
available with diesel engines.
JEEP-REGISTERED TRADEMARK- CHEROKEE. The Cherokee offers excellent
performance, versatility and off-road capability. The Cherokee is available in
two- and four-wheel drive configurations, two-door and four-door body styles and
as left hand and right hand drive models. The Cherokee comes equipped with a
six-cylinder gasoline engine. The Chrysler Group will discontinue
Jeep-Registered Trademark- Cherokee production in 2001.
JEEP-REGISTERED TRADEMARK- WRANGLER. The Wrangler is the authentic
four-wheel drive vehicle that is the icon of the Jeep-Registered Trademark-
brand. Wrangler is offered with four-wheel drive, removable soft and hard top
systems, and a choice of four- and six-cylinder gasoline engines.
The Chrysler Group recently presented the Jeep-Registered Trademark- Liberty
at the North American International Auto Show in Detroit as the successor to the
Jeep-Registered Trademark- Cherokee. The all-new 2002 model year
Jeep-Registered Trademark- Liberty continues Jeep-Registered Trademark-
leadership in four-wheel drive capability and adds a new level of on-road
refinement through independent front suspension, a new V-6 engine and isolated
multi-link rear suspension in addition to a new body style and other features.
The Liberty is offered with left hand or right hand drive, two- or four-wheel
drive, and a 2.4-liter gasoline, 3.7-liter V-6 gasoline or 2.5-liter turbo
diesel engine. The Liberty models will be built in an all-new facility in
Toledo, Ohio.
MARKETS, SALES AND COMPETITION
In 2000, the most important markets for the Chrysler Group were the United
States (81% of factory shipments or unit sales), Canada (9% of unit sales) and
Mexico (4% of unit sales). Retail sales in the United States and Canada amounted
to 2,791,000 vehicles in 2000, which compares to 2,903,000 in 1999. For 2000,
this represents a 14.4% share of the United States and Canada car and truck
market, compared to 15.3% in 1999. Industry retail sales in the United States
and Canada for 2000 reached 19.4 million units, an increase of 2% over 1999.
15
The following table sets forth the distribution of revenues and unit sales
for this segment by geographic market since 1998:
REVENUES AND UNIT SALES
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2000 % CHANGE 1999 % CHANGE 1998
--------- -------- --------- ----------- ---------
REVENUES(1)
NAFTA region........................ 62,814 +5 59,766 +14 52,339
United States................... 55,924 +3 54,052 +15 47,064
Canada.......................... 4,963 +11 4,473 +9 4,113
Mexico.......................... 1,927 +55 1,241 +7 1,162
European Union...................... 3,309 +26 2,620 +31 1,998
Other markets....................... 2,249 +32 1,699 -18 2,075
--------- --------- ---------
World........................... 68,372 +7 64,085 +14 56,412
========= ========= =========
UNITS(2)
NAFTA region........................ 2,858,500 -6 3,052,000 +5 2,905,500
United States................... 2,469,700 -8 2,693,200 +6 2,548,900
Canada.......................... 267,400 0 268,300 +2 261,800
Mexico.......................... 121,400 +34 90,500 -5 94,800
European Union...................... 103,000 +10 93,500 +7 87,100
Other markets....................... 83,700 0 83,800 -17 101,100
--------- --------- ---------
World........................... 3,045,200 -6 3,229,300 +4 3,093,700
========= ========= =========
- ------------------------------
(1) [EURO] in millions.
(2) Unit sales represent factory shipments by the Chrysler Group.
------------------------------
In 2000, revenues of the Chrysler Group increased as a result of the
appreciation of the dollar against the euro and, to a lesser extent, higher
vehicle pricing, partially offset by a decrease in unit sales and higher
incentive levels. Measured in dollars, the currency in which a significant
portion of the Chrysler Group's sales are earned, revenues declined by 8%. Total
unit sales decreased by 6% to 3,045,200. Unit sales in the United States were
down 8% in 2000 to 2,469,700 vehicles, primarily attributable to increased
competition in the U.S. market, especially in the Chrysler Group's historically
most profitable market segments of minivans, sport utility vehicles and pickup
trucks. See also "Item 5. Operating and Financial Review and Prospects."
In the NAFTA region, principal competitors of the Chrysler Group are General
Motors, Ford, Toyota, Honda and Nissan. Intense competition in the NAFTA region
is likely to continue. Due to the economic conditions in certain markets,
particularly in Asia, and a relatively strong U.S. dollar, competitors with
excess capacity may intensify their efforts to export vehicles to the NAFTA
region.
16
The following table sets forth, by vehicle line, the number of units sold
since 1998:
YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
UNITS(1)
Cars
Neon....................................... 236,300 251,200 268,200
Stratus and Sebring Sedans(2).............. 197,100 215,400 250,500
Intrepid, Concorde and LHS/300M............ 293,400 338,300 300,100
Other...................................... 92,300 101,300 120,000
Minivans....................................... 589,000 681,500 685,000
PT Cruiser..................................... 141,200 -- --
Trucks
Ram Pickup................................. 434,700 487,100 474,700
Dakota..................................... 195,800 171,100 160,100
Durango.................................... 180,900 219,600 182,000
Ram Van and Wagon.......................... 77,000 83,100 84,400
Jeep-Registered Trademark-
Grand Cherokee............................. 336,600 380,100 270,200
Cherokee................................... 174,500 200,500 194,500
Wrangler................................... 96,400 100,100 104,000
--------- --------- ---------
Total...................................... 3,045,200 3,229,300 3,093,700
========= ========= =========
- ------------------------------
(1) Unit sales represent factory shipments by the Chrysler Group.
(2) Includes former Cirrus and Breeze sedans.
DISTRIBUTION
In the NAFTA region, new passenger cars and trucks are sold at retail by
dealers who have sales and service agreements with DaimlerChrysler Corporation.
The dealers purchase cars, trucks, parts and accessories from DaimlerChrysler
Corporation for sale to retail customers. In the United States, DaimlerChrysler
Corporation distributed its products through 4,377 dealers at December 31, 2000,
compared to 4,423 at December 31, 1999. In Canada, the dealer network comprised
543 dealers at December 31, 2000, compared to 560 dealers at December 31, 1999.
In Mexico, the dealer network comprised 121 dealers at December 31, 2000,
compared to 117 dealers at December 31, 1999.
DaimlerChrysler Corporation also sells vehicles in various other countries
through wholly owned, affiliated and independent distributors and dealers.
CAPITAL EXPENDITURES; RESEARCH AND DEVELOPMENT
In 2000, DaimlerChrysler Corporation and its subsidiaries invested
[EURO]6.3 billion in fixed assets. These capital expenditures were related
primarily to completion of the launches of the new PT Cruiser, minivan and
Stratus/ Sebring vehicles and the product launches due in 2001, including the
all-new Jeep-Registered Trademark- Liberty and Dodge Ram Pickup. This amount
also includes expenditures made to improve capacity, upgrade powertrain and
component facilities and maintain other existing facilities.
Research and development expenditures in 2000 were primarily for new product
development but also included development costs for improving existing products.
These expenditures included compliance costs associated with regulations
promulgated by various governmental agencies worldwide.
17
The capital expenditures for fixed assets and research and development
expenditures of the Chrysler Group segment during the last three years are shown
below:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Capital expenditures for fixed assets..................... 6,339 5,224 3,920
Research and development.................................. 2,456 2,000 1,695
INTERNATIONAL OPERATIONS/COOPERATIONS
International operations in Europe include the manufacture of Chrysler
Voyager minivans at Eurostar Automobilwerk located in Graz, Austria. The plant
expects to begin building the Chrysler PT Cruiser in the summer of 2001.
Operations in South America include manufacturing facilities in Venezuela, where
Neons, Jeep-Registered Trademark- Cherokees and Jeep-Registered Trademark- Grand
Cherokees are assembled; Brazil, where Dakota pickup trucks are assembled; and
Argentina, where Jeep-Registered Trademark- Cherokees and Grand Cherokees are
assembled.
International cooperations in Austria include the manufacture of
Jeep-Registered Trademark- Grand Cherokees under an assembly contract with
Steyr-Daimler-Puch Fahrzeugtechnik AG & Co KG. The segment's automotive
affiliations in the Asia-Pacific region include the assembly and distribution of
Jeep-Registered Trademark- Cherokees in China by Beijing
Jeep-Registered Trademark- Corporation, Ltd., a minority-owned joint venture. In
addition, DaimlerChrysler Corporation has an agreement for the assembly of right
hand drive Jeep-Registered Trademark- vehicles in Thailand. In Brazil, it
participates in a joint venture with Bayerische Motoren Werke AG to manufacture
a 1.6-liter gasoline engine for use in both Chrysler Group and BMW vehicles.
DaimlerChrysler Corporation also has a minority interest in a company that
assembles Jeep-Registered Trademark- Grand Cherokees in Egypt.
COMMERCIAL VEHICLES
DaimlerChrysler manufactures and sells commercial vehicles under the brand
names Mercedes-Benz, Freightliner, Sterling, Setra, Thomas Built Buses, American
LaFrance, Western Star and Orion. With facilities throughout the world, the
Group has a very strong network for the production and assembly of commercial
vehicles and core components. It also has a worldwide distribution and service
network. Commercial Vehicles contributed approximately 17% of the Group's
revenues in 2000.
PRODUCTS
VANS. Worldwide, the product lines consist of three series of Mercedes-Benz
vans between 2 metric tons (t) and 7.5t gross vehicle weight (GVW), the
Vito/V-Class, the Sprinter and the Vario. A new Mercedes-Benz compact van, the
Vaneo, is expected to enter the market in the first half of 2002. The Vaneo is
designed for use as a family vehicle and for commercial purposes.
DaimlerChrysler manufactures its Mercedes-Benz vans in Germany and Spain for the
European market and in Argentina for the South American market. DaimlerChrysler
AG's wholly owned subsidiary Freightliner LLC expects to assemble and sell the
Sprinter van in the United States under the Freightliner brand name beginning in
mid 2001.
TRUCKS. The European Mercedes-Benz truck lines consist of the Actros in the
heavy weight category, the Atego in the light, medium and heavy weight category
and the Econic, a vehicle that can be adapted for a variety of special
applications. Complementing this line-up is the Unimog, a four-wheel drive
vehicle which is designed for special purpose applications such as street
maintenance, certain construction industry uses, fire-fighting, forestry and
agriculture.
In the United States and Canada, the Group operates through Freightliner
LLC. Freightliner manufactures trucks in Classes 5 through 8 (from 16,000 lbs.
GVW to 33,000 lbs. GVW and over) under the Freightliner and Sterling brand
names. In September 2000, Freightliner further strengthened its position in the
North American market by acquiring Western Star Trucks Holdings Ltd., a
Canadian-based manufacturer of premium trucks and
18
buses. Through American LaFrance, Freightliner is active in the market for
custom fire truck chassis. Freightliner also manufactures chassis for trucks,
buses and motorhomes in Classes 3 through 7 (from 10,000 lbs. GVW to 33,000 lbs.
GVW).
Mercedes-Benz Mexico manufactures Mercedes-Benz trucks primarily for sale in
the NAFTA region. Mercedes-Benz do Brasil develops and produces Mercedes-Benz
trucks for the South American markets. The new generation of trucks produced in
Brazil uses the cabin of the European Atego. The African, Asian and Australian
continents are supplied by European factories and manufacturing operations in
Brazil, South Africa, Nigeria, Indonesia, Iran and Australia.
BUSES. The bus product lines consist of complete buses for city, intercity
and touring purposes and bus chassis which are completed by local bus builders
in various countries. The segment's operating companies develop their own bus
designs based on national requirements and adapt their models to the specific
market needs of each region. Moreover, numerous cooperation partners throughout
the world manufacture buses or bus chassis under license. In Europe,
DaimlerChrysler markets buses under the Mercedes-Benz and Setra brand names. In
North America, the Group offers buses under the Setra, Thomas Built Buses and
Orion brand names. Through the acquisition of Western Star, Freightliner also
acquired control of Orion Bus Industries, one of North America's leading
heavy-duty transit bus manufacturers.
POWERTRAIN. The Powertrain business unit of DaimlerChrysler designs and
manufactures a full line of powertrain components consisting of diesel engines,
transmissions, axles and steering systems under the Mercedes-Benz brand. It
sells these components to parts of the DaimlerChrysler Group and to third party
customers. The Powertrain business unit also manufactures industrial diesel
engines which are widely used as propulsion units in off-highway applications.
In October 2000, DaimlerChrysler acquired the remaining 78.6% interest in
Detroit Diesel Cooperation which it did not already own. Detroit Diesel is one
of the leading U.S. manufacturers of heavy-duty diesel engines for on-highway
applications. It has cooperated with DaimlerChrysler's Powertrain business unit
and with MTU Motoren- und Turbinen-Union Friedrichshafen GmbH in several joint
development, production and marketing projects for on- and off-highway engines.
In January 2001, DaimlerChrysler combined the respective businesses of the
Powertrain business unit, Detroit Diesel and MTU Motoren- und Turbinen-Union
Friedrichshafen in a new business unit called DaimlerChrysler Powersystems.
In November 2000, Caterpillar Inc. and DaimlerChrysler agreed to form an
alliance to develop, manufacture and market medium-duty engines, fuel systems
and other powertrain components for their own products and third party
customers. The agreement provides the framework for several planned joint
ventures, supply agreements and cooperative projects. Completion of the
transaction is still subject to approval by U.S. and European regulators.
In June 2000, DaimlerChrysler and Hyundai Motor Company agreed to form a
50-50 joint venture for the development, production and marketing of commercial
vehicles. In September 2000, DaimlerChrysler purchased a 9% equity interest in
Hyundai Motor Company in support of the joint venture.
MARKETS, SALES AND COMPETITION
The market for commercial vehicles depends significantly on general economic
conditions since they directly influence transportation needs and the
availability of funds for capital investment. In 2000, sales for all
manufacturers of commercial vehicles continued to grow in Western Europe (+5%)
despite weaker demand in some countries, especially Germany, Belgium and the
Netherlands. Market growth in Western Europe was primarily supported by sales of
vans/pickup trucks and heavy trucks (16t GVW and above). In the NAFTA region,
sales for all manufacturers were down approximately 10% to 454,000 vehicles in
the Class 6 through 8 categories which are particularly important for the
Freightliner and Sterling brands. In Brazil, Turkey, most of the Southeast Asian
countries and Eastern Europe, demand for commercial vehicles rose as a result of
the economic recovery in these regions.
19
In Germany, registrations of new commercial vehicles decreased 3% to 314,800
units. In 2000, DaimlerChrysler sold 21% of its commercial vehicles in the
German market. The remaining European Union market accounted for an additional
29% of the segment's 2000 unit sales. Outside Europe, the NAFTA region and South
America are the most important markets for Commercial Vehicles.
The following table sets forth the distribution of revenues and unit sales
by geographic market since 1998:
REVENUES AND UNIT SALES
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2000 % CHANGE 1999 % CHANGE 1998
-------- -------- -------- -------- --------
REVENUES(1)
European Union................................. 13,538 +6 12,754 +11 11,448
Germany.................................... 7,318 +4 7,046 +11 6,355
Other...................................... 6,220 +9 5,708 +12 5,093
NAFTA region................................... 10,277 -1 10,408 +50 6,937
United States.............................. 8,759 -4 9,164 +53 5,989
Canada..................................... 771 -9 844 +40 604
Mexico..................................... 747 +87 400 +16 344
South America.................................. 1,722 +28 1,346 -35 2,082
Brazil..................................... 1,174 +38 849 -37 1,353
Other...................................... 548 +10 497 -32 729
Other markets.................................. 3,281 +50 2,187 -19 2,695
------- ------- -------
World...................................... 28,818 +8 26,695 +15 23,162
======= ======= =======
UNITS
European Union................................. 272,000 +2 267,100 +8 247,100
Germany.................................... 113,100 -1 114,500 +7 107,500
Other...................................... 158,900 +4 152,600 +9 139,600
NAFTA region................................... 153,700 -20 193,000 +54 125,600
United States.............................. 131,700 -23 171,800 +59 107,800
Canada..................................... 9,900 -23 12,800 +20 10,700
Mexico..................................... 12,100 +44 8,400 +18 7,100
South America.................................. 50,700 +14 44,600 -23 57,700
Brazil..................................... 37,100 +23 30,100 -24 39,400
Other...................................... 13,600 -6 14,500 -21 18,300
Other markets.................................. 72,600 +45 50,200 -15 59,300
------- ------- -------
World...................................... 549,000 -1 554,900 +13 489,700
======= ======= =======
- ------------------------------
(1) [EURO] in millions.
------------------------------
Worldwide unit sales of the Commercial Vehicles segment decreased slightly
to 549,000 in 2000 compared to 554,900 vehicles in 1999. While sales of vans and
buses went up 10% to 249,300 and 49,200 units, respectively, sales of trucks
were 12% lower at 250,500 units in 2000.
In Germany, DaimlerChrysler sold 113,100 units, 1% less than in the previous
year. In the European Union (excluding Germany), unit sales rose 4% from 152,600
in 1999 to 158,900 in 2000. This increase resulted primarily from the success of
Mercedes-Benz vans, especially in France, Spain and Switzerland.
DaimlerChrysler's European Union market share for vans between 2t and 6t GVW was
18% (1999: 19%). The Mercedes-Benz and
20
Setra bus brands strengthened their position in the European market with a
combined European Union market share of 26% in 2000 (1999: 25%). In the category
of trucks over 6t GVW, DaimlerChrysler had a European Union market share of 22%
(1999: 24%).
In the United States, retail sales in the Class 6/7 segment for all
manufacturers showed a 3% decrease to 173,800 vehicles (1999: 179,100 units). In
the Class 8 heavy duty truck segment unit sales for all manufacturers fell from
262,300 in 1999 to 211,500 in 2000 (-19%). In line with this market trend, the
Group's U.S. commercial vehicle sales declined 23% to 131,700 units. As a result
of the acquisition of Western Star, DaimlerChrysler's market share in the
Class 8 segment increased from 37% in 1999 to 38%; in the Class 6/7 segment, the
Group was able to increase its market share from 23% in 1999 to 24% in 2000.
In 2000, sales of trucks for all manufacturers rose in Brazil 27% to 59,400
units but fell in Argentina 10% to 9,500 units. DaimlerChrysler was able to
defend its strong leadership position in the market for trucks above 6t GVW with
market shares of approximately 37% in Brazil and 35% in Argentina.
For a discussion of changes in revenues see "Item 5. Operating and Financial
Review and Prospects."
The primary sales market for Mercedes-Benz vans is Western Europe. Principal
competitors in this market are Fiat (IVECO), Volkswagen, Ford, PSA
(Peugeot/Citroen) and Renault.
In the truck market segment, competitors vary in each geographical region.
In the two most important truck markets for DaimlerChrysler, Western Europe and
the NAFTA region, its principal competitors are the following:
WESTERN EUROPE NAFTA REGION
(OVER 6T GVW) (CLASSES 5 THROUGH 8)
- -------------- ---------------------
Volvo/Renault Navistar
Fiat (IVECO) Paccar
MAN (Kenworth/Peterbilt)
Scania Volvo/Renault (Mack)
Paccar (DAF) General Motors
Ford
Principal competitors in the bus sector (over 8t GVW) include Volvo/Renault,
Irisbus, a joint venture of Fiat and Renault, Scania, MAN/Auwaerter (Neoplan)
and Dennis in Western Europe and Volvo, Scania and Volkswagen in South America.
The following table sets forth, by vehicle category, the unit sales of
Commercial Vehicles since 1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
UNITS
Vans(1)............................................. 249,300 226,400 220,400
Trucks(2)........................................... 250,500 283,800 236,700
Buses............................................... 49,200 44,700 32,600
------- ------- -------
Total........................................... 549,000 554,900 489,700
======= ======= =======
- ------------------------------
(1) Including sales of pickup trucks (L 200) manufactured by Mercedes-Benz South
Africa under an agreement with Mitsubishi Motors Corporation.
(2) Including chassis manufactured by Freightliner for motorhomes and
walk-in-vans.
DISTRIBUTION
In Germany, DaimlerChrysler operates a wholesale and a retail network for
its commercial vehicles. In other major European markets, subsidiaries of
DaimlerChrysler AG provide the wholesale function to a network of independent
dealers. Outside Europe, commercial vehicles are generally sold by the sales
organization of the related production company or through independent general
distributors.
21
CAPITAL EXPENDITURES; RESEARCH AND DEVELOPMENT
Capital expenditures of the Commercial Vehicles segment for fixed assets
amounted to [EURO]1.1 billion in 2000. Principal areas of investment were the
preparation for the production of the new compact van Vaneo, the successor model
of the Vito, and the new cab-over engine truck generation for the South American
market.
Research and development projects focused on new products, especially a new
Freightliner truck and a new Setra bus, and successor models of existing product
lines, primarily the Actros and the Vito.
The table below shows the capital expenditures for fixed assets and the
research and development expenditures of the Commercial Vehicles segment during
the last three years:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Capital expenditures for fixed assets.................. 1,091 770 832
Research and development............................... 917 827 714
SERVICES
DaimlerChrysler conducts its services business through its wholly-owned
subsidiary DaimlerChrysler Services AG. In 2000, the services business consisted
of two business units: Financial Services and IT Services. Services contributed
approximately 9% of the Group's revenues in 2000.
On October 1, 2000, DaimlerChrysler and Deutsche Telekom combined their
information technology activities in a joint venture. As part of the
transaction, Deutsche Telekom contributed [EURO]4.6 billion in cash to
DaimlerChrysler's information technology subsidiary debis Systemhaus in return
for which Deutsche Telekom received a 50.1% interest in debis Systemhaus. The
agreement between DaimlerChrysler and Deutsche Telekom provides Deutsche Telekom
with an option to purchase from DaimlerChrysler, and DaimlerChrysler with an
option to sell to Deutsche Telekom, the Group's remaining 49.9% interest in
debis Systemhaus. The Group accounts for its 49.9% interest in debis Systemhaus
using the equity method of accounting. See "Material Contracts" in "Item 10.
Additional Information" and Note 11 to the Consolidated Financial Statements.
In January 2001, DaimlerChrysler Services sold its remaining 10% interest in
debitel AG to Swisscom for proceeds of approximately [EURO]300 million.
DaimlerChrysler's disposition of its controlling interest in debis
Systemhaus and the divestiture of the Group's equity stake in the
telecommunications services company debitel reflect Services' strategy to focus
its business on financial and other services along the automotive value chain.
In connection with this strategic focus, DaimlerChrysler renamed its services
subsidiary from DaimlerChrysler Services (debis) AG to DaimlerChrysler Services
AG. In Germany, DaimlerChrysler plans to offer an expanded range of financial
services through the DaimlerChrysler Bank. The DaimlerChrysler Bank is expected
to start operations in early 2002 and will primarily offer its services to
customers and employees of DaimlerChrysler.
The following table sets forth the revenues generated by Services since
1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Financial Services(1)............................... 15,088 10,015 7,745
IT Services......................................... 2,438 2,917 2,167
Other(2)............................................ -- -- 1,498
------ ------ ------
Total........................................... 17,526 12,932 11,410
====== ====== ======
- ------------------------------
(1) Figures for 1998 have been restated to reflect the combination of the
financial services activities of debis and Chrysler Financial Company L.L.C.
(2) The 1998 revenues in this category primarily represent the Group's divested
telecom services activities.
22
As a result of the disposition of DaimlerChrysler's controlling interest in
debis Systemhaus, revenues for 2000 only include the IT activities prior to
October 2000.
BUSINESS UNITS AND SERVICES
FINANCIAL SERVICES. The Financial Services business unit is one of the
leading financial services providers in the world outside the banking and
insurance sector. It is divided into three areas of responsibility: "NAFTA
region" and "World excluding NAFTA region" for automotive financial services and
"Capital Services" for non-automotive financial services. Financial Services
offers customized financing and leasing packages, primarily in connection with
the sale of DaimlerChrysler automotive products. In addition to consumer and
dealer automotive financing, it also provides dealer facility development and
management, car fleet management and insurance-related activities.
The car fleet management activities grew significantly in 2000, primarily as
a result of acquisitions in South Africa and Great Britain, and the
establishment of new service locations. The insurance activities are conducted
by debis Assekuranz and Chrysler Insurance Company and include direct insurance
(mainly dealer property and casualty insurance), insurance and reinsurance
brokerage, and risk consulting and management services which are provided to
companies within the Group, to DaimlerChrysler employees and to third-party
industrial customers worldwide. In 2000, Financial Services expanded its
insurance activities, primarily in Eastern Europe and Asia.
In the area of Capital Services, the Financial Services business unit offers
customer-oriented financing concepts for various non-automotive products and
activities, such as the sale of aircraft, rail systems, marine vessels or
commercial real estate and infrastructure projects. Financial Services also
conducts trading activities. In 2000, Capital Services strengthened its aircraft
leasing business through the acquisition of an aircraft leasing portfolio from
Raytheon.
IT SERVICES. debis Systemhaus is one of Germany's leading independent
providers of comprehensive IT services. It provides a wide range of services
including consulting (PLAN), development of software solutions (BUILD) and
operation of applications, computer centers, networks and desktops (RUN). IT
Services concentrates on IT solutions for specific industries, such as
manufacturing, retail and distribution, transportation, telecommunications,
financial services and the public sector. In 2000, IT Services focused on the
integration of the French company Soleri and the Spanish company Eltec, and on
the reorganization of its business following the acquisition by Deutsche Telekom
of a controlling interest in debis Systemhaus.
For a discussion of changes in revenues see "Item 5. Operating and Financial
Review and Prospects."
DaimlerChrysler Services and the City of Berlin operate a traffic management
center that collects and uses traffic data, especially for traffic routing.
DaimlerChrysler Services plans to expand further its activities in the area of
mobility services along DaimlerChrysler's automotive value-added chain. In this
regard, DaimlerChrysler Services is part of a consortium with Deutsche Telekom
and Cofiroute which has submitted a bid for the planned electronic toll
collection to be imposed on commercial vehicles over 12t GVW using German
highways (AUTOBAHNEN).
23
MARKETS, SALES AND COMPETITION
The following table sets forth the distribution of Services' revenues by
geographic market since 1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
European Union...................................... 6,073 5,705 6,138
Germany......................................... 4,139 4,196 4,553
Other........................................... 1,934 1,509 1,585
NAFTA region........................................ 10,643 6,356 4,696
United States................................... 9,229 5,491 4,522
Canada and Mexico............................... 1,414 865 174
Other markets....................................... 810 871 576
------ ------ ------
World........................................... 17,526 12,932 11,410
====== ====== ======
------------------------
As a result of the disposition of DaimlerChrysler's controlling interest in
debis Systemhaus, revenues for 2000 only include the IT activities prior to
October 2000.
Services generated approximately 61% of its total 2000 business volume in
the NAFTA region, 24% in Germany and 11% in other European Union countries. For
a detailed discussion of changes in revenues see "Item 5. Operating and
Financial Review and Prospects."
In 2000, the Financial Services business unit processed approximately
2,095,000 new leasing and finance contracts with a total value of
[EURO]56.8 billion, an increase of approximately 12% in new contract value
compared to 1999 when it processed approximately 1,993,000 new contracts with a
total value of [EURO]50.7 billion. The average monthly payment for new vehicle
installment sale contracts in 2000 was [EURO]641. The average new contract
balance amounted to [EURO]26,056 and the average original term was 43 months.
The following table sets forth the number and total value of new contracts
and the total number and value of contracts outstanding at December 31, 2000 in
the Financial Services business unit:
NEW VALUE TOTAL VALUE
CONTRACTS ([EURO] IN MILLIONS) CONTRACTS ([EURO] IN MILLIONS)
--------- -------------------- --------- --------------------
United States(1)............. 1,334,167 38,004 4,031,792 91,009
Germany(1)................... 252,116 6,095 511,019 10,583
Canada(1).................... 181,413 4,202 573,488 8,066
United Kingdom(1)............ 34,780 1,236 95,653 2,363
Italy........................ 54,590 1,116 109,974 1,769
France....................... 27,436 717 59,770 1,286
Japan(1)..................... 22,341 877 63,691 1,603
Mexico....................... 34,788 537 81,449 1,638
Switzerland.................. 13,015 453 28,021 685
Netherlands.................. 15,831 484 43,881 2,462
Other(1)..................... 124,904 3,093 218,402 4,849
--------- ------ --------- -------
Total.................... 2,095,381 56,814 5,817,140 126,313
========= ====== ========= =======
- ------------------------------
(1) Includes portfolios of activity conducted by Financial Services which have
been included in several asset-backed receivables transactions by that
business unit in these countries.
------------------------------
Competitors in the leasing and financial services area include leasing and
finance subsidiaries of banks and financial institutions and of other automobile
manufacturers to the extent they do not limit their leasing and
24
financial services activities to their own automobile brands. debis Assekuranz
competes primarily with AON/ Jauch & Huebener and Marsh Inc. Chrysler Insurance
Company's main competitor in the U.S. dealer market is Universal Underwriters
Group (Zuerich Financial Services Group).
CAPITAL EXPENDITURES
In 2000, capital expenditures for fixed assets, largely data processing
equipment, decreased to [EURO]282 million (1999: [EURO]324 million). Additions
to equipment on operating leases amounted to [EURO]15.6 billion (1999:
[EURO]16.4 billion).
AEROSPACE
In July 2000, DaimlerChrysler combined the aerospace activities operated by
its subsidiary DaimlerChrysler Aerospace AG (Dasa), with the businesses of the
French aerospace company Aerospatiale Matra S.A. and the Spanish aerospace
company Construcciones Aeronauticas S.A. (CASA) in a new company called European
Aeronautic Defence and Space Company EADS N.V. (EADS). As part of the
transaction, DaimlerChrysler exchanged its controlling interest in
DaimlerChrysler Aerospace for a 33% equity interest in EADS for which it
accounts using the equity method of accounting. DaimlerChrysler retained its
aero engines business operated by MTU Motoren- und Turbinen-Union Muenchen GmbH
which was renamed MTU Aero Engines GmbH. See also "Material Contracts" in "Item
10. Additional Information."
In May 2000, DaimlerChrysler Aerospace AG and Matra Marconi Space, a
French-British joint venture of Aerospatiale Matra and BAE Systems, combined
their space systems businesses in a company named Astrium. Following the
formation of EADS, EADS controls 75% and BAE Systems controls 25% of Astrium.
Prior to July 2000, principal Aerospace activities included the development,
production and sale of commercial aircraft, helicopters, defense and civil
systems, aero engines, military aircraft, satellites, and space infrastructure.
Aerospace contributed approximately 3% of the Group's revenues in 2000.
The following table sets forth the revenues generated by the Aerospace
business units since 1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
MTU Aero Engines....................................... 2,106 1,740 1,655
Commercial Aircraft/Helicopters........................ 2,139 3,937 3,508
Defense and Civil Systems.............................. 417 1,655 1,687
Military Aircraft...................................... 354 848 765
Satellites............................................. 161 446 629
Space Infrastructure................................... 206 552 526
Other(1)............................................... 4 13 --
----- ----- -----
Total.............................................. 5,387 9,191 8,770
===== ===== =====
- ------------------------------
(1) The revenues in this category primarily relate to research activities
conducted by DaimlerChrysler Aerospace's research department for third
parties prior to July 2000.
------------------------------
Aerospace revenues fell 41% to [EURO]5.4 billion in 2000. The decrease
resulted from DaimlerChrysler's disposition in July 2000 of all of its aerospace
activities with the exception of the aero engines business. Accordingly,
revenues for 2000 only include the disposed activities for the first half of
2000. For a discussion of changes in revenues for this segment, see "Item 5.
Operating and Financial Review and Prospects."
25
BUSINESS UNITS AND PRODUCTS
MTU AERO ENGINES. The MTU Aero Engines business unit consists of MTU Aero
Engines GmbH and its subsidiaries. MTU Aero Engines is mainly involved in the
development, production and maintenance of aircraft engines.
In the area of engines for commercial and executive aircraft, MTU Aero
Engines primarily works with the engine manufacturers Pratt & Whitney, a
division of United Technologies, Inc., and General Electric. Pratt & Whitney and
MTU Aero Engines jointly develop and manufacture the PW4000 Growth turbofan
engine family, the PW2000 jet engine series, the PW305 and PW306 jet engines and
the PW500 turbofan engine family. Since October 1998, the two companies are also
developing a new engine program, the PW6000 series. MTU Aero Engines'
cooperation with General Electric relates primarily to the General Electric CF6
engine family for which MTU Aero Engines manufactures parts and components.
In the V2500 jet engine program, MTU Aero Engines cooperates with Pratt &
Whitney, Rolls-Royce plc and Japanese Aero Engines Corporation. In the military
area, MTU Aero Engines is engaged in the development and production of the EJ200
engine for the Eurofighter/Typhoon, the RB199 engine for the Tornado, the MTR390
engine for the Tiger helicopter and the TP400 engine for the military
transporter A400M. MTU Aero Engines is also one of the leading providers of
maintenance and repair services for jet engines. Following a joint venture with
Canadian Airlines, MTU Aero Engines continued its expansion in the aircraft
engine repair and maintenance business in 2000 by entering into a joint venture
with China Southern Airlines and establishing a maintenance center in Brazil.
MTU Aero Engines also expanded its U.S. activities by entering into a joint
venture with Honeywell in the industrial gas turbine business in 1999 and
establishing a new development center in 2000.
The following business units formed part of the Aerospace segment through
June 2000:
COMMERCIAL AIRCRAFT/HELICOPTERS. The commercial aircraft/helicopter
business unit included the activities of former DaimlerChrysler Aerospace Airbus
GmbH and its subsidiaries and the production of helicopters for military and
civil applications by the Eurocopter group. DaimlerChrysler Aerospace Airbus
conducted the German activities within Airbus Industrie, a consortium of
European aerospace companies. These activities included the final assembly of
the Airbus A321 and the A319 in Hamburg. DaimlerChrysler Aerospace Airbus also
manufactured a variety of fuselage sections and vertical stabilizers for all
Airbus models, installed interior furnishings and was responsible for the wing
integration of all widebody Airbus aircraft.
DEFENSE AND CIVIL SYSTEMS. This business unit was active in the areas of
defense and dynamics systems, radar and radio systems, command and information
systems and systems technology.
MILITARY AIRCRAFT. The Military Aircraft business unit focused primarily on
the Eurofighter/Typhoon program. In addition, it was involved in the Panavia
program (modernization and servicing of Tornado aircraft), the manufacturing of
certain Airbus components and other aircraft programs.
SATELLITES. The Satellites business unit was mainly active in the SRTM
(Shuttle Radar Topography Mission) project and in several satellite programs and
projects commissioned by the European Space Agency (ESA), including Envisat,
Metop and MSG (Meteosat Second Generation).
SPACE INFRASTRUCTURE. Space Infrastructure concentrated on the development
and production of orbital systems. These activities included the participation
in the space laboratory COF (Columbus Orbital Facility) for the International
Space Station (ISS), the space transporter ATV (Automated Transfer Vehicle), the
ERA (European Robotic Arm) program and the Ariane 4 and 5 launcher programs.
26
MARKETS, SALES AND COMPETITION
The following table sets forth the distribution of Aerospace revenues by
geographic market since 1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
European Union......................................... 3,561 7,313 6,730
Germany............................................ 821 2,702 2,604
Other.............................................. 2,740 4,611 4,126
NAFTA region........................................... 1,596 1,457 1,496
United States...................................... 1,419 1,322 1,414
Canada and Mexico.................................. 177 135 82
Asia................................................... 138 267 244
Other markets.......................................... 92 154 300
----- ----- -----
World.............................................. 5,387 9,191 8,770
===== ===== =====
------------------------------
Aerospace revenues fell 41% to [EURO]5.4 billion in 2000. The decrease
resulted from DaimlerChrysler's disposition in July 2000 of all of its aerospace
activities with the exception of the aero engines business. Accordingly,
revenues for 2000 only include the disposed activities for the first half of
2000. For a discussion of changes in revenues for this segment, see "Item 5.
Operating and Financial Review and Prospects."
Revenues of MTU Aero Engines grew 21% to [EURO]2.1 billion in 2000, mainly
due to stronger demand for engines and commercial aircraft maintenance. MTU Aero
Engines participates in several international aircraft engine cooperations which
compete in some areas with Pratt & Whitney, General Electric, Snecma,
Rolls-Royce plc, Volvo Aero and FiatAvio SpA.
CAPITAL EXPENDITURES; RESEARCH AND DEVELOPMENT
Capital expenditures for fixed assets were [EURO]229 million in 2000
compared with [EURO]336 million in 1999. They related primarily to capacity
increases in the Commercial Aircraft/Helicopters business unit intended to
address the anticipated increase in deliveries of Airbus aircraft. MTU Aero
Engines' capital expenditures for fixed assets focused on the expansion in the
maintenance business, efficiency improvements and lead time reduction.
Research and development expenditures decreased in 2000 to
[EURO]1,057 million (1999: [EURO]2,005 million). Of this amount,
[EURO]290 million was attributable to projects funded by the Group (1999:
[EURO]458 million). In 2000, 73% of DaimlerChrysler Aerospace's total research
and development expenditures was customer-funded (1999: 77%). Research and
development projects related primarily to the Airbus program, especially two new
versions of the long range aircraft A340. Projects within the MTU Aero Engines
business unit emphasized development work on the EJ200 and the PW6000 engine
programs and research work directed at engine technologies leading to lower
emissions, reduced noise and lower fuel consumption. MTU Aero Engines also
started the development of the GP7000 engine for the Airbus A380.
The capital expenditures for fixed assets and the research and development
expenditures of the Aerospace segment during the last three years are shown
below:
YEAR ENDED DECEMBER 31,
------------------------------
2000(1) 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Capital expenditures for fixed assets................. 229 336 326
Research and development.............................. 1,057 2,005 2,047
of which: Company funded projects............... 290 458 367
Third party projects.................. 767 1,547 1,680
- ------------------------------
(1) Capital expenditures and research and development relating to the aerospace
activities disposed of in July 2000 are only included for the first half of
2000.
27
OTHER
This segment includes the operating businesses Rail Systems, Automotive
Electronics and MTU/Diesel Engines. In 2000, this segment contributed
approximately 4% of the DaimlerChrysler Group's total revenues. The following
table sets forth, by business unit, the revenues generated since 1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Rail Systems(1)........................................ 3,900 3,562 1,658
Automotive Electronics................................. 1,067 890 754
MTU/Diesel Engines..................................... 1,031 959 921
Other Businesses(2).................................... 261 441 193
----- ----- -----
Total.............................................. 6,262 5,852 3,526
===== ===== =====
- ------------------------------
(1) The increase in 1999 revenues is primarily due to the full consolidation of
Adtranz following DaimlerChrysler's acquisition of ABB's 50% interest in
Adtranz. The 1998 revenue figure represents the pro rata share in Adtranz'
revenues reflecting DaimlerChrysler's previous 50% ownership interest in the
company.
(2) The revenues principally derive from the management of real estate projects
including Potsdamer Platz.
------------------------------
For a discussion of revenues of this segment see "Item 5. Operating and
Financial Review and Prospects."
RAIL SYSTEMS. The Rail Systems activities of the Group are conducted by
DaimlerChrysler Rail Systems GmbH (Adtranz). Adtranz is one of the leaders in
the global rail transportation market. Its products and services include people
movers, light rail vehicles, metros, diesel and electric regional and intercity
multiple units, electric and diesel locomotives, high speed trains, signaling
systems and customer support.
In the first quarter of 1999, DaimlerChrysler acquired ABB's 50% interest in
Adtranz for $472 ([EURO]441) million. In December 1999, Rail Systems began
implementing a comprehensive restructuring program. This ongoing program
primarily aims at cost-cutting through the elimination of excess capacity and
efficiency improvements.
In August 2000, DaimlerChrysler signed a sale and purchase agreement with
the Canadian company Bombardier Inc. for the acquisition of DaimlerChrysler Rail
Systems GmbH (Adtranz), for cash consideration. According to the sale and
purchase agreement, the purchase price of $725 million is subject to adjustments
to reflect the proceeds from potential disposals of Adtranz' fixed installations
and signaling businesses and adjustments based on the financial performance of
Adtranz through the closing date of the transaction. The sale of Adtranz to
Bombardier is still subject to regulatory approval by the European Commission.
AUTOMOTIVE ELECTRONICS. The Automotive Electronics activities conducted
through TEMIC TELEFUNKEN microelectronic GmbH and its subsidiaries focus on
electronic systems for engines, safety systems and applications that enhance
driving comfort. Major product areas are powertrain and chassis, antilock
braking systems (including electronic stability programs), occupant safety
devices, sensor systems, vehicle body electronics, automotive electric motors
and intelligent, radar-based distance control systems.
MTU/DIESEL ENGINES. DaimlerChrysler AG's subsidiary MTU Motoren- und
Turbinen-Union Friedrichshafen GmbH is one of the world's leading suppliers of
high-grade propulsion systems for land, marine and rail-bound vehicles,
energy-supply applications based on diesel engines, gas engines or gas turbines,
and the new technologies of high-temperature fuel cells and electrolysis. MTU
Friedrichshafen also produces drive shafts for passenger cars and light
commercial vehicles. Its subsidiary L'Orange manufactures injection systems for
high-power diesel engines, some of which use common rail technology. In
January 2001, DaimlerChrysler combined the respective businesses of the
Powertrain business unit, Detroit Diesel and MTU Motoren- und Turbinen-Union
Friedrichshafen in a new business unit called DaimlerChrysler Powersystems.
28
MARKETS, SALES AND COMPETITION
The following table sets forth the distribution of revenues of this segment
by geographic market since 1998:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999(1) 1998
-------- -------- --------
([EURO] IN MILLIONS)
European Union........................................ 4,241 4,080 2,295
Germany........................................... 2,417 2,497 1,395
Other............................................. 1,824 1,583 900
NAFTA region.......................................... 766 707 421
United States..................................... 709 658 390
Canada and Mexico................................. 57 49 31
Asia.................................................. 450 407 443
Other markets......................................... 805 658 367
----- ----- -----
World............................................. 6,262 5,852 3,526
===== ===== =====
- ------------------------------
(1) The increase in 1999 revenues is primarily due to the full consolidation of
Adtranz following DaimlerChrysler's acquisition of ABB's 50% interest in
Adtranz. The 1998 revenue figure represents the pro rata share in Adtranz'
revenues reflecting DaimlerChrysler's previous 50% ownership interest in the
company.
------------------------------
Principal competitors of Adtranz are Siemens, Alstom and, until the planned
sale to Bombardier is consummated, Bombardier. TEMIC competes with Bosch,
Siemens, TRW and Nippondenso. Principal competitors of MTU/Diesel Engines in the
diesel engines business include Caterpillar and Cummins.
CAPITAL EXPENDITURES; RESEARCH AND DEVELOPMENT
In 2000, the Group spent [EURO]355 million on fixed assets of the businesses
included in this segment (1999: [EURO]589 million). At TEMIC, investments
consisted primarily of funding for increased production capacity.
MTU/Diesel Engines directed its capital expenditures primarily at capacity
expansion for diesel engine and drive shaft production as well as improvements
and replacements of production facilities. Adtranz invested primarily in the
modernization of its production facilities and acquired selected service and
maintenance businesses.
During 2000, research and development activities at MTU/Diesel Engines
focused primarily on the engine series 2000, 4000 and 8000 and further
development in the field of high temperature fuel cells and electrolysis. At
Adranz, development activities continued to concentrate on new vehicle
technologies and standardized product platforms. Research and development work
at TEMIC was primarily directed at motor management systems and electronic
systems designed to enhance vehicle safety and comfort. The Group's research and
development expenditures for these activities in 2000 were [EURO]433 million
(1999: [EURO]312 million).
SUPPLIES AND RAW MATERIALS
In 2000, the DaimlerChrysler Group purchased goods and services from
suppliers around the world with a total value of approximately
[EURO]113.3 billion (1999: [EURO]94.9 billion). Mercedes-Benz Passenger Cars &
smart accounted for 28% of this volume, Chrysler Group for 44%, Commercial
Vehicles for 19%, Services for 2%, Aerospace for 3%, and Other for 4%.
DaimlerChrysler enters into long-term supply agreements for the purchase of
various commodities used to manufacture vehicles. It also purchases commodities
on the spot market from time to time.
DaimlerChrysler operates its worldwide procurement and supply activities
through a single Global Procurement and Supply function. It employs the Extended
Enterprise-Registered Trademark- concept to maximize the efficiency of supply
networks by involving not only the first tier supplier but also sub-suppliers,
raw material suppliers, and transportation carriers. In 2000, DaimlerChrysler
expanded its e-business activities in the fields of electronic
29
purchasing (e-procurement) and electronic management of logistics processes
(e-supply chain management). In particular, DaimlerChrysler, together with Ford,
General Motors, Renault and Nissan, established Covisint, a joint venture
company that operates a business-to-business (B2B) Internet marketplace offering
e-procurement services to participants in the automotive industry.
A strong increase in demand for steel products and raw materials caused the
price of these materials to increase significantly. Aluminum and copper rose
slightly due to industry cost pressures and the rise in utilities (electric and
gas). Resin (plastic) prices fluctuated with the price of oil, which steadily
increased in 2000. Material shortages were avoided due to close cooperation with
suppliers under the Extended Enterprise-Registered Trademark- concept.
There was a significant increase in the price for precious metals throughout
the automotive industry. To minimize this increase in price, DaimlerChrysler's
purchasing and engineering initiatives improved processes and researched
alternative materials and processes.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
Government regulation of the automobile industry is extensive. Laws in
various jurisdictions regulate the emission levels, fuel economy, noise, and
safety of vehicles, as well as the levels of pollutants generated by the plants
that produce them. The cost of complying with these regulations can be
significant, and DaimlerChrysler expects to incur significant compliance costs
in the future. However, DaimlerChrysler management recognizes leadership in
environmental protection as an increasingly important competitive factor in the
marketplace.
VEHICLE EMISSIONS
U.S. STANDARDS. FEDERAL. The Clean Air Act directs the Environmental
Protection Agency (EPA) to establish and enforce national ambient air quality
standards. As part of that directive, the EPA has imposed tailpipe emission
control standards on passenger cars and light trucks, including minivans, sport
utility vehicles, and pickup trucks. The standards in effect for model year
1994-2003 passenger cars and light trucks are known as Tier 1 standards.
Manufacturers are obligated to recall vehicles that fail to meet those standards
for ten years or 100,000 miles, whichever occurs first.
The EPA also adopted Tier 2 standards that establish the same stringent
tailpipe emission requirements for passenger cars and light trucks. Tier 2
standards, which will be phased in over model years 2004-2009, increase the
recall obligation to 120,000 miles. The Tier 2 standards present a significant
technological challenge to the automobile industry, particularly with respect to
diesel engines. Manufacturers, including DaimlerChrysler, will not be able to
sell vehicles in the United States that do not meet the standards. Complying
with these new standards will require further research and development
achievements on the part of the automotive industry.
Separate standards are in effect for heavy-duty commercial vehicles. More
stringent standards will apply in model year 2004, and even more stringent
standards have been proposed beginning in model year 2007.
CALIFORNIA STANDARDS. The State of California sets its own stringent
emission control standards for passenger cars and light trucks under the low
emission vehicle program run by the California Air Resources Board (CARB). The
standards in effect for model years 1994-2003 will be succeeded by more
restrictive standards to be phased in over model years 2004-2007. Meeting these
new standards will require significant progress in the development of engine,
exhaust system, and fuel technologies.
An important part of California's low emissions vehicle program is the
introduction of zero-emission vehicles. Beginning with model year 2003, 10% of
the passenger cars and light trucks sold each year by a manufacturer in
California must be certified as zero-emission vehicles that produce no emissions
of regulated pollutants. Modifications proposed by CARB on December 8, 2000,
however, would reduce the stringency of the zero-emission standards for the
2003-2005 model years. Seven vehicle manufacturers, including DaimlerChrysler,
voluntarily agreed with CARB to provide zero-emission vehicle demonstrations in
California through the 2002 model year and to continue investing in the research
and development of battery technology.
30
Other states may either adopt the California standards, or participate in
the national low emission vehicle program established by the U.S. automotive
industry and subsequently adopted as a rule by the EPA. That program requires
manufacturers to sell low emission vehicles nationwide beginning with the 2001
model year. The states of Maine, Massachusetts, New York and Vermont have
adopted the California standards, including the requirement for zero-emission
vehicles.
DaimlerChrysler participates in a consortium of vehicle manufacturers,
electric utilities and the U.S. Department of Energy, which was formed to
develop battery technology that would qualify electric vehicles as zero-emission
vehicles. Development of a commercially viable electric vehicle will require
further intensive research. Compared to conventional vehicles, electric vehicles
today cost significantly more, have a much more limited range between recharges,
require a long time to recharge, and lack a nationwide infrastructure of
recharging stations. Without new battery technology, manufacturers, including
DaimlerChrysler, may be forced to take costly actions such as reducing the
number of non-zero-emission vehicles they sell in California or selling electric
vehicles below cost.
EUROPEAN STANDARDS. Current vehicle emission control standards in the
European Union are generally no more restrictive than U.S. standards. However,
the EU Commission and the European Parliament have adopted a directive that
establishes increasingly stringent emission standards for passenger and light
commercial vehicles for model years 2000 (EURO 3) and for 2005 and thereafter
(EURO 4). Under the directive, manufacturers will be obligated to recall
vehicles that fail to meet those standards for five years or 80,000 kilometers,
whichever occurs first. Standards for heavy commercial vehicles have been
adopted by the EU Commission and the European Parliament for model years 2000
(EURO 3), 2005 (EURO 4, stage 1) and 2008 and thereafter (EURO 4, stage 2).
DaimlerChrysler believes that its passenger cars and commercial vehicles will
comply with the European standards.
VEHICLE FUEL ECONOMY
U.S. STANDARDS. Under the federal Motor Vehicle Information and Cost
Savings Act, a manufacturer is subject to significant penalties for each model
year its vehicles do not meet Corporate Average Fuel Economy standards, commonly
referred to as the CAFE standards. CAFE standards for passenger cars and
light-duty trucks are currently 27.5 miles per gallon and 20.7 miles per gallon,
respectively. A manufacturer earns credits by exceeding CAFE standards. Credits
earned for the three preceding model years and credits projected to be earned
for the next three model years can be used to meet CAFE standards in the current
model year, except that credits earned in respect of cars may not be used for
trucks.
DaimlerChrysler expects to meet current U.S. domestic fleet CAFE standards
for both passenger cars and light-duty trucks, although it will likely use
credits to meet the standard for light-duty trucks. However, increased demand
for larger light-duty trucks could jeopardize its ability to comply with that
standard and require it to take additional costly steps, including the sale of
ethanol flexible fuel vehicles. DaimlerChrysler did not meet the CAFE standards
for the 2000 model year vehicle fleet imported into the United States, and may
be required to pay a penalty of between $15-20 million.
More stringent CAFE standards may be adopted as a way of reducing "green
house gas" carbon dioxide emissions by increasing fuel economy. These emissions
are said to contribute to global warming, which has become a matter of
international concern. In 1997, the United States signed the Kyoto Protocol to
the United Nations Framework Convention on Climate Change. This protocol calls
for the United States to reduce its fossil energy use substantially during years
2008-2012. Although the protocol is non-binding unless ratified by the U.S.
Senate, the United States is considering ways to achieve the called-for
reductions, including more stringent CAFE standards, higher fuel costs and
restrictions on fuel usage. These actions would be costly to DaimlerChrysler and
could significantly restrict the products it is able to offer in the United
States.
In addition to conventional gasoline powered vehicles, DaimlerChrysler
manufactures vehicles that operate on compressed natural gas, liquid petroleum
gas, and electricity, and flexible fuel vehicles capable of operating on both
gasoline and ethanol blend fuels.
31
EUROPEAN STANDARDS. The European Union also signed the Kyoto Protocol and
agreed to reduce carbon dioxide emissions substantially during years 2008-2012.
In early 1999, the European Union entered into a voluntary agreement with the
European automotive manufacturers association which establishes an emission
target of 140 grams of carbon dioxide per kilometer for the average new car sold
in the European Union in 2008. That target represents an average reduction in
passenger vehicle fuel usage of 25 percent, measured from 1995 levels. The
European Union has reaffirmed its goal of reducing carbon dioxide emissions from
new passenger cars to an average of 120 grams per kilometer by 2010. Vehicle
manufacturers have agreed to reexamine in 2003 whether further reductions are
possible by 2010. Achievement of these reductions will require European vehicle
manufacturers, including DaimlerChrysler, to improve engine and overall
efficiency and reduce vehicle weight.
VEHICLE SAFETY
The U.S. National Traffic and Motor Vehicle Safety Act of 1966 requires new
vehicles and original equipment sold in the United States to meet various safety
standards established by authority of the National Highway Traffic Safety
Administration (NHTSA). The Safety Act also requires manufacturers to recall
vehicles found to have safety related defects and to repair them without charge.
The cost of such recalls can be substantial depending on the nature of the
repair and the number of vehicles affected.
In general, vehicle safety regulations in Canada are similar to those in the
United States. Vehicles sold in Europe are subject to comparable vehicle safety
regulations established by the European Union or by individual countries. In
1999, the EU Commission proposed to expand existing vehicle safety regulations
by a directive on pedestrian protection. Countries in South America and Asia
have also established vehicle safety regulations.
In 2000, NHTSA issued various motor vehicle safety standards, including an
interim final rule specifying performance requirements for advanced airbag
systems. The rule imposes a new regimen of tests with stringent new injury
criteria, and sets forth a compliance phase in schedule mandating that 35% of
all vehicles produced by a manufacturer by 2003, 65% by 2004, and 100% by 2005,
meet the new safety standard. These standards add to the cost and complexity of
designing and producing new motor vehicles and original motor vehicle equipment.
The Transportation Recall Enhancement, Accountability and Documentation Act
(the TREAD Act) was enacted in the United States on November 1, 2000. The TREAD
Act requires NHTSA to upgrade federal motor vehicle safety standards relating to
tires based on a dynamic vehicle test that takes into account the rollover
propensity of vehicles. It also requires NHTSA to initiate new rules that
enhance its authority to gather information potentially relating to motor
vehicle defects. The TREAD Act substantially increases NHTSA's authority to
impose civil penalties for noncompliance with regulatory requirements and
specifies possible criminal penalties for violations of the federal Fraud and
False Statements Act.
STATIONARY SOURCE REGULATION
DaimlerChrysler's assembly, manufacturing and other operations in the United
States must meet a substantial number of regulatory requirements under various
federal laws, including the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Pollution Prevention Act of 1990 and the
Toxic Substances Control Act. State laws parallel and, in some cases, impose
more stringent requirements than federal law. Together these laws impose severe
restrictions on airborne and waterborne emissions and discharges of pollutants,
the handling of hazardous materials, and the disposal of wastes. Similar
requirements apply to its operations in Europe and Canada. Increasing
governmental regulation and environmental enforcement is likely in Mexico.
ENVIRONMENTAL MATTERS
In the United States, the EPA and various state agencies have notified
DaimlerChrysler Corporation that it may be a potentially responsible party for
the cost of cleaning up hazardous waste storage or disposal facilities pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act and
other federal and state environmental laws. A number of lawsuits allege that
DaimlerChrysler Corporation violated environmental
32
laws and seek to recover costs associated with remedial action. It is only one
of a number of potentially responsible parties who may be found to be jointly
and severally liable for remediation costs. As of December 31, 2000,
DaimlerChrysler Corporation may incur remediation costs at 147 sites in
connection with the foregoing matters and other remediation issues at its active
or deactivated facilities.
Pollution remediation is also a potentially significant issue in Germany at
some older sites, including plants and the Group's own service outlets. These
remediation issues involve ten principal sites.
Estimates of future costs of such environmental matters are inevitably
imprecise due to numerous uncertainties, including the enactment of new laws and
regulations, the development and application of new technologies, the
identification of new sites for which DaimlerChrysler may have remediation
responsibility and the apportionment and collectibility of remediation costs
among responsible parties. DaimlerChrysler establishes reserves for these
environmental matters when the loss is probable and reasonably estimable. It is
possible that final resolution of some of these matters may require
DaimlerChrysler to make expenditures in excess of established reserves, over an
extended period of time and in a range of amounts that cannot be reasonably
estimated. Although final resolution of any such matters could have a material
effect on DaimlerChrysler's consolidated operating results for the particular
reporting period in which an adjustment of the estimated reserve is recorded,
DaimlerChrysler believes that any resulting adjustment should not materially
affect its consolidated financial position.
In 2000, the EU Commission adopted a directive that requires automobile
manufacturers to take back end-of-life passenger cars (up to 9 seats) and trucks
(up to 3.5t total weight) beginning January 1, 2007 and incur all, or a
significant part of, the costs of recycling such vehicles. The directive affects
all end-of-life-vehicles in the European Union and imposes additional costs on
automobile manufacturers which could be significant. In Germany, automobile
manufacturers are currently required to take back up to twelve year old
passenger cars free of charge. Older vehicles and batteries are also taken back
for disposal or recycling but manufacturers are allowed to charge their costs.
In addition, German manufacturing facilities are subject to enhanced noise
restrictions.
DaimlerChrysler is committed to reducing the environmental impact of its
operations and products beyond currently applicable regulatory requirements
where this is technically and financially feasible. DaimlerChrysler's policy is
environmental protection in pursuit of sustainable development. This policy is
laid down in the Group's environmental guidelines and designed to further
minimize the environmental effects generally associated with the type of
manufacturing operations conducted by DaimlerChrysler. DaimlerChrysler has
installed environmental management systems in both its plant operations and its
development departments to consider environmental effects already at the
planning stage of a new manufacturing process or product. DaimlerChrysler
publishes environmental reports summarizing the use of resources and measures
undertaken to minimize further the environmental impact of the Group's products
and operations.
INTRODUCTION OF THE EURO
On January 1, 1999, eleven member states of the European Union -- Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Portugal and Spain -- introduced the euro as their common legal currency for
"paperless" transactions (European Monetary Union). Since then, funds
denominated in the currency of one participating member state are converted into
the currency of another participating member state based on a fixed conversion
rate. By February 28, 2002, the euro will be the sole legal tender for the
member states participating in the European Monetary Union. The national
currencies of those member states will then be withdrawn from circulation. On
January 1, 2001, Greece joined the European Monetary Union.
DaimlerChrysler has adopted the euro as its corporate currency throughout
its operations as of January 1, 1999. The introduction of the euro necessitated
changes in information technology and other systems in order to accommodate the
use of the euro in financial reporting. DaimlerChrysler adapted all of its
internal processes and systems operating in the currencies of the participating
member states to the euro.
33
Due to its significant manufacturing and transactional activity within
Europe, DaimlerChrysler has already realized benefits from the euro by
capitalizing on the greater market transparency and efficiency resulting from
the introduction of a single European currency. Productivity gains with respect
to products manufactured and sold in the euro zone are no longer offset by
exchange rate fluctuations. As sales and production costs are both calculated in
euro, it is easier for DaimlerChrysler to monitor its price competitiveness in
the euro zone. In addition, the introduction of the euro produces the following
effects:
BUSINESS AND COMPETITIVE IMPLICATIONS. The euro leads to greater market
efficiency and fosters a more competitive economic environment within and among
the participating member states. The fact that the pricing of products and
services is more transparent through the use of a single common currency
continues to lead to increased price harmonization within the euro zone. See
also "Risk Factors" in "Item 3. Key Information."
CURRENCY AND FOREIGN EXCHANGE EXPOSURE. Transition to the euro with its
fixed exchange rates among national currencies of the participating member
states has eliminated the need for exchange transactions in those currencies.
For DaimlerChrysler, this has led to savings in transaction and hedging costs of
at least [EURO]50 million annually. See "Item 11. Quantitative and Qualitative
Disclosures About Market Risk."
DESCRIPTION OF PROPERTY
At December 31, 2000, the DaimlerChrysler Group had 161 manufacturing
facilities worldwide of which 29 are located in Germany and 49 in the United
States. Most of the remaining facilities are located in Argentina, Brazil,
Canada, Indonesia, Mexico, South Africa, Spain and Turkey. The Group also has
other properties, including office buildings, spare parts centers, research
laboratories, testing tracks and warehouses, mainly in Germany and in the United
States. The Group owns most of its manufacturing facilities and other
properties.
The following table sets forth a list of all principal production and other
facilities of the DaimlerChrysler Group throughout the world:
PRODUCTION FACILITIES
MERCEDES-BENZ PASSENGER CARS & SMART
GERMANY
- Berlin................................. Manufacturing plant for engines and
components
- Bremen................................. Bodywork and assembly plant
- Hamburg................................ Manufacturing plant for axles and components
- Rastatt................................ Bodywork and assembly plant
- Sindelfingen........................... Bodywork and assembly plant
- Stuttgart-Untertuerkheim............... Manufacturing plant for engines, axles and
gearboxes
UNITED STATES
- Tuscaloosa, Alabama.................... Bodywork and assembly plant
BRAZIL
- Juiz de Fora........................... Bodywork and assembly plant
FRANCE
- Hambach................................ Bodywork and assembly plant
SOUTH AFRICA
- East London............................ Bodywork and assembly plant
CHRYSLER GROUP
UNITED STATES
- Belvidere, Illinois.................... Bodywork, assembly and stamping plant
- Dayton, Ohio........................... Manufacturing plant for thermal products
34
- Detroit, Michigan...................... Bodywork and assembly plants, manufacturing
plants for engines and glass
- Fenton, Missouri....................... Bodywork and assembly plants
- Huntsville, Alabama.................... Manufacturing plant for automotive
electronics
- Indianapolis, Indiana.................. Foundry for engine blocks
- Kenosha, Wisconsin..................... Manufacturing plant for engines
- Kokomo, Indiana........................ Transmission plants, aluminum die castings
plant
- New Castle, Indiana.................... Forging, machining and assembly plant for
components
- Newark, Delaware....................... Bodywork and assembly plant
- Sterling Heights, Michigan............. Bodywork and assembly plant, stamping and
subassembly plant
- Toledo, Ohio........................... Bodywork and assembly plant, machining plant
for components
- Trenton, Michigan...................... Manufacturing plant for engines
- Twinsburg, Ohio........................ Stamping and subassembly plant
- Warren, Michigan....................... Bodywork and assembly plant, stamping and
subassembly plant
AUSTRIA
- Graz................................... Bodywork and assembly plants
CANADA
- Bramalea............................... Bodywork, assembly and stamping plant
- Windsor................................ Assembly plants
MEXICO
- Mexico City............................ Bodywork and assembly plant
- Saltillo............................... Bodywork and assembly plant, engine plant
- Toluca................................. Bodywork and assembly plant
COMMERCIAL VEHICLES
GERMANY
- Duesseldorf............................ Bodywork and assembly plant, manufacturing
plant for steering systems
- Gaggenau............................... Bodywork and assembly plant, manufacturing
plant for axles and transmissions
- Kassel................................. Manufacturing plant for axles
- Ludwigsfelde........................... Bodywork and assembly plant
- Mannheim............................... Bodywork and assembly plant, manufacturing
plant for engines
- Ulm.................................... Bodywork and assembly plant
- Woerth................................. Bodywork and assembly plant
UNITED STATES
- Cleveland, North Carolina.............. Bodywork and assembly plant
- High Point, North Carolina............. Bodywork and assembly plant
- Mt. Holly, North Carolina.............. Bodywork and assembly plant
- Portland, Oregon....................... Bodywork and assembly plant
- Redford, Michigan...................... Assembly plant, manufacturing plant for
engines
ARGENTINA
- Buenos Aires........................... Bodywork and assembly plant
35
BRAZIL
- Sao Bernardo do Campo.................. Bodywork and assembly plant
CANADA
- Kelowna................................ Bodywork and assembly plant
- St. Thomas............................. Bodywork and assembly plant
MEXICO
- Santiago Tianguistenco................. Assembly plant
SPAIN
- Barcelona.............................. Manufacturing plant for engines,
transmissions and axles
- Vitoria................................ Bodywork and assembly plant
TURKEY
- Aksaray................................ Bodywork and assembly plant, manufacturing
plant for engines and axles
- Hosdere................................ Assembly plant
AEROSPACE
GERMANY
- Muenchen............................... Manufacturing plant for aircraft engines
- Hannover............................... Maintenance plant for commercial aircraft
engines
OTHER
GERMANY
- Friedrichshafen........................ Manufacturing plant for diesel engines
- Hennigsdorf............................ Manufacturing plant for rail systems
- Ingolstadt............................. Manufacturing plant for automotive
electronics
- Nuernberg.............................. Manufacturing plant for automotive
electronics
UNITED STATES
- Pittsburgh, Pennsylvania............... Manufacturing plant for rail systems
HUNGARY
- Budapest............................... Manufacturing plant for automotive
electronics
MEXICO
- Cuautla................................ Manufacturing plant for automotive
electronics
SWEDEN
- Vasteras............................... Manufacturing plant for rail systems
UNITED KINGDOM
- Derby.................................. Manufacturing plant for rail systems
OTHER FACILITIES
GERMANY
- Berlin................................. Potsdamer Platz real estate project,
including DaimlerChrysler Services
headquarters
- Stuttgart-Moehringen................... DaimlerChrysler headquarters
- Ulm.................................... Research center
UNITED STATES
- Auburn Hills, Michigan................. DaimlerChrysler headquarters and technology
center
36
At year-end 2000, the total amount of indebtedness secured by mortgages and
other security interests on the Group's principal facilities was
[EURO]1.6 billion, which related to the Potsdamer Platz real estate project.
DaimlerChrysler believes that the Group's principal manufacturing facilities
and other significant properties are in good condition and that they are
adequate to meet the needs of the DaimlerChrysler Group.
As part of its strategic planning process, in view of continuing
overcapacity in the automobile industry, DaimlerChrysler is reviewing worldwide
capacity requirements, especially in North and South America. In particular,
Chrysler Group's turnaround plan includes six plant closings, elimination of
shifts, and reduced line speeds at various facilities in order to rationalize
capacity and production levels in an effort to reduce inventories and fixed
costs. See "Introduction -- Turnaround Plan for the Chrysler Group."
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
ACCOUNTING PRINCIPLES
U.S. GAAP
The Consolidated Financial Statements have been prepared in accordance with
U.S. GAAP except for the use of the proportionate method of consolidation for a
material joint venture in 1998. Under U.S. GAAP, joint ventures would be
accounted for using the equity method of accounting. DaimlerChrysler received
permission from the United States Securities and Exchange Commission to prepare
its consolidated financial statements with this departure from U.S. GAAP. See
Note 3 to the Consolidated Financial Statements.
OPERATING PROFIT
The Group measures the performance of its business segments through
"Operating Profit." Segment Operating Profit is defined as income before
financial income included in the consolidated statement of income, modified to
exclude certain pension and post-retirement benefit costs, to include certain
financial income, net, and to include or exclude certain miscellaneous items.
See Note 33 to the Consolidated Financial Statements.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." This
standard requires companies to record derivatives on the balance sheet as assets
and liabilities, measured at fair value. Gains and losses resulting from changes
in the values of those derivatives would be accounted for depending on the use
of the derivative and whether it qualifies for hedge accounting. DaimlerChrysler
adopted SFAS 133 effective January 1, 2000. Upon adoption of this standard,
DaimlerChrysler recorded a cumulative effect of a change in accounting principle
(net after-tax gain) of [EURO]12 million in the statement of income and a net
transition loss of [EURO]349 million in accumulated other comprehensive income.
In June 2000, the FASB issued SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities -- an amendment of FASB Statement
No. 133." DaimlerChrysler adopted SFAS 138 on July 1, 2000. Adoption of this
accounting standard did not have a material impact on the Group's consolidated
financial statements.
In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities -- a
replacement of FASB Statement No. 125." This statement revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain financial statement disclosures. This statement
is effective for transactions occurring after March 31, 2001. Adoption of this
replacement standard is not anticipated to have a material effect on
DaimlerChrysler's consolidated financial statements.
37
As of July 1, 2000, DaimlerChrysler adopted Emerging Issues Task Force Issue
(EITF) No. 99-20, "Recognition of Interest Income and Impairment on Purchased
and Retained Beneficial Interests in Securitized Financial Assets." EITF 99-20
specifies, among other things, how a transferor that retains an interest in a
securitization transaction, or an enterprise that purchases a beneficial
interest, should account for interest income and impairment. The cumulative
effect of adopting EITF 99-20 was an after-tax charge of [EURO]99 million.
In July 2000, the Emerging Issues Task Force reached a final consensus on
EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." The Issue
requires that all amounts billed to the customer in a sale transaction related
to shipping and handling, if any, represent revenues earned for the goods
provided and should be classified as revenue. DaimlerChrysler adopted the
consensus effective October 1, 2000. Adoption of EITF 00-10 did not have a
material impact on the Group's consolidated financial statements. With the
adoption of EITF 00-10, DaimlerChrysler has elected to reclassify shipping and
handling costs from selling expenses to cost of sales for all years presented.
DaimlerChrysler classifies amounts billed to a customer in a sale transaction
related to shipping and handling as revenues.
During 2000, the Emerging Issues Task Force reached a final consensus on
EITF 00-14, "Accounting for Certain Sales Incentives." The Issue requires that
an entity recognize sales incentives at the latter of (1) the date at which the
related revenue is recorded by the entity or (2) the date at which the sales
incentive is offered. The Issue also requires that when recognized, the
reduction in or refund of the selling price of the product or service resulting
from any cash sales incentive should be classified as a reduction of revenue. If
the sales incentive is a free product or service delivered at the time of the
sale, the cost of the free product or service should be classified as cost of
sales. The consensus reached in the Issue will be effective for DaimlerChrysler
in its financial statements beginning April 1, 2001. DaimlerChrysler will apply
the consensus prospectively in 2001. DaimlerChrysler is currently determining
the impact of the adoption of EITF 00-14 on the Group's consolidated financial
statements.
INFLATION
The rates of inflation on an annual average basis in Germany during 2000,
1999 and 1998 were 1.9%, 0.6% and 1.0%, respectively. The inflation rates on an
annual average basis in the United States for those years were 3.4%, 2.2% and
1.6%, respectively. The effects of inflation on the Group's operations have not
been significant in recent years.
OPERATING RESULTS
The DaimlerChrysler Group operates in six business segments:
(1) Mercedes-Benz Passenger Cars & smart; (2) Chrysler Group; (3) Commercial
Vehicles; (4) Services; (5) Aerospace; and (6) Other. The information and
discussion in this Item should be read in conjunction with Notes 2 and 33 to the
Consolidated Financial Statements included in Item 18. The following table sets
forth revenues and operating profit (loss) for each of the six business segments
during the last three fiscal years:
38
DAIMLERCHRYSLER GROUP
BUSINESS SEGMENT REVENUES AND OPERATING PROFIT (LOSS)(1)
([EURO] IN MILLIONS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2000 1999 1998
-------------------- -------------------- --------------------
OPERATING OPERATING OPERATING
PROFIT PROFIT PROFIT
REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS)
-------- --------- -------- --------- -------- ---------
Mercedes-Benz Passenger Cars &
smart............................... 43,700 2,145 38,100 2,703 32,587 1,993
Chrysler Group........................ 68,372 501 64,085 5,051 56,412 4,255
Commercial Vehicles................... 28,818 1,110 26,695 1,067 23,162 946
Services.............................. 17,526 2,457 12,932 2,039 11,410 985
Aerospace............................. 5,387 3,754 9,191 730 8,770 623
Other................................. 6,262 (62) 5,852 (399) 3,526 (130)
Eliminations.......................... (7,681) (153) (6,870) (179) (4,085) (79)
------- ------ ------- ------ ------- -----
Total............................. 162,384 9,752 149,985 11,012 131,782 8,593
======= ====== ======= ====== ======= =====
- ------------------------------
(1) For additional segment information see Note 33 to the Consolidated Financial
Statements.
------------------------------
The year-to-year comparability of revenues and operating profit in Services
and Aerospace is significantly affected by two transactions in 2000, one
involving DaimlerChrysler Aerospace and the other debis Systemhaus. In
July 2000, the Group disposed of most of the aerospace activities by exchanging
its controlling interest in DaimlerChrysler Aerospace for a 33% interest in the
European Aeronautic Defence and Space Company (EADS). In October 2000, Deutsche
Telekom made a capital investment in debis Systemhaus for which it received a
50.1% controlling interest, thereby reducing the Group's interest to 49.9%. As a
result of these transactions, revenues and operating profit of DaimlerChrysler
Aerospace and debis Systemhaus are included in the Group's totals only through
the date of the respective transaction. Thereafter, the operating profit of the
Services and Aerospace segments includes DaimlerChrysler's allocable percentage
interest in the operating profit of debis Systemhaus (49.9%) and EADS (33%),
respectively. In addition, the operating profit of Aerospace includes the gain
realized on the disposition of the Group's controlling interest in
DaimlerChrysler Aerospace ([EURO]3.3 billion) and the operating profit of
Services includes a gain realized as a result of the transaction involving debis
Systemhaus ([EURO]2.3 billion). See "Item 4. Information on the Company."
2000 COMPARED WITH 1999
DAIMLERCHRYSLER GROUP
Group revenues in 2000 increased 8% from [EURO]150.0 billion to
[EURO]162.4 billion. This increase consisted of 12% revenue growth in the Group
excluding the Aerospace segment and the IT Services business unit, offset by a
revenue decline due to the disposition of most of DaimlerChrysler's aerospace
activities in July 2000 and the disposition of DaimlerChrysler's controlling
interest in debis Systemhaus in October 2000. Revenues for the Mercedes-Benz
Passenger Cars & smart segment increased 15% to [EURO]43.7 billion. Chrysler
Group revenues rose 7% to [EURO]68.4 billion as a result of the depreciation of
the euro against the dollar, absent which Chrysler Group revenues would have
been 8% lower than in the previous year. Revenues of Commercial Vehicles went up
8% to [EURO]28.8 billion. Services' revenues improved 36% to
[EURO]17.5 billion. Aerospace revenues in 2000 were [EURO]3.8 billion below 1999
principally because the year 2000 did not include any revenues from the second
half of the year from the aerospace activities disposed of in July.
In 2000, cost of sales amounted to [EURO]134.8 billion, a 12% rise. Cost of
sales as a percentage of revenues increased to 83% in 2000 compared to 80% in
1999. This increase resulted from higher sales incentives for
39
specific Chrysler Group models which reduced revenues, an impairment charge on
the carrying values of leased vehicles in the Services segment and charges
related to the smart brand recorded in connection with the planned joint
development of a new small car platform with Mitsubishi Motors.
Selling expenses were [EURO]11.4 billion in 2000 compared to
[EURO]9.9 billion in 1999, a 16% increase. The increase was due to higher
marketing costs in connection with new product launches. Selling expenses as a
percentage of revenues were 7% in both 2000 and 1999. General administrative
expenses in 2000 rose 11% over 1999 to [EURO]5.7 billion.
Research and development funded by the Group reached [EURO]6.3 billion in
2000 compared to [EURO]5.7 billion in 1999. In addition, the Group undertook
research and development projects for third party customers funded by such
parties (mainly the German government and ESA) in the amount of
[EURO]1.1 billion in 2000 (1999: [EURO]1.8 billion). Research and development
for third party customers decreased as a result of the disposition of most of
DaimlerChrysler's aerospace activities.
In 2000, DaimlerChrysler's operating profit was [EURO]9.8 billion compared
to [EURO]11.0 billion in the previous year, a decrease of 11%. The operating
profit of 2000 includes gains of [EURO]3.3 billion from the exchange of the
Group's controlling interest in DaimlerChrysler Aerospace for a 33% interest in
EADS, [EURO]2.3 billion from the disposition of the Group's controlling interest
in debis Systemhaus, and gains of [EURO]0.2 billion from the sale of the fixed
installations activities of the Rail Systems business unit and the dilution of
DaimlerChrysler's equity interest in Ballard Power Systems, a Canadian company
focusing on fuel cell technology. Group operating profit in 2000 was reduced by
a write-down of [EURO]0.5 billion on the carrying values of leased vehicles and
charges of [EURO]0.5 billion related to the smart brand in connection with the
planned joint development of a new small car platform with Mitsubishi Motors. In
addition, DaimlerChrysler recorded a charge in 2000 relating to the European
Union's directive for end-of-life-vehicles ([EURO]0.3 billion). The 1999
operating profit includes gains from the sales of most of DaimlerChrysler's
investment in the telecommunications company debitel amounting to
[EURO]1.1 billion, partially offset by charges for restructuring measures in the
Rail Systems business and other one-time items. After adjustment for one-time
items included in operating profit in both 2000 ([EURO]4.5 billion) and 1999
([EURO]0.7 billion), operating profit decreased from [EURO]10.3 billion in 1999
to [EURO]5.2 billion. This decline was mainly attributable to lower
contributions from the Chrysler Group and Services, resulting primarily from the
intense competition in the North American automotive market. The business
segment contributions to Group operating profit are shown in the table on page
39. Special items and business developments are described in more detail in the
discussion of the segment contributions below.
Financial income (net) decreased from [EURO]0.3 billion in 1999 to
[EURO]0.2 billion in 2000. Financial income (net) in 2000 includes losses of
[EURO]0.2 billion from the Group's equity investments in EADS and Mitsubishi
Motors. Financial income (net) was also negatively affected by increased
interest expenses resulting from higher borrowings. Principally as a result of
DaimlerChrysler's adoption of SFAS 133, financial income (net) in 2000 was not
burdened by losses on derivative financial instruments to the same extent it was
in 1999.
Income tax expense decreased from [EURO]4.5 billion in 1999 to
[EURO]2.0 billion in 2000. The decrease in income tax expense was principally
the result of lower pre-tax income in 2000. Income tax expense was also affected
by changes in German tax laws in 2000 and 1999. In 2000, the German corporate
income tax rate was reduced from 40% to 25%. This reduction triggered a current
revaluation of the Group's net deferred tax assets in Germany. The other
significant change in 2000 is the future exemption from taxation for certain
gains from the sale of investments. The changes in 2000 resulted in a net income
tax charge of [EURO]0.3 billion. In 1999, the German corporate income tax rate
was reduced from 45% to 40% and the tax base was broadened, resulting in a net
income tax charge of [EURO]0.8 billion. Excluding the effects of the changes in
German tax laws in both years, the Group's effective tax rate increased slightly
from 38.5% in 1999 to 38.8% in 2000.
Group net income increased from [EURO]5.7 billion in 1999 to
[EURO]7.9 billion in 2000. Net income includes net gains on dispositions of
[EURO]5.5 billion (1999: [EURO]0.6 billion) which have been classified as
extraordinary and are described above. Net income also contains a net expense of
[EURO]87 million from cumulative effects of changes in accounting principles for
derivative financial instruments (SFAS 133) and retained interests in sold
receivables (EITF 99-20).
40
Net income before extraordinary items and cumulative effects of changes in
accounting principles decreased by [EURO]2.6 billion to [EURO]2.5 billion. Basic
and diluted earnings per ordinary share (before extraordinary items and
cumulative effects of changes in accounting principles) were [EURO]2.46 and
[EURO]2.45 in 2000, compared to [EURO]5.09 and [EURO]5.06 in 1999, respectively.
After extraordinary items and cumulative effects of changes in accounting
principles, basic and diluted earnings per ordinary share were [EURO]7.87 and
[EURO]7.80 in 2000, higher than in 1999 when they reached [EURO]5.73 and
[EURO]5.69, respectively.
MERCEDES-BENZ PASSENGER CARS & SMART
Revenues of the Mercedes-Benz Passenger Cars & smart segment rose
[EURO]5.6 billion or 15% to [EURO]43.7 billion, resulting mainly from the strong
performance of the M-Class and the S-Class and the successful introduction of
the new C-Class in the European market. In 2000, total unit sales rose 7% to a
record level of 1,154,900. At [EURO]15.7 billion, revenues in Germany were 8%
higher than in 1999 and unit sales rose 6% in an overall declining German
market. Germany continues to be the most important market for Mercedes-Benz
Passenger Cars & smart with unit sales of 440,000 in 2000 representing 38% of
the segment's worldwide unit sales (1999: 39%).
In the other European Union member countries, revenues of Mercedes-Benz
Passenger Cars & smart rose 14% to [EURO]9.9 billion while unit sales were 8%
higher reaching 321,700 units. These increases were primarily due to higher
demand for passenger cars in Italy, France, Spain and Belgium. In the United
States, revenues increased by [EURO]1.8 billion or 21% to [EURO]10.3 billion and
unit sales rose 4% to 205,700 units, setting a unit sales record for the fifth
consecutive year in this market. The revenue increase in the United States was
mainly due to the appreciation of the dollar against the euro and continued
strong demand for higher priced S-Class and M-Class vehicles. At
[EURO]2.2 billion, revenues in Japan were up 10% despite a 13% decrease in unit
sales, mainly due to a favorable change in product mix and the depreciation of
the euro against the Japanese yen. In Asia (excluding Japan) revenues jumped 51%
to [EURO]1.7 billion while unit sales climbed from 25,500 to 41,100.
In 2000, Mercedes-Benz Passenger Cars & smart had an operating profit of
[EURO]2.1 billion (1999: [EURO]2.7 billion). The segment's operating profit
decreased as a result of a [EURO]0.3 billion charge relating to the
end-of-life-vehicle directive adopted by the European Union and charges of
[EURO]0.5 billion related to the smart brand in connection with the planned
joint development of a new small car platform with Mitsubishi Motors. Based, in
part, on DaimlerChrysler's recent investment in Mitsubishi Motors Corporation
and the corresponding strategic alliance, in the fourth quarter of 2000
management conducted a strategic review of the smart brand, including a review
of the Group's small car platform, and concluded that it was necessary to revise
the current operating plan of the smart brand, including restructuring of
supplier contracts. As a result, the carrying values of the brand's long-lived
assets were determined to be impaired. Mercedes-Benz Passenger Cars & smart
recorded an impairment charge of [EURO]281 million to write off the carrying
values of the manufacturing facility, equipment, tooling and related goodwill
for the smart brand. In addition, it recorded charges of [EURO]255 million
related to fixed cost reimbursement agreements with smart suppliers. If the
smart brand continues to experience low sales volumes from competition within
the small car industry, management expects operating results to continue to be
negatively affected. The charges relating to the smart brand and the European
Union end-of-life-vehicle directive were partially offset by a gain of
[EURO]0.1 billion relating to the reduction of DaimlerChrysler's equity interest
in Ballard Power Systems. Adjusted for all these one-time items, operating
profit in 2000 improved by 6% to [EURO]2.9 billion.
CHRYSLER GROUP
The Chrysler Group achieved revenues of [EURO]68.4 billion compared with
revenues of [EURO]64.1 billion for 1999. This increase in revenues is the result
of the appreciation of the dollar against the euro and, to a lesser extent,
higher vehicle pricing, partially offset by a decrease in unit sales and higher
sales incentives. Measured in dollars, the currency in which a significant
portion of the Chrysler Group's sales are earned, revenues declined by 8%.
In 2000, the Chrysler Group sold 3.0 million units, 6% lower than the year
before. Worldwide factory unit sales decreased in part as a result of intense
competition in the U.S. market, particularly in the minivan, sport
41
utility and pickup segments. Model changeovers and launches of certain new
vehicles also contributed to the decrease in volume. Strong sales of the PT
Cruiser (141,200 units) which was introduced in 2000 helped to offset the
decrease in volume. In the NAFTA region, total sales decreased 6% to 2,858,500
units. Unit sales outside the NAFTA region rose to 186,700 in 2000, an increase
of 9,400 units or 5%.
The Chrysler Group's operating profit declined to [EURO]0.5 billion in 2000
compared with [EURO]5.1 billion in 1999. This decrease resulted primarily from
increased sales incentives due to the highly competitive U.S. and Canadian
markets, lower unit sales and an unfavorable change in product mix, and, to a
lesser degree, increased fixed costs related to newly introduced products. The
operating profit decrease was partially offset by a reduction in profit-based
compensation costs and higher vehicle pricing.
Revenues and operating profit of the Chrysler Group are derived principally
from the U.S. and Canadian automotive markets. Retail industry sales (including
fleet sales) of new cars and trucks in the U.S. and Canada were 19.4 million
units in 2000, compared with 19.0 million units in 1999, an increase of 2%.
The U.S. and combined U.S. and Canada retail sales and market share data for
the Chrysler Group in 2000 and 1999 are set forth below:
YEAR ENDED DECEMBER 31,
----------------------------------
INCREASE/
2000 1999 (DECREASE)
--------- --------- ----------
U.S. RETAIL MARKET(1)
Car sales................................................... 649,373 745,275 (95,902)
Car market share............................................ 7.3% 8.6% (1.3%)
Truck sales (including minivans)............................ 1,873,322 1,893,286 (19,964)
Truck market share.......................................... 20.9% 21.7% (0.8%)
Combined car and truck sales................................ 2,522,695 2,638,561 (115,866)
Combined car and truck market share......................... 14.2% 15.2% (1.0%)
U.S. AND CANADA RETAIL MARKET(1)
Combined car and truck sales................................ 2,791,483 2,903,378 (111,895)
Combined car and truck market share......................... 14.4% 15.3% (0.9%)
- ------------------------------
(1) All retail sales and market share data include fleet sales.
------------------------------
Retail sales of cars for the Chrysler Group in the U.S. market for 2000
decreased 13% compared to 1999, while retail sales for the Chrysler Group in the
U.S. truck market for 2000 decreased 1% compared to 1999. The decrease in retail
sales and related market share of cars and trucks is primarily a result of
increased competition.
For a discussion of Chrysler Group's turnaround plan see "Introduction --
Turnaround Plan for the Chrysler Group" in "Item 4. Information on the Company."
COMMERCIAL VEHICLES
Revenues of the Commercial Vehicles segment rose 8% to [EURO]28.8 billion,
but unit sales of 549,000 were 1% lower than 1999. The change in total unit
sales from 1999 to 2000 consisted of a 10% increase in unit sales of vans
(249,300 units) and buses (49,200 units) offset by a 12% decrease in unit sales
of trucks (250,500 units). In 2000, revenues in Germany were 4% higher at
[EURO]7.3 billion while unit sales decreased 1% to 113,100 vehicles. In the rest
of the European Union, revenues were up 9% reaching [EURO]6.2 billion while unit
sales rose 4% to 158,900 units in 2000. This increase resulted primarily from
the success of Mercedes-Benz vans, especially in France, Spain and Switzerland.
In the European Union (including Germany), Commercial Vehicles maintained market
leadership in the category of vans between 2t and 6t GVW with a market share of
18%. In the category of trucks over 6t GVW, Commercial Vehicles maintained its
position as the market leader in Germany with a market share of 42%
42
compared to 45% in the previous year. Its market share for trucks above 6t GVW
in the European Union (excluding Germany) remained at 15%. With a combined
European Union market share of 26% in 2000 (1999: 25%), the Mercedes-Benz and
Setra bus brands improved their position in the European market.
Due to the appreciation of the dollar against the euro, revenues of the
Commercial Vehicles segment in the NAFTA region decreased only 1% to
[EURO]10.3 billion in 2000, while unit sales fell 20% to 153,700 units. Revenues
were [EURO]8.8 billion in the United States and [EURO]0.8 billion in Canada, a
decrease of 4% and 9%, respectively. Unit sales decreased 23% in both the United
States and Canada, primarily as a result of weakening economic conditions which
caused lower demand for trucks in the Class 8 heavy duty segment. In Mexico,
revenues jumped 87% to [EURO]0.7 billion and unit sales increased 44%.
Benefiting from a strong Brazilian market, Commercial Vehicles was able to sell
50,700 units in South America, a 14% increase over 1999. Revenues in South
America rose 28% to [EURO]1.7 billion.
In 2000, Commercial Vehicles contributed an operating profit of
[EURO]1.1 billion which was slightly better than 1999. The improvement was
primarily a result of overall favorable market conditions in the European Union,
Turkey, Mexico and Brazil, partially offset by difficult market conditions in
the United States and Canada, especially in the Class 8 heavy duty truck
segment.
SERVICES
The year-to-year comparability of revenues and operating profit for the
Services segment is significantly affected by the transaction involving debis
Systemhaus described on page 39.
In 2000, Services had revenues of [EURO]17.5 billion, a 36% improvement over
1999 ([EURO]12.9 billion). Revenues of Financial Services went up 51% to
[EURO]15.1 billion, contributing 86% of Services' total revenues in 2000
compared with 77% in the prior year. Financial Services processed new leasing
and finance contracts in 2000 with a total value of [EURO]56.8 billion, an
increase of 12% in new contract value compared to 1999. In 2000, Financial
Services managed a portfolio of finance receivables of [EURO]126.3 billion, a
27% increase over the 1999 portfolio of [EURO]99.2 billion. Revenues of IT
Services decreased to [EURO]2.4 billion from [EURO]2.9 billion in the prior
year. As a result of the disposition of DaimlerChrysler's controlling interest
in debis Systemhaus, revenues for 2000 only include the IT activities prior to
October 2000.
In 2000, Services' activities in the NAFTA region contributed
[EURO]10.6 billion or 61% of total revenues, a 67% increase over 1999. Services'
revenues generated in Germany were [EURO]4.1 billion or 24% of total revenues,
compared with [EURO]4.2 billion or 32% of total revenues in 1999. Revenues
originated in the European Union (excluding Germany) amounted to
[EURO]1.9 billion or 11% of total revenues.
Operating profit in the Services segment increased to [EURO]2.5 billion from
[EURO]2.0 billion in 1999. The 2000 operating profit of the Services segment
includes a gain of [EURO]2.3 billion resulting from the disposition of
DaimlerChrysler's controlling interest in debis Systemhaus, partially offset by
charges of [EURO]0.5 billion due to an impairment charge on the carrying values
of leased vehicles in the NAFTA and U.K. markets. Services' operating profit in
1999 included gains on the sales of debitel shares of [EURO]1.1 billion, offset
by charges of [EURO]0.1 billion relating to prior period securitization
transactions. Excluding these one-time effects in 2000 and 1999, Services'
operating profit declined to [EURO]0.6 billion from [EURO]1.0 billion in the
previous year. The decrease resulted principally from lower margins in Services'
operations in the NAFTA market due to declining residual values for leased
automobiles, higher costs of capital and more intense competition.
If resale prices of used vehicles continue to decline in the NAFTA and U.K.
markets, which declines in 2000 required Services to re-evaluate the
recoverability of the carrying values of its leased vehicles and resulted in the
impairment charge of [EURO]0.5 billion, management expects further negative
effects on future operating profit of the Services segment. To the extent that
sales incentives remain an integral part of sales promotion with the effect of
reducing new car prices, resale prices of used vehicles and, correspondingly,
the carrying value of Services' leased vehicles could experience further
downward pressure.
43
AEROSPACE
The year-to-year comparability of revenues and operating profit for the
Aerospace segment is significantly affected by the transaction involving
DaimlerChrysler Aerospace described on page 39.
Aerospace revenues fell 41% to [EURO]5.4 billion in 2000. The decrease
results from the disposition by DaimlerChrysler of most of its aerospace
activities in July 2000. Accordingly, revenues derived from these activities
were included in DaimlerChrysler's consolidated results only for the first half
of 2000. Revenues of MTU Aero Engines grew 21% to [EURO]2.1 billion in 2000,
mainly due to stronger demand for engines and commercial aircraft maintenance.
In 2000, Aerospace achieved an operating profit of [EURO]3.8 billion (1999:
[EURO]0.7 billion). The increase in operating profit is a result of the gain of
[EURO]3.3 billion from the exchange of the Group's controlling interest in
DaimlerChrysler Aerospace for a 33% interest in EADS. The operating activities
of all of DaimlerChrysler Aerospace for the first six months and of MTU Aero
Engines and EADS for the last six months contributed [EURO]0.5 billion to the
operating profit of 2000.
OTHER
In 2000, revenues of this segment increased 7% to [EURO]6.3 billion. The
increase was mainly due to increased sales in the Rail Systems, MTU/Diesel
Engines and Automotive Electronics business units.
The 2000 operating loss of the segment includes the Group's share of losses
from its equity investment in Mitsubishi Motors Corporation (34%).
1999 COMPARED WITH 1998
DAIMLERCHRYSLER GROUP
In 1999, Group revenues increased 14% from [EURO]131.8 billion to
[EURO]150.0 billion. The increase was primarily due to higher revenues in the
three automotive segments and to the full consolidation of Adtranz' 1999
financial results in DaimlerChrysler's consolidated financial statements
following its acquisition of the remaining outstanding shares of Adtranz from
ABB Asea Brown Boveri. Revenues of Mercedes-Benz Passenger Cars & smart rose 17%
to [EURO]38.1 billion and Chrysler Group revenues went up 14% to
[EURO]64.1 billion. Revenues of Commercial Vehicles reached [EURO]26.7 billion,
an improvement of 15% compared to 1998. The Rail Systems business unit
contributed [EURO]3.6 billion to Group revenues compared to [EURO]1.7 billion in
1998, when Adtranz was consolidated on a pro-rata basis reflecting
DaimlerChrysler's then 50% ownership interest.
In 1999, cost of sales reached [EURO]120.1 billion, an increase of 14%. Cost
of sales was higher in all segments and was commensurate with revenue
improvements achieved by the segments. Cost of sales as a percentage of revenues
was 80% in both 1999 and 1998.
Selling expenses were [EURO]9.9 billion in 1999 compared to
[EURO]8.5 billion in 1998, a 17% rise. General administrative expenses in 1999
were [EURO]5.1 billion, slightly less than in 1998 when they reached
[EURO]5.2 billion.
Research and development funded by the Group amounted to [EURO]5.7 billion
in 1999 compared to [EURO]5.0 billion in the previous year. In addition, the
Group undertook research and development projects for third party customers
funded by these customers (mainly the German government and ESA) in the amount
of [EURO]1.8 billion in 1999 (1998: [EURO]1.7 billion).
In 1999, DaimlerChrysler achieved an operating profit of [EURO]11.0 billion
compared to [EURO]8.6 billion in 1998. This 28% increase in operating profit was
considerably higher than the 14% expansion in revenues. Contributions to Group
operating profit by business segment are shown in the table on page 39. The 1999
operating profit includes gains from the sale of most of DaimlerChrysler's
investment in the telecommunications company debitel of [EURO]1.1 billion,
partially offset by charges for restructuring measures in the Rail Systems
business unit and other one-time items. After adjustment for one-time items
included in operating profit in both 1999 and 1998, operating
44
profit increased by 20% to [EURO]10.3 billion. These one-time items are
described in more detail in the discussion of the segment contributions below.
The growth in operating profit was largely attributable to higher business
volume in all segments, the market success of DaimlerChrysler's premium
passenger cars and light trucks, especially the Mercedes-Benz S-Class and the
Jeep Grand Cherokee, and more favorable exchange rates, primarily between the
euro and the dollar. The improvement in operating profit was also the result of
synergies achieved in the first year after the business combination, primarily
due to cost savings in procurement and supply, and the sales organization.
Group net income increased from [EURO]4.8 billion to [EURO]5.7 billion. This
was principally the result of expanded business volume and gains from the
divestment of the Telecom Services business, partially offset by lower financial
income, one-time tax effects and other one-time charges affecting operating
profit. Net income in 1998 was burdened by merger costs and a loss from the
early extinguishment of debt. Income before financial income, income taxes and
extraordinary items increased 27% to [EURO]9.3 billion. Financial results
decreased from [EURO]0.8 billion to [EURO]0.3 billion, mainly due to charges
from the mark-to-market valuation of derivative financial instruments which did
not qualify for hedge accounting, partially offset by higher gains on sales of
securities. Changes in German tax law that were adopted in 1999 reduced the
income tax rate applicable to corporations from previously 45% to 40%. While the
changes will result in future tax savings for DaimlerChrysler, they triggered a
current revaluation of the Group's deferred tax assets in 1999. This revaluation
combined with the effect of a broader tax base which included an additional tax
imposed on foreign dividend distributions resulted in a negative one-time effect
of [EURO]0.8 billion. Basic and diluted earnings per ordinary share (before
extraordinary items) were [EURO]5.09 and [EURO]5.06 in 1999, compared to
[EURO]5.16 and [EURO]5.04 in 1998, respectively. After extraordinary items,
basic and diluted earnings per ordinary share were [EURO]5.73 and [EURO]5.69 in
1999, significantly higher than in 1998 when they reached [EURO]5.03 and
[EURO]4.91, respectively.
MERCEDES-BENZ PASSENGER CARS & SMART
Revenues of Mercedes-Benz Passenger Cars & smart division rose 17% to
[EURO]38.1 billion. The increase was mainly the result of the very strong
performance of the new S-Class, the A-Class and the M-Class. Total unit sales
increased 17% from 922,800 cars in 1998 to an all-time high of 1,080,300 in
1999. Unit sales of the E-class were somewhat lower than in 1998, but recovered
in the second half of 1999 after the introduction of the updated model. Lower
unit sales were reported for the C-class, principally due to the planned
introduction of a completely new model during the year 2000.
At [EURO]14.5 billion, revenues from sales in Germany were 14% higher than
in 1998. Germany remains the most important market for the Mercedes-Benz
Passenger Cars & smart division with unit sales of 416,800 in 1999, 17% more
than in the prior year. The German market accounts for 39% of the division's
worldwide passenger car unit sales (1998: 38%). In the other European Union
member states, revenues of the Mercedes-Benz Passenger Cars & smart division
were 15% higher than in 1998, reaching [EURO]8.7 billion, while unit sales
increased 17% to 298,900 units. These increases were primarily due to the market
success of the division's products in all major European markets. Market
conditions were especially favorable in Italy and Spain. In the United States,
revenues amounted to [EURO]8.5 billion, 27% more than in 1998, while unit sales
improved 14% to 197,200 units, setting a record for the fourth consecutive year
for the highest sales volume ever achieved by the division in this market. This
significant increase was the result of continued strong demand and the
exceptional performance of the new S-class. Despite difficult market conditions,
revenues in Japan were 19% higher reaching [EURO]2.0 billion, while unit sales
increased by 9,300 to 49,500 vehicles.
Operating profit of the Mercedes-Benz Passenger Cars & smart division jumped
36% to [EURO]2.7 billion (1998: [EURO]2.0 billion). This increase was primarily
due to the record level of unit sales for the division coupled with the
favorable development of exchange rates, mainly between the euro and the dollar.
These beneficial effects were partially offset by higher expenses associated
with product adjustments and repositioning of the smart.
45
CHRYSLER GROUP
The Chrysler Group division achieved record revenues of [EURO]64.1 billion
compared with [EURO]56.4 billion for 1998. This increase in revenues reflects
increased unit sales, an improved product mix, higher vehicle pricing and more
favorable dollar to euro exchange rates, partially offset by higher sales
incentives.
In 1999, the Chrysler Group sold 3.2 million units, 4% more than the year
before. Worldwide unit sales increased as a result of the strong performance of
the new Jeep Grand Cherokee, the Dodge Durango and the full-size sedans
(Intrepid, LHS/300M), partially offset by lower unit sales of the mid-size
sedans (Breeze, Cirrus, Stratus) and Neons. In the NAFTA region, total sales
increased 5% to 3,052,000 units. Unit sales outside the NAFTA region dropped to
177,300 in 1999, a decrease of 10,900 units or 6%. This decline was primarily
caused by continuing economic difficulties in the South American markets.
The division's operating profit improved by 19%, climbing to
[EURO]5.1 billion in 1999 compared with [EURO]4.3 billion in 1998. This increase
resulted from increased unit sales, improvements in product mix, favorable
vehicle pricing, decreased warranty costs and favorable dollar to euro exchange
rates, partially offset by higher sales incentives, increased research and
development costs and higher depreciation due to an intensified capital
spending. Operating results were also burdened by a [EURO]139 million charge for
lump-sum retiree payments related to the 1999 UAW collective bargaining
agreement.
Revenues and operating profit of the Chrysler Group division derive
principally from the U.S. and Canadian automotive marketplaces. Retail industry
sales (including fleet sales) of new cars and trucks in the U.S. and Canada were
19.0 million units in 1999, compared with 17.4 million units in 1998, an
increase of 9%.
The U.S. and combined U.S. and Canada retail sales and market share data for
the Chrysler Group in 1999 and 1998 are set forth below:
YEAR ENDED DECEMBER 31,
----------------------------------
INCREASE/
1999 1998 (DECREASE)
--------- --------- ----------
U.S. RETAIL MARKET(1)
Car sales................................................... 745,275 739,217 6,058
Car market share............................................ 8.6% 9.1% (0.5%)
Truck sales (including minivans)............................ 1,893,286 1,770,794 122,492
Truck market share.......................................... 21.7% 22.6% (0.9%)
Combined car and truck sales................................ 2,638,561 2,510,011 128,550
Combined car and truck market share......................... 15.2% 15.7% (0.5%)
U.S. AND CANADA RETAIL MARKET(1)
Combined car and truck sales................................ 2,903,378 2,779,207 124,171
Combined car and truck market share......................... 15.3% 16.0% (0.7%)
- ------------------------------
(1) All retail sales and market share data include fleet sales.
------------------------------
Retail sales of cars in the U.S. market for 1999 increased 1% over 1998, but
market share decreased slightly due to increased competition and lower U.S.
sales of mid-size sedans and Neons, partially offset by higher sales of
full-size sedans. Retail sales in the U.S. truck market for 1999 increased 7%
over 1998, but market share declined slightly in part as a result of capacity
constraints in the growing and highly-competitive lower mid-utility and large
pick-up market segments. Increased retail sales of the Jeep Grand Cherokee and
Dodge Durango were partially offset by decreased sales of the Minivan and Dodge
Dakota.
COMMERCIAL VEHICLES
Revenues of the Commercial Vehicles division rose 15% to [EURO]26.7 billion
and unit sales grew 13% to 554,900 vehicles in 1999. These increases were due to
strong demand for trucks and buses, particularly in the NAFTA
46
region and to a lesser degree in the European Union. Revenues from sales in
Germany were 11% higher than in 1998 at [EURO]7.0 billion, while unit sales in
this market increased 7% in 1999 to 114,500 vehicles. Revenues derived from
other member states of the European Union were up 12%, reaching
[EURO]5.7 billion, while unit sales rose 9% to 152,600 units. In the European
Union (including Germany) the division maintained market leadership in the
category of vans between 2t and 6t GVW with a market share of 19% (1998: 18%).
In the category of trucks over 6t GVW the Commercial Vehicles division also
maintained its position as the market leader in Germany with a market share of
45%. In the European Union (excluding Germany), the division's market share for
trucks above 6t GVW remained unchanged at 15%.
Revenues of the Commercial Vehicles division in the NAFTA region increased
50% to [EURO]10.4 billion in 1999 while unit sales jumped 54% to 193,000 units.
This growth was primarily due to continued favorable market conditions in the
United States. The vehicles of the new truck brand, Sterling, and the school bus
manufacturer, Thomas Built Buses, contributed to revenues for the entire year
for the first time in 1999. Revenues in the South American market declined 35%
to [EURO]1.3 billion, while unit sales experienced a decrease of 23% to 44,600
vehicles due to difficult economic conditions in this market.
In 1999, the Commercial Vehicles division contributed an operating profit of
[EURO]1,067 million (1998: [EURO]946 million), mainly resulting from the
continuing expansion of the division's business volume in the NAFTA region and
the European Union and more favorable exchange rates. This 13% improvement over
1998 continues the favorable earnings trend which this division has experienced
over the past three years.
SERVICES
In 1999, the Services division recorded revenues of [EURO]12.9 billion, a
13% improvement over 1998 ([EURO]11.4 billion). Financial Services increased
revenues by 29% to [EURO]10.0 billion, representing 77% of total revenues
achieved by Services. Overall, Financial Services processed approximately
1,993,000 new leasing and finance contracts in 1999 with a total value of
[EURO]50.7 billion, an increase of 44% in new contract value compared to 1998.
In 1999, Financial Services managed a portfolio of finance receivables of
[EURO]99.2 billion, a 42% increase over 1998 ([EURO]69.9 billion). Revenues of
IT Services grew from [EURO]2.2 billion to [EURO]2.9 billion. IT Services'
revenues from goods and services provided to customers outside the Group
accounted for 75% of total revenues in 1999 (1998: 69%). In 1999,
DaimlerChrysler divested its Telecom Services business by selling most of its
investment in the telecommunications company debitel. Excluding the effects of
this sale, 1999 revenues represent a 29% improvement over comparable 1998
revenues.
In 1999, Services generated [EURO]4.2 billion or 32% of its total revenues
in Germany (1998: [EURO]4.6 billion or 40%). The decline is principally caused
by the withdrawal from Telecom Services. The division's leasing and sales
financing business continued to perform well in the NAFTA region, which
contributed revenues of [EURO]6.4 billion in 1999 (49% of total revenues), and
in the European Union (excluding Germany), which contributed [EURO]1.5 billion
or 12% of total revenues.
Services achieved an operating profit of [EURO]2,039 million in 1999
compared with [EURO]985 million in the previous year. The 1999 result includes
the gains of [EURO]1,140 million from the sale of debitel shares, partially
offset by lower gains on sales of receivables and charges of [EURO]127 million
relating to prior period securitization transactions.
AEROSPACE
Aerospace revenues rose 5% to [EURO]9.2 billion in 1999 compared to
[EURO]8.8 billion in 1998. The increase was predominantly due to the ongoing
success of the Airbus program, which resulted in higher shipments from
DaimlerChrysler Aerospace Airbus to Airbus Industrie.
As in previous years, Commercial Aircraft/Helicopters was the largest
contributor to Aerospace revenues in 1999, with a share of 43% (1998: 40%). The
revenues of this business unit climbed from [EURO]3.5 billion in 1998 to
[EURO]3.9 billion in 1999 primarily as a result of increased deliveries of
Airbus aircraft and components. Aero Engines revenues increased from
[EURO]1,655 million in 1998 to [EURO]1,740 million in 1999, mainly because of
growing
47
maintenance activities. Defense and Civil Systems revenues were flat at
[EURO]1.7 billion. Military Aircraft recorded revenues of [EURO]848 million in
1999 (1998: [EURO]765 million). This increase was primarily due to the
Eurofighter and Tornado programs.
The Aerospace division derived 29% ([EURO]2.7 billion) of its total revenues
in 1999 from the German market, compared to 30% in 1998.
In 1999, incoming orders at the Aerospace segment decreased to
[EURO]9.9 billion (1998: [EURO]13.9 billion). In contrast to 1998, the Military
Aircraft and Aero Engines businesses did not benefit substantially from orders
received in connection with the Eurofighter/Typhoon program. The Defense and
Civil Systems business unit suffered from continued budget constraints in
Germany in 1999. Incoming orders at Commercial Aircraft/ Helicopters were
positively affected by orders for the delivery of 80 Tiger helicopters each to
France and Germany. New orders for Airbus aircraft declined to 476 in 1999,
compared to 556 aircraft in 1998. There were 46 order cancellations in 1999
(1998: 27) and Airbus Industrie delivered 294 aircraft versus 229 in 1998. At
December 31, 1999, the Airbus Industrie firm order backlog(1) was 1,445
aircraft, 10% higher than at the end of 1998 (1,309 aircraft).
Research and development expenditures decreased 2% to [EURO]2,005 million in
1999. Of this amount, [EURO]458 million was attributable to projects funded by
the Group (1998: [EURO]367 million). In 1999, 77% of Aerospace's total research
and development expenditures was customer-funded (1998: 82%).
In 1999, the Aerospace division achieved an operating profit of
[EURO]730 million (1998: [EURO]623 million). The increase resulted primarily
from expanded business volume in most areas, further cost reductions and the
continued strength of the dollar in relation to the euro. Due to existing
currency-hedging, however, the division was not able to take full advantage of
the exchange rate improvement. The operating result in 1998 was burdened by an
expense of [EURO]229 million in connection with the repayment of DaimlerChrysler
Aerospace Airbus' obligations to the Federal Republic of Germany. This repayment
resulted in the complete discharge of all remaining obligations relating to the
acquisition of DaimlerChrysler Aerospace Airbus in 1989. In contrast, the
operating profit of 1998 included gains from the sales of businesses.
OTHER
Revenues of this segment increased to [EURO]5.9 billion in 1999 from
[EURO]3.5 billion in the previous year. The increase was primarily the result of
the full consolidation of Adtranz in this segment for the first time following
the acquisition of the remaining 50% interest previously held by ABB Asea Brown
Boveri. The business unit Rail Systems comprising Adtranz contributed revenues
of [EURO]3.6 billion in 1999 compared to [EURO]1.7 billion in 1998, when Adtranz
was consolidated on a pro-rata basis reflecting the 50% ownership interest
DaimlerChrysler previously held.
In 1999, the segment contributed an operating loss of [EURO]399 million
compared to a loss of [EURO]130 million in 1998. This loss was caused by a
substantial negative contribution of Rail Systems resulting from the full
consolidation of Adtranz. Operating improvements achieved at Adtranz were
partially offset by charges of [EURO]178 million relating to restructuring
measures initiated to improve Adtranz' future competitive position. The
remaining operating businesses of the segment were able to increase their
contribution to Group operating profit. The 1998 results were positively
affected by gains from the sale of the Group's semiconductor business and two
real estate project companies.
- --------------------------
(1) Purchase options, announced orders for which definitive contracts have not
been executed and orders from customers which have filed for bankruptcy are
excluded from firm order backlog.
48
LIQUIDITY AND CAPITAL RESOURCES
In 2000, 1999 and 1998, DaimlerChrysler utilized funds from operations and
borrowings to finance capital expenditures and the continuing expansion of its
financial services activities. The principal reason for the borrowings was the
growing lease and sales financing business which is typically financed with a
high proportion of debt.
The Group's cash and cash equivalents as of December 31, 2000, 1999 and 1998
amounted to [EURO]7.1 billion, [EURO]9.1 billion and [EURO]6.6 billion. Cash and
cash equivalents are primarily held in U.S. dollars (65%) and euros (28%). Cash
differs from the liquidity of the Group which also includes securities.
Liquidity was [EURO]12.5 billion at December 31, 2000 compared to
[EURO]18.2 billion at the end of 1999 and [EURO]19.1 billion at the end of 1998.
It is primarily held in U.S. dollars (48%) and euros (43%). As a percentage of
total assets, liquidity was 6.3% at December 31, 2000 compared to 10.4% at the
end of 1999. See Notes 18 through 20 to the Consolidated Financial Statements.
In the fourth quarter of 1999, DaimlerChrysler established the
"DaimlerChrysler Pension Trust" to provide for future pension benefit payments
in Germany. DaimlerChrysler transferred securities in the amount of
[EURO]4.1 billion to the pension trust, resulting in the reduction of accrued
pension liabilities. In 2000, DaimlerChrysler contributed an additional
[EURO]1.4 billion of cash and securities to the pension trust. The establishment
of the DaimlerChrysler Pension Trust and the related contributions are not
expected to have a material effect on the Group's net income or its segments'
reported operating profit in future periods. See Note 24 to the Consolidated
Financial Statements.
Cash provided by operating activities decreased to [EURO]16.0 billion in
2000 from [EURO]18.0 billion in 1999 and [EURO]16.7 billion in 1998, mainly
resulting from a decreased contribution of the Chrysler Group and an increase in
working capital.
Another source of cash was provided by the Group's financing activities. Net
cash provided by DaimlerChrysler's financial liabilities, including commercial
paper borrowings, was [EURO]16.9 billion in 2000 compared to [EURO]18.1 billion
in 1999 and [EURO]7.9 billion in 1998. Group financial liabilities were
[EURO]84.8 billion at December 31, 2000 (1999: [EURO]64.5 billion), of which
[EURO]35.8 billion were due within one year (1999: [EURO]36.7 billion). The 2000
increase in financial liabilities primarily resulted from cash requirements of
the lease and sales financing business and changes in exchange rates, especially
the euro/dollar rate. DaimlerChrysler uses a variety of short- and long-term
financial instruments, principally notes/bonds (2000: [EURO]48.9 billion; 1999:
[EURO]29.3 billion), commercial paper (2000: [EURO]19.9 billion; 1999:
[EURO]20.9 billion) and borrowings from financial institutions (2000:
[EURO]13.1 billion; 1999: [EURO]11.3 billion). At year-end 2000, financial
liabilities were primarily denominated in U.S. dollars (71%), euros and euro
zone currencies (13%) and Canadian dollars (6%). In general, borrowings by
DaimlerChrysler subsidiaries are in the functional currency of those
subsidiaries. The aggregate borrowing rate of DaimlerChrysler's outstanding
indebtedness was 6.3% for 2000. Approximately 36% of the Group's financial
liabilities was at fixed rates. Total Group debt was 42.5% of total
stockholders' equity and liabilities in 2000 compared to 36.9% in 1999. See
Note 25 for the amounts, maturities and interest rates of the financial
liabilities and "Significant Changes" in "Item 8. Financial Information."
Financial liabilities of the Group's financial services entities on a
stand-alone basis were [EURO]75.3 billion in 2000 and [EURO]60.1 billion in
1999, which include financial liabilities to other members of the Group. The
intercompany amounts are eliminated upon consolidation into the Group financial
statements. Financial liabilities of the financial services entities closely
corresponded to the assets being financed (equipment on operating leases and
receivables from financial services) which aggregated [EURO]79.3 billion in 2000
and [EURO]63.4 billion in 1999. Sales of receivables are still a significant
source of funding for the Group, principally in the United States. Net proceeds
from the sales of automotive retail receivables were [EURO]63.6 billion in 2000
compared to [EURO]51.8 billion in 1999 and [EURO]41.0 billion in 1998.
Net cash used for investing activities in 2000 was [EURO]32.7 billion as
compared to [EURO]32.1 billion in 1999 (1998: [EURO]23.4 billion). The Group
used substantial amounts of cash for its growing lease and sales financing
activities, net
49
of disposals and repayments (2000: [EURO]19.4 billion; 1999:
[EURO]21.1 billion; 1998: [EURO]11.8 billion), and the purchase of fixed assets,
principally property, plant and equipment (2000: [EURO]10.3 billion; 1999:
[EURO]9.5 billion; 1998: [EURO]8.2 billion). Acquisitions of businesses and
strategic equity investments, net of disposals, increased to [EURO]4.6 billion
in 2000 compared to [EURO](47) million in 1999 and [EURO]0.2 billion in 1998,
primarily resulting from the acquisition of Western Star Trucks Holdings Ltd.
and Detroit Diesel Corporation and investments in Mitsubishi Motors Corporation
and Hyundai Motor Company. See also Note 5 to the Consolidated Financial
Statements.
At December 31, 2000 and 1999, the Group had credit lines (short- and
long-term) available of [EURO]40.9 billion and [EURO]34.6 billion, respectively,
of which [EURO]28.0 billion and [EURO]23.9 billion, respectively, were unused as
of such dates. In 2000, the weighted average interest rate payable under
DaimlerChrysler's lines of credit was 5.6%. The credit lines include an
$18 billion revolving credit facility with a syndicate of international banks.
The credit agreement is comprised of a multi-currency revolving credit facility
which allows DaimlerChrysler AG and several subsidiaries to borrow up to
$5 billion until 2006 and a revolving credit facility which allows
DaimlerChrysler North America Holding Corporation, a wholly-owned subsidiary of
DaimlerChrysler AG, to borrow up to $13 billion ($6 billion until 2004 and
$7 billion until 2001). The $13 billion revolving credit facility serves as a
back-up for commercial paper drawings.
The Group can also rely on commercial paper programs denominated in U.S.
dollars, Canadian dollars, Portuguese escudos and Australian dollars and on a
multi-currency commercial paper program established in 1999. In the United
States, DaimlerChrysler North America Holding Corporation has a $30.2 billion
debt securities shelf registration filed with the U.S. Securities and Exchange
Commission, of which $30.2 billion remained unused as of February 16, 2001.
Commercial paper issued by DaimlerChrysler AG and several of its
subsidiaries is rated "A-1" by Standard & Poor's Ratings Services and "Prime-1"
by Moody's Investors Service. On December 1, 2000, Moody's Investors Service
lowered its ratings for senior unsecured long-term debt issued or guaranteed by
DaimlerChrysler AG from A1 to A2 and announced that such ratings remain on
review for further possible downgrade. On December 4, 2000, Standard & Poor's
Ratings Services lowered its ratings for senior unsecured long-term debt issued
or guaranteed by DaimlerChrysler AG from A+ to A and announced that the current
outlook in respect of such ratings is negative. The downgrades primarily
resulted from the decline in earnings at the Chrysler Group, the need to
comprehensively restructure this segment, and lower expectations for vehicle
unit sales in North America. Further downgrades by the ratings agencies would
increase DaimlerChrysler's cost of capital and could negatively affect its
continuing expansion, particularly in the lease and sales financing business
which is typically financed with a high proportion of debt.
Another source of funds available to the Group is through the issuance of
DaimlerChrysler ordinary shares and bonds convertible into the Group's ordinary
shares. The Board of Management is authorized, subject to the prior approval of
the Supervisory Board, to issue new ordinary shares for cash up to an aggregate
nominal amount of [EURO]256 million by April 30, 2003. Additionally, the Board
of Management is authorized to issue convertible bonds and notes with
appertaining warrants in a nominal volume of up to [EURO]15 billion and with a
term of up to 20 years by April 18, 2005. The convertible bonds and notes with
appertaining warrants would grant to the holders or creditors option or
conversion rights for new shares in DaimlerChrysler in an amount not to exceed
[EURO]300 million of capital stock.
DaimlerChrysler's policy is to maintain a high degree of flexibility in its
funding process by using a broad variety of financial instruments and currencies
depending on market conditions. The Group uses instruments of modern portfolio
management in allocating part of its liquidity in equity and interest-bearing
securities. DaimlerChrysler employs a variety of derivative financial
instruments for hedging purposes. Swaps, swaptions, forward rate agreements,
futures, caps and floors are primarily used to manage the risks arising from
changes in interest rates. The principal derivative financial instruments
employed by the Group to cover foreign currency exposures are forward foreign
exchange contracts and currency options. In accordance with the guidelines
50
established by the Bank for International Settlements, Corporate Treasury is
separated organizationally, physically and in its technical systems from the
administrative functions of settlement, financial accounting and controlling.
See "Item 11. Quantitative and Qualitative Disclosures About Market Risk."
In recent years, DaimlerChrysler's sources of liquidity have primarily been
operations, funds from capital markets and sales of automotive retail
receivables. Although DaimlerChrysler's liquidity decreased in 2000 and 1999,
management of DaimlerChrysler believes the funding available to it from these
and other sources will be sufficient to satisfy its working capital and debt
service requirements for the foreseeable future. Management also believes that
the Group's liquidity and capital resources give it adequate flexibility to
accelerate or decelerate the pace of planned capital spending programs as
appropriate to address shorter term business conditions. The Group's capital
requirements are primarily dependent on management's business plans regarding
the levels and timing of capital expenditures and investments. Subject to
developments affecting the Group which cannot be predicted or controlled,
management currently intends to maintain Group capital expenditure levels
generally in the range of the past three years. DaimlerChrysler is not currently
subject to any commitment for capital expenditures which individually is
material to the Group.
RESEARCH AND DEVELOPMENT
Innovation in products and production systems and shortening lead times in
research and development are essential for the DaimlerChrysler Group to be
competitive in its principal markets and to secure technological leadership.
The Research & Technology department of DaimlerChrysler maintains an
"Integrated Innovations and Technology Management" process as a systematic and
comprehensive approach for formulating a joint technology strategy together with
the Group's business units. The mission of the Research & Technology department
is to function as a hub for new technologies and concepts in order to support
and secure the Group's leading technological position. The Research & Technology
department works closely with the business units on projects commissioned by the
specific units. Also, a number of research projects funded on the corporate
level address the need for long-term research with a Group-wide scope.
DaimlerChrysler Group research projects are conducted in the following
areas: internal combustion engines and power trains; alternative propulsion
systems; systems, structures and modules for vehicles, aerospace and defense;
cabin interior design, comfort and safety; electronic control systems for
vehicles, aerospace and defense; information, communication and traffic systems;
materials, manufacturing processes and design principles; markets, customers and
future business environment; and new services.
In 2000, DaimlerChrysler presented the NECAR 5, the newest generation of its
zero-emission concept vehicle based on the Mercedes-Benz A-Class, and the
Jeep-Registered Trademark- Commander 2 concept car. Both the NECAR 5 and the
Jeep-Registered Trademark- Commander 2 are fuel cell cars that run on methanol
which is converted into hydrogen by an onboard reformer. DaimlerChrysler expects
to introduce its first commercial fuel cell car in 2004. In addition,
DaimlerChrysler develops fuel cell buses and plans to deliver its first
commercial fuel cell bus in 2002.
DaimlerChrysler is a partner in the "California Fuel Cell Partnership,"
together with other automotive manufacturers, suppliers, oil companies and U.S.
governmental organizations. This project is a collaborative effort to test fuel
cell vehicles, gain experience in infrastructure topics, raise public perception
for the new technology and investigate the path for commercialization.
DaimlerChrysler, Ford Motor Company and Ballard Power Systems Inc. are also
parties to a joint venture company formed to develop fuel cell technology for
automotive applications. DaimlerChrysler holds an equity interest of
approximately 19% in Ballard.
In 2000, DaimlerChrysler presented two prototypes with hybrid drive systems:
the "HyPer" which is based on the A-Class and features good acceleration and
four-wheel drive capability, and the Dodge Ram which provides electric current
to supply power for tools or recreational equipment when it is not moving.
51
Following the vision of "accident-free driving," DaimlerChrysler introduced
a lane assistant system for commercial vehicles in 2000. This system warns the
driver of unintentional lane changes with a rumble-strip sound of the sort
caused by the marker bumps at highway construction sites. In addition,
DaimlerChrysler is working on a brake system that acts as an "electronic crumple
zone" by using radar to determine the distance between a truck and a leading
vehicle.
Through cooperations with world-renowned research institutes and exchange
programs for scientists and employees, DaimlerChrysler actively participates in
the international exchange of new ideas and concepts. DaimlerChrysler maintains
a research and technology center in Palo Alto, California, a vehicle systems
technology center in Portland, Oregon, a research center for information and
communication technology in Bangalore, India, and a joint venture with the
Shanghai Institute of Metallurgy. DaimlerChrysler has established internal
research audit procedures to ensure the quality, efficiency and effectiveness of
its research programs.
In 2000, the DaimlerChrysler Group spent a total of [EURO]7.4 billion on
research and development (1999: [EURO]7.6 billion; 1998: [EURO]6.7 billion).
Research and development costs (including costs reimbursed by third parties) as
a percentage of revenues was 4.6% in 2000. Research performed for and funded by
third parties, which occurred primarily in the Aerospace segment, accounted for
[EURO]1.1 billion (1999: [EURO]1.8 billion; 1998: [EURO]1.7 billion).
Approximately 28,000 people are employed worldwide in the research, development
and testing sectors of DaimlerChrysler.
The following table sets forth the research and development expenditures
funded by the Group and expenditures funded by third parties, principally the
German government and ESA:
YEAR ENDED DECEMBER 31,
------------------------------
2000(1) 1999 1998
-------- -------- --------
([EURO] IN MILLIONS)
Research and development
Group funded projects..................................... 6,337 5,737 4,971
Third party projects...................................... 1,058 1,838 1,722
----- ----- -----
Total................................................... 7,395 7,575 6,693
===== ===== =====
- ------------------------------
(1) Research and development expenditures relating to the aerospace activities
disposed of in July 2000 are only included for the first half of 2000. See
"Description of Business Segments -- Aerospace" in "Item 4. Information on
the Company."
OUTLOOK
ECONOMIC AND MARKET CONDITIONS
DaimlerChrysler expects the global economy to expand by more than 3%
annually during the 2001-2003 planning period, with generally satisfactory
macroeconomic conditions in the Group's most important markets. Although the
economies of North America and Western Europe are likely to weaken in 2001 in
comparison to their above-average growth rates in 2000, moderate growth is
expected in the Japanese economy and high growth rates are expected in the
emerging markets of Asia, in South America and in Eastern Europe during this
period.
Automotive unit sales should continue at relatively high levels through
2003, despite an anticipated decrease in demand in North America compared to
record level unit sales in 1999 and 2000. Unit sales are expected to stabilize
at current high levels in Western Europe, and to increase significantly in Asia
and South America. Despite high unit sales worldwide, competition in all market
segments is likely to intensify as a result of increased pressure on costs. Such
pressure, due in part to excess global capacity and shorter product life cycles,
is expected to lead to further consolidation within the industry.
REVENUES
DaimlerChrysler expects a decline in revenues to approximately
[EURO]140 billion in 2001 as a result of the disposition of several business
units, weakening demand in the U.S. automotive market, which will particularly
52
affect the Chrysler Group and Freightliner, and a strengthening of the euro
against the U.S. dollar. Revenue projections for 2001 reflect the disposition of
DaimlerChrysler's controlling interest in debis Systemhaus and the exchange of
its controlling interest in DaimlerChrysler Aerospace for a 33% equity interest
in EADS in 2000, as well as the pending sale of Adtranz, which is expected to be
completed in the first half of 2001. Revenues in 2000 (which include these units
prior to disposition and benefited from the depreciation of the euro in 2000)
were [EURO]162 billion. Assuming moderate appreciation of the euro against the
U.S. dollar, the British pound and the Japanese yen, and increased sales in
Asia, South America and Eastern Europe, DaimlerChrysler anticipates revenues of
approximately [EURO]148 billion by 2003.
BUSINESS SEGMENTS
MERCEDES-BENZ PASSENGER CARS & SMART. Mercedes-Benz Passenger Cars & smart
plans to strengthen its market position worldwide by expanding its product
range. In 2001, it will supplement the new C-Class sedan with a newly redesigned
station wagon and a new sports coupe, and will introduce a new SL roadster
model. New products scheduled for 2002 include the new E-Class and the Maybach
luxury sedan. In the mid-term, Mercedes-Benz Passenger Cars & smart plans to
selectively expand the smart product line, including the addition of the Z car,
a four-seater model to be developed jointly with Mitsubishi Motors Corporation.
CHRYSLER GROUP. The Chrysler Group expects to position itself for
profitable growth in the U.S. automotive market by adjusting its cost structure,
workforce and production capacity, while maintaining its product development
program. See "Introduction -- Turnaround Plan for the Chrysler Group" and
"Description of Business Segments -- Chrysler Group" in "Item 4. Information on
the Company."
COMMERCIAL VEHICLES. Commercial Vehicles plans to continue its
international expansion with the new Vaneo compact van and the launch of the
Sprinter under the Freightliner brand in North America in 2001. Vehicle-related
services are also expected to contribute to this segment's revenue potential.
Long-term cost advantages and new growth opportunities should arise in the
component business through the combination of the Powertrain business unit,
MTU/Diesel Engines and Detroit Diesel Corporation in a new business unit called
DaimlerChrysler Powersystems.
SERVICES. Services intends to increase its focus on providing services
along the automotive value chain and supporting the sales of the Group's
products by offering innovative financial services. Long-term growth potential
is expected from the DaimlerChrysler Bank which plans to offer an expanded range
of financial services in Germany. Services also intends to achieve a significant
profit improvement in its leasing business throughout the planning period with a
modified leasing strategy in North America that aims at a more balanced market
penetration for certain models while promoting the sale of used vehicles by
means of innovative marketing measures.
In order to support planned future growth and improve financial results,
Mitsubishi Motors Corporation intends to initiate cost reduction measures
involving adjustments to its production capacity and workforce. These
adjustments are expected to result in restructuring charges at Mitsubishi Motors
which would negatively affect DaimlerChrysler's future operating results.
CAPITAL EXPENDITURES; RESEARCH AND DEVELOPMENT
DaimlerChrysler plans to spend approximately [EURO]43 billion on investments
in property, plant and equipment and research and development in the period
2001-2003, primarily for the development and production preparation of about 60
new passenger car and commercial vehicle models, which are scheduled to be
introduced over the period ending in 2005.
GLOBAL NETWORKS
It is DaimlerChrysler's goal to be the world's premier and most profitable
automobile manufacturer. DaimlerChrysler has laid the foundations for achieving
this goal with the extension of its global presence, its
53
alliance with Mitsubishi Motors and its stake in Hyundai Motor. DaimlerChrysler
is now represented in all of the world's key automobile markets. It has strong
brands with which it can offer custom-tailored products worldwide in almost all
market segments. DaimlerChrysler intends to realize its full potential, optimize
its product portfolio and improve its market penetration worldwide. To achieve
this, it plans to utilize the opportunities of e-business more intensively to
redesign its internal processes and its relations with customers and suppliers.
FORWARD-LOOKING INFORMATION
The Outlook section and other sections in this Annual Report contain
forward-looking statements based on beliefs of DaimlerChrysler management. The
words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan,"
"project," and "should" identify forward-looking statements. Such statements
reflect the current views and assumptions of DaimlerChrysler regarding the
future and are subject to risks and uncertainties. Many factors could cause
actual results to differ materially from those expressed or implied by such
forward-looking statements, including, among others, changes in general economic
and business conditions, changes in currency exchange rates and interest rates,
introduction of competing products by other companies, lack of acceptance of new
products or services by the Group's targeted customers, inability to meet
efficiency and cost reduction objectives and changes in business strategy. See
also "Risk Factors" in "Item 3. Key Information." DaimlerChrysler does not
intend or assume any obligation to update these forward-looking statements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
In accordance with the German Stock Corporation Law (AKTIENGESETZ),
DaimlerChrysler AG has a Supervisory Board (AUFSICHTSRAT) and a Board of
Management (VORSTAND). The two Boards are separate and no individual may
simultaneously be a member of both Boards. The following information is included
in respect of all members of DaimlerChrysler AG's Supervisory Board and its
Board of Management.
SUPERVISORY BOARD
Under the German Stock Corporation Law, the German Co-determination Law
(MITBESTIMMUNGSGESETZ) and the Memorandum and Articles of Association of
DaimlerChrysler AG, the Supervisory Board of DaimlerChrysler AG consists of
twenty members. The principal function of the Supervisory Board is to appoint
and supervise the Board of Management and to approve mid-term planning and
matters not in the ordinary course of business that are of fundamental
importance.
The stockholders elect ten members at the annual general meeting and the
employees elect the remaining ten members. The term of a Supervisory Board
member expires at the end of the general meeting of stockholders in which the
stockholders discharge Supervisory Board members for the fourth fiscal year
following the year in which the member was elected. There is no compulsory
retirement age for members of the Supervisory Board.
Any member elected by the stockholders in a general meeting may be removed
by a majority of the votes cast by the stockholders in a general meeting. Any
member of the Supervisory Board elected by the employees may be removed by
three-quarters of the votes cast by the relevant class of employees. Under
normal circumstances the Supervisory Board acts by simple majority vote and the
Chairman, who is always a representative of the stockholders, has the deciding
vote in case of any deadlock.
All of the current stockholder representatives on the Supervisory Board were
elected by the stockholders at the annual general meeting held on May 18, 1999.
The current employee representatives were appointed by a court pursuant to
Section 104 of the German Stock Corporation Law. In October 2000, Mr. Kuda and
Mr. Schiller resigned from their positions as members of the Supervisory Board.
The district court in Stuttgart appointed Mr. Roder and Mr. Schwaab as their
successors representing the employees. Mr. Browne and Mr. Allen have announced
their intention to resign from the Supervisory Board effective at the end of the
annual general meeting of stockholders to be held on April 11, 2001. Mr. Earl G.
Graves, Chairman and Chief Executive Officer of Earl G.
54
Graves, Ltd. and a director of Chrysler Corporation prior to its merger with
Daimler-Benz, and Prof. Victor Halberstadt, Chair of Public Economics at Leiden
University in the Netherlands and Chairman of the International Advisory Board
of DaimlerChrysler, have been proposed as successor candidates.
The following table shows the current members of the Supervisory Board,
their ages as of February 26, 2001, the year in which they were first elected or
appointed, their principal occupation and their supervisory board
memberships/directorships. Employee representatives are identified by an
asterisk.
Hilmar Kopper, Age: 65
Chairman First elected: 1998 (Daimler-Benz AG: 1990)
Principal Occupation: Chairman of the Supervisory Board of
Deutsche Bank AG
Supervisory Board
Memberships/
Directorships: Akzo-Nobel N.V., Bayer AG, Solvay S.A.,
Xerox Corp., Unilever N.V.
Erich Klemm*, Age: 46
Deputy Chairman First elected: 1998 (Daimler-Benz AG: 1988)
Principal Occupation: Chairman of the Corporate Works Council,
DaimlerChrysler AG and DaimlerChrysler Group
Robert E. Allen Age: 66
First elected: 1998 (Chrysler Corporation: 1994)
Principal Occupation: Retired Chairman of the Board and Chief
Executive Officer of AT&T Corp.
Supervisory Board
Memberships/
Directorships: Bristol-Myers Squibb Co., PepsiCo
Willi Boehm* Age: 61
First elected: 1998 (Daimler-Benz AG: 1993)
Principal Occupation: Senior Manager Wage Accounting, Member of
the Works Council, Woerth Plant,
DaimlerChrysler AG
Sir John Browne Age: 53
First elected: 1998 (Daimler-Benz AG: 1998)
Principal Occupation: Group Chief Executive of BP Amoco p.l.c.
Supervisory Board
Memberships/
Directorships: Intel Corporation, Goldman Sachs Inc.
Manfred Goebels* Age: 59
First elected: 1998 (Daimler-Benz AG: 1993)
Principal Occupation: Director, Service and Mobility Concept;
Chairman of the Management Representative
Committee, DaimlerChrysler Group
Robert J. Lanigan Age: 72
First elected: 1998 (Chrysler Corporation: 1984)
Principal Occupation: Chairman Emeritus of Owens-Illinois, Inc.;
Founder Partner, Palladium Equity Partners
Supervisory Board
Memberships/
Directorships: IMS Health, Owens-Illinois, Inc.
Helmut Lense* Age: 49
First elected: 1998 (Daimler-Benz AG: 1993)
Principal Occupation: Chairman of the Works Council,
Untertuerkheim Plant, DaimlerChrysler AG
55
Peter A. Magowan Age: 58
First elected: 1998 (Chrysler Corporation: 1986)
Principal Occupation: President of San Francisco Giants
Supervisory Board
Memberships/
Directorships: Safeway Inc., Caterpillar Inc.
Gerd Rheude* Age: 55
First elected: 1999
Principal Occupation: Chairman of the Works Council, Woerth Plant,
DaimlerChrysler AG
Wolf Juergen Roeder* Age: 53
First elected: 2000
Principal Occupation: Member of the Executive Council, German
Metalworkers' Union
Supervisory Board
Memberships/
Directorships: Robert Bosch GmbH, AOK Baden-Wuerttemberg
Dr. rer. pol. Age: 62
Manfred Schneider First elected: 1998 (Daimler-Benz AG: 1993)
Principal Occupation: Chairman of the Board of Management of Bayer
Supervisory Board AG
Memberships/
Directorships: Allianz AG, Metro AG, RWE AG
Peter Schoenfelder* Age: 51
First elected: 1998 (Daimler-Benz AG: 1990)
Principal Occupation: Chairman of the Works Council, Augsburg
Plant, EADS Deutschland GmbH
Stefan Schwaab* Age: 48
First elected: 2000
Principal Occupation: Vice Chairman of the Works Council, Gaggenau
Plant, DaimlerChrysler AG
G. Richard Thoman Age: 56
First elected: 1998 (Chrysler Corporation: 1998)
Principal Occupation: Former President and Chief Executive Officer
of Xerox Corporation, Senior Advisor to
Evercore Partners
Supervisory Board
Memberships/
Directorships: Union Bancaire Privee
Bernhard Walter Age: 58
First elected: 1998 (Daimler-Benz AG: 1998)
Principal Occupation: Former Chairman of the Board of Managing
Directors of Dresdner Bank AG
Supervisory Board
Memberships/
Directorships: Bilfinger + Berger Bauaktiengesellschaft,
Deutsche Hyp Deutsche Hypothekenbank
Frankfurt-Hamburg AG, Deutsche Telekom AG,
Heidelberger Zement AG, Henkel KGaA, KG
Allgemeine Leasing GmbH & Co., mg
technologies ag, Staatliche Porzellan-
Manufaktur Meissen GmbH, Thyssen Krupp AG
Lynton R. Wilson Age: 60
First elected: 1998 (Chrysler Corporation: 1994)
Principal Occupation: Chairman of the Board of CAE Inc.
Supervisory Board
Memberships/
Directorships: Imperial Oil Limited, Ontario Power
Generation Inc., Nortel Networks Corp.,
DaimlerChrysler Canada Inc., J.P. Morgan &
Co. (International Council)
56
Dr.-Ing. Mark Woessner Age: 62
First elected: 1998 (Daimler-Benz AG: 1998)
Principal Occupation: Former CEO and Chairman of the Supervisory
Board of Bertelsmann AG
Supervisory Board
Memberships/
Directorships: eCircle GmbH, thorborgnet GmbH & Co. KGaA
i.G.
Bernhard Wurl* Age: 56
First elected: 1998 (Daimler-Benz AG: 1979)
Principal Occupation: Head of Department reporting to the
Executive Council, German Metalworkers'
Union
Supervisory Board
Memberships/
Directorships: Deutsche Babcock AG
Stephen P. Yokich* Age: 65
First elected: 1998
Principal Occupation President of International Union United
Automobile, Aerospace and Agricultural
Implement Workers of America (UAW)
Supervisory Board:
Memberships/
Directorships: Blue Cross Blue Shield of Michigan (BCBSM)
The Supervisory Board maintains the following standing committees:
- The PRESIDENTIAL COMMITTEE is responsible for deciding the terms of the
service contracts and other contractual arrangements between
DaimlerChrysler AG and members of the Board of Management. In particular,
the committee determines salaries and incentive compensation awards for
members of the Board of Management and establishes corporate goals for
performance-based compensation plans. Members of the Presidential
Committee are Hilmar Kopper, Erich Klemm, Dr. Manfred Schneider, and
Bernhard Wurl. The Presidential Committee held three meetings in 2000.
- The FINANCIAL AUDIT COMMITTEE recommends the appointment of independent
auditors to be elected by the annual general meeting and reviews the scope
of external audit services. The Financial Audit Committee also reviews the
annual financial statements of DaimlerChrysler AG and the consolidated
annual and half-year financial statements of the DaimlerChrysler Group,
taking into account the results of the audits and reviews performed by the
independent auditors. Members of the Financial Audit Committee are Hilmar
Kopper, Erich Klemm, Willi Boehm and Bernhard Walter. The Financial Audit
Committee held two meetings in 2000.
BOARD OF MANAGEMENT
The Supervisory Board determines the size of the Board of Management, which
must have at least two members. Members are appointed by the Supervisory Board
for a maximum term of five years and are eligible for reappointment thereafter.
The normal retirement age for members of the Board of Management is 65 although
it is possible for a member of the Board of Management to continue in office
beyond this age with the approval of the Supervisory Board.
Under certain circumstances, such as a serious breach of duty or a vote of
no confidence by the stockholders in a general meeting, a member of the Board of
Management may be removed by the Supervisory Board prior to the expiration of
his term. A member of the Board of Management may not deal with, or vote on,
matters relating to proposals, arrangements or contracts between himself and
DaimlerChrysler AG and he is under a duty to disclose any material interest in
proposals, arrangements or contracts between DaimlerChrysler AG and third
parties.
57
The terms of all members of the Board of Management expire in 2003 except
for Mr. Fleig whose term expires in 2004. The current members of the Board of
Management, their ages as of February 26, 2001, the year in which they were
appointed, their current position/area of responsibility and prior positions
held within the last five years, are as follows:
Juergen E. Schrempp Age: 56
First appointed: 1998 (Daimler-Benz AG: 1987)
Current Position: Chairman of the Board of Management
Prior Position(s): Chairman of the Board of Management of
Daimler-Benz AG
Dr. rer. pol. Manfred Bischoff Age: 58
First appointed: 1998 (Daimler-Benz AG: 1995)
Responsible for: Aerospace & Industrial Businesses,
Prior Position(s): Board Member Mitsubishi Motors Corporation
Member of the Board of Management of
Daimler-Benz AG and President and Chief
Executive Officer of Daimler-Benz Aerospace
AG
Dr. rer. pol. Eckhard Cordes Age: 50
First appointed: 1998 (Daimler-Benz AG: 1996)
Responsible for: Commercial Vehicles
Prior Position(s): Member of the Board of Management of
DaimlerChrysler AG -- Corporate
Development & IT-Management; Member of the
Board of Management of Daimler-Benz AG --
Corporate Development and Directly Managed
Businesses; Deputy Member of the Board of
Management of Daimler-Benz AG -- Corporate
Development and Directly Managed Businesses
Guenther Fleig Age: 52
First appointed: 1999
Responsible for: Human Resources & Labor Relations Director
Prior Position(s): President of DaimlerChrysler France S.A.S.,
DaimlerChrysler Holding S.A. France and Head
of the Corporate Representation Office,
France; President of Mercedes-Benz France;
Head of European Sales Projects,
Mercedes-Benz AG
Dr. iur. Manfred Gentz Age: 59
First appointed: 1998 (Daimler-Benz AG: 1983)
Responsible for: Finance & Controlling
Prior Position(s): Member of the Board of Management of
Daimler-Benz AG -- Finance & Controlling,
Human Resources
Prof. Juergen Hubbert Age: 61
First appointed: 1998 (Daimler-Benz AG: 1987)
Responsible for: Mercedes-Benz Passenger Cars & smart
Prior Position(s): Member of the Board of Management of
Daimler-Benz AG -- Passenger Cars; Member of
the Board of Management of Mercedes-Benz AG
-- Passenger Cars
58
Dr. iur. Klaus Mangold Age: 57
First appointed: 1998 (Daimler-Benz AG: 1995)
Responsible for: Services
Prior Position(s): Member of the Board of Management of
Daimler-Benz AG and President and Chief
Executive Officer of Daimler-Benz
InterServices (debis) AG
Thomas W. Sidlik Age: 51
First appointed: 1998 (Chrysler Corporation: 1992)
Responsible for: Procurement & Supply Chrysler Group &
Prior Position(s): Jeep-Registered Trademark- Operations, Board
Member Hyundai Motor Company
Executive Vice President of Chrysler
Corporation -- Procurement & Supply; Vice
President and Chairman of Chrysler Financial
Corporation and General Manager -- Small Car
Operations
Gary C. Valade Age: 58
First appointed: 1998 (Chrysler Corporation: 1990)
Responsible for: Global Procurement & Supply
Prior Position(s): Executive Vice President and Chief Financial
Officer of Chrysler Corporation
Prof. Klaus-Dieter Voehringer Age: 59
First appointed: 1998 (Daimler-Benz AG: 1997)
Responsible for: Research & Technology
Prior Position(s): Member of the Board of Management of
Daimler-Benz AG -- Research & Technology;
Deputy Member of the Board of Management of
Mercedes-Benz AG -- Powertrain Unit
Commercial Vehicles
Dr.-Ing. Dieter Zetsche Age: 47
First appointed: 1998 (Daimler-Benz AG: 1997)
Responsible for: Chrysler Group
Prior Position(s): Member of the Board of Management of
DaimlerChrysler AG -- Commercial Vehicles;
Member of the Board of Management of
DaimlerChrysler AG -- Sales and Marketing;
Member of the Board of Management of
Daimler-Benz AG -- Sales and Marketing
Dr. rer. pol. Age: 40
Wolfgang Bernhard First appointed: 2000
(Deputy Member) Current Position: Chief Operating Officer Chrysler Group
Prior Position(s): CEO of Mercedes-AMG GmbH; General Manager for
S-Class assembly at the Sindelfingen Plant
COMPENSATION
GENERAL
The amount of compensation paid by the DaimlerChrysler Group to all members
of the Supervisory Board and the Board of Management, as a group, for the year
ended December 31, 2000 was [EURO]54 million. The aggregate amount accrued by
the Group during the year ended December 31, 2000 to provide pension, retirement
and similar benefits for the members of the Supervisory Board and the Board of
Management was [EURO]4 million. See also Note 6 to the Consolidated Financial
Statements.
59
SUPERVISORY BOARD
Members of the Supervisory Board receive a fixed annual amount of
[EURO]51,129 for serving on the board plus reimbursement of expenses. The
Chairman of the Supervisory Board receives twice that amount; the deputy
Chairman receives 1.5 times that amount; and members serving on committees of
the Supervisory Board receive 1.3 times that amount. Members also receive a flat
fee of [EURO]1,023 for each meeting of the Supervisory Board. This compensation
is fixed in DaimlerChrysler AG's Memorandum and Articles of Association.
BOARD OF MANAGEMENT
DaimlerChrysler AG has entered into service agreements with members of the
Board of Management. These agreements establish the following four principal
elements of compensation:
- BASE SALARY -- Base salaries are established based on a comparative
analysis of base salaries paid within a selected peer group of
international companies.
- ANNUAL BONUS -- Annual bonuses are based on corporate performance,
primarily in relation to profitability. Bonuses are expressed as a
percentage of base salary and may be adjusted, upward or downward, based
on other corporate objectives, such as shareholder return or revenue
growth, and on individual performance.
- MEDIUM-TERM-INCENTIVE -- Performance-based stock unit awards that track
the value of DaimlerChrysler ordinary shares are made at the beginning of
three year performance periods. The amount ultimately earned in cash at
the end of a performance period is based on the degree of achievement of
corporate goals derived from competitive and internal planning benchmarks,
such as return on net assets, return on sales, revenue growth and quality,
and the market value of DaimlerChrysler ordinary shares. Board of
Management members received 451,825 performance-based stock unit awards in
2000.
- STOCK OPTIONS -- Stock option plans provide long-term-incentives based on
the appreciation of DaimlerChrysler ordinary shares. DaimlerChrysler
granted Board of Management members, as a group, 2.1 million stock options
in 2000. Options granted under the 2000 stock option plan are exercisable
at a reference price of [EURO] 62.30 plus a 20% exercise premium. They
become exercisable in two equal installments on April 21, 2002 and on
April 21, 2003 and expire on April, 21, 2010. If the market price per
DaimlerChrysler Ordinary Share on the date of exercise is at least 20%
higher than the reference price, the holder is additionally entitled to
receive a cash payment equal to the original exercise premium of 20%
multiplied by the number of stock options exercised.
In the past, the Supervisory Board has negotiated limited benefits upon
termination of a Board of Management member's service prior to the stated
expiration date of his service contract. Moreover, if a U.S. member of the Board
of Management, who was party to a pre-merger employment contract with Chrysler
Corporation, dies during the term of his service agreement, then, in addition to
benefits payable under pension and retirement plans, his estate will be entitled
to receive an annual bonus payment and a medium-term incentive payment, pro
rated through the date of death, that assumes corporate goals have been
achieved. If such member is terminated, or terminates his service with good
reason, as defined in the service agreement, then, in addition to the foregoing,
he is entitled to receive a severance payment expressed as a multiple of the sum
of his base salary and his average bonus over the last three years, together
with an additional amount to reimburse him for any excise tax assessable on any
amounts so received. The Supervisory Board may also negotiate additional or
different terms with Board of Management members at the time their service to
DaimlerChrysler terminates.
See also Note 23 to the Consolidated Financial Statements.
60
EMPLOYEES AND LABOR RELATIONS
At December 31, 2000, the DaimlerChrysler Group employed a workforce of
416,501 people worldwide, which represented a decrease of 11% from year-end
1999. The decrease resulted from DaimlerChrysler's dispositions of most of its
aerospace activities and its controlling interest in debis Systemhaus. See
"Description of Business Segments -- Services" and "Description of Business
Segments -- Aerospace" in "Item 4. Information on the Company."
Of the total number of employees, 196,861 employees were based in Germany
and 123,633 in the United States. The following table sets forth the number of
employees at December 31, 2000, 1999 and 1998:
EMPLOYEES AT DECEMBER 31,
------------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------ ------------------------------ ------------------------------
TOTAL GERMANY U.S. TOTAL GERMANY U.S. TOTAL GERMANY U.S.
----- -------- -------- -------- -------- -------- -------- -------- --------
Mercedes-Benz
Passenger Cars &
smart.............. 100,893 92,099 1,910 99,459 91,698 1,834 95,158 90,963 1,731
Chrysler Group....... 121,027 2 90,536 124,837 225 92,044 123,180 215 90,347
Commercial
Vehicles........... 94,999 46,438 18,526 90,082 45,389 16,990 89,711 45,201 13,216
Sales organization
for automotive
business........... 36,857 26,048 1,508 34,133 24,086 1,457 31,280 22,308 1,352
Services............. 9,589 2,321 4,787 26,240 14,183 4,797 23,734 13,519 4,620
Aerospace............ 7,162 6,702 39 46,107 42,771 99 45,858 42,525 --
Other(1)............. 45,974 23,251 6,327 46,080 22,881 6,707 32,581 18,299 5,782
------- ------- ------- ------- ------- ------- ------- ------- -------
DaimlerChrysler
Group.............. 416,501 196,861 123,633 466,938 241,233 123,928 441,502 233,030 117,048
======= ======= ======= ======= ======= ======= ======= ======= =======
- ------------------------
(1) Including holding companies and corporate functions.
------------------------------
On average, the Group had approximately 16,500 temporary employees in 2000.
Almost all the Group's employees in Germany who are members of labor unions
belong to the metalworkers' union (IGM). None of the Group's facilities in
Germany is operated on a "closed shop" basis. In Germany, collective bargaining
agreements for blue collar workers and for white collar employees below
management level are generally negotiated between the regional association of
the companies within a particular industry and the respective unions. The most
recent agreement for "metalworkers," which covers most of the Group's employees
in Germany (including both white collar and blue collar workers), was signed in
April 2000. The agreement, which runs from March 2000 to February 2002, provides
for lump sum payments for the months of March and April of 2000, a 3.0% salary
increase effective as of May 1, 2000, and a 2.1% salary increase effective as of
May 1, 2001.
In the United States and Canada, substantially all of DaimlerChrysler
Corporation's hourly employees and 19% of its salaried employees are represented
by unions. Substantially all of these represented employees are represented by
the United Automobile, Aerospace, and Agricultural Implement Workers of America
(UAW) or the National Automobile, Aerospace and Agricultural Implement Workers
of Canada (CAW).
In 1999, DaimlerChrysler Corporation and the UAW entered into a new
four-year collective bargaining agreement that covers more than 70,000 hourly
and salaried workers in the United States. The agreement, which expires in
September 2003, provides for an annual base wage increase of 3% each contract
year, a one-time lump sum payment of $1,350 per worker, increases in pension
benefit rates, and improvements in certain health care, supplemental
unemployment and other benefits. The agreement limits DaimlerChrysler
Corporation's ability to close plants, reduce employment levels, or dispose of
operations that constitute a UAW bargaining unit, but provides flexibility in
establishing job assignments and work rules in order to increase productivity in
plants.
61
In addition, DaimlerChrysler Canada, Ltd. and the CAW entered into a new
three-year collective bargaining agreement in 1999 that covers approximately
14,000 workers in Canada through September 2002. It also provides for an annual
base wage increase of 3% each contract year, a one-time lump sum payment of
$1,000 per worker, as well as increases in pension and other benefits.
On January 29, 2001, DaimlerChrysler Corporation announced its intention to
reduce its workforce by approximately 20% over the next three years. The
announcement was made after concluding discussions with the UAW and the CAW. The
reduction, which will affect approximately 26,000 people, will be accomplished
through a combination of retirements, special programs, attrition and layoffs.
See "Introduction -- Turnaround Plan for the Chrysler Group" in "Item 4.
Information on the Company."
SHARE OWNERSHIP
As of December 31, 2000, the current members of the Supervisory Board and
the Board of Management as a group owned 161,328 DaimlerChrysler ordinary shares
(0.02% of all outstanding shares), and had the right to acquire 2,104,020
ordinary shares under the option plans described below.
Daimler-Benz AG instituted a stockholder approved stock option plan for
management board members and other senior executives in 1996. For reasons of
German law applicable at the time, the options granted under this plan took the
form of conversion rights attached to convertible bonds, with the principal
amount corresponding to a stated value (or par value equivalent) of the ordinary
shares subject to the option -- which was [EURO]2.56 per ordinary share in all
cases and which the optionee paid in cash at the time he or she received the
convertible bond (or option). Conversion rights under the 1996 plan are
exercisable during certain three-week window periods on or before July 12, 2006
at a conversion price of [EURO]42.62 per DaimlerChrysler ordinary share.
Conversion rights are only exercisable if the price per share exceeds a
threshold of [EURO]49.01.
In 2000, DaimlerChrysler AG instituted a stockholder approved stock option
plan for management board members and other senior executives. See
"Compensation." Stock options granted under the 2000 plan become exercisable in
two equal installments on April 21, 2002 and on April 21, 2003, and expire on
April 21, 2010. In May 2000, certain shareholders challenged the approval of the
2000 stock option plan at the stockholders' meeting on April 19, 2000. In
October 2000, the Stuttgart District Court (LANDGERICHT STUTTGART) dismissed the
case. The shareholders have appealed the decision.
See also Note 23 to the Consolidated Financial Statements.
As part of its value based management approach, DaimlerChrysler supports
employee stock ownership. DaimlerChrysler offers the opportunity to purchase
DaimlerChrysler ordinary shares to employees of Group companies incorporated in
Germany and, beginning in 2000, also to employees of Group companies
incorporated in Austria, France, Portugal, Spain and Switzerland. In 2000, each
eligible employee of Group companies incorporated in Germany had the right to
acquire up to 30 shares with a maximum aggregate discount of [EURO]153.39 plus
one bonus share. A total of 1,330,559 shares were acquired by 64,103 employees
of German Group companies in 2000. The programs established in Austria, France,
Portugal, Spain and Switzerland follow the German program except for changes
resulting from different national legal requirements. A total of 21,801 shares
were acquired by 2,135 employees in these countries.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
MAJOR SHAREHOLDERS
The capital stock of DaimlerChrysler AG consists of ordinary shares, no par
value (STUCKAKTIEN), which are issued in registered form. Under the Memorandum
and Articles of Association, each ordinary share represents one vote. Major
shareholders do not have different voting rights.
Under the German Securities Trading Act (WERTPAPIERHANDELSGESETZ), holders
of voting securities of a listed German company must notify the company of the
level of their holding whenever it reaches, exceeds or falls below specified
thresholds. These thresholds are 5%, 10%, 25%, 50% and 75% of a company's
outstanding voting rights.
62
The table below sets forth, as of December 31, 2000, the number of
DaimlerChrysler ordinary shares held by holders of 5% or more of DaimlerChrysler
ordinary shares and their percentage ownership:
IDENTITY OF PERSON OR GROUP SHARES OWNED PERCENT
- --------------------------- ------------ --------
KARU Beteiligungsverwaltung GmbH & Co. KG, a wholly owned
subsidiary of Deutsche Bank AG............................ 119,818,714 11.9%
Kuwait Investment Authority as agent for the Government of
the State of Kuwait....................................... 73,169,320 7.3%
------------------------
As a result of the business combination of Daimler-Benz and Chrysler in
1998, the percentage ownership of Deutsche Bank decreased from 22% to 12% and
that of the State of Kuwait decreased from 13% to 7%.
As of December 31, 2000, DaimlerChrysler AG had approximately 1.9 million
stockholders. Approximately 312,000 were U.S. holders, of which approximately
72,000 were record holders. Based on the share register, approximately 17% of
DaimlerChrysler ordinary shares were held by U.S. holders as of that date.
See also "Share Ownership" in "Item 6. Directors, Senior Management and
Employees."
RELATED PARTY TRANSACTIONS
DaimlerChrysler purchases materials, supplies and services from numerous
suppliers throughout the world in the ordinary course of business, including
firms in which it holds an ownership interest and those with which certain
members of the Supervisory Board are affiliated.
Deutsche Bank AG and its subsidiaries provided various financial and other
services to the Group in 2000 for which they were paid reasonable and customary
fees. KARU Beteiligungsverwaltung GmbH & Co. KG, a wholly owned subsidiary of
Deutsche Bank AG, owns approximately 12% of the outstanding shares of
DaimlerChrysler AG. Hilmar Kopper, Chairman of the Supervisory Board of
DaimlerChrysler AG, is also Chairman of the Supervisory Board of Deutsche Bank
AG.
Mitsubishi Motor Manufacturing of America, a subsidiary of Mitsubishi Motors
Corporation, produces the Dodge Stratus and Chrysler Sebring coupes for
DaimlerChrysler Corporation. DaimlerChrysler beneficially owns a 34% equity
interest in Mitsubishi Motors Corporation.
DaimlerChrysler purchases products and services from debis Systemhaus GmbH,
an information technology company in which DaimlerChrysler beneficially owns a
49.9% equity interest.
DaimlerChrysler entered into an agreement with McLaren Cars Ltd., a wholly
owned subsidiary of TAG McLaren Holdings Ltd., for the design and production of
a new high-performance sports car, the SLR. The market launch of the SLR is
scheduled for 2003. DaimlerChrysler also supplies engines to the West McLaren
team in support of motorsport activities under the Mercedes-Benz brand.
DaimlerChrysler owns a 40% equity interest in TAG McLaren Holdings Ltd.
ITEM 8. FINANCIAL INFORMATION.
CONSOLIDATED FINANCIAL STATEMENTS
See "Item 18. Financial Statements" and pages F-i, F-1 through F-63 and page
S-1.
OTHER FINANCIAL INFORMATION
EXPORT SALES
In 2000, approximately 661,000 or 58% of all passenger cars and commercial
vehicles produced by DaimlerChrysler in Germany and approximately 315,000 or 16%
of all passenger cars and trucks produced by DaimlerChrysler in the United
States were exported to other countries.
63
LEGAL PROCEEDINGS
Various legal proceedings are pending against the Group. DaimlerChrysler
believes that such proceedings, other than the shareholder litigation discussed
below, constitute ordinary routine litigation incidental to its businesses. See
also "Government Regulation and Environmental Matters -- Environmental Matters"
in "Item 4. Information on the Company" and Note 29 to the Consolidated
Financial Statements.
Various legal proceedings pending against DaimlerChrysler Corporation allege
defects in various components (including door and liftgate latches, occupant
restraint systems, seats, brake systems, and fuel systems) in several different
vehicle models or allege design defects relating to vehicle stability (rollover
propensity), pedal misapplication (sudden acceleration), or crashworthiness.
Some of these proceedings seek repair or replacement of the vehicles or
compensation for their alleged reduction in value, while others seek recovery
for personal injuries. As of December 31, 2000, the complaints filed in personal
injury proceedings specify more than $6 billion ([EURO]6.4 billion) in
compensatory and punitive damages in the aggregate. This amount represents
damages sought by plaintiffs and, therefore, does not necessarily constitute an
accurate measure of the ultimate cost to resolve those complaints. Further, many
of those complaints do not specify a dollar amount of damages or specify only
the jurisdictional minimum. These amounts may vary significantly from one period
to the next depending on the number of new complaints filed or pending cases
resolved in a given period.
On October 8, 1997, a jury awarded $12.5 million ([EURO]13.3 million) in
compensatory damages and $250 million ([EURO]266 million) in punitive damages
against DaimlerChrysler Corporation in JIMENEZ VS. CHRYSLER CORPORATION, a case
filed in U.S. District Court in South Carolina. The complaint alleged that the
liftgate latch striker of a 1985 Dodge Caravan was defective and opened when the
Caravan was struck by another vehicle resulting in the ejection and death of an
occupant. On December 2, 1999, the trial judge denied the company's motion
challenging the verdict, but reduced the compensatory damage award to
$9 million ([EURO]10 million). DaimlerChrysler Corporation's appeal is pending
in the United States Court of Appeals for the Fourth Circuit.
On February 18, 1999, a jury awarded $54.75 million ([EURO]58.3 million) in
compensatory damages and $3.7 million ([EURO]3.9 million) in punitive damages to
the owners of approximately 75,000 1988 3/4 -1990 model year Chrysler vehicles
in CRAWLEY VS. CHRYSLER CORPORATION, a class action lawsuit tried in the Court
of Common Pleas, Philadelphia, Pennsylvania. The complaint alleged that the air
bags in those vehicles were defective because the vent hole positions could
cause hand burns when the air bags deploy. DaimlerChrysler Corporation has filed
motions challenging the verdict and the damage awards, and is pursuing such
motions vigorously.
In addition, ten purported class action lawsuits are pending in various U.S.
federal and state courts that allege that the paint applied to 1982-1997 model
year Chrysler, Plymouth, Jeep-Registered Trademark- and Dodge vehicles
delaminates, peels or chips as the result of defective paint, paint primer, or
application processes. Plaintiffs seek compensatory and punitive damages, costs
of repair or replacement, attorneys' fees and costs.
DaimlerChrysler received a "statement of objections" from the European
Commission on April 1, 1999, which alleged that it violated antitrust rules by
impeding cross-border sales of Mercedes-Benz passenger cars to final customers
in the European Economic Area. DaimlerChrysler denies these charges and is
defending itself vigorously in the Commission's pending investigation. If the
Commission rules that DaimlerChrysler violated antitrust rules, it is reasonably
possible that the Commission may impose a substantial fine on DaimlerChrysler.
In the fourth quarter of 2000, Tracinda Corporation filed a lawsuit in the
United States District Court for the District of Delaware against
DaimlerChrysler AG and certain members of its Supervisory Board and Board of
Management (Messrs. Kopper, Schrempp and Gentz). Shortly therafter, a number of
other actions, most purporting to be shareholder class actions, were filed
against the same defendants, making similar claims to those in the Tracinda
complaint. The plaintiffs, current or former DaimlerChrysler shareholders,
allege that the defendants violated U.S. securities law and committed fraud in
obtaining approval from Chrysler stockholders of the business combination
between Chrysler and Daimler-Benz AG in 1998. In essence, the complaint alleges
that by describing the transaction as a "merger of equals" in the proxy
statement/prospectus and other statements preceding the special meeting of
Chrysler stockholders called to vote on the business combination agreement, the
64
defendants misrepresented that DaimlerChrysler would operate as two equal
companies, while they always intended to relegate Chrysler to division status
and to replace Chrysler's management with executives from Daimler-Benz. The
complaints generally seek (a) actual damages, including an acquisition premium,
(b) "recissory" damages representing the difference between the value of the
Chrysler common stock exchanged and the present value of the DaimlerChrysler
shares, (c) compensatory and, in the individual actions, punitive damages,
(d) an order unwinding the transaction, (e) pre- and post-judgment interest, and
(f) such other relief as may be just and proper. DaimlerChrysler believes that
these claims are without merit and intends to defend against them vigorously.
DaimlerChrysler and numerous other German companies (including subsidiaries
of U.S. companies) are defendants in class action lawsuits which seek to recover
compensation on behalf of individuals forced to work for those companies by the
Third Reich during World War II. In an effort to resolve such claims, German
companies, including DaimlerChrysler, and the German government agreed in 2000
to establish a DM 10 billion "Remembrance, Responsibility and the Future
Foundation," which will provide humanitarian assistance to victims of forced
labor and other injustices under that regime. The Foundation will be funded in
equal parts by the German government and German companies. The amount of
DaimlerChrysler's contribution has not been finalized. In conjunction with the
establishment of the Foundation, the United States and other countries have
agreed to assist in attempting to achieve a final dismissal of all existing and
future claims relating to such injustices.
Litigation is subject to many uncertainties, and the outcome of individual
matters is not predictable with assurance. It is reasonably possible that the
final resolution of some of these matters could require DaimlerChrysler to make
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. Although the
final resolution of any such matters could have a material effect on
DaimlerChrysler's consolidated operating results for a particular reporting
period, DaimlerChrysler believes that it should not materially affect its
consolidated financial position.
DIVIDEND POLICY
The Supervisory Board and the Board of Management propose dividends based on
DaimlerChrysler AG's year-end unconsolidated financial statements. The proposed
dividend is then submitted for approval at the annual general meeting of
stockholders, which is generally held during the second quarter of the following
year. Shareholders of record on the date of the annual general meeting at which
a dividend is declared are entitled to receive the dividend, less any amounts
required to be withheld on account of taxes or other governmental charges.
DaimlerChrysler AG expects to continue to pay dividends, although there can be
no assurance as to the particular amounts that would be paid from year to year.
The payment of future dividends will depend upon DaimlerChrysler's earnings,
financial condition (including its cash needs), future earnings prospects and
other factors. See "Item 5. Operating and Financial Review and Prospects."
Cash dividends payable to holders of ordinary shares are distributed by
Deutsche Bank AG as global paying agent. In Germany, the payment is generally
made to the holder's depot bank which then credits the payment to the
stockholder's account. Shareholders in the United States receive payment through
The Bank of New York as U.S. paying agent if they are shareholders of record, or
payment is credited to their brokerage or other account through the Depository
Trust Company system established by U.S. banks and brokers. For shareholders in
the United States, the payment is converted from euros into U.S. dollars unless
they instruct otherwise. The U.S. dollar amounts of dividends received by
holders of ordinary shares may be affected by fluctuations in exchange rates.
See "Dividends" and "Exchange Rate Information" in "Item 3. Key Information."
SIGNIFICANT CHANGES
In January 2001, DaimlerChrysler decided to restructure the operations of
the Chrysler Group. For a description of the turnaround plan for the Chrysler
Group see "Introduction" in "Item 4. Information on the Company."
65
On January 18, 2001, the Group issued five separate tranches of euro, Pound
Sterling and dollar denominated notes bearing interest at rates ranging between
6.0% and 8.5% with maturity dates between 2004 and 2031 for net proceeds of
approximately [EURO]7.5 billion.
In January 2001, the Group sold its remaining 10% interest in debitel AG to
Swisscom for proceeds of approximately [EURO]0.3 billion.
ITEM 9. THE OFFER AND LISTING.
TRADING MARKETS
The principal trading markets for DaimlerChrysler ordinary shares are the
Frankfurt Stock Exchange and the New York Stock Exchange. The ordinary shares
are also listed on the other German stock exchanges in Berlin, Bremen,
Duesseldorf, Hamburg, Hannover, Munich and Stuttgart, on the Chicago Stock
Exchange, the Pacific Stock Exchange and the Philadelphia Stock Exchange, on the
stock exchanges in Montreal, Paris, Tokyo and Toronto, and on the Swiss stock
exchange.
As of December 31, 2000, DaimlerChrysler ordinary shares represented
approximately 5.1% of the Deutsche Aktienindex (DAX), the leading index of
trading on the Frankfurt Stock Exchange, 1.0% of the Dow Jones STOXX 50(SM),
which is composed of stocks from 16 European equity markets, and 1.8% of the Dow
Jones EURO STOXX 50(SM), which includes stocks from the equity markets of those
member states of the European Union that introduced the euro as their common
legal currency on January 1, 1999. See also "Introduction of the Euro" in "Item
4. Information on the Company."
The transfer agents for DaimlerChrysler ordinary shares are Deutsche Bank AG
in Germany and The Bank of New York in the United States.
TRADING ON THE FRANKFURT STOCK EXCHANGE
The Frankfurt Stock Exchange, which is operated by Deutsche Boerse AG, is
the most significant of the eight German stock exchanges and accounted for more
than 85% of the turnover in exchange-traded shares in Germany in 2000. As of
December 31, 2000, equity securities traded on the Frankfurt Stock Exchange
included the shares of 5,694 companies, of which 4,789 were non-German.
Trading on the floor of the Frankfurt Stock Exchange commences each business
day at 9:00 a.m. and continues until 8:00 p.m. Central European Time. Markets in
listed securities are generally of the auction type, but listed securities also
change hands in inter-bank dealer markets both on and off the stock exchange.
Price formation is by open outcry, as determined by state appointed specialists
(AMTLICHE KURSMAKLER) who are themselves exchange members, but who do not, as a
rule, deal with the public. Prices for active stocks, including those of larger
companies, are quoted continuously during stock exchange hours. For all other
stocks, a fixed price is determined by auction around mid-session of each
trading day. Transactions settle on the second business day following the day of
their trade.
DaimlerChrysler ordinary shares are also traded on Xetra (Exchange
Electronic Trading), an integrated electronic exchange system operated by
Deutsche Boerse AG. Xetra is available daily from 9:00 a.m. to 8:00 p.m. Central
European Time to brokers and banks which have been admitted to Xetra by the
Frankfurt Stock Exchange. Securities traded by this system include liquid
stocks, warrants and bonds traded on the floor of the Frankfurt Stock Exchange.
Xetra is integrated into the Frankfurt Stock Exchange and is subject to its
rules and regulations. In 2000, Xetra accounted for approximately 89% of the
DaimlerChrysler ordinary shares trading volume at the Frankfurt Stock Exchange.
Trading activities on the German stock exchanges are monitored by the
Federal Supervisory Authority for Securities Trading (BUNDESAUFSICHTSAMT FUER
DEN WERTPAPIERHANDEL). All orders from customers to buy or sell listed
securities must be executed on a stock exchange unless a customer gives specific
instructions to the contrary.
66
The tables below set forth, for the periods indicated, the Xetra high and
low sales prices for the DaimlerChrysler ordinary shares from November 17, 1998,
the first day on which DaimlerChrysler ordinary shares officially traded on the
Frankfurt Stock Exchange. Since January 4, 1999, the first official trading day
of 1999, the prices of shares traded on the German stock exchanges, including
the ordinary shares of DaimlerChrysler AG, have been quoted in euros. In order
to achieve comparability with the 1998 sales prices quoted in marks, the 1998
sales prices have been converted into euros at the Official Fixed Conversion
Rate. The tables also show, for the periods indicated, the Xetra highs and lows
of the DAX. The DAX is a continuously updated, capital-weighted performance
index of 30 German blue chip companies. In principle, the shares included in the
DAX are selected on the basis of their stock exchange turnover and their market
capitalization. Adjustments of the DAX are made for capital changes,
subscription rights and dividends. See "Exchange Rate Information" in "Item 3.
Key Information" with respect to rates of exchange between the U.S. dollar and
the mark (translated into euros at the Official Fixed Conversion Rate) and the
U.S. dollar and the euro applicable during the periods set forth below.
PRICE PER
DAIMLERCHRYSLER
ORDINARY SHARE DAX
------------------- -------------------
HIGH LOW HIGH LOW
---- --- ---- ---
([EURO])
ANNUAL HIGHS AND LOWS
1998 (from November 17, 1998).............................. 85.90 70.61 5,174.42 4,435.94
1999....................................................... 95.79 63.26 6,992.92 4,601.07
2000....................................................... 79.97 42.70 8,136.16 6,110.26
QUARTERLY HIGHS AND LOWS
1999
First Quarter............................................ 94.20 77.70 5,509.30 4,601.07
Second Quarter........................................... 95.79 78.95 5,506.25 4,768.77
Third Quarter............................................ 89.79 63.26 5,686.55 4,948.08
Fourth Quarter........................................... 78.50 64.51 6,992.92 5,078.59
2000
First Quarter............................................ 79.97 61.55 8,136.16 6,388.91
Second Quarter........................................... 72.03 54.61 7,641.53 6,794.08
Third Quarter............................................ 63.80 49.95 7,503.32 6,468.46
Fourth Quarter........................................... 57.42 42.70 7,185.66 6,110.26
MONTHLY HIGHS AND LOWS
2000
July..................................................... 61.35 54.81 7,503.32 6,842.61
August................................................... 63.80 56.00 7,395.81 6,954.60
September................................................ 59.34 49.95 7,456.71 6,468.46
October.................................................. 55.50 49.60 7,087.92 6,297.49
November................................................. 57.42 44.01 7,185.66 6,361.43
December................................................. 51.70 42.70 6,813.30 6,110.26
2001
January.................................................. 53.20 43.27 6,795.14 6,172.44
February (through February 16, 2001)..................... 55.84 48.50 6,788.57 6,439.26
------------------------
On February 16, 2001 the closing sales price per DaimlerChrysler ordinary
share on Xetra was [EURO]54.70, which was equivalent to $50.12 per ordinary
share, translated at the noon buying rate for euros on that date.
67
Based on turnover statistics supplied by the Frankfurt Stock Exchange, the
average daily volume of DaimlerChrysler ordinary shares traded on the exchange
(including Xetra) in 2000 was 2.5 million. As of December 31, 2000, the market
capitalization of DaimlerChrysler on the Frankfurt Stock Exchange was
[EURO]45.4 billion.
TRADING ON THE NEW YORK STOCK EXCHANGE
Official trading of DaimlerChrysler ordinary shares on the New York Stock
Exchange commenced on November 17, 1998. DaimlerChrysler ordinary shares trade
under the symbol "DCX."
The following table sets forth, for the periods indicated, the high and low
sales prices per DaimlerChrysler ordinary share as reported on the New York
Stock Exchange Composite Tape.
PRICE PER
DAIMLERCHRYSLER
ORDINARY SHARE
-----------------------
HIGH LOW
---- ---
($)
ANNUAL HIGHS AND LOWS
1998 (from November 17, 1998)............................. 99.06 82.38
1999...................................................... 108.63 65.31
2000...................................................... 78.69 37.75
QUARTERLY HIGHS AND LOWS
1999
First Quarter........................................... 108.63 83.31
Second Quarter.......................................... 102.00 85.38
Third Quarter........................................... 91.81 65.31
Fourth Quarter.......................................... 78.50 66.13
2000
First Quarter........................................... 78.69 59.88
Second Quarter.......................................... 68.75 51.81
Third Quarter........................................... 57.00 43.67
Fourth Quarter.......................................... 49.47 37.75
MONTHLY HIGHS AND LOWS
2000
July.................................................... 56.31 52.06
August.................................................. 57.00 51.31
September............................................... 52.38 43.67
October................................................. 47.33 42.35
November................................................ 49.47 37.75
December................................................ 45.00 38.90
2001
January................................................. 49.00 41.01
February (through February 16, 2001).................... 51.25 45.86
On February 16, 2001, the closing sales price per DaimlerChrysler ordinary
share on the New York Stock Exchange as reported on the NYSE Composite Tape was
$50.15.
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ITEM 10. ADDITIONAL INFORMATION.
OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
The minority stockholders who own 41.6% of Dornier GmbH, a subsidiary of
DADC Luft- und Raumfahrt Beteiligungs AG, have the right, exercisable at any
time, to exchange their shareholdings in Dornier for holdings of equal value in
DaimlerChrysler AG or its subsidiary DaimlerChrysler Luft- und Raumfahrt Holding
Aktiengesellschaft. If this right were exercised in full, the number of
DaimlerChrysler ordinary shares which would be issued would not be material to
DaimlerChrysler or the stockholders of DaimlerChrysler AG.
In 1996, DaimlerChrysler Luxembourg Capital S.A., formerly known as
Daimler-Benz Capital (Luxembourg) AG, a DaimlerChrysler subsidiary, issued
4 1/8% bearer notes with appertaining warrants due July 5, 2003 with a nominal
amount of DM 1,000 ([EURO]511) per note. Each note has warrants attached that
originally entitled the noteholder to receive 10.254 Daimler-Benz ordinary
shares, consisting partially of shares already issued and partially of newly
issued shares. In accordance with Section 23 of the German Transformation Act
(UMWANDLUNGSGESETZ) these warrants are now DaimlerChrysler AG warrants which
entitle the noteholder to receive 10.30527 DaimlerChrysler ordinary shares. As
of February 16, 2001, there were outstanding warrants for approximately 1.1
million new DaimlerChrysler ordinary shares.
In 1997, Daimler-Benz AG issued 5 3/4% subordinated mandatory convertible
notes due June 14, 2002 convertible into newly issued Daimler-Benz ordinary
shares on or before June 4, 2002. In accordance with Section 23 of the German
Transformation Act these notes, including notes represented by American
Depositary Notes and DM Book Entry Securities, are now notes of DaimlerChrysler
AG, convertible into DaimlerChrysler ordinary shares. If they are not converted
by June 4, 2002, the notes will be mandatorily converted into DaimlerChrysler
ordinary shares at a conversion rate to be determined on the basis of the
average official quotation for the shares on the Frankfurt Stock Exchange during
a specified window period. As of February 16, 2001, the maximum number of
ordinary shares that would be issued upon exercise of all outstanding conversion
rights was approximately 9.5 million.
In addition, DaimlerChrysler Board of Management members and other senior
executives of DaimlerChrysler hold options granted under the stock option plans
instituted by Daimler-Benz AG in 1996 and by DaimlerChrysler AG in 2000. See
"Share Ownership" in "Item 6. Directors, Senior Management and Employees."
MEMORANDUM AND ARTICLES OF ASSOCIATION
ORGANIZATION AND REGISTER
DaimlerChrysler AG is a stock corporation organized in the Federal Republic
of Germany under the Stock Corporation Law (AKTIENGESETZ). DaimlerChrysler AG is
registered in the Commercial Register (HANDELSREGISTER) maintained by the local
court in Stuttgart, Germany, under the entry number "HRB 19360."
CORPORATE GOVERNANCE
German stock corporations are governed by three separate bodies: the annual
general meeting of shareholders, the supervisory board and the board of
management. Their roles are defined by German law and by the corporation's
memorandum and articles of association (SATZUNG), and may be described generally
as follows:
- THE ANNUAL GENERAL MEETING OF SHAREHOLDERS -- ratifies the actions of the
corporation's supervisory board and board of management. It approves the
amount of the annual dividend, the appointment of an independent auditor,
and certain significant corporate transactions. In corporations with more
than 2,000 employees, shareholders and employees elect or appoint an equal
number of representatives to the supervisory board. The annual general
meeting must be held within the first eight months of each fiscal year.
69
- THE SUPERVISORY BOARD -- appoints and removes the members of the board of
management and oversees the management of the corporation. Although prior
approval of the supervisory board may be required in connection with
certain significant matters, the law prohibits the supervisory board from
making management decisions.
- THE BOARD OF MANAGEMENT -- manages the corporation's business and
represents it in dealings with third parties. The board of management
submits regular reports to the supervisory board about the corporation's
operations and business strategies, and prepares special reports upon
request. A person may not serve on the board of management and the
supervisory board of a corporation at the same time.
Several additional corporate governance provisions applicable to
DaimlerChrysler AG are summarized below.
OBJECTS AND PURPOSES
Section 2 of DaimlerChrysler AG's Memorandum and Articles of Association
states that its object is to pursue, directly or indirectly, business in the
fields of development, production and sale of products and rendering of
services, in particular in the following lines of business: vehicles for use on
land; vehicles for use on water, in the air and in space and other products in
the fields of transport, aerospace, space, and marine technology; engines and
other technological propulsion systems; plants, machinery and equipment for
power generation, distribution and utilization; electrical and electronic
equipment, plants and systems; communication and information technology,
business consulting; financial services of all kinds, insurance brokerage, and
activities in the fields of media and expositions; and management and
development of real property. The Articles authorize DaimlerChrysler AG to take
all actions that serve the attainment of its objects, except that it is not
permitted to carry out directly banking and real property transactions that are
subject to license requirements.
DIRECTORS
Under German law, DaimlerChrysler's Supervisory Board members and Board of
Management members owe a duty of loyalty and care to DaimlerChrysler. They must
exercise the standard of care of a prudent and diligent businessman and bear the
burden of proving they did so if their actions are contested. Both boards must
consider the interests of DaimlerChrysler AG's shareholders and its workers and,
to some extent, the common interest. Those who violate their duties may be held
jointly and severally liable for any resulting damages, unless their actions
were validly approved by resolution at a shareholders' meeting. Further, a
Supervisory Board member may not receive a loan from DaimlerChrysler AG unless
approved by the Supervisory Board, and may not vote on a matter that concerns
ratification of his own acts or in which he has a material interest. See also
"Item 6. Directors, Senior Management and Employees" for further information
about the Supervisory Board and the Board of Management.
ORDINARY SHARES
The capital stock of DaimlerChrysler AG consists of ordinary shares, no par
value (STUECKAKTIEN), which are issued in registered form. Record holders of
ordinary shares are registered in DaimlerChrysler's share register
(AKTIENREGISTER). The share register is administered on behalf of
DaimlerChrysler AG by Deutsche Bank AG, as transfer agent and registrar in
Germany and various other countries, and by The Bank of New York, as transfer
agent and registrar in the United States.
Some of the significant provisions under German law and DaimlerChrysler's
Articles of Association relating to ordinary shares may be summarized as
follows:
- CAPITAL INCREASES. The share capital may be increased in consideration of
contributions in cash or in property, or by establishing authorized
capital or conditional capital. Authorized capital provides the Board of
Management with the flexibility to issue new shares for a period of up to
five years, generally to preserve liquidity. Conditional capital allows
the Board of Management to issue new shares for specified purposes,
including employee stock option plans, mergers, and the issuance of shares
upon conversion of
70
option bonds and convertible bonds. Capital increases require an amendment
of the Articles of Association approved by 75% of the issued shares
present at the shareholders' meeting at which the increase is proposed.
The Board of Management must also obtain the approval of the Supervisory
Board before issuing new shares. DaimlerChrysler AG's Articles of
Association do not contain conditions regarding changes in the share
capital that are more stringent than the law requires.
- REDEMPTION. The share capital may also be reduced by an amendment of the
Articles of Association approved by 75% of the issued shares present at
the shareholders' meeting.
- PREEMPTIVE RIGHTS. DaimlerChrysler AG's Articles of Association provide
that the preemptive right of shareholders to subscribe (BEZUGSRECHT) for
any issue of additional shares, debt instruments convertible into shares
or participating debt instruments in proportion to their share holdings in
the existing capital may be excluded under certain circumstances.
- LIQUIDATION. If DaimlerChrysler AG were to be liquidated, any liquidation
proceeds remaining after all of its liabilities were paid would be
distributed to its shareholders in proportion to their share holdings.
- NO LIMITATION ON FOREIGN OWNERSHIP. There are no limitations under German
law or in DaimlerChrysler AG's Articles of Association on the right of
persons who are not citizens or residents of Germany to hold or vote
ordinary shares.
DIVIDENDS
Dividends in respect of ordinary shares are declared once a year at the
annual general meeting of shareholders. The Supervisory Board and the Board of
Management ratify the financial statements for each fiscal year and recommend
the disposition of all unappropriated profits for approval by shareholders at
the meeting, including the amount of net profits to be distributed as a
dividend. Shareholders registered in the share register on the date of the
meeting are entitled to receive the dividend. Dividends are paid to shareholders
in proportion to their percentage ownership of the outstanding capital stock.
The Articles of Association authorize the Board of Management, with the
approval of the Supervisory Board, to make an interim payment to shareholders
with respect to the unappropriated profit of the prior financial year, if a
preliminary closing of the financial statements for that year shows a profit.
The interim payment may not exceed 50% of the amount of the foreseeable
unappropriated profit, after deducting any amounts required to be added to the
disclosed reserves. Furthermore, the interim payment may not exceed 50% of the
previous fiscal year's unappropriated profit.
The Articles of Association permit the Board of Management, with the
approval of the Supervisory Board, to issue new shares from capital previously
approved by the shareholders at any time during the year, and to provide that
such new shares are entitled to the entire per ordinary share annual dividend
for the year in which they are issued.
VOTING RIGHTS
Each ordinary share represents one vote. Cumulative voting is not permitted
under German law. DaimlerChrysler AG's Articles of Association provide that
resolutions are passed at shareholder meetings by a simple majority of votes
cast, unless a higher vote is required by law. German law requires that the
following matters, among others, be approved by the affirmative vote of 75% of
the issued shares present at the shareholders' meeting at which the matter is
proposed:
- changing the objects and purposes provision in the articles of
association,
- capital increases and capital decreases,
- excluding preemptive rights of shareholders to subscribe for new shares,
- dissolution,
- a merger into, or a consolidation with, another stock corporation,
- a transfer of all or virtually all of the assets, and
- a change of corporate form.
71
SHAREHOLDER MEETINGS
The Board of Management, the Supervisory Board, or shareholders owning in
the aggregate at least 5% of the issued shares may call a meeting of
shareholders. There is no minimum quorum requirement for shareholder meetings.
Among other things, the annual general meeting is asked to ratify the actions of
the Board of Management and the Supervisory Board during the prior year, approve
the disposition of unappropriated profit, and the appointment of an independent
auditor. Shareholder representatives to the Supervisory Board are elected at the
annual general meeting for terms of approximately five years.
In order to be entitled to participate and vote at the meeting, a
shareholder must be registered in the share register on the meeting date, and
must also have notified DaimlerChrysler AG no later than on the third day before
the meeting date that he or she wishes to attend the meeting. Instead of voting
in person at the meeting, shareholders in North America may vote their shares by
proxy by signing and returning the proxy card mailed to them in advance of the
meeting. A notice of the meeting, an agenda describing the items to be voted on
at the meeting, and a short form annual report accompany the proxy card. As a
foreign private issuer, DaimlerChrysler is not required to file a proxy
statement under U.S. securities law. The proxy voting process for
DaimlerChrysler's shareholders in North America is substantially similar to the
process utilized by publicly held companies incorporated in the United States.
Amendments to the Articles of Association may be proposed either by the
Supervisory Board and the Board of Management, or by a shareholder or group of
shareholders holding a minimum of either 5% of the issued shares or shares
representing at least [EURO]500,000 of the company's capital stock.
CHANGE IN CONTROL
There are no provisions in the Articles that would have an effect of
delaying, deferring or preventing a change in control of DaimlerChrysler and
that would only operate with respect to a merger, acquisition or corporate
restructuring involving it or any of its subsidiaries. German law does not
specifically regulate business combinations with interested stockholders.
However, general principles of German law may restrict business combinations
under certain circumstances.
DISCLOSURE OF SHARE HOLDINGS
DaimlerChrysler AG's Articles of Association do not require shareholders to
disclose their share holdings. The Securities Trading Act
(WERTPAPIERHANDELSGESETZ), however, requires holders of voting securities of a
corporation whose shares are listed on a stock exchange to notify the
corporation of the number of shares they hold if that number reaches, exceeds or
falls below specified thresholds. These thresholds are 5%, 10%, 25%, 50% and 75%
of the corporation's outstanding voting rights.
CURRENCY CONVERSION -- DIVIDENDS
Under the transfer agent agreement in place with the U.S. transfer agent,
shareholders registered in the share register with addresses in the United
States may elect to receive dividends in either euros or U.S. dollars. Unless
instructed otherwise, the U.S. transfer agent will convert all cash dividends
and other cash distributions it receives in respect of ordinary shares into
dollars before payment to the shareholder. The amount distributed will be
reduced by any amounts required to be withheld by DaimlerChrysler AG or the U.S.
transfer agent on account of taxes or other governmental charges. If the U.S.
transfer agent determines, following consultation with DaimlerChrysler AG, that
in its judgment any foreign currency received by it cannot be so converted and
distributed, the U.S. transfer agent may distribute the foreign currency (or an
appropriate document evidencing the right to receive such currency) received by
it or in its discretion hold such foreign currency for the account of the
shareholder entitled to receive the same.
72
OTHER
Claims against members of the Supervisory Board or Board of Management may
be asserted on behalf of DaimlerChrysler AG if the shareholders' meeting so
resolves by simple majority or upon request of shareholders holding in the
aggregate at least 10% of the issued shares. The shareholders' meeting or a
court of competent jurisdiction, upon request by shareholders holding in the
aggregate at least 10% (under special circumstances 5%) of the issued shares or
shares representing at least [EURO]1,000,000 (under special circumstances
[EURO]500,000) of the company's capital stock must then appoint a special
representative to pursue such a claim.
MATERIAL CONTRACTS
On July 28, 2000, DaimlerChrysler and Mitsubishi Motors Corporation (MMC)
agreed to establish an alliance calling for DaimlerChrysler to acquire a 34%
equity interest in MMC and for cooperation in the design, development,
production and distribution of passenger cars and light commercial vehicles
throughout the world. In particular, the parties agreed to implement projects
relating to the joint development of a small car platform and the joint
production of small cars at a facility in the Netherlands, and to make available
the use of DaimlerChrysler's financial services affiliates for sales financing
and leasing of MMC brand passenger and light commercial vehicles. The alliance
excludes medium and heavy trucks and buses. The terms and conditions of the
alliance are reflected in a Master Alliance Agreement, a Securities Subscription
Agreement and a Standstill Agreement, each as amended in September 2000. The
agreements were consummated on October 18, 2000, when DaimlerChrysler acquired
the 34% equity interest for [EURO]2.2 billion. Under the agreements,
DaimlerChrysler may not increase its percentage of equity ownership for three
years without the written consent of the MMC Board of Directors, but has the
right to designate four directors to the MMC Board of Directors as well as an
individual to serve as MMC's Chief Operating Officer. At the closing of the
transaction, DaimlerChrysler also purchased convertible bonds of Mitsubishi
Motors Corporation for approximately [EURO]0.2 billion, which are convertible
into shares of Mitsubishi Motors Corporation stock. The bonds are only
convertible by DaimlerChrysler in the event that its ownership percentage would
be diluted below 34% upon conversion of previously issued convertible bonds.
On March 27, 2000, Deutsche Telekom and DaimlerChrysler Services AG
announced an agreement to form a joint venture in the area of information
technology. The transaction was consummated in October 2000, when Deutsche
Telekom contributed [EURO]4.6 billion in cash to DaimlerChrysler's information
technology subsidiary debis Systemhaus GmbH in return for which Deutsche Telekom
received a 50.1% interest in debis Systemhaus. The agreement provides, among
other things, that DaimlerChrysler Services will receive a minimum annual
dividend each financial year through 2004 in respect of its 49.9% interest in
debis Systemhaus, and that Deutsche Telekom has the right to buy such interest
from DaimlerChrysler Services, and DaimlerChrysler Services has the right to
sell such interest to Deutsche Telekom. DaimlerChrysler Services may exercise
its right to sell through January 1, 2005, and Deutsche Telekom may exercise its
right to buy from January 1, 2002 through January 1, 2005. DaimlerChrysler
Services may delay the beginning of Deutsche Telekom's exercise period for up to
two years. It is estimated that the purchase price for the 49.9% interest would
be between approximately [EURO]4.6 billion and [EURO]4.9 billion, but the exact
price depends on when the option is exercised and is subject to adjustment based
on various factors.
In 1999, DaimlerChrysler agreed to combine the aerospace business of
DaimlerChrysler Aerospace AG, except for the aero engines business which it
retained, with those of Aerospatiale Matra S.A. and Construcciones Aeronauticas
S.A. (CASA), into a new Dutch company called European Aeronautic Defence and
Space Company EADS N.V. (EADS). Aerospatiale Matra S.A. was owned by the French
State, Lagardere SCA, a French limited partnership, and the public. CASA was
owned by Sociedad Estatal de Participaciones Industriales (SEPI), a Spanish
state holding company. In 2000, the parties consummated the agreements and the
transactions contemplated thereby, including a public stock offering of EADS
shares, which trade on the Spanish, Frankfurt, and Paris stock exchanges, and
the formation of EADS Participations B.V., a limited liability company under the
laws of the Netherlands which holds legal title to approximately 66% of the
shares of EADS. The voting right to these shares is held by that company on
behalf of a Dutch law contractual partnership. DaimlerChrysler owns
73
45.75% of the partnership (equivalent to an approximately 30% beneficial
ownership interest in EADS), the French partners own 45.75%, and SEPI owns
8.50%. In addition, DaimlerChrysler owns approximately 3% of the shares of EADS
outside the partnership. Approximately 31% of the EADS' shares are held by the
public. DaimlerChrysler has the right to sell its partnership interest in EADS
to all or some of the French partners. This put option may be exercised for
specified reasons such as partnership deadlock on certain matters and, after
three years, during certain periods conditioned upon certain distribution of the
shareholding of EADS. The price is based on the average closing mid-market price
in euros of EADS shares during the 30 trading days prior to exercise of the put
option.
EXCHANGE CONTROLS
The euro and the mark are fully convertible currencies. There are, except in
limited embargo circumstances, no legal restrictions in Germany on international
capital movements and foreign exchange transactions. For statistical purposes
only, every individual or corporation residing in Germany (a "Resident") must
report to the German Central Bank (DEUTSCHE BUNDESBANK) any payment received
from or made to an individual or a corporation resident outside of Germany (a
"Non-resident") if the payment exceeds [EURO]12,500 (or the equivalent in a
foreign currency). In addition, Residents must report any claims against or any
liabilities payable to Non-residents if such claims or liabilities, in the
aggregate, exceed [EURO]1.5 million (or the equivalent in a foreign currency) at
the end of any one month.
TAXATION
The following is a discussion of the material United States federal income
and German tax consequences to Qualified Holders holding DaimlerChrysler
ordinary shares. This discussion is based upon existing United States federal
income and German tax law, including legislation, regulations, administrative
rulings and court decisions, as in effect on the date of this Annual Report, all
of which are subject to change, possibly with retroactive effect. For purposes
of this discussion, in general, a "Qualified Holder" means a beneficial owner of
DaimlerChrysler ordinary shares that (1) is a resident of the United States for
purposes of the United States-Germany income tax treaty (the "Income Tax
Treaty"), which generally includes an individual United States resident, a
corporation created or organized under the laws of the United States, any state
thereof or the District of Columbia and a partnership, estate or trust, to the
extent its income is subject to taxation in the United States as the income of a
United States resident, either in its hands or in the hands of its partners or
beneficiaries, (2) does not hold DaimlerChrysler ordinary shares as part of the
business property of a permanent establishment located in Germany or as part of
a fixed base of an individual located in Germany and used for the performance of
independent personal services and (3) if not an individual, is not subject to
the limitation on benefits restrictions in the Income Tax Treaty. This
discussion assumes that the Qualified Holder holds DaimlerChrysler ordinary
shares as a capital asset. This discussion does not address all aspects of
United States federal income and German taxation that may be relevant to all
Qualified Holders in light of their particular circumstances, including for
example Qualified Holders whose stock was acquired pursuant to the exercise of
an employee stock option or otherwise as compensation or Qualified Holders who
are subject to special treatment under United States federal income tax laws
(for example, financial institutions, insurance companies, tax-exempt
organizations and broker-dealers). This discussion also does not address any
aspects of state, local or non-United States (other than certain German) tax
law.
EACH QUALIFIED HOLDER IS STRONGLY URGED TO CONSULT HIS OR HER TAX ADVISOR AS
TO THE UNITED STATES FEDERAL INCOME AND GERMAN TAX CONSEQUENCES OF HOLDING
DAIMLERCHRYSLER ORDINARY SHARES, INCLUDING THE PARTICULAR FACTS AND
CIRCUMSTANCES THAT MAY BE UNIQUE TO SUCH QUALIFIED HOLDER, AND AS TO ANY OTHER
TAX CONSEQUENCES OF HOLDING DAIMLERCHRYSLER ORDINARY SHARES.
74
TAXATION OF DIVIDENDS
For dividends distributed in 2001 out of profits earned in or before 2000,
German corporations are required to withhold German tax on dividends in an
amount equal to 25% of the gross amount paid to resident and non-resident
stockholders. A partial refund of this 25% withholding tax can be obtained by
Qualified Holders under the Income Tax Treaty (subject to certain limitations).
Qualified Holders are generally subject to United States federal income tax on
dividends paid by German corporations. Subject to applicable limitations of
United States federal income tax law, Qualified Holders may be able to claim a
foreign tax credit for certain German income taxes paid. The amount of the
refund of German withholding tax and the determination of the foreign tax credit
allowable against United States federal income tax generally depend on whether
or not the Qualified Holder is a United States corporation owning at least 10%
of the voting stock of DaimlerChrysler AG (a "10% Holder").
In the case of any Qualified Holder other than a 10% Holder, the German
withholding tax on the dividends paid in 2001 is partially refunded under the
Income Tax Treaty, effectively reducing the withholding tax to 15% of the gross
amount of the dividend. In addition, since the German imputation system provides
German resident individual stockholders with a tax credit in respect of
dividends paid by German corporations in 2001, the Income Tax Treaty provides
that Qualified Holders (other than 10% Holders) are entitled to an additional
refund equal to 5% of the gross amount of the respective dividend. For United
States federal income tax purposes, the benefit resulting from this additional
5% treaty refund is treated as a refund received by the Qualified Holder with
respect to German corporate taxes equal to 5.88% of the gross amount of the
respective dividend, subject to a German withholding tax of 0.88% (15% of
5.88%). Qualified Holders are not entitled to the dividends received deduction
for United States federal income tax purposes with respect to dividends paid by
non-United States corporations.
Thus, for each $100 of gross dividend paid by DaimlerChrysler AG in 2001 to
a Qualified Holder (other than a 10% Holder), the dividend after partial refund
of the 25% withholding tax under the Income Tax Treaty will be subject to a
German withholding tax of $15. If the Qualified Holder also applies for the
additional 5% treaty refund, German withholding tax is effectively reduced to
$10; the cash received per $100 of gross dividend is $90. For United States
federal income tax purposes, the Qualified Holder is generally treated as
receiving a total dividend of $105.88 (to the extent paid out of current or
accumulated earnings and profits of DaimlerChrysler AG as determined for United
States federal income tax purposes), consisting of the $100 gross dividend and
the deemed refund of German corporate tax of $5.88. The notional $105.88
dividend is deemed to have been subject to German withholding tax of $15.88.
Thus, for each $100 of gross dividend, the Qualified Holder will include $105.88
in gross income and may be entitled to a foreign tax credit of $15.88, subject
to applicable limitations of United States federal income tax law.
In the case of a 10% Holder, the 25% German withholding tax on dividends
paid in 2001 is reduced under the Income Tax Treaty to 5% of the gross amount of
the dividend. Such 10% Holders may, therefore, apply for a refund of German
withholding tax on the dividend paid in 2001 in the amount of 20% of the gross
amount of the dividend. Subject to applicable limitations of United States
federal income tax laws, a 10% Holder may be entitled to a foreign tax credit
for the 5% German withholding tax on dividends and for the portion of the total
income taxes (trade income tax and corporation income tax, including any surtax)
paid by DaimlerChrysler AG attributable to distributed profits.
The German corporate imputation system that has provided German resident
individual shareholders with a tax credit in respect of dividends paid by German
corporations was recently repealed, effective with respect to dividends paid
after 2001. Consequently, Qualified Holders will no longer be entitled to the
additional 5% treaty refund with respect to such dividends. However, the German
withholding tax will be reduced from 25% to 20% with respect to such dividends.
Dividends paid in euros to a Qualified Holder of DaimlerChrysler ordinary
shares will be included in income in a dollar amount calculated by reference to
the exchange rate in effect on the date the dividends (including any deemed
refund of German corporate tax) are received or treated as received by such
holder. If dividends paid in euros are converted into dollars on the date
received or treated as received, Qualified Holders generally should not be
required to recognize foreign currency gain or loss in respect of each dividend.
75
A surtax on the German withholding tax is currently levied on dividend
distributions paid by a German resident company. The rate of this surtax is
5.5%, which is 1.375% (5.5% X 25%) of the gross dividend amount. Under the
Income Tax Treaty, Qualified Holders are entitled to a full refund of this
surtax.
Under Section 904(g) of the United States Internal Revenue Code of 1986, as
amended (the "Code"), dividends paid by a foreign corporation that is treated as
more than 50% owned by United States person may be treated as United States
source income (rather than foreign source income) for foreign tax credit
purposes, to the extent the foreign corporation earns United States source
income. Such treatment may adversely affect Qualified Holders' ability to use
foreign tax credits. It is possible that DaimlerChrysler AG may be treated as
more than 50% owned by United States persons for purposes of Section 904(g) of
the Code.
REFUND PROCEDURES
To claim the refund reflecting the current reduction of the German
withholding tax from 25% to 15%, the additional 5% treaty refund and the refund
of the effective 1.375% German surtax, when applicable, a Qualified Holder must
submit (either directly or, as described below, through the U.S. transfer agent
for DaimlerChrysler ordinary shares or the Depository Trust Company) a claim for
refund to the German tax authorities, with the original bank voucher (or
certified copy thereof) issued by the paying entity documenting the tax withheld
within four years from the end of the calendar year in which the dividend is
received. Claims for refunds are made on a special German claim for refund form,
which must be filed with the German tax authorities: Bundesamt fuer Finanzen,
53221 Bonn-Beuel, Germany. The German claim for refund forms may be obtained
from the German tax authorities at the same address where the applications are
filed or from the Embassy of the Federal Republic of Germany, 4645 Reservoir
Road, N.W., Washington, D.C. 20007-1998.
Qualified Holders must also submit to the German tax authorities
certification (IRS Form 6166) of their last filed United States federal income
tax return. Such certification is obtained from the office of the Director of
the Internal Revenue Service Center by filing a request for the certification
with the Internal Revenue Service -- Philadelphia Service Center, Foreign
Certification Request, P.O. Box 16347, Philadelphia, PA 19114-0447. (Additional
information, including IRS Publication 686, can be obtained from the Internal
Revenue Service website at WWW.IRS.GOV.) Requests for certification are to be
made in writing and must include the Qualified Holder's name, social security
number or employer identification number, tax return form number and tax period
for which certification is requested. The Internal Revenue Service will send the
certification directly to the German tax authorities if the Qualified Holder
authorizes the Internal Revenue Service to do so. This certification is valid
for three years and need only be resubmitted in a fourth year in the event of a
subsequent application for refund.
The U.S. transfer agent will receive and distribute dividends to Qualified
Holders who hold DaimlerChrysler ordinary shares of record and will perform
administrative functions necessary to claim the refund reflecting the current
reduction in German withholding tax from 25% to 15% (to 5% for 10% Holders), the
additional 5% treaty refund and the refund of the effective 1.375% German
surtax, when applicable, for such holders. These arrangements may be amended or
revoked at any time in the future.
Under a newly implemented simplified and accelerated refund procedure, the
U.S. transfer agent will prepare the German claim for refund forms on behalf of
Qualified Holders and file them electronically with the German tax authorities.
In order for the U.S. transfer agent to file the claim for refund forms, the
U.S. transfer agent will prepare and mail to these Qualified Holders, and the
holders will be requested to sign and return to the U.S. transfer agent, (1) a
statement authorizing the U.S. transfer agent to perform these procedures and
agreeing that the German tax authorities may inform the IRS of any refunds of
German taxes and (2) a written authorization to remit the refund of withholding
to an account other than that of the Qualified Holder. The U.S. transfer agent
will attach the signed statement and the documentation issued by the paying
agency documenting the dividend paid and the tax withheld to the claim for
refund form and file them with the German tax authorities. Qualified Holders
should also request certification (IRS Form 6166) of their last filed United
States federal income tax return from the IRS and have it ready for presentation
to the U.S. transfer agent upon request. This certification (IRS
76
Form 6166) may be requested from the Qualified Holder if the Qualified Holder is
selected as part of a verifying sample; if in this case, the certification (IRS
Form 6166) cannot be presented by the Qualified Holder within a reasonable time,
the refund of the German withholding taxes will be denied.
A simplified refund procedure for Qualified Holders whose DaimlerChrysler
ordinary shares are registered with brokers participating in the Depository
Trust Company is in effect between the Depository Trust Company and the German
tax authorities. Under this simplified refund procedure, the Depository Trust
Company provides the German tax authorities with electronic certification of the
U.S. taxpayer status of such Qualified Holders based on information it receives
from its broker participants, and claims a refund on behalf of those Qualified
Holders. Accordingly, these Qualified Holders do not need to file refund claim
forms through the U.S. transfer agent.
The German tax authorities will issue refunds denominated in marks. The
refunds will be issued in the name of the U.S. transfer agent or the Depository
Trust Company, as the case may be, which will convert the refunds to dollars and
make corresponding refund payments to Qualified Holders and to brokers. The
brokers, in turn, will remit corresponding refund amounts to the Qualified
Holders holding DaimlerChrysler ordinary shares registered with such brokers.
Qualified Holders of DaimlerChrysler ordinary shares who receive a refund
attributable to reduced withholding taxes under the Income Tax Treaty may be
required to recognize foreign currency gain or loss, which will be treated as
ordinary income or loss, to the extent that the dollar value of the refund
received or treated as received by the Qualified Holder differs from the U.S.
dollar equivalent of the refund on the date the dividend on which such
withholding taxes were imposed was received or treated as received by the
Qualified Holder.
TAXATION OF CAPITAL GAINS
Under the Income Tax Treaty, a Qualified Holder will not be liable for
German tax on capital gains realized or accrued on the sale or other disposition
of DaimlerChrysler ordinary shares.
Upon a sale or other disposition of DaimlerChrysler ordinary shares, a
Qualified Holder will recognize capital gain or loss for United States federal
income tax purposes equal to the difference between the amount realized and the
Qualified Holder's adjusted tax basis in the DaimlerChrysler ordinary shares. In
the case of an individual Qualified Holder of DaimlerChrysler ordinary shares,
any such capital gain will be subject to a maximum United States federal income
tax rate of 20%, if the individual Qualified Holder's holding period in the
DaimlerChrysler ordinary shares is more than 12 months.
GERMAN GIFT AND INHERITANCE TAXES
The United States-Germany estate tax treaty provides that an individual
whose domicile is determined to be in the United States for purposes of such
treaty will not be subject to German inheritance and gift tax (the equivalent of
the United States federal estate and gift tax) on the individual's death or
making of a gift unless the DaimlerChrysler ordinary shares (1) are part of the
business property of a permanent establishment located in Germany or (2) are
part of the assets of a fixed base of an individual located in Germany and used
for the performance of independent personal services. An individual's domicile
in the United States, however, does not prevent imposition of German inheritance
and gift tax with respect to an heir, donee or other beneficiary who is
domiciled in Germany at the time the individual died or the gift was made.
The United States-Germany estate tax treaty also provides a credit against
United States federal estate and gift tax liability for the amount of
inheritance and gift tax paid in Germany, subject to certain limitations, in a
case where the DaimlerChrysler ordinary shares are subject to German inheritance
or gift tax and United States federal estate or gift tax.
77
GERMAN CAPITAL TAX (VERMOEGENSTEUER)
The Income Tax Treaty provides that a Qualified Holder will not be subject
to German capital tax (VERMOEGENSTEUER) with respect to the DaimlerChrysler
ordinary shares. As a result of a judicial decision, the German capital tax
(VERMOEGENSTEUER) presently is not imposed.
OTHER GERMAN TAXES
There are no German transfer, stamp or other similar taxes that would apply
to Qualified Holders upon receipt, purchase, holding or sale of DaimlerChrysler
ordinary shares.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING
Dividends on DaimlerChrysler ordinary shares, and payments of the proceeds
of a sale of DaimlerChrysler ordinary shares, paid within the United States or
through certain U.S.-related financial intermediaries are subject to information
reporting and may be subject to backup withholding at a 31% rate unless the
Qualified Holder (1) is a corporation or other exempt recipient or (2) provides
a taxpayer identification number and certifies that no loss of exemption from
backup withholding has occurred.
DOCUMENTS ON DISPLAY
DaimlerChrysler is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. In accordance with these
requirements, DaimlerChrysler files reports and other information with the
Securities and Exchange Commission. These materials, including this Annual
Report and the exhibits thereto, may be inspected and copied at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, New York, New York 10048.
Copies of the materials may be obtained from the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The public may obtain information on the operation of the Commission's
Public Reference Room by calling the Commission in the United States at
1-800-SEC-0330. The Commission also maintains a web site at http://www.sec.gov
that contains reports, proxy statements and other information regarding
registrants that file electronically with the Commission. DaimlerChrysler's
annual reports and some of the other information submitted by DaimlerChrysler to
the Commission may be accessed through this web site. In addition, material
filed by DaimlerChrysler can be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The DaimlerChrysler Group is exposed to market risks from changes in foreign
currency exchange rates, interest rates and equity prices which may adversely
affect its operating results and financial condition. The Group seeks to manage
these risks through its regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments.
DaimlerChrysler controls and manages foreign exchange risk, interest rate risk
and equity price risk by continually monitoring changes in key economic
indicators and market information.
The Group does not use financial instruments for trading or other
speculative purposes.
Following organizational standards in the international banking industry,
DaimlerChrysler maintains risk management control systems independent of
Corporate Treasury and with a separate reporting line.
78
EXCHANGE RATE RISK
TRANSACTION RISK AND CURRENCY RISK MANAGEMENT
As a consequence of the global nature of DaimlerChrysler's businesses, its
operations and its reported financial results and cash flows are exposed to the
risks associated with fluctuations in the exchange rates between the euro, the
dollar and other world currencies. The Group's businesses are exposed to
transaction risk whenever revenues are denominated in a currency other than the
currency in which the costs relating to those revenues are incurred. This risk
exposure primarily affects the Mercedes-Benz Passenger Cars & smart segment.
Revenues of the Mercedes-Benz Passenger Cars & smart segment are denominated in
the currencies of the countries in which cars are sold but manufacturing costs
are denominated primarily in euros. Commercial Vehicles is also subject to
transaction risk, although -- because of its global production network -- to a
lesser degree. Since the Chrysler Group generates the vast majority of its
revenues and costs in dollars, the transaction risk of this segment is
relatively low compared to that of Mercedes-Benz Passenger Cars & smart. The
Aerospace segment is exposed to transaction risk resulting from the dollar
exposure of the aircraft engine business conducted through MTU Aero Engines.
Following the exchange of DaimlerChrysler's controlling interest in
DaimlerChrysler Aerospace for an equity interest in EADS in July 2000, those
business units of the Aerospace segment which were contributed to EADS ceased to
participate in DaimlerChrysler's centralized financial management. Treasury
functions for these entities are now carried out by EADS. Consequently,
transaction risk resulting from the dollar exposure of those business units of
the Aerospace segment which were contributed to EADS is not included in the
quantitative exchange rate risk disclosure for 2000. See "Description of
Business Segments" in "Item 4. Information on the Company" and Note 11 to the
Consolidated Financial Statements.
Cash inflows and outflows of a business segment are netted if they are
denominated in the same currency. Therefore, only the unmatched amounts are
subject to transaction risk. The currency exposure of DaimlerChrysler is
additionally reduced through the natural hedging potential arising from offsets
in the euro exposure of the Chrysler Group with the dollar exposure of
Mercedes-Benz Passenger Cars & smart. In order to provide an additional natural
hedge against the remaining transaction risk exposure, DaimlerChrysler attempts
to increase cash outflows in the same currencies in which it has a net excess
inflow, where possible and appropriate. This is mainly achieved through
increased procurement in foreign currencies and by increasing production in
those countries which are primary markets for the Group's products.
In order to mitigate further the impact of currency exchange rate
fluctuations, DaimlerChrysler continually assesses its exposure to currency
risks and hedges a portion of those risks through the use of derivative
financial instruments. Responsibility for managing DaimlerChrysler's currency
exposures and use of currency derivatives is centralized within the Group's
Currency Committee. The Currency Committee, which consists of two separate
sub-groups, one for the Group's vehicle businesses and one for the remaining
Aerospace activities, is comprised of members of senior management from each of
the respective businesses as well as from Corporate Treasury and Risk
Controlling of DaimlerChrysler. Decisions concerning foreign currency hedging
taken by the Currency Committee are implemented by Corporate Treasury. Risk
Controlling regularly informs the Board of Management of the decisions of the
Currency Committee as well as the actions of Corporate Treasury. Corporate
Treasury is responsible for assessing, consolidating and managing foreign
currency exposures through transactions with international financial
institutions. In addition to the currency exposure inherent in the Group's
operational business, exchange rate fluctuations can also affect the conversion
into euros of profits of subsidiaries of DaimlerChrysler located outside the
euro zone. This risk is also managed by Corporate Treasury.
The principal derivative financial instruments used by the Group to cover
foreign currency exposures are forward foreign exchange contracts and currency
options. The maturity dates of forward contracts are established according to
the anticipated cash flows of the Group. The policy of the Group is to use a
mixture of these instruments depending upon the Group's view of market
conditions which is based on fundamental analysis and technical analysis. The
currencies, in which the Group's derivative financial instruments are
denominated, are in
79
parallel with the currencies in which it is subject to transaction risk. For a
description of the accounting for derivative financial instruments see "New
Accounting Pronouncements" in "Item 5. Operating and Financial Review and
Prospects" and Note 31 to the Consolidated Financial Statements.
For 2000, the Group's net transaction exposure before hedging transactions
was approximately [EURO]11.5 billion which consisted primarily of U.S. Dollars
([EURO]5.2 billion), British Pounds ([EURO]2.4 billion) and Japanese Yen
([EURO]1.4 billion). In 2000, the Group's net transaction exposure decreased 12%
compared to 1999 since transaction exposure resulting from those business units
of the Aerospace segment which were contributed to EADS were no longer included.
During 2000, the U.S. Dollar, the British Pound and the Japanese Yen appreciated
considerably against the euro. DaimlerChrysler was able to benefit from this
exchange rate development. However, the smoothing effect of hedging activities
undertaken in prior years diluted these benefits to some extent.
The effective exchange rates for the major world currencies achieved for the
Group through hedging transactions in contrast to the pure unhedged market
average rates for these currencies in 2000 and 1999, respectively, were as
follows:
2000 1999
------------------------------------------------- -------------------------------------------------
% MARKET % % MARKET %
CURRENCY EFFECTIVE(1) CHANGE(2) AVERAGE(3) CHANGE(2) EFFECTIVE(1) CHANGE(2) AVERAGE(3) CHANGE(2)
- -------- ------------ --------- ---------- --------- ------------ --------- ---------- ---------
(CURRENCY UNITS PER [EURO])
U.S. Dollar............... 1.08 (5.3) 0.92 (14.0) 1.14 (1.7) 1.07 (3.6)
British Pound............. 0.68 0 0.61 (7.6) 0.68 (5.6) 0.66 (1.5)
Japanese Yen.............. 126 (6.0) 99 (18.2) 134 16.5 121 (16.6)
- ------------------------------
(1) The effective rates shown represent the average of all hedging transactions
for each specific currency which matured during the year shown including all
hedging effects such as swap prices and the net premium revenue and expense
resulting from option transactions.
(2) The percentage change shown is in comparison to the figure shown in the
comparable column in the prior year, except that percentage changes for 1999
are as compared to the 1998 figures which are not shown.
(3) The market average exchange rates for the foreign currencies shown are based
on the daily reference rates published by the European Central Bank.
EXCHANGE RATE SENSITIVITY
Because the Group enters into foreign exchange transactions for a
significant portion of its contracted and forecasted foreign currency exposures,
a significant increase or decrease in the exchange rate of the euro relative to
other major world currencies should not, in the short term, materially affect
the Group's cash flows. Over time, however, to the extent that such exchange
rate movements cannot be reflected in the pricing of the Group's products in
local currency they could materially affect the Group's cash flows. In general,
appreciation of the euro in relation to another currency has an adverse effect
on the Group's reported revenues and results, whereas depreciation of the euro
has a positive effect. The tables below provide information about the effect on
the Group's pre-tax cash flow of a 10% appreciation of the euro against foreign
currencies. The figures shown in the tables were calculated as of December 31,
2000.
80
U.S. CANADIAN BRITISH JAPANESE
2001 DOLLAR DOLLAR POUND YEN OTHER TOTAL
- ---- -------- -------- -------- -------- -------- --------
([EURO] EQUIVALENT IN BILLIONS)
ESTIMATES OF:
Gross Amount of Foreign Currency Exposure............. 11.4 7.7 3.7 2.1 3.0 27.9
Gross Amount of Foreign Currency Netting.............. (6.3) (7.9) (0.3) (0.2) (0.7) (15.4)
Net Transaction Exposure in Foreign Currency.......... 5.1 (0.2) 3.4 1.9 2.3 12.5
Loss from a 10% Appreciation of the Euro After
Hedging Activities(1,2)
Status as of December 31, 1999.................... 0.30 -- 0.19 0.04 0.14 0.67
Status as of December 31, 2000.................... 0.09 -- 0.13 0.05 0.12 0.39
U.S. CANADIAN BRITISH JAPANESE
2002 DOLLAR DOLLAR POUND YEN OTHER TOTAL
- ---- -------- -------- -------- -------- -------- --------
([EURO] EQUIVALENT IN BILLIONS)
ESTIMATES OF:
Gross Amount of Foreign Currency Exposure............. 11.8 7.5 3.5 2.3 2.9 28.0
Gross Amount of Foreign Currency Netting.............. (6.8) (7.5) (0.3) (0.2) (0.7) (15.5)
Net Transaction Exposure in Foreign Currency.......... 5.0 0.0 3.2 2.1 2.2 12.5
Loss from a 10% Appreciation of the Euro After
Hedging Activities(1,2)
Status as of December 31, 2000.................... 0.17 -- 0.21 0.08 0.16 0.62
- ------------------------------
(1) Sensitivity is calculated based on net transaction exposure after
consideration of the derivative financial instruments the Group entered into
to offset such foreign currency exposure.
(2) Anticipated losses from a more than 10% appreciation of the euro against
those currencies would increase proportionately.
------------------------------
The relatively lower sensitivity shown for 2001 is explained by the Group's
policy to hedge relatively larger portions of short-term anticipated revenues.
As a general rule, the longer expected revenues extend into the future, the
larger is the unhedged portion of such revenues.
EFFECTS OF CURRENCY TRANSLATION
Many subsidiaries of DaimlerChrysler are located outside the euro zone.
Since the Group's financial reporting currency is the euro, the income
statements of these subsidiaries are translated into euros for inclusion of the
results of these subsidiaries in the DaimlerChrysler consolidated financial
statements. Period-to-period changes in the average exchange rate for a
particular country's currency can significantly affect the translation into
euros of both revenues and operating income denominated in that currency. Unlike
the effect of exchange rate fluctuations on transaction exposure, the effect of
exchange rate translation exposure does not affect the Group's local currency
cash flows. See Notes 18 and 25 to the Consolidated Financial Statements.
DaimlerChrysler has significant assets, liabilities and operations outside
the euro zone which are denominated in local currencies, most importantly
DaimlerChrysler Corporation and DaimlerChrysler's financial services companies.
The long-term currency risk inherent in these investments is subject to
continuing assessment and evaluation. In specific circumstances, DaimlerChrysler
seeks to hedge the currency risk inherent in certain of its long-term
investments. Effects from currency fluctuations on the translation of net asset
amounts into euros will be reflected in the Group's equity position.
81
INTEREST RATE RISK AND EQUITY PRICE RISK
INTEREST RATE RISK
DaimlerChrysler holds a variety of interest rate sensitive assets and
liabilities to manage the liquidity and cash needs of its day-to-day operations.
A substantial volume of interest rate sensitive assets and liabilities is
related to the leasing and sales financing business. In particular, the Group's
leasing and sales financing business enters into transactions with customers
resulting in fixed-rate or floating-rate receivables. DaimlerChrysler's policy
is to match funding in terms of maturities and interest rates for a substantial
portion of these assets using bank loans, bonds and commercial paper.
DaimlerChrysler uses derivative financial instruments including swaps,
swaptions, forward rate agreements, futures, caps and floors to achieve the
desired asset/liability structure.
EQUITY PRICE RISK
Following modern portfolio theory, DaimlerChrysler also holds investments in
various equity securities to improve the return on its liquidity. These
securities subject DaimlerChrysler to risks due to changes in quoted market
prices. To a much lesser extent than the risks from changing interest rates,
DaimlerChrysler uses derivative financial instruments including futures and
options to manage the risks arising from changes in equity prices.
VALUE-AT-RISK ANALYSES
In order to quantify the interest rate risk and the equity price risk of the
Group on a continuous basis, DaimlerChrysler's risk management control systems
employ value-at-risk analyses as recommended by the Bank for International
Settlements. Value-at-risk figures indicate maximum potential losses that are
not exceeded under normal market conditions. The value-at-risk calculations
employed by DaimlerChrysler express potential losses in fair values and are
based on the variance-covariance-approach and assume a 99% confidence level and
a holding period of five days. Estimates of volatilities and correlations are
primarily drawn from the RiskMetrics-TM- datasets and supplemented by additional
interest rate and equity price information.
The following table sets forth the period-end, high, low and average
value-at-risk figures for DaimlerChrysler's 2000 and 1999 portfolio of interest
rate sensitive financial instrumens and equity securities.
2000(1) 1999
------------------------------------------ ------------------------------------------
PERIOD- PERIOD-
VALUE-AT-RISK END HIGH LOW AVERAGE END HIGH LOW AVERAGE
- ------------- -------- -------- -------- --------- --------- -------- -------- --------
([EURO] IN MILLIONS)
Interest Rate Risk...................... 126 163 81 128 81 94 42 71
Equity Price Risk....................... 87 105 82 95 105 201 105 148
Aggregate............................... 137 206 127 156 127 209 127 168
- ------------------------------
(1) Financial instruments attributable to those business units of the Aerospace
segment which were contributed to EADS were only considered prior to
July 2000.
------------------------------
The average value-at-risk to DaimlerChrysler's portfolio of interest rate
sensitive financial instruments increased in 2000, primarily due to the
expansion of the Group's lease and sales financing business. The average
value-at-risk to the portfolio of equity securities decreased in 2000, mainly
resulting from the transfer of equity securities to the DaimlerChrysler Pension
Trust.
Due to risk-reducing correlation effects between the portfolio of interest
rate sensitive financial instruments and the portfolio of equity securities, the
aggregate values-at-risk are always less than the sums of the individual
values-at-risk.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
Not applicable.
82
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS.
None.
ITEM 15. [RESERVED].
ITEM 16. [RESERVED].
PART III
ITEM 17. FINANCIAL STATEMENTS.
Not applicable.
ITEM 18. FINANCIAL STATEMENTS.
See pages F-i, F-1 through F-63 and page S-1, incorporated herein by
reference.
ITEM 19. EXHIBITS.
Documents filed as exhibits to this Annual Report:
1.1 Memorandum and Articles of Association (SATZUNG) of DaimlerChrysler AG as
amended to date (English translation included).
2.1 The total amount of long-term debt securities of DaimlerChrysler AG
authorized under any instrument does not exceed 10% of the total assets of
the Group on a consolidated basis. DaimlerChrysler AG hereby agrees to
furnish to the Commission, upon its request, a copy of any instrument
defining the rights of holders of long-term debt of DaimlerChrysler AG or of
its subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed.
4.1 The following agreements (without exhibits and schedules): the Amended and
Restated Master Alliance Agreement dated as of September 8, 2000 between
DaimlerChrysler AG and Mitsubishi Motors Corporation; the Amended and
Restated Standstill Agreement between those parties dated as of
September 8, 2000; the Securities Subscription Agreement between
DaimlerChrysler AG, Mitsubishi Motors Corporation, and DaimlerChrysler Japan
Holding, Ltd. dated as of July 28, 2000; the Amendment to the Securities
Subscription Agreement dated as of September 8, 2000; and Amendment No. 2 to
the Securities Subscription Agreement dated as of September 28, 2000.
4.2 Joint Venture Agreement, dated April 3, 2000, between DaimlerChrysler
Services (debis) AG, Deutsche Telekom AG and Rubin Telekommunikationsdienste
GmbH, and Option Agreement, dated April 3, 2000, between DaimlerChrysler
Services (debis) AG and Deutsche Telekom AG (English translations included).
8.1 Significant subsidiaries as of the end of the year covered by this report:
See "Significant Subsidiaries" in "Item 4. Information on the Company."
10.1 Independent Auditors' Report on Schedule and Consent of KPMG Deutsche
Treuhand-Gesellschaft AG.
10.2 Independent Auditors' Consent of Deloitte & Touche LLP.
10.3 Independent Auditors' Report of Deloitte & Touche LLP on the consolidated
financial statements of DaimlerChrysler Corporation.
83
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this Annual Report on its behalf.
Date: February 26, 2001
DAIMLERCHRYSLER AG
By: /s/ JUERGEN E. SCHREMPP
------------------------------------------
Juergen E. Schrempp
Chairman of the Board of Management
By: /s/ MANFRED GENTZ
------------------------------------------
Dr. Manfred Gentz
Member of the Board of Management
Finance & Controlling
84
DAIMLERCHRYSLER AG
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
Independent Auditors' Report................................ F-1
Consolidated Financial Statements:
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998........................ F-2
Consolidated Balance Sheets at December 31, 2000 and
1999.................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2000, 1999 and 1998.... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998........................ F-6
Consolidated Fixed Assets Schedule for the year ended
December 31, 2000....................................... F-8
Notes to the Consolidated Financial Statements............ F-10
Financial Statement Schedule:
Allowance for Doubtful Accounts........................... S-1
F-i
'
INDEPENDENT AUDITORS' REPORT
The Board of Management
DaimlerChrysler AG:
We have audited the accompanying consolidated balance sheets of
DaimlerChrysler AG and subsidiaries ("DaimlerChrysler") as of December 31, 2000
and 1999, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements are the
responsibility of DaimlerChrysler's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We
did not audit the financial statements of DaimlerChrysler Corporation or certain
of its consolidated subsidiaries ("DaimlerChrysler Corporation"), which
statements reflect total assets constituting 29 percent at December 31, 2000 and
1999, and total revenues constituting 42 percent, 43 percent and 45 percent for
the years ended December 31, 2000, 1999 and 1998, of the related consolidated
totals. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for DaimlerChrysler Corporation, is based solely on the report of the other
auditors.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of the other auditors
provide a reasonable basis for our opinion.
In 1998, DaimlerChrysler accounted for a material joint venture in
accordance with the proportionate method of consolidation as is permitted under
the Seventh Directive of the European Community and the Standards of the
International Accounting Standards Committee. In our opinion, United States
generally accepted accounting principles required that such joint venture be
accounted for using the equity method of accounting. The United States
Securities and Exchange Commission stated that it would not object to
DaimlerChrysler's use of the proportionate method of consolidation as
supplemented by the disclosures in Note 3.
In our opinion, based on our audits and the report of the other auditors,
except for the use of the proportionate method of accounting in 1998, as
discussed in the preceding paragraph, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of DaimlerChrysler as of December 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with United States generally
accepted accounting principles.
As discussed in Note 10 to the consolidated financial statements, in 2000
DaimlerChrysler adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," and Emerging
Issues Task Force Issue No. 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets."
KPMG Deutsche Treuhand-Gesellschaft AG
Stuttgart, Germany
February 9, 2001
F-1
DAIMLERCHRYSLER AG
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2000
NOTE (NOTE 1) 2000 1999 1998
- -------------------------------------------------------------------------------------------------
Revenues 33 $ 152,446 [EURO]162,384 [EURO]149,985 [EURO]131,782
- -------------------------------------------------------------------------------------------------
Cost of sales 6 (126,558) (134,808) (120,082) (105,303)
- -------------------------------------------------------------------------------------------------
GROSS MARGIN 25,888 27,576 29,903 26,479
- -------------------------------------------------------------------------------------------------
Selling, administrative and
other expenses 6 (16,772) (17,865) (15,669) (14,592)
- -------------------------------------------------------------------------------------------------
Research and development (5,949) (6,337) (5,737) (4,971)
- -------------------------------------------------------------------------------------------------
Other income 7 889 946 827 1,099
- -------------------------------------------------------------------------------------------------
Merger costs 1 -- -- -- (685)
- -------------------------------------------------------------------------------------------------
INCOME BEFORE FINANCIAL INCOME 4,056 4,320 9,324 7,330
- -------------------------------------------------------------------------------------------------
Financial income (expense),
net 8 146 156 333 763
- -------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 4,202 4,476 9,657 8,093
- -------------------------------------------------------------------------------------------------
Effects of changes in German
tax law (247) (263) (812) --
- -------------------------------------------------------------------------------------------------
Income taxes (1,630) (1,736) (3,721) (3,014)
- -------------------------------------------------------------------------------------------------
Total income taxes 9 (1,877) (1,999) (4,533) (3,014)
- -------------------------------------------------------------------------------------------------
Minority interests (11) (12) (18) (130)
- -------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY
ITEMS AND CUMULATIVE EFFECTS
OF CHANGES IN ACCOUNTING
PRINCIPLES 2,314 2,465 5,106 4,949
- -------------------------------------------------------------------------------------------------
Extraordinary items: 11
- -------------------------------------------------------------------------------------------------
Gains on disposals of
businesses, net of taxes
(therein gain on issuance
of subsidiary and
associated company stock
of [EURO]2,418 in 2000) 5,179 5,516 659 --
- -------------------------------------------------------------------------------------------------
Losses on early
extinguishment of debt, net
of taxes -- -- (19) (129)
- -------------------------------------------------------------------------------------------------
Cumulative effects of changes
in accounting principles:
transition adjustments
resulting from adoption of
SFAS 133 and EITF 99-20,
net of taxes 10 (82) (87) -- --
- -------------------------------------------------------------------------------------------------
NET INCOME 7,411 7,894 5,746 4,820
- -------------------------------------------------------------------------------------------------
EARNINGS PER SHARE 34
- -------------------------------------------------------------------------------------------------
Basic earnings per share
- -------------------------------------------------------------------------------------------------
Income before
extraordinary items and
cumulative effects of
changes in accounting
principles 2.31 2.46 5.09 5.16
- -------------------------------------------------------------------------------------------------
Extraordinary items 5.16 5.50 0.64 (0.13)
- -------------------------------------------------------------------------------------------------
Cumulative effects of
changes in accounting
principles (0.08) (0.09) -- --
- -------------------------------------------------------------------------------------------------
Net income 7.39 7.87 5.73 5.03
- -------------------------------------------------------------------------------------------------
Diluted earnings per share
- -------------------------------------------------------------------------------------------------
Income before
extraordinary items and
cumulative effects of
changes in accounting
principles 2.30 2.45 5.06 5.04
- -------------------------------------------------------------------------------------------------
Extraordinary items 5.10 5.44 0.63 (0.13)
- -------------------------------------------------------------------------------------------------
Cumulative effects of
changes in accounting
principles (0.08) (0.09) -- --
- -------------------------------------------------------------------------------------------------
Net income 7.32 7.80 5.69 4.91
- -------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-2
DAIMLERCHRYSLER AG
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INDUSTRIAL BUSINESS FINANCIAL SERVICES
- ------------------------------------------------- ------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
- ------------------------------------------------- ------------------------------------------------
2000 1999 1998 2000 1999 1998
- ------------------------------------------------- ------------------------------------------------ ------------------------------
[EURO]147,260 [EURO]139,929 [EURO]124,010 [EURO]15,124 [EURO]10,056 [EURO]7,772 Revenues
- ------------------------------------------------- ------------------------------------------------ ------------------------------
(120,912) (111,668) (99,129) (13,896) (8,414) (6,174) Cost of sales
- ------------------------------------------------- ------------------------------------------------ ------------------------------
26,348 28,261 24,881 1,228 1,642 1,598 GROSS MARGIN
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Selling, administrative and
(16,621) (14,669) (13,714) (1,244) (1,000) (878) other expenses
- ------------------------------------------------- ------------------------------------------------ ------------------------------
(6,337) (5,737) (4,971) -- -- -- Research and development
- ------------------------------------------------- ------------------------------------------------ ------------------------------
842 691 993 104 136 106 Other income
- ------------------------------------------------- ------------------------------------------------ ------------------------------
-- -- (685) -- -- -- Merger costs
- ------------------------------------------------- ------------------------------------------------ ------------------------------
4,232 8,546 6,504 88 778 826 INCOME BEFORE FINANCIAL INCOME
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Financial income (expense),
166 327 740 (10) 6 23 net
- ------------------------------------------------- ------------------------------------------------ ------------------------------
4,398 8,873 7,244 78 784 849 INCOME BEFORE INCOME TAXES
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Effects of changes in German
tax law
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Income taxes
- ------------------------------------------------- ------------------------------------------------ ------------------------------
(2,152) (4,340) (2,732) 153 (193) (282) Total income taxes
- ------------------------------------------------- ------------------------------------------------ ------------------------------
(11) (16) (128) (1) (2) (2) Minority interests
- ------------------------------------------------- ------------------------------------------------ ------------------------------
INCOME BEFORE EXTRAORDINARY
ITEMS AND CUMULATIVE EFFECTS
OF CHANGES IN ACCOUNTING
2,235 4,517 4,384 230 589 565 PRINCIPLES
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Extraordinary items:
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Gains on disposals of
businesses, net of taxes
(therein gain on issuance
of subsidiary and
associated company stock
5,516 659 -- -- -- -- of [EURO]2,418 in 2000)
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Losses on early
extinguishment of debt,
-- (19) (129) -- -- -- net of taxes
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Cumulative effects of changes
in accounting principles:
transition adjustments
resulting from adoption of
SFAS 133 and EITF 99-20, net
10 -- -- (97) -- -- of taxes
- ------------------------------------------------- ------------------------------------------------ ------------------------------
7,761 5,157 4,255 133 589 565 NET INCOME
- ------------------------------------------------- ------------------------------------------------ ------------------------------
EARNINGS PER SHARE
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Basic earnings per share
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Income before
extraordinary items and
cumulative effects of
changes in accounting
-- -- -- -- -- -- principles
- ------------------------------------------------- ------------------------------------------------ ------------------------------
-- -- -- -- -- -- Extraordinary items
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Cumulative effects of
changes in accounting
-- -- -- -- -- -- principles
- ------------------------------------------------- ------------------------------------------------ ------------------------------
-- -- -- -- -- -- Net income
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Diluted earnings per share
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Income before
extraordinary items and
cumulative effects of
changes in accounting
-- -- -- -- -- -- principles
- ------------------------------------------------- ------------------------------------------------ ------------------------------
-- -- -- -- -- -- Extraordinary items
- ------------------------------------------------- ------------------------------------------------ ------------------------------
Cumulative effects of
changes in accounting
-- -- -- -- -- -- principles
- ------------------------------------------------- ------------------------------------------------ ------------------------------
-- -- -- -- -- -- Net income
- ------------------------------------------------- ------------------------------------------------ ------------------------------
F-3
DAIMLERCHRYSLER AG
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
INDUSTRIAL
CONSOLIDATED BUSINESS FINANCIAL SERVICES
------------------------------------ ---------------------------- ---------------------------
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
------------------------------------ ---------------------------- ---------------------------
2000
NOTE (NOTE 1) 2000 1999 2000 1999 2000 1999
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
ASSETS
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Intangible assets 12 $ 2,922 [EURO] 3,113 [EURO] 2,823 [EURO] 2,907 [EURO] 2,632 [EURO] 206 [EURO] 191
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Property, plant and
equipment, net 12 37,688 40,145 36,434 40,043 36,338 102 96
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Investments and long-term
financial assets 18 11,366 12,107 3,942 10,967 3,079 1,140 863
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Equipment on operating
leases, net 13 31,651 33,714 27,249 3,047 2,518 30,667 24,731
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
FIXED ASSETS 83,627 89,079 70,448 56,964 44,567 32,115 25,881
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Inventories 14 15,286 16,283 14,985 15,333 14,036 950 949
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Trade receivables 15 7,506 7,995 8,840 7,617 8,522 378 318
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Receivables from
financial services 16 45,694 48,673 38,735 30 38 48,643 38,697
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Other receivables 17 13,515 14,396 12,571 6,414 6,323 7,982 6,248
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Securities 18 5,049 5,378 8,969 4,195 8,250 1,183 719
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Cash and cash equivalents 19 6,691 7,127 9,099 6,445 8,197 682 902
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
NON-FIXED ASSETS 93,741 99,852 93,199 40,034 45,366 59,818 47,833
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
DEFERRED TAXES 9 2,287 2,436 3,806 2,350 3,710 86 96
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
PREPAID EXPENSES 21 7,423 7,907 7,214 7,782 7,076 125 138
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
TOTAL ASSETS (THEREOF
SHORT-TERM 2000:
[EURO]71,300; 1999:
[EURO]70,111) 187,078 199,274 174,667 107,130 100,719 92,144 73,948
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Capital stock $ 2,449 [EURO] 2,609 [EURO] 2,565
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Additional paid-in
capital 6,840 7,286 7,329
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Retained earnings 27,659 29,461 23,925
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Accumulated other
comprehensive income 2,866 3,053 2,241
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Treasury stock -- -- --
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
STOCKHOLDERS' EQUITY 22 39,814 42,409 36,060 [EURO]35,825 [EURO]30,318 [EURO]6,584 [EURO]5,742
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
MINORITY INTERESTS 487 519 650 506 637 13 13
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
ACCRUED LIABILITIES 24 34,211 36,441 37,695 35,772 37,155 669 540
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Financial liabilities 25 79,594 84,783 64,488 9,508 4,400 75,275 60,088
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Trade liabilities 26 14,323 15,257 15,786 14,875 15,484 382 302
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
Other liabilities 27 9,033 9,621 10,286 7,068 7,655 2,553 2,631
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
LIABILITIES 102,950 109,661 90,560 31,451 27,539 78,210 63,021
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
DEFERRED TAXES 9 5,145 5,480 5,192 (639) 1,227 6,119 3,965
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
DEFERRED INCOME 28 4,471 4,764 4,510 4,215 3,843 549 667
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
TOTAL LIABILITIES
(THEREOF SHORT-TERM
2000: [EURO]81,516;
1999: [EURO]83,315) 147,264 156,865 138,607 71,305 70,401 85,560 68,206
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 187,078 199,274 174,667 107,130 100,719 92,144 73,948
- ----------------------------------------------------------------------- ---------------------------- ---------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
DAIMLERCHRYSLER AG
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS OF [EURO])
ACCUMULATED OTHER
COMPREHENSIVE INCOME
------------------------------------------------
ADDITIONAL CUMULATIVE AVAILABLE- DERIVATIVE MINIMUM
CAPITAL PAID-IN RETAINED TRANSLATION FOR-SALE FINANCIAL PENSION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT SECURITIES INSTRUMENTS LIABILITY STOCK TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1,
1998 2,391 2,958 21,892 893 269 -- (19) (424) 27,960
- ---------------------------------------------------------------------------------------------------------------------------
Net income -- -- 4,820 -- -- -- -- -- 4,820
Other comprehensive income
(loss) -- -- -- (1,402) 259 -- (1) -- (1,144)
- ---------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 3,676
- ---------------------------------------------------------------------------------------------------------------------------
Issuance of capital stock 163 3,913 -- -- -- -- -- -- 4,076
Purchase and retirement of
capital stock -- -- -- -- -- -- -- (169) (169)
Re-issuance of treasury
stock -- 538 -- -- -- -- -- 482 1,020
Dividends -- -- (1,086) -- -- -- -- -- (1,086)
Special distribution -- -- (5,284) -- -- -- -- -- (5,284)
Other 7 (135) 191 -- -- -- -- 111 174
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1998 2,561 7,274 20,533 (509) 528 -- (20) -- 30,367
- ---------------------------------------------------------------------------------------------------------------------------
Net income -- -- 5,746 -- -- -- -- -- 5,746
Other comprehensive income
(loss) -- -- -- 2,431 (181) -- (8) -- 2,242
- ---------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 7,988
- ---------------------------------------------------------------------------------------------------------------------------
Issuance of capital stock 4 63 -- -- -- -- -- -- 67
Purchase of capital stock -- -- -- -- -- -- -- (86) (86)
Re-issuance of treasury
stock -- -- -- -- -- -- -- 86 86
Dividends -- -- (2,356) -- -- -- -- -- (2,356)
Other -- (8) 2 -- -- -- -- -- (6)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1999 2,565 7,329 23,925 1,922 347 -- (28) -- 36,060
- ---------------------------------------------------------------------------------------------------------------------------
Net income -- -- 7,894 -- -- -- -- -- 7,894
Other comprehensive income
(loss) -- -- -- 1,363 (149) (408) 6 -- 812
- ---------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 8,706
- ---------------------------------------------------------------------------------------------------------------------------
Increase in stated value of
capital stock 44 (44) -- -- -- -- -- -- --
Issuance of capital stock -- 1 -- -- -- -- -- -- 1
Purchase of capital stock -- -- -- -- -- -- -- (88) (88)
Re-issuance of treasury
stock -- -- -- -- -- -- -- 88 88
Dividends -- -- (2,358) -- -- -- -- -- (2,358)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
2000 2,609 7,286 29,461 3,285 198 (408) (22) -- 42,409
- ---------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
DAIMLERCHRYSLER AG
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
CONSOLIDATED
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2000
(NOTE 1) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------
Net income $ 7,411 [EURO]7,894 [EURO]5,746 [EURO]4,820
- --------------------------------------------------------------------------------------------------------------
Income applicable to minority interests 11 12 18 130
- --------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
- --------------------------------------------------------------------------------------------------------------
Gains on disposals of businesses (see also Note
11) (5,227) (5,568) (1,181) (296)
- --------------------------------------------------------------------------------------------------------------
Depreciation and amortization of equipment on
operating leases 6,090 6,487 3,315 1,972
- --------------------------------------------------------------------------------------------------------------
Depreciation and amortization of fixed assets 6,695 7,131 6,035 5,359
- --------------------------------------------------------------------------------------------------------------
Change in deferred taxes 1,145 1,220 2,402 1,959
- --------------------------------------------------------------------------------------------------------------
Equity income (loss) from associated companies 229 244 (23) (59)
- --------------------------------------------------------------------------------------------------------------
Cumulative effects of changes in accounting
principles 82 87 -- --
- --------------------------------------------------------------------------------------------------------------
Losses on early extinguishment of debt
(extraordinary item) -- -- 19 129
- --------------------------------------------------------------------------------------------------------------
Change in financial instruments (84) (90) 247 (191)
- --------------------------------------------------------------------------------------------------------------
(Gains) losses on disposals of fixed
assets/securities (427) (455) (1,215) (368)
- --------------------------------------------------------------------------------------------------------------
Change in trading securities 21 22 495 251
- --------------------------------------------------------------------------------------------------------------
Change in accrued liabilities 1,669 1,778 4,001 1,419
- --------------------------------------------------------------------------------------------------------------
Changes in other operating assets and
liabilities:
- --------------------------------------------------------------------------------------------------------------
-- inventories, net (822) (876) (2,436) (976)
- --------------------------------------------------------------------------------------------------------------
-- trade receivables (686) (731) (733) (688)
- --------------------------------------------------------------------------------------------------------------
-- trade liabilities (398) (424) 1,331 1,827
- --------------------------------------------------------------------------------------------------------------
-- other assets and liabilities (672) (714) 2 1,393
- --------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 15,037 16,017 18,023 16,681
- --------------------------------------------------------------------------------------------------------------
Purchases of fixed assets:
- --------------------------------------------------------------------------------------------------------------
- -- Increase in equipment on operating leases (17,947) (19,117) (19,336) (10,245)
- --------------------------------------------------------------------------------------------------------------
- -- Purchases of property, plant and equipment (9,756) (10,392) (9,470) (8,155)
- --------------------------------------------------------------------------------------------------------------
- -- Purchases of other fixed assets (451) (480) (645) (305)
- --------------------------------------------------------------------------------------------------------------
Proceeds from disposals of equipment on operating
leases 7,778 8,285 6,575 4,903
- --------------------------------------------------------------------------------------------------------------
Proceeds from disposals of fixed assets 809 862 507 515
- --------------------------------------------------------------------------------------------------------------
Payments for investments in businesses (4,584) (4,883) (1,289) (857)
- --------------------------------------------------------------------------------------------------------------
Proceeds from disposals of businesses 292 311 1,336 685
- --------------------------------------------------------------------------------------------------------------
Change in cash from exchange of businesses (1,268) (1,351) -- --
- --------------------------------------------------------------------------------------------------------------
Additions to receivables from financial services (109,377) (116,507) (102,140) (81,196)
- --------------------------------------------------------------------------------------------------------------
Repayments of receivables from financial services:
- --------------------------------------------------------------------------------------------------------------
- -- Finance receivables collected 41,566 44,276 41,928 33,784
- --------------------------------------------------------------------------------------------------------------
- -- Proceeds from sales of finance receivables 59,754 63,649 51,843 40,950
- --------------------------------------------------------------------------------------------------------------
Acquisitions of securities (other than trading) (7,309) (7,786) (4,395) (4,617)
- --------------------------------------------------------------------------------------------------------------
Proceeds from sales of securities (other than
trading) 9,598 10,224 3,719 2,734
- --------------------------------------------------------------------------------------------------------------
Change in other cash 188 200 (743) (1,641)
- --------------------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (30,707) (32,709) (32,110) (23,445)
- --------------------------------------------------------------------------------------------------------------
Change in commercial paper borrowings and
short-term financial liabilities (3,039) (3,238) 9,333 2,503
- --------------------------------------------------------------------------------------------------------------
Additions to long-term financial liabilities 27,466 29,257 13,340 9,491
- --------------------------------------------------------------------------------------------------------------
Repayment of financial liabilities (8,592) (9,152) (4,611) (4,126)
- --------------------------------------------------------------------------------------------------------------
Dividends paid (including profit transferred from
subsidiaries) (2,233) (2,379) (2,378) (6,454)
- --------------------------------------------------------------------------------------------------------------
Proceeds from issuance of capital stock (including
minority interests) 105 112 164 4,076
- --------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (83) (88) (86) (169)
- --------------------------------------------------------------------------------------------------------------
Proceeds from special distribution tax refund -- -- -- 1,487
- --------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 13,624 14,512 15,762 6,808
- --------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash
and cash equivalents (maturing
within 3 months) 470 501 805 (397)
- --------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (MATURING WITHIN 3 MONTHS) (1,576) (1,679) 2,480 (353)
- --------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS (MATURING WITHIN 3
MONTHS)
- --------------------------------------------------------------------------------------------------------------
AT BEGINNING OF PERIOD 8,225 8,761 6,281 6,634
- --------------------------------------------------------------------------------------------------------------
AT END OF PERIOD 6,649 7,082 8,761 6,281
- --------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
DAIMLERCHRYSLER AG
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN MILLIONS)
INDUSTRIAL BUSINESS FINANCIAL SERVICES
- ---------------------------------------------- -------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
- ---------------------------------------------- -------------------------------------------------
2000 1999 1998 2000 1999 1998
- ---------------------------------------------- ------------------------------------------------- ------------------------------
[EURO]7,761 [EURO]5,157 [EURO]4,255 [EURO]133 [EURO]589 [EURO]565 Net income
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Income applicable to minority
11 16 128 1 2 2 interests
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Adjustments to reconcile net
income to net cash provided
by operating activities:
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Gains on disposals of
businesses (see also Note
(5,568) (1,181) (296) -- -- -- 11)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Depreciation and
amortization of equipment on
207 68 45 6,280 3,247 1,927 operating leases
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Depreciation and
7,047 5,966 5,321 84 69 38 amortization of fixed assets
- ---------------------------------------------- ------------------------------------------------- ------------------------------
590 1,496 1,560 630 906 399 Change in deferred taxes
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Equity income (loss) from
185 (10) (38) 59 (13) (21) associated companies
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Cumulative effects of
changes in accounting
(10) -- -- 97 -- -- principles
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Losses on early
extinguishment of debt
-- 19 129 -- -- -- (extraordinary item)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Change in financial
(76) 247 (191) (14) -- -- instruments
- ---------------------------------------------- ------------------------------------------------- ------------------------------
(Gains) losses on disposals
(454) (1,213) (317) (1) (2) (51) of fixed assets/securities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
22 495 251 -- -- -- Change in trading securities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Change in accrued
1,742 3,913 1,375 36 88 44 liabilities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Changes in other operating
assets and liabilities:
- ---------------------------------------------- ------------------------------------------------- ------------------------------
(725) (2,387) (1,040) (151) (49) 64 -- inventories, net
- ---------------------------------------------- ------------------------------------------------- ------------------------------
(698) (541) (812) (33) (192) 124 -- trade receivables
- ---------------------------------------------- ------------------------------------------------- ------------------------------
(498) 1,222 1,668 74 109 159 -- trade liabilities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
-- other assets and
(623) (166) 36 (91) 168 1,357 liabilities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
CASH PROVIDED BY OPERATING
8,913 13,101 12,074 7,104 4,922 4,607 ACTIVITIES
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Purchases of fixed assets:
- ---------------------------------------------- ------------------------------------------------- ------------------------------
-- Increase in equipment on
(3,566) (2,935) (2,538) (15,551) (16,401) (7,707) operating leases
- ---------------------------------------------- ------------------------------------------------- ------------------------------
-- Purchases of property,
(10,340) (9,407) (8,118) (52) (63) (37) plant and equipment
- ---------------------------------------------- ------------------------------------------------- ------------------------------
-- Purchases of other fixed
(422) (524) (245) (58) (121) (60) assets
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Proceeds from disposals of
equipment on operating
3,374 3,007 2,548 4,911 3,568 2,355 leases
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Proceeds from disposals of
836 411 500 26 96 15 fixed assets
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Payments for investments in
(4,723) (1,145) (814) (160) (144) (43) businesses
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Proceeds from disposals of
298 1,336 682 13 -- 3 businesses
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Change in cash from exchange
(1,351) -- -- -- -- -- of businesses
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Additions to receivables from
133 (28) 63 (116,640) (102,112) (81,259) financial services
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Repayments of receivables from
financial services:
- ---------------------------------------------- ------------------------------------------------- ------------------------------
-- Finance receivables
-- -- -- 44,276 41,928 33,784 collected
- ---------------------------------------------- ------------------------------------------------- ------------------------------
-- Proceeds from sales of
-- -- -- 63,649 51,843 40,950 finance receivables
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Acquisitions of securities
(5,594) (3,958) (2,015) (2,192) (437) (2,602) (other than trading)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Proceeds from sales of
securities (other than
8,355 3,333 247 1,869 386 2,487 trading)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
385 (462) (1,455) (185) (281) (186) Change in other cash
- ---------------------------------------------- ------------------------------------------------- ------------------------------
CASH USED FOR INVESTING
(12,615) (10,372) (11,145) (20,094) (21,738) (12,300) ACTIVITIES
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Change in commercial paper
borrowings and short-term
(393) (260) (1,136) (2,845) 9,593 3,639 financial liabilities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Additions to long-term
2,523 918 322 26,734 12,422 9,169 financial liabilities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Repayment of financial
2,324 439 944 (11,476) (5,050) (5,070) liabilities
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Dividends paid (including
profit transferred from
(2,370) (2,373) (5,865) (9) (5) (589) subsidiaries)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Proceeds from issuance of
capital stock (including
(224) 82 3,561 336 82 515 minority interests)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
(88) (86) (169) -- -- -- Purchase of treasury stock
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Proceeds from special
-- -- 1,487 -- -- -- distribution tax refund
- ---------------------------------------------- ------------------------------------------------- ------------------------------
CASH PROVIDED BY (USED FOR)
1,772 (1,280) (856) 12,740 17,042 7,664 FINANCING ACTIVITIES
- ---------------------------------------------- ------------------------------------------------- ------------------------------
Effect of foreign exchange
rate changes on cash and
cash equivalents (maturing
471 750 (371) 30 55 (26) within 3 months)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
(1,459) 2,199 (298) (220) 281 (55) (MATURING WITHIN 3 MONTHS)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
CASH AND CASH EQUIVALENTS
(MATURING WITHIN 3 MONTHS)
- ---------------------------------------------- ------------------------------------------------- ------------------------------
7,859 5,660 5,958 902 621 676 AT BEGINNING OF PERIOD
- ---------------------------------------------- ------------------------------------------------- ------------------------------
6,400 7,859 5,660 682 902 621 AT END OF PERIOD
- ---------------------------------------------- ------------------------------------------------- ------------------------------
F-7
DAIMLERCHRYSLER AG
CONSOLIDATED FIXED ASSETS SCHEDULE
(IN MILLIONS OF [EURO])
ACQUISITION OR MANUFACTURING COSTS
-----------------------------------------------------------------------------------------------
BALANCE AT
BALANCE AT CHANGE IN DECEMBER
JANUARY 1, CURRENCY CONSOLIDATED RECLASSI- 31,
2000 CHANGE COMPANIES ADDITIONS FICATIONS DISPOSALS 2000
- --------------------------------------------------------------------------------------------------------------------------
Other intangible assets 983 23 (190) 163 9 108 880
Goodwill 4,061 192 81 81 40 42 4,413
- --------------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS 5,044 215 (109) 244 49 150 5,293
- --------------------------------------------------------------------------------------------------------------------------
Land, leasehold
improvements and
buildings including
buildings on land owned
by others 20,232 545 (1,977) 1,336 486 316 20,306
Technical equipment and
machinery 30,673 1,247 (1,421) 3,970 741 1,476 33,734
Other equipment, factory
and office equipment 20,416 870 (1,434) 3,525 300 2,797 20,880
Advance payments relating
to plant and equipment
and construction in
progress 7,100 455 (137) 1,591 (1,583) 125 7,301
- --------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND
EQUIPMENT 78,421 3,117 (4,969) 10,422 (56) 4,714 82,221
- --------------------------------------------------------------------------------------------------------------------------
Investments in affiliated
companies 1,062 19 (68) 339 (35) 405 912
Loans to affiliated
companies 42 -- 27 119 (2) 49 137
Investments in associated
companies 546 19 5,452 2,930 (4) 747 8,196
Investments in related
companies 1,323 57 (106) 905 (1) 409 1,769
Loans to associated and
related companies 220 11 (37) 114 -- 3 305
Long-term securities 785 -- (2) 142 -- 8 917
Other loans 373 10 (89) 85 2 188 193
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND LONG-TERM
FINANCIAL ASSETS 4,351 116 5,177 4,634 (40) 1,809 12,429
- --------------------------------------------------------------------------------------------------------------------------
EQUIPMENT ON OPERATING
LEASES(2) 32,678 2,082 (21) 19,117 47 11,296 42,607
- --------------------------------------------------------------------------------------------------------------------------
(1) Currency translation changes with period end rates.
(2) Excluding initial direct costs.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-8
DAIMLERCHRYSLER AG
CONSOLIDATED FIXED ASSETS SCHEDULE (CONTINUED)
(IN MILLIONS OF [EURO])
DEPRECIATION/AMORTIZATION BOOKVALUE(1)
---------------------------------------------------------------------------- ---------------------
BALANCE AT BALANCE AT BALANCE AT
BALANCE AT CHANGE IN DECEMBER DECEMBER DECEMBER
JANUARY 1, CURRENCY CONSOLIDATED RECLASSI- 31, 31, 31,
2000 CHANGE COMPANIES ADDITIONS FICATIONS DISPOSALS 2000 2000 1999
---------------------------------------------------------------------------- --------------------- ----------------------------
519 8 (156) 153 (5) 66 453 427 464 Other intangible assets
1,702 74 (328) 279 8 8 1,727 2,686 2,359 Goodwill
---------------------------------------------------------------------------- --------------------- ----------------------------
2,221 82 (484) 432 3 74 2,180 3,113 2,823 INTANGIBLE ASSETS
---------------------------------------------------------------------------- --------------------- ----------------------------
Land, leasehold improvements
and buildings including
buildings on land owned by
9,159 171 (1,435) 823 6 122 8,602 11,704 11,073 others
Technical equipment and
19,575 602 (1,194) 3,122 (31) 1,240 20,834 12,900 11,098 machinery
Other equipment, factory and
13,252 474 (1,167) 2,693 30 2,648 12,634 8,246 7,164 office equipment
Advance payments relating to
plant and equipment and
1 (1) (1) 7 -- -- 6 7,295 7,099 construction in progress
---------------------------------------------------------------------------- --------------------- ----------------------------
PROPERTY, PLANT AND
41,987 1,246 (3,797) 6,645 5 4,010 42,076 40,145 36,434 EQUIPMENT
---------------------------------------------------------------------------- --------------------- ----------------------------
Investments in affiliated
117 -- (22) 33 (2) 6 120 792 945 companies
Loans to affiliated
4 -- -- -- -- 4 -- 137 38 companies
Investments in associated
16 2 (19) 1 -- -- -- 8,196 530 companies
Investments in related
216 1 (24) 20 (6) 15 192 1,577 1,107 companies
Loans to associated and
38 (1) (37) -- -- -- -- 305 182 related companies
1 -- -- -- -- -- 1 916 784 Long-term securities
17 -- (6) -- -- 2 9 184 356 Other loans
---------------------------------------------------------------------------- --------------------- ----------------------------
INVESTMENTS AND LONG-TERM
409 2 (108) 54 (8) 27 322 12,107 3,942 FINANCIAL ASSETS
---------------------------------------------------------------------------- --------------------- ----------------------------
EQUIPMENT ON OPERATING
5,574 324 1 6,487 -- 3,313 9,073 33,534 27,104 LEASES(2)
---------------------------------------------------------------------------- --------------------- ----------------------------
F-9
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
BASIS OF PRESENTATION
1. THE COMPANY
The consolidated financial statements of DaimlerChrysler AG
("DaimlerChrysler" or the "Group") have been prepared in accordance with United
States Generally Accepted Accounting Principles ("U.S. GAAP"), except that in
1998 the Group accounted for a material joint venture in accordance with the
proportionate method of consolidation (see Note 3). All amounts herein are shown
in millions of euros and for the year 2000 are also presented in U.S. dollars
("$"), the latter being unaudited and presented solely for the convenience of
the reader at the rate of [EURO]1 = $0.9388, the Noon Buying Rate of the Federal
Reserve Bank of New York on December 29, 2000.
Certain prior year balances have been reclassified to conform with the
Group's current year presentation.
DaimlerChrysler was formed through the merger of Daimler-Benz
Aktiengesellschaft ("Daimler-Benz") and Chrysler Corporation ("Chrysler") in
November 1998 ("Merger"). Pursuant to the amended and restated business
combination agreement dated May 7, 1998, 1.005 Ordinary Shares, no par value
("DaimlerChrysler Ordinary Share"), of DaimlerChrysler were issued for each
outstanding Ordinary Share of Daimler-Benz and 0.6235 DaimlerChrysler Ordinary
Shares were issued for each outstanding share of Chrysler common stock, stock
options and performance shares. DaimlerChrysler issued 1,001.7 million Ordinary
Shares in connection with these transactions.
The Merger was accounted for as a pooling of interests and accordingly, the
historical results of Daimler-Benz and Chrysler for 1998 have been restated as
if the companies had been combined for all periods presented. In connection with
the Merger, [EURO]685 of merger costs ([EURO]401 after tax) were incurred and
charged to expense in 1998. These costs consisted primarily of fees for
investment bankers, attorneys, accountants, financial printing, accelerated
management compensation and other related charges.
Commercial practices with respect to the products manufactured by
DaimlerChrysler necessitate that sales financing, including leasing
alternatives, be made available to the Group's customers. Accordingly, the
Group's consolidated financial statements are significantly influenced by
activities of the financial services businesses. To enhance the readers'
understanding of the Group's consolidated financial statements, the accompanying
financial statements present, in addition to the consolidated financial
statements, information with respect to the financial position, results of
operations and cash flows of the Group's industrial and financial services
business activities. Such information, however, is not required by U.S. GAAP and
is not intended to, and does not represent the separate U.S. GAAP financial
position, results of operations or cash flows of the Group's industrial or
financial services business activities. Transactions between the Group's
industrial and financial businesses principally represent intercompany sales of
products, intercompany borrowings and related interest, and other support under
special vehicle financing programs. The effects of transactions between the
industrial and financial services businesses have been eliminated within the
industrial business columns.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- All material companies in which DaimlerChrysler has legal
or effective control are consolidated. Significant investments in which
DaimlerChrysler has 20% to 50% of the voting rights and the ability to exercise
significant influence over operating and financial policies ("associated
companies") are accounted for using the equity method. For a material joint
venture in 1998, DaimlerChrysler used the proportionate method of consolidation
(see Note 3). All other investments are accounted for at cost.
F-10
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
For business combinations accounted for under the purchase accounting
method, all assets acquired and liabilities assumed are recorded at fair value.
An excess of the purchase price over the fair value of net assets acquired is
capitalized as goodwill and amortized over the estimated period of benefit on a
straight-line basis.
The effects of intercompany transactions have been eliminated.
FOREIGN CURRENCIES -- The assets and liabilities of foreign subsidiaries
where the functional currency is not the euro are generally translated using
period-end exchange rates while the statements of income are translated using
average exchange rates during the period. Differences arising from the
translation of assets and liabilities in comparison with the translation of the
previous periods are included as a separate component of stockholders' equity.
The assets and liabilities of foreign subsidiaries operating in highly
inflationary economies are translated into euro on the basis of period-end rates
for monetary assets and liabilities and at historical rates for non-monetary
items, with resulting translation gains and losses being recognized in income.
Further, in such economies, depreciation and gains and losses from the disposal
of non-monetary assets are determined using historical rates.
The exchange rates of the significant currencies of non-euro countries used
in preparation of the consolidated financial statements were as follows (amounts
for the year 1998 have been restated from Deutsche Marks into euros using the
Official Fixed Conversion Rate of [EURO]1 = DM1.95583):
EXCHANGE RATE AT ANNUAL AVERAGE
DECEMBER 31, EXCHANGE RATE
---------------------- ----------------------------------
2000 1999 2000 1999 1998
[EURO]1 = [EURO]1 = [EURO]1 = [EURO]1 = [EURO]1 =
------ ------ ------ ------ ------
CURRENCY:
Brazil.............. BRL 1.84 1.80 1.69 1.93 1.29
Great Britain....... GBP 0.62 0.62 0.61 0.66 0.67
Japan............... JPY 106.92 102.73 99.47 121.25 144.96
USA................. USD 0.93 1.00 0.92 1.07 1.11
REVENUE RECOGNITION -- Revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, the
price of the transaction is fixed and determinable, and collectibility is
reasonably assured. Revenues are recognized net of discounts, cash sales
incentives, customer bonuses and rebates granted. Cash sales incentives are
recorded as a reduction of revenue when the related revenue is recorded.
Sales under which the Group conditionally guarantees the minimum resale
value of the product are accounted for as operating leases with the related
revenues and costs deferred at the time of title passage. Operating lease income
is recorded when earned on a straight-line basis. Revenue on long-term contracts
is generally recognized under the percentage-of-completion method based upon
contractual milestones or performance. Revenue from finance receivables is
recorded on the interest method.
RECEIVABLE SALES AND RETAINED INTERESTS IN SOLD RECEIVABLES -- The Group
sells significant amounts of finance receivables as asset-backed securities
through securitization. The Group sells a portfolio of receivables to a trust
and remains as servicer, and is paid a servicing fee. Servicing fees are earned
on a level-yield basis over the remaining term of the related sold receivables.
In a subordinated capacity, the Group retains residual cash flows, a beneficial
interest in principal balances of sold receivables and certain cash deposits
provided as credit enhancements for investors. Gains and losses from the sales
of finance receivables are recognized in the period in which sales occur. In
determining the gain or loss for each qualifying sale of finance receivables,
the investment in the sold receivable pool is allocated between the portion sold
and the portion retained based upon their relative fair values.
F-11
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The Group recognizes unrealized gains or losses attributable to 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
separate component of stockholders' equity until realized. The Group is not
aware of an active market for the purchase or sale of retained interests, and
accordingly, determines the estimated fair value of the retained interests by
discounting the expected cash flow releases (the cash out method) using a
discount rate which is commensurate with the risks involved. In determining the
fair value of the retained interests, the Group estimates the future rates of
prepayments, net credit losses and forward yield curves. These estimates are
developed by evaluating the historical experience of comparable receivables and
the specific characteristics of the receivables purchased, and forward yield
curves based on trends in the economy. An other-than-temporary impairment
adjustment to the carrying value of the retained interests generally is required
if the expected cash flows decline below the cash flows inherent in the cost
basis of an individual retained interest (the pool by pool method).
Other-than-temporary impairment adjustments are recorded as a component of
revenue.
PRODUCT-RELATED EXPENSES -- Provisions for estimated product warranty costs
are recorded in cost of sales at the time the related sale is recognized.
Non-cash sales incentives that do not reduce the transaction price to the
customer are classified within cost of sales. Shipping and handling costs are
recorded as cost of sales. Expenditures for advertising and sales promotion and
for other sales-related expenses are charged to selling expense as incurred.
RESEARCH AND DEVELOPMENT -- Research and development costs are expensed as
incurred.
SALES OF SUBSIDIARY STOCK -- Gains resulting from the issuance of stock by a
Group subsidiary or equity method investment which reduces DaimlerChrysler's
percentage ownership are recorded in the statement of income.
EARNINGS PER SHARE -- Basic earnings per share is calculated by dividing net
income by the weighted average number of shares outstanding. Diluted earnings
per share reflects the potential dilution that would occur if all securities and
other contracts to issue Ordinary Shares were exercised or converted (see
Note 34). Net income represents the earnings of the Group after minority
interests. Basic and diluted earnings per Ordinary Share for the year ended
December 31, 1998 have been restated to reflect the conversion of Daimler-Benz
and Chrysler shares into DaimlerChrysler Ordinary Shares (see Note 1) and the
dilutive effect resulting from the discount to market value at which the
Daimler-Benz Ordinary Shares were sold in the rights offering (see Note 22).
INTANGIBLE ASSETS -- Purchased intangible assets, other than goodwill, are
valued at acquisition cost and are amortized over their respective useful lives
(3 to 40 years) on a straight-line basis. Goodwill derived from acquisitions is
capitalized and amortized over 3 to 40 years. The Group periodically assesses
the recoverability of its goodwill based upon projected future cash flows.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is valued at
acquisition or manufacturing costs less accumulated depreciation. Depreciation
expense is recognized either using the declining balance method until the
straight-line method yields larger expenses or the straight-line method. The
costs of internally produced equipment and facilities include all direct costs
and allocable manufacturing overhead. Costs of the construction of certain
long-term assets include capitalized interest which is amortized over the
estimated useful life of the related asset. The following useful lives are
assumed: buildings -- 17 to 50 years; site improvements -- 8 to 20 years;
technical equipment and machinery -- 3 to 30 years; and other equipment, factory
and office equipment -- 2 to 15 years.
LEASING -- The Group is a lessee of property, plant and equipment and lessor
of equipment, principally passenger cars and commercial vehicles. All leases
that meet certain specified criteria intended to represent situations where the
substantive risks and rewards of ownership have been transferred to the lessee
are
F-12
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
accounted for as capital leases. All other leases are accounted for as operating
leases. Equipment on operating leases, where the Group is lessor, is valued at
acquisition cost and depreciated over its estimated useful life of 3 to
14 years using the straight-line method.
LONG-LIVED ASSETS -- The Group accounts for long-lived assets in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS") 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount of fair value less costs to
sell.
NON-FIXED ASSETS -- Non-fixed assets represent the Group's inventories,
receivables, securities and cash, including amounts to be realized in excess of
one year. In the accompanying notes, the portion of assets and liabilities to be
realized and settled in excess of one year has been disclosed.
MARKETABLE SECURITIES AND INVESTMENTS -- Securities and investments are
accounted for at fair values, if readily determinable. Unrealized gains and
losses on trading securities, representing securities bought principally for the
purposes of selling them in the near term, are included in income. Unrealized
gains and losses on available-for-sale securities are included in accumulated
other comprehensive income, net of applicable deferred income taxes. All other
securities are recorded at cost. Unrealized losses on all marketable securities
and investments that are other than temporary are recognized in income.
INVENTORIES -- Inventories are valued at the lower of acquisition or
manufacturing cost or market, cost being generally determined on the basis of an
average or first-in, first-out method ("FIFO"). Certain of the Group's U.S.
inventories are valued using the last-in, first-out method ("LIFO").
Manufacturing costs comprise direct material and labor and applicable
manufacturing overheads, including depreciation charges.
FINANCIAL INSTRUMENTS -- DaimlerChrysler uses derivative financial
instruments such as forward foreign exchange contracts, swaps, options, futures,
swaptions, forward rate agreements, caps and floors for hedging purposes.
Effective January 1, 2000, DaimlerChrysler adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS 137 and 138
(see Note 10). SFAS 133 requires that all derivative instruments are recognized
as assets or liabilities on the balance sheet and measured at fair value,
regardless of the purpose or intent for holding them. Changes in the fair value
of derivative instruments are recognized periodically either in income or
stockholders' equity (as a component of other comprehensive income), depending
on whether the derivative is designated as a hedge of changes in fair value or
cash flows. For derivatives designated as fair value hedges, changes in fair
value of the hedged item and the derivative are recognized currently in
earnings. For derivatives designated as cash flow hedges, fair value changes of
the effective portion of the hedging instrument are recognized in accumulated
other comprehensive income on the balance sheet until the hedged item is
recognized in earnings. The ineffective portion of the fair value changes are
recognized in earnings immediately. SFAS 133 also requires that certain
derivative instruments embedded in host contracts be accounted for separately as
derivatives.
Prior to the adoption of SFAS 133, derivative instruments which were not
designated as hedges of specific assets, liabilities, or firm commitments were
marked to market and any resulting unrealized gains or losses recognized in
income. If there was a direct connection between a derivative instrument and an
underlying
F-13
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
transaction and a derivative was so designated, a valuation unit was formed.
Once allocated, gains and losses from these valuation units, which were used to
manage interest rate and currency risks of identifiable assets, liabilities, or
firm commitments, did not affect income until the underlying transaction was
realized.
Further information of the Group's financial instruments is included in
Note 31.
ACCRUED LIABILITIES -- The valuation of pension liabilities and
postretirement benefit liabilities is based upon the projected unit credit
method in accordance with SFAS 87, "Employers' Accounting for Pensions," and
SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." An accrued liability for taxes and other contingencies is recorded
when an obligation to a third party has been incurred, the payment is probable
and the amount can be reasonably estimated. The effects of accrued liabilities
relating to personnel and social costs are valued at their net present value
where appropriate.
USE OF ESTIMATES -- Preparation of the financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NEW ACCOUNTING PRONOUNCEMENTS -- In September 2000, the FASB issued
SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities -- a replacement of FASB Statement No. 125." This
statement revises the standards for accounting for securitizations and other
transfers of financial assets and collateral and requires certain financial
statement disclosures. SFAS 140 is effective for transactions occurring after
March 31, 2001. The new disclosure requirements are effective for fiscal years
ending after December 15, 2000. Adoption of this replacement standard is not
anticipated to have a material effect on DaimlerChrysler's consolidated
financial statements (see Note 32).
As of July 1, 2000, DaimlerChrysler adopted Emerging Issues Task Force Issue
No. 99-20 ("EITF 99-20"), "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets."
EITF 99-20 specifies, among other things, how a transferor that retains an
interest in a securitization transaction, or an enterprise that purchases a
beneficial interest, should account for interest income and impairment (see
Note 10).
In July 2000, the Emerging Issues Task Force reached a final consensus on
Issue 00-10, "Accounting for Shipping and Handling Fees and Costs." The Issue
requires that all amounts billed to the customer in a sale transaction related
to shipping and handling, if any, represent revenues earned for the goods
provided and should be classified as revenue. DaimlerChrysler adopted the
consensus effective October 1, 2000. Adoption of Issue 00-10 did not have a
material impact on the Group's consolidated financial statements. With the
adoption of EITF 00-10, DaimlerChrysler has elected to reclassify shipping and
handling costs from selling expenses to cost of sales for all years presented.
DaimlerChrysler classifies amounts billed to a customer in a sale transaction
related to shipping and handling as revenue.
During 2000, the Emerging Issues Task Force reached a final consensus on
Issue 00-14, "Accounting for Certain Sales Incentives." The Issue requires that
an entity recognizes sales incentives at the latter of (1) the date at which the
related revenue is recorded by the entity or (2) the date at which the sales
incentive is offered. The Issue also requires that when recognized, the
reduction in or refund of the selling price of the product or service resulting
from any cash sales incentive should be classified as a reduction of revenue. If
the sales incentive is a free product or service delivered at the time of the
sale, the cost of the free product or service should be classified as cost of
sales. The consensus reached in the Issue is effective for DaimlerChrysler in
its financial statements
F-14
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
beginning April 1, 2001, with earlier adoption encouraged. DaimlerChrysler will
apply the consensus prospectively in 2001. DaimlerChrysler is currently
determining the impact of the adoption of Issue 00-14 on the Group's
consolidated financial statements.
3. SCOPE OF CONSOLIDATION
SCOPE OF CONSOLIDATION -- DaimlerChrysler comprises 485 foreign and domestic
subsidiaries (1999: 549) and 1 joint venture (1999: 16); the latter is accounted
for on a pro rata basis. A total of 108 (1999: 55) subsidiaries are accounted
for in the consolidated financial statements using the equity method of
accounting. During 2000, 45 subsidiaries and 1 joint venture were included in
the consolidated financial statements for the first time. A total of 113
subsidiaries and 16 joint ventures were no longer included in the consolidated
group. Significant effects of changes in the consolidated group on the
consolidated balance sheets and the consolidated statements of income are
explained further in the notes to the consolidated financial statements. A total
of 255 subsidiaries ("affiliated companies") are not consolidated as their
combined influence on the financial position, results of operations, and cash
flows of the Group is not material (1999: 343). The effect of such
non-consolidated subsidiaries for all years presented on consolidated assets,
revenues and net income of DaimlerChrysler was approximately 1%. In addition, 6
(1999: 7) companies administering pension funds whose assets are subject to
restrictions have not been included in the consolidated financial statements.
The consolidated financial statements include 74 associated companies (1999:
109) accounted for at cost and recorded under investments in related companies
as these companies are not material to the respective presentation of the
financial position, results of operations or cash flows of the Group.
INVESTMENT IN ADTRANZ -- In the first quarter of 1999, DaimlerChrysler
acquired the remaining outstanding shares of Adtranz, a rail systems joint
venture, from Asea Brown Boveri for $472 ([EURO]441). The acquisition was
accounted for under the purchase method of accounting. The purchase price was
allocated to assets acquired and liabilities assumed based on their estimated
fair values. This allocation resulted in goodwill of [EURO]100, which is being
amortized on a straight-line basis over 17 years. Prior to the acquisition in
1999, the Group accounted for its investment in Adtranz, including its 65
subsidiaries, using the proportionate method of consolidation. Accordingly, the
consolidated financial statements of DaimlerChrysler for the year ended
December 31, 1998 included DaimlerChrysler's 50% interest in the assets and
liabilities, revenues and expenses and cash flows of Adtranz.
Under U.S. GAAP, DaimlerChrysler's investment in Adtranz was required to be
accounted for using the equity method of accounting. The differences in
accounting treatment between the proportionate and equity methods would not have
affected reported stockholders' equity or net income of DaimlerChrysler. Under
the equity method of accounting, DaimlerChrysler's net investment in Adtranz
would have been included within investments in the balance sheet and its share
of the net loss of Adtranz together with the amortization of the excess of the
cost of its investment over its share of the investment's net assets would have
been reported as part of financial income, net in the Group's statement of
income. Additionally, Adtranz would have impacted the Group's reported cash
flows only to the extent of the investing cash outflow in 1998 of [EURO]159
resulting from a capital contribution by DaimlerChrysler. For purposes of its
United States financial reporting obligation, DaimlerChrysler requested and
received permission from the United States Securities and Exchange Commission to
prepare its 1998 consolidated financial statements with this departure from U.S.
GAAP.
Summarized consolidated financial information of Adtranz follows for the
year ended December 31, 1998. The amounts represent those used in the
DaimlerChrysler consolidation, including goodwill resulting from the formation
of Adtranz. Other companies included in the consolidated financial statements
according to the proportionate method are not material.
F-15
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME INFORMATION
YEAR ENDED
DECEMBER 31,
1998
--------------
Revenues.................................................... 1,658
Operating loss(1)........................................... (322)
Net loss.................................................... (316)
- ------------------------
(1) The operating loss for 1998 includes an impairment charge on goodwill of
[EURO]64.
CASH FLOW INFORMATION
YEAR ENDED
DECEMBER 31,
1998
------------
Cash flows from:
Operating activities...................................... (130)
Investing activities...................................... (84)
Financing activities...................................... 161
Effect of foreign exchange on cash.......................... (2)
----
Change in cash (maturing within 3 months)................... (55)
Cash (maturing within 3 months) at beginning of period...... 155
----
Cash (maturing within 3 months) at end of period............ 100
====
In 1998, cash maturing within 3 months includes [EURO]30 held by
DaimlerChrysler AG in connection with internal cash concentration procedures.
In August 2000, DaimlerChrysler entered into an agreement to sell Adtranz
(see Note 35).
4. EQUITY METHOD INVESTMENTS
At December 31, 2000, the significant investments in companies accounted for
under the equity method were the following:
OWNERSHIP
COMPANY PERCENTAGE
------- ----------
European Aeronautic Defence and Space Company ("EADS")...... 33.0%
Mitsubishi Motors Corporation ("MMC")....................... 34.0%
debis Systemhaus ("dSH").................................... 49.9%
Further information with respect to the transactions which resulted in the
Group's holdings in EADS, MMC and dSH is presented in Note 5 (ACQUISITIONS AND
DISPOSITIONS) and Note 11 (EXTRAORDINARY ITEMS). The aggregate quoted market
prices as of December 31, 2000, for DaimlerChrysler's shares in EADS and MMC
were [EURO]5,974 and [EURO]1,543, respectively.
The carrying value of the significant investments exceeded DaimlerChrysler's
share of the underlying reported net assets by approximately [EURO]1,268 at
December 31, 2000. The excess of the Group's initial investment in equity method
companies over the Group's ownership percentage in the underlying net assets of
those
F-16
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
companies is attributed to fair value adjustments, if any, with the remaining
portion classified as goodwill. The fair value adjustments and goodwill are
accounted for in the respective equity method investment balances. Under the
equity method, investments are stated at initial cost and are adjusted for
subsequent contributions and DaimlerChrysler's share of earnings, losses and
distributions. Goodwill is being amortized over 20 years.
The following tables present the combined, summarized financial information
for the Group's significant equity method investments (amounts shown on a 100%
basis):
Income statement information (for periods included at equity):
PERIODS ENDED
DECEMBER 31,
2000
-------------
Revenues.................................................... 19,213
Net loss.................................................... (590)
Balance sheet information:
AT
DECEMBER 31,
2000
------------
Fixed assets................................................ 34,161
Non-fixed assets............................................ 43,423
------
Total assets................................................ 77,584
======
Stockholders' equity........................................ 16,377
Minority interests.......................................... 358
Accrued liabilities......................................... 16,718
Other liabilities........................................... 44,131
------
Total liabilities and stockholders' equity.................. 77,584
======
5. ACQUISITIONS AND DISPOSITIONS
Information on the sale of Adtranz' fixed installations business is included
in Note 11.
On October 18, 2000, DaimlerChrysler acquired a 34% equity interest in MMC
for approximately [EURO]2,200. At the closing date of the transaction, the Group
also purchased MMC bonds with an aggregate face value of JPY19,200 and a stated
interest rate of 1.7% for [EURO]206, which are convertible into shares of MMC
stock. The bonds are only convertible by DaimlerChrysler in the event that its
ownership percentage would be diluted below 34% upon conversion of previously
issued convertible bonds. To the extent not converted, the bonds and accrued
interest are due on April 30, 2003.
In October 2000, DaimlerChrysler acquired all the remaining outstanding
shares of Detroit Diesel Corporation for approximately [EURO]500. The
acquisition of the remaining 78.6% interest in Detroit Diesel was accounted for
under the purchase method of accounting and resulted in goodwill of
approximately [EURO]250, which is being amortized on a straight-line basis over
20 years.
In October 2000, DaimlerChrysler and Deutsche Telekom combined their
information technology activities in a joint venture. As part of the agreement,
Deutsche Telekom received a 50.1% interest in debis Systemhaus through a capital
investment in debis Systemhaus (see Note 11).
F-17
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
In September 2000, DaimlerChrysler purchased a 9% equity interest in Hyundai
Motor Company for approximately [EURO]450. DaimlerChrysler is accounting for its
investment in Hyundai as an available-for-sale security.
In September 2000, DaimlerChrysler acquired 100% of the outstanding shares
of the Canadian company Western Star Trucks Holdings Ltd. for approximately
[EURO]500. The acquisition was accounted for under the purchase method of
accounting and resulted in goodwill of approximately [EURO]380, which is being
amortized on a straight-line basis over 20 years.
Information on the exchange of the Group's controlling interest in
DaimlerChrysler Aerospace for shares of EADS and the related initial public
offering of EADS is included in Note 11.
Due to an initial public offering in March 1999 as well as to the selling of
a substantial portion of its remaining interests in September 1999, debis AG, a
wholly-owned subsidiary of DaimlerChrysler, reduced its remaining interest in
debitel AG to 10% (see Note 11).
Information on the acquisition of the remaining outstanding shares of
Adtranz in 1999 is included in Note 3.
In March 1998, the Group's semiconductor business was sold to an American
company, Vishay Intertechnology, Inc. Also, during 1998 the Group sold further
interests, including the sale of 30% of its interests in
LFK-Lenkflugkorpersysteme GmbH and 100% of its interests in CMS, Inc. and two
real-estate-project-companies. The total pretax gains from these dispositions
were approximately [EURO]300.
NOTES TO THE CONSOLIDATED STATEMENTS OF INCOME
6. FUNCTIONAL COSTS AND OTHER EXPENSES
Selling, administrative and other expenses are comprised of the following:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Selling expenses................................... 11,423 9,881 8,463
Administration expenses............................ 5,726 5,145 5,217
Goodwill amortization and write-downs.............. 279 215 227
Other expenses..................................... 437 428 685
------ ------ ------
17,865 15,669 14,592
====== ====== ======
Other expenses in 1998 includes [EURO]229 related to settlement payments of
Airbus obligations by DaimlerChrysler Aerospace Airbus GmbH to the Federal
Republic of Germany.
Based on its investment in MMC and the corresponding strategic alliance
entered into in the fourth quarter 2000, DaimlerChrysler conducted a review of
its Compact Car Strategy in view of the "Z-Car" project, and concluded that it
was necessary to revise the current strategic plan for the smart brand,
including restructuring of supplier contracts. As a result, the carrying values
of certain of the brand's long-lived assets were determined to be impaired as
the identifiable, undiscounted future cash flows from the operation of such
assets were less then their respective carrying values. In accordance with
SFAS 121, DaimlerChrysler recorded an impairment charge of [EURO]281. The
impairment charge represents the amount by which the carrying values of such
assets exceeded their respective fair market values. The impairment relates
principally to the carrying values of the manufacturing
F-18
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
facility, equipment and tooling. In addition, charges of [EURO]255 were recorded
related to fixed cost reimbursement agreements with MCC smart suppliers. The
charges were recorded in cost of sales ([EURO]494) and other expenses
([EURO]42).
In 2000, DaimlerChrysler recorded an impairment charge in cost of sales of
approximately [EURO]500 for certain leased vehicles in the Services segment.
Declining resale prices of used vehicles in the North American and the U.K.
markets required the Group to re-evaluate the recoverability of the carrying
values of its leased vehicles. This re-evaluation was performed using product
specific cash flow information. As a result, the carrying values of these leased
vehicles were determined to be impaired as the identifiable undiscounted future
cash flows from such vehicles were less than their respective carrying values.
In accordance with SFAS 121, the resulting pre-tax impairment charges represent
the amount by which the carrying values of such vehicles exceeded their
respective fair market values.
Personnel expenses included in the statement of income are comprised of:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Wages and salaries................................. 21,836 21,044 19,982
Social levies...................................... 3,428 3,179 2,990
Net periodic pension cost (see Note 24a)........... 327 931 1,126
Net periodic postretirement benefit cost (see
Note 24a)........................................ 830 783 866
Other expenses for pensions and retirements........ 79 221 69
------ ------ ------
26,500 26,158 25,033
====== ====== ======
Number of employees (annual average):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Hourly employees................................ 270,814 279,124 268,764
Salaried employees.............................. 165,117 170,539 152,415
Trainees/apprentices............................ 13,663 13,898 12,760
------- ------- -------
449,594 463,561 433,939
======= ======= =======
In 2000, 28 people (1999: 14,851 people; 1998: 36,024 people) were employed
in joint venture companies.
In 2000, the total remuneration paid by Group companies to the members of
the Board of Management of DaimlerChrysler AG amounted to [EURO]52.6, and the
remuneration paid to the members of the Supervisory Board of DaimlerChrysler AG
totaled [EURO]1.2. Disbursements to former members of the Board of Management of
DaimlerChrysler AG and their survivors amounted to [EURO]29.5. An amount of
[EURO]137.4 has been accrued in the financial statements of DaimlerChrysler AG
for pension obligations to former members of the Board of Management and their
survivors. As of December 31, 2000, no advances or loans existed to members of
the Board of Management of DaimlerChrysler AG.
F-19
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
7. OTHER INCOME
Other income includes gains on sales of property, plant and equipment
([EURO]106, [EURO]132 and [EURO]99 in 2000, 1999 and 1998, respectively) and
rental income, other than relating to financial services leasing activities
([EURO]178, [EURO]153 and [EURO]138 in 2000, 1999 and 1998, respectively). In
1998 gains on sales of companies of [EURO]389 were recognized in other income.
8. FINANCIAL INCOME, NET
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Income (loss) from investments.............................. 73 19 (111)
of which from affiliated companies [EURO]24 (1999:
[EURO]41; 1998: [EURO](20))
Gains, net from disposals of investments and shares in
affiliated and associated companies....................... 1 41 37
Write-down of investments and shares in affiliated
companies................................................. (54) (19) (55)
Income (loss) from companies included at equity............. (244) 23 59
----- ------ -----
Income (loss) from investments, net......................... (224) 64 (70)
----- ------ -----
Other interest and similar income........................... 1,268 1,382 1,327
of which from affiliated companies [EURO]20 (1999:
[EURO]17; 1998: [EURO]13)
Interest and similar expenses............................... (988) (729) (702)
----- ------ -----
Interest income, net........................................ 280 653 625
----- ------ -----
Income from securities and long-term receivables............ 161 913 231
Write-down of securities and long-term receivables.......... (3) (17) (10)
Other, net.................................................. (58) (1,280) (13)
----- ------ -----
Other financial income (loss), net.......................... 100 (384) 208
----- ------ -----
156 333 763
===== ====== =====
In 1999, realized and unrealized losses on derivative financial instruments
of [EURO]1,078 were included in other, net.
The Group capitalized interest expenses related to qualifying construction
projects of [EURO]181 (1999: [EURO]163; 1998: [EURO]186).
9. INCOME TAXES
Income before income taxes consists of the following:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Germany................................................... 2,729 2,688 2,229
Foreign................................................... 1,747 6,969 5,864
----- ----- -----
4,476 9,657 8,093
===== ===== =====
F-20
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Income tax expense (benefit) are comprised of the following components:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Current taxes
Germany............................................ (45) 1,074 (267)
Foreign............................................ 1,160 1,538 1,322
Deferred taxes
Germany............................................ 1,490 836 967
Foreign............................................ (606) 1,085 992
----- ----- -----
1,999 4,533 3,014
===== ===== =====
In 2000, the German government enacted new tax legislation which, among
other changes, will reduce the Group's statutory corporate tax rate for German
companies from 40% on retained earnings and 30% on distributed earnings to a
uniform 25%, effective for the Group's year beginning January 1, 2001. The
significant other tax law change is the exemption from tax for certain gains
from the sale of shares in affiliated and unaffiliated companies. The effects of
the reduction in the tax rate and other changes on the deferred tax assets and
liabilities of the Group's German companies were recognized in the year of
enactment. As a result, a net charge of [EURO]263 is included in the
consolidated statement of income in 2000. The effects of the reduction in the
tax rate resulted in deferred tax expense of [EURO]373. The exemption from tax
for certain gains from the sale of shares resulted in deferred tax benefit of
[EURO]110 due to the elimination of the net deferred tax liabilities on the net
unrealized gains.
In 1999, the tax laws in Germany were changed including a reduction in the
retained corporate income tax rate from 45% to 40% and the broadening of the tax
base. The effects of the changes in German tax laws were recognized as a net
charge of [EURO]812 in the consolidated statement of income in 1999. The effects
of the reduction in the tax rate on the deferred tax assets and liabilities of
the Group's German companies as of December 31, 1998 amounted to [EURO]290. The
broadening of the tax base resulted in tax expense of [EURO]522.
For the year ending December 31, 2000, the German corporate tax law applied
a split-rate imputation with regard to the taxation of the income of a
corporation. In accordance with the tax law in effect for fiscal year 2000,
retained corporate income is initially subject to a federal corporate tax of 40%
(1999: 40%; 1998: 45%) plus a solidarity surcharge of 5.5% for each year on
federal corporate taxes payable. Including the impact of the surcharge, the
federal corporate tax rate amounts to 42.2% (1999: 42.2%; 1998: 47.475%). Upon
distribution of certain retained earnings generated in Germany to stockholders,
the corporate income tax rate on the earnings is adjusted to 30%, plus a
solidarity surcharge of 5.5% for each year on the distribution corporate tax,
for a total of 31.65% for each year, by means of a refund for taxes previously
paid. Under the new German corporate tax system, during a 15 year transition
period beginning on January 1, 2001, the Group will continue to receive a refund
or pay additional taxes on the distribution of retained earnings which existed
as of December 31, 2000.
For German companies, the deferred taxes at December 31, 2000 are calculated
using a federal corporate tax of 25% (1999: 40%; 1998: 45%) plus a solidarity
surcharge of 5.5% for each year on federal corporate taxes payable plus the
after federal tax benefit rate for trade tax of 12.125% (1999: 9.3%; 1998:
8.525%). Including the impact of the surcharge and the trade tax, the tax rate
applied to German deferred taxes amounts to 38.5% (1999: 51.5%; 1998: 56%). The
effect of the tax rate reductions in 2000 and 1999 on deferred tax balances are
reflected separately in the reconciliations presented below.
F-21
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
A reconciliation of income taxes determined using the German corporate tax
rate of 42.2% (1999: 42.2%; 1998: 47.475%) plus the after federal tax benefit
rate for trade taxes of 9.3% (1999: 9.3%; 1998: 8.525%) for a combined statutory
rate of 51.5% in 2000 (1999: 51.5%; 1998: 56%) is as follows:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Expected expense for income taxes..................... 2,305 4,973 4,532
Effect of changes in German tax laws.................. 263 812 --
Credit for dividend distributions..................... (486) (500) (515)
Foreign tax rate differential......................... (346) (966) (1,012)
Changes in valuation allowances on German deferred tax
assets.............................................. -- 23 112
Effect of equity method investments................... 113 (12) (30)
Amortization of non-deductible goodwill............... 52 33 78
Other................................................. 98 170 (151)
----- ----- ------
Actual expense for income taxes....................... 1,999 4,533 3,014
===== ===== ======
Income tax credits from dividend distributions reflected mainly the tax
benefits from the dividend distributions of [EURO]2.35 per Ordinary Share to be
paid for each year.
F-22
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Deferred income tax assets and liabilities are summarized as follows:
DECEMBER 31,
-------------------
2000 1999
-------- --------
Property, plant and equipment............................. 463 1,217
Equipment on operating leases............................. 800 920
Inventories............................................... 664 1,424
Receivables............................................... 2,200 993
Net operating loss and tax credit carryforwards........... 915 1,011
Retirement plans.......................................... 3,539 3,984
Other accrued liabilities................................. 4,756 4,248
Liabilities............................................... 1,113 1,482
Deferred income........................................... 1,330 1,246
Other..................................................... 471 568
------- -------
16,251 17,093
Valuation allowances...................................... (335) (363)
------- -------
Deferred tax assets....................................... 15,916 16,730
------- -------
Property, plant and equipment............................. (3,609) (3,346)
Equipment on operating leases............................. (7,569) (5,600)
Receivables............................................... (2,386) (3,278)
Prepaid expenses.......................................... (481) (508)
Retirement plans.......................................... (2,325) (2,187)
Other accrued liabilities................................. (1,010) (671)
Taxes on undistributed earnings of foreign subsidiaries... (486) (520)
Other..................................................... (1,094) (2,006)
------- -------
Deferred tax liabilities.................................. (18,960) (18,116)
------- -------
Deferred tax liabilities, net............................. (3,044) (1,386)
======= =======
At December 31, 2000, the Group had corporate tax net operating losses
("NOLs") and credit carryforwards amounting to [EURO]2,309 (1999: [EURO]2,232)
and German trade tax NOLs amounting to [EURO]1,882 (1999: [EURO]1,352). The
corporate tax NOLs and credit carryforwards relate to losses of foreign and
domestic non-Organschaft companies and are partly limited in their use to the
Group. The valuation allowances on deferred tax assets of foreign and domestic
operations decreased by [EURO]28. In future periods, depending upon the
financial results, management's estimate of the amount of the deferred tax
assets considered realizable may change, and hence the valuation allowances may
increase or decrease.
Net deferred income tax assets and liabilities in the consolidated balance
sheets are as follows:
DECEMBER 31, 2000 DECEMBER 31, 1999
---------------------- ----------------------
THEREOF THEREOF
TOTAL NON-CURRENT TOTAL NON-CURRENT
-------- ----------- -------- -----------
Deferred tax assets................... 2,436 1,576 3,806 2,937
Deferred tax liabilities.............. (5,480) (4,938) (5,192) (4,689)
------ ------ ------ ------
Deferred tax liabilities, net......... (3,044) (3,362) (1,386) (1,752)
====== ====== ====== ======
F-23
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
DaimlerChrysler provided foreign withholding taxes of [EURO]351 (1999:
[EURO]343) on [EURO]7,028 (1999: [EURO]6,868) in cumulative undistributed
earnings of foreign subsidiaries and additional German tax of [EURO]135 (1999:
[EURO]177) on the future payout of these foreign dividends because these
earnings are not intended to be permanently reinvested in those operations.
Beginning in 1999, the German tax law requires that deductible expenses are
reduced by 5% of foreign dividends received.
The Group did not provide income taxes or foreign withholding taxes on
[EURO]15,543 (1999: [EURO]13,224) in cumulative earnings of foreign subsidiaries
because these earnings are intended to be indefinitely reinvested in those
operations. It is not practicable to estimate the amount of unrecognized
deferred tax liabilities for these undistributed foreign earnings.
Including the items charged or credited directly to related components of
stockholders' equity, the expense (benefit) for income taxes consists of the
following:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Expense for income taxes before extraordinary items.... 1,999 4,533 3,014
Income tax expense (benefit) of extraordinary items.... 324 470 (78)
Changes in accounting principles....................... (53) -- --
Stockholders' equity for employee stock option expense
in excess of amounts recognized for financial
purposes............................................. -- (31) (212)
Stockholders' equity for items of other comprehensive
income............................................... (338) (155) 296
----- ----- -----
1,932 4,817 3,020
===== ===== =====
10. CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES
BENEFICIAL INTERESTS IN SECURITIZED FINANCIAL ASSETS: ADOPTION OF EITF
99-20 -- As of July 1, 2000, DaimlerChrysler adopted EITF 99-20 which specifies,
among other things, how a transferor that retains an interest in a
securitization transaction, or an enterprise that purchases a beneficial
interest, should account for interest income and impairment. The cumulative
effect of adopting EITF 99-20 was a charge of [EURO]99 (net of income tax
benefits of [EURO]58).
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES: ADOPTION OF
SFAS 133 AND SFAS 138 -- DaimlerChrysler elected to adopt SFAS 133 on
January 1, 2000. Upon adoption of this Statement, DaimlerChrysler recorded a net
transition adjustment gain of [EURO]12 (net of income tax expense of [EURO]5) in
the statement of income and a net transition adjustment loss of [EURO]349 (net
of income tax benefit of [EURO]367) in accumulated other comprehensive income.
Adoption of SFAS 138 did not have an impact on the Group's consolidated
statement of income.
11. EXTRAORDINARY ITEMS
In October 2000, Adtranz sold its fixed installations business which
primarily focuses on rail electrification and traction power to Balfour Beatty
for [EURO]153 resulting in an extraordinary after-tax gain of [EURO]89 (net of
income tax expense of [EURO]52).
F-24
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
In October 2000, DaimlerChrysler and Deutsche Telekom combined their
information technology activities in a joint venture. In accordance with an
agreement announced on March 27, 2000, Deutsche Telekom received a 50.1%
interest in dSH through an investment of approximately [EURO]4,600 for new
shares of dSH. The agreements require a minimum annual dividend to be paid to
DaimlerChrysler for each year through 2004. The agreements also confer on
Deutsche Telekom the option to acquire from the Group, and on DaimlerChrysler
the option to sell to Deutsche Telekom, the Group's remaining 49.9% interest in
dSH. The Deutsche Telekom option is exercisable from January 1, 2002 through
January 1, 2005, with the exercise period subject to a delay of up to two years
at the option of the Group. The DaimlerChrysler option is exercisable from
October 1, 2000 through January 1, 2005. The price for the purchase of the
remaining 49.9% interest ranges from [EURO]4,600 to [EURO]4,900, depending upon
when the option is exercised and various other factors. In 2000, the transaction
resulted in an extraordinary after-tax gain of [EURO]2,345.
In July 2000, the Group exchanged its controlling interest in
DaimlerChrysler Aerospace for shares of EADS, which subsequently completed its
initial public offering. EADS is a global aerospace and defense company which
was established through a merger of Aerospatiale Matra S.A., DaimlerChrysler
Aerospace AG and Construcciones Aeronauticas S.A. ("CASA"). DaimlerChrysler
accounted for the shares of EADS received in the exchange at their fair value on
that date and recorded an extraordinary gain of [EURO]3,009. The Group accounts
for its 33% interest in EADS using the equity method of accounting.
DaimlerChrysler has the right to sell all of its ownership interest in EADS to
certain French shareholders. This put option may be exercised immediately in the
event of a voting deadlock on certain matters or at certain times after three
years. The price is based on the average closing mid-market price of EADS shares
during the 30 trading days prior to the exercise of the put option.
In 2000, Ballard Inc., a developer of fuel cells and related power
generation systems, issued additional common shares to its shareholders.
DaimlerChrysler elected not to purchase additional shares thereby reducing its
ownership interest in Ballard to 19%. The dilution of its ownership interest
resulted in an extraordinary gain of [EURO]73.
In March 1999, debis AG, a wholly-owned subsidiary of DaimlerChrysler, sold
a portion of its interests in debitel AG in an initial public offering of its
ordinary shares for proceeds of [EURO]274. In September 1999, debis AG sold an
additional portion of its remaining interests in debitel AG to Swisscom for
proceeds of [EURO]924. The sales resulted in an extraordinary after-tax gain of
[EURO]659 (net of income tax expense of [EURO]481) and reduced debis' remaining
interest in debitel to 10%.
The gains from each of the foregoing transactions are reported as
extraordinary items because U.S. GAAP requires such presentation when a
significant disposition of assets or businesses occurs within two years
subsequent to accounting for a business combination using the
pooling-of-interests method of accounting.
In 1999 the Group extinguished [EURO]51 of long-term debt resulting in an
extraordinary after tax loss of [EURO]19 (net of income tax benefit of
[EURO]11).
In December 1998, DaimlerChrysler extinguished [EURO]257 of the outstanding
principal amount of its Auburn Hills Trust Guaranteed Exchangeable Certificates
due 2020 (the "Certificates") at a cost of [EURO]454. The extinguishment of the
Certificates resulted in an extraordinary after tax loss of [EURO]129 (net of
income tax benefit of [EURO]78).
F-25
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
NOTES TO THE CONSOLIDATED BALANCE SHEETS
12. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT, NET
Information with respect to changes in the Group's intangible assets and
property, plant and equipment is presented in the Consolidated Fixed Assets
Schedule included herein. Intangible assets represent principally goodwill and
intangible pension assets.
Property, plant and equipment includes buildings, technical equipment and
other equipment capitalized under capital lease agreements of [EURO]140 (1999:
[EURO]368). Depreciation expense and impairment charges on assets under capital
lease arrangements were [EURO]188 (1999: [EURO]32; 1998: [EURO]38).
13. EQUIPMENT 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, [EURO]32,639 represent automobiles
and commercial vehicles (1999: [EURO]26,409).
Noncancellable future lease payments due from customers for equipment on
operating leases at December 31, 2000 are as follows:
2001........................................................ 6,924
2002........................................................ 4,663
2003........................................................ 1,954
2004........................................................ 678
2005........................................................ 241
thereafter.................................................. 265
------
14,725
======
14. INVENTORIES
AT DECEMBER 31,
-----------------------
2000 1999
-------- --------
Raw materials and manufacturing supplies................. 2,495 2,602
Work-in-process ......................................... 5,232 6,285
thereof relating to long-term contracts and programs in
process [EURO]1,967 (1999: [EURO]2,000)
Finished goods, parts and products held for resale....... 10,726 9,887
Advance payments to suppliers............................ 309 518
------ ------
18,762 19,292
------ ------
Less: Advance payments received ......................... (2,479) (4,307)
thereof relating to long-term contracts and programs in
process [EURO]608 (1999: [EURO]1,166)
------ ------
16,283 14,985
====== ======
Certain of the Group's U.S. inventories are valued using the LIFO method. If
the FIFO method had been used instead of the LIFO method, inventories would have
been higher by [EURO]1,058 (1999: [EURO]691).
F-26
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
15. TRADE RECEIVABLES
AT DECEMBER 31,
----------------------
2000 1999
-------- --------
Receivables from sales of goods and services................ 8,506 8,859
Long-term contracts and programs, unbilled, net of advance
payments received......................................... 200 779
----- -----
8,706 9,638
Allowance for doubtful accounts............................. (711) (798)
----- -----
7,995 8,840
===== =====
As of December 31, 2000, [EURO]261 of the trade receivables mature after
more than one year (1999: [EURO]469).
16. RECEIVABLES FROM FINANCIAL SERVICES
AT DECEMBER 31,
----------------------
2000 1999
-------- --------
Receivables from:
Sales financing........................................... 37,193 32,696
Finance leases............................................ 19,031 11,440
------ ------
56,224 44,136
Initial direct costs...................................... 177 143
Unearned income........................................... (8,021) (5,977)
Unguaranteed residual value of leased assets.............. 1,183 1,032
------ ------
49,563 39,334
Allowance for doubtful accounts........................... (890) (599)
------ ------
48,673 38,735
====== ======
As of December 31, 2000, [EURO]28,138 of the financing receivables mature
after more than one year (1999: [EURO]21,194).
Sales financing and finance lease receivables consist of retail installment
sales contracts secured by automobiles and commercial vehicles. Contractual
maturities applicable to receivables from sales financing and finance leases in
each of the years following December 31, 2000 are as follows:
2001........................................................ 22,235
2002........................................................ 10,416
2003........................................................ 8,249
2004........................................................ 5,053
2005........................................................ 2,662
thereafter.................................................. 7,609
------
56,224
======
Actual cash flows will vary from contractual maturities due to future sales
of finance receivables, prepayments and charge-offs.
F-27
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
17. OTHER RECEIVABLES
AT DECEMBER 31,
----------------------
2000 1999
-------- --------
Receivables from affiliated companies..................... 1,341 850
Receivables from related companies(1)..................... 1,379 1,250
Retained interests in sold receivables and subordinated
asset backed certificates............................... 4,872 4,006
Other receivables and other assets........................ 7,761 7,592
------ ------
15,353 13,698
Allowance for doubtful accounts........................... (957) (1,127)
------ ------
14,396 12,571
====== ======
- --------------------------
(1) Related companies include entities which have a significant ownership in
DaimlerChrysler or entities in which the Group holds a significant
investment.
As of December 31, 2000, [EURO]2,101 of the other receivables mature after
more than one year (1999: [EURO]3,390).
18. SECURITIES, INVESTMENTS AND LONG-TERM FINANCIAL ASSETS
Information with respect to the Group's investments and long-term financial
assets is presented in the Consolidated Fixed Assets Schedule included herein.
Securities included in non-fixed assets are comprised of the following:
AT DECEMBER 31,
----------------------
2000 1999
-------- --------
Debt securities............................................ 2,791 4,347
Equity securities.......................................... 601 938
Equity-based funds......................................... 397 1,191
Debt-based funds........................................... 1,589 2,493
----- ------
5,378 8,969
===== ======
Carrying amounts and fair values of debt and equity securities included in
securities and investments for which fair values are readily determinable are
classified as follows:
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999
----------------------------------------- -----------------------------------------
UNREALIZED UNREALIZED
FAIR ------------------- FAIR -------------------
COST VALUE GAIN LOSS COST VALUE GAIN LOSS
-------- -------- -------- -------- -------- -------- -------- --------
Available-for-sale............... 4,859 4,918 246 187 8,114 8,486 522 150
Trading.......................... 451 460 9 -- 487 483 -- 4
----- ----- --- --- ----- ----- ----- ---
Securities....................... 5,310 5,378 255 187 8,601 8,969 522 154
----- ----- --- --- ----- ----- ----- ---
Investments and long-term
financial assets
available-for-sale............. 843 1,304 737 276 296 784 488 --
----- ----- --- --- ----- ----- ----- ---
6,153 6,682 992 463 8,897 9,753 1,010 154
===== ===== === === ===== ===== ===== ===
F-28
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The aggregate costs, fair values and gross unrealized holding gains and
losses per security class are as follows:
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999
------------------------------------------ --------------------------------------------
UNREALIZED UNREALIZED
FAIR -------------------- FAIR ----------------------
COST VALUE GAIN LOSS COST VALUE GAIN LOSS
--------- --------- --------- --------- --------- --------- --------- -----------
Equity securities.................. 1,333 1,880 855 308 977 1,662 698 13
Debt securities issued by the
German government and its
agencies......................... 122 123 1 -- 159 167 8 --
Municipal securities............... 24 25 1 -- 20 20 -- --
Debt securities issued by foreign
governments...................... 652 656 5 1 1,682 1,654 13 41
Corporate debt securities.......... 536 537 6 5 1,234 1,210 -- 24
Equity-based funds................. 323 397 80 6 935 1,191 276 20
Debt-based funds................... 1,692 1,590 14 116 2,526 2,495 15 46
Asset-backed securities............ 178 180 3 1 622 616 -- 6
Other marketable debt securities... 842 834 18 26 255 255 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Available-for-sale................. 5,702 6,222 983 463 8,410 9,270 1,010 150
--------- --------- --------- --------- --------- --------- --------- ---------
Trading............................ 451 460 9 -- 487 483 -- 4
--------- --------- --------- --------- --------- --------- --------- ---------
6,153 6,682 992 463 8,897 9,753 1,010 154
========= ========= ========= ========= ========= ========= ========= =========
The estimated fair values of investments in debt securities, by contractual
maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty.
AT DECEMBER 31,
--------------------
AVAILABLE-FOR-SALE 2000 1999
- --------------------------------------------------------------------------- --------- ---------
Due within one year........................................................ 2,704 3,968
Due after one year through five years...................................... 735 1,806
Due after five years through ten years..................................... 430 477
Due after ten years........................................................ 76 166
--------- ---------
3,945 6,417
========= =========
Proceeds from disposals of available-for-sale securities were [EURO]9,422
(1999: [EURO]2,481; 1998: [EURO]2,734). Gross realized gains from sales of
available-for-sale securities were [EURO]275 (1999: [EURO]627; 1998: [EURO]98),
while gross realized losses were [EURO]140 (1999: [EURO]4; 1998: [EURO]8).
DaimlerChrysler uses the specific identification method as a basis for
determining cost and calculating realized gains and losses.
Other securities classified as cash equivalents were approximately
[EURO]4,300 and [EURO]5,400 at December 31, 2000 and 1999, respectively, and
consisted primarily of purchase agreements, commercial paper and certificates of
deposit.
19. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include [EURO]45 (1999: [EURO]338) of deposits
with original maturities of more than three months.
F-29
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
20. ADDITIONAL CASH FLOW INFORMATION
Liquid assets recorded under various balance sheet captions are as follows:
AT DECEMBER 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Cash and cash equivalents originally maturing within 3 months....................... 7,082 8,761 6,281
Cash and cash equivalents originally maturing after 3 months........................ 45 338 308
Securities.......................................................................... 5,378 8,969 12,160
Other............................................................................... 5 133 324
--------- --------- ---------
12,510 18,201 19,073
========= ========= =========
The following represents supplemental information with respect to cash
flows:
YEAR ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Interest paid........................................................................... 5,629 3,315 2,553
Income taxes paid....................................................................... 775 1,883 993
21. PREPAID EXPENSES
Prepaid expenses are comprised of the following:
AT DECEMBER 31,
------------------------
2000 1999
----------- -----------
Prepaid pension cost............................................................................ 6,799 6,236
Other prepaid expenses.......................................................................... 1,108 978
--------- ---------
7,907 7,214
========= =========
As of December 31, 2000, [EURO]6,819 of the total prepaid expenses mature
after more than one year (1999: [EURO]6,118).
22. STOCKHOLDERS' EQUITY
NUMBER OF SHARES ISSUED AND OUTSTANDING
DaimlerChrysler had issued and outstanding 1,003,271,911 registered Ordinary
Shares of no par value at December 31, 2000. Each share represents a nominal
value of [EURO]2.60 of capital stock.
SPECIAL DISTRIBUTION
On May 27, 1998 the Daimler-Benz shareholders approved, and on June 15, 1998
Daimler-Benz paid, a special distribution of [EURO]10.23 ([EURO]10.04 after
adjustment to reflect the approximately 20% discount to market value at which
the Daimler-Benz Ordinary Shares and ADS were sold in the rights offering) per
Ordinary Share/ADS.
F-30
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
RIGHTS OFFERING
In June 1998, Daimler-Benz issued to holders of Daimler-Benz Ordinary
Shares, ADS and convertible debt securities, rights to acquire up to an
aggregate of 52.4 million newly issued Daimler-Benz Ordinary Shares and on
June 25, 1998, Daimler-Benz issued and sold 52.4 million Daimler-Benz Ordinary
Shares for net proceeds of [EURO]3,827. The rights issued by Daimler-Benz
entitled the holders to purchase Daimler-Benz Ordinary Shares at approximately a
20% discount to the market price of Daimler-Benz Ordinary Shares. Basic and
diluted earnings per Ordinary Share have been restated to reflect the dilutive
effect resulting from the discount to market value at which the Daimler-Benz
Ordinary Shares were sold in the rights offering.
TREASURY STOCK
In 2000, DaimlerChrysler purchased and re-issued approximately 1.4 million
Ordinary Shares in connection with an employee share purchase plan.
During the second half of 1999, DaimlerChrysler purchased approximately
1.2 million of its Ordinary Shares and re-issued the shares to employees in
connection with an employee share purchase plan.
In November 1998, Chrysler contributed 23.5 million shares of its common
stock to the Chrysler Corporation Retirement Master Trust, which serves as a
funding medium for and holds the assets of various pension and retirement plans
of Chrysler.
PREFERRED STOCK
On July 24, 1998, Chrysler redeemed all of the outstanding Chrysler
Depositary Shares representing its Series A Convertible Preferred Stock.
AUTHORIZED AND CONDITIONAL CAPITAL
Through April 30, 2003, the Board of Management is authorized, upon approval
of the Supervisory Board, to increase capital stock by a total of up to an
aggregate nominal amount of [EURO]256 and to issue Ordinary Shares of up to an
aggregate nominal amount of [EURO]26 to employees.
In April 2000, the Group's shareholders agreed to increase the nominal
amount of capital stock per share from approximately [EURO]2.56 (originating
from the conversion of Deutsche Marks into euros) to [EURO]2.60. This resulted
in an increase of capital stock and an equivalent decrease of additional paid-in
capital of [EURO]44. The conditional and authorized capital as described in the
Articles of Association were adjusted accordingly. DaimlerChrysler is authorized
to issue convertible bonds and notes with warrants in a nominal volume of up to
[EURO]15,000 with a term of up to 20 years by April 18, 2005. The convertible
bonds and notes with warrants shall grant to the holders or creditors option or
conversion rights for new shares in DaimlerChrysler in a nominal amount not to
exceed [EURO]300 of capital stock. DaimlerChrysler is also entitled to grant up
to 96,000,000 rights (representing up to a nominal amount of approximately
[EURO]250 of capital stock) with respect to the DaimlerChrysler Stock Option
Plan by April 18, 2005. Finally, DaimlerChrysler is authorized through
October 18, 2001, to acquire treasury stock for certain defined purposes up to a
maximum nominal amount of [EURO]256 of capital stock, representing approximately
10% of issued and outstanding capital stock.
CONVERTIBLE NOTES
In June 1997, DaimlerChrysler issued 5.75% subordinated mandatory
convertible notes due June 14, 2002 with a nominal amount of [EURO]66.83 per
note. These convertible notes represent a nominal amount of [EURO]508 including
F-31
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
7,600,000 notes which may be converted into 0.86631 newly issuable shares before
June 4, 2002. Notes not converted by this date will be mandatorily converted at
a conversion rate between 0.86631 and 1.25625 Ordinary Shares per note to be
determined on the basis of the average market price for the shares during the
last 20 trading days before June 8, 2002. During 2000, 92 (1999: 665; 1998:
3,713) DaimlerChrysler Ordinary Shares were issued upon exercise.
During 1996, DaimlerChrysler Luxembourg Capital S.A., a wholly-owned
subsidiary of DaimlerChrysler, issued 4.125% bearer notes with appertaining
warrants due July 5, 2003, in the amount of [EURO]383 with a nominal value of
[EURO]511 each, including a total of 7,690,500 options which, on the basis of
the option agreement (as amended), entitles the bearer of the option to
subscribe for shares of DaimlerChrysler AG. The option price per share is
[EURO]42.67 in consideration of exchange of the notes or [EURO]44.49 in cash.
During 2000, options for the subscription of 10,416 (1999: 1,517,468; 1998:
5,027,002) newly issued DaimlerChrysler Ordinary Shares have been exercised.
COMPREHENSIVE INCOME
The changes in the components of other comprehensive income (loss) are as
follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ----------------------------- -------------------------------
PRETAX TAX EFFECT NET PRETAX TAX EFFECT NET PRETAX TAX EFFECT NET
-------- ----------- ------ ------- ----------- ------- -------- ----------- -------
Unrealized gains (losses)
on securities:
Unrealized holding
gains (losses)....... (250) 46 (204) 292 (163) 129 659 (354) 305
Reclassification
adjustments for
(gains) losses
included in net
income............... 61 (6) 55 (623) 313 (310) (103) 57 (46)
------- ---------- ----- ------ ---------- ------ ------- ---------- ------
Net unrealized gains
(losses)........... (189) 40 (149) (331) 150 (181) 556 (297) 259
------- ---------- ----- ------ ---------- ------ ------- ---------- ------
Net gains (losses) on
derivatives hedging
variability of cash
flows:
Unrealized derivative
gains (losses)....... (1,932) 978 (954) -- -- -- -- -- --
Reclassification
adjustments for
(gains) losses
included in net
income............... 1,113 (567) 546 -- -- -- -- -- --
------- ---------- ----- ------ ---------- ------ ------- ---------- ------
Net derivative gains
(losses)........... (819) 411 (408) -- -- -- -- -- --
------- ---------- ----- ------ ---------- ------ ------- ---------- ------
Foreign currency
translation
adjustments............ 1,474 (111) 1,363 2,431 -- 2,431 (1,402) -- (1,402)
Minimum pension liability
adjustments............ 8 (2) 6 (13) 5 (8) (2) 1 (1)
------- ---------- ----- ------ ---------- ------ ------- ---------- ------
Other comprehensive
income (loss).......... 474 338 812 2,087 155 2,242 (848) (296) (1,144)
======= ========== ===== ====== ========== ====== ======= ========== ======
F-32
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
MISCELLANEOUS
Minority stockholders of Dornier GmbH have the right to exchange their
interests in Dornier for holdings of equal value in DaimlerChrysler Luft- und
Raumfahrt Holding AG or Ordinary Shares of DaimlerChrysler AG and such options
are exercisable at any time.
Under the German corporation law (Aktiengesetz), the amount of dividends
available for distribution to shareholders is based upon the earnings of
DaimlerChrysler AG (parent company only) as reported in its statutory financial
statements determined in accordance with the German commercial code
(Handelsgesetzbuch). For the year ended December 31, 2000, DaimlerChrysler
management has proposed a distribution of [EURO]2,358 ([EURO]2.35 per share) of
the 2000 earnings of DaimlerChrysler AG as a dividend to the stockholders.
23. STOCK-BASED COMPENSATION
The Group currently has various stock appreciation rights ("SARs") plans,
two stock option plans and a performance-based stock award plan. Prior to the
Merger, Chrysler had both fixed stock option and performance-based stock
compensation plans. These Chrysler plans were terminated as a result of the
Merger and all outstanding options and awards became vested and were converted
into equivalent DaimlerChrysler Ordinary Shares. The Group accounts for all
stock-based compensation plans in accordance with APB Opinion No. 25 and related
interpretations.
STOCK APPRECIATION-BASED PLANS
In the first half of 1999, DaimlerChrysler established a stock appreciation
rights plan (the "SAR Plan 1999") which provides eligible employees of the Group
with the right to receive cash equal to the appreciation of DaimlerChrysler
Ordinary Shares subsequent to the date of grant. The stock appreciation rights
granted under the SAR Plan 1999 vest in equal installments on the second and
third anniversaries from the date of grant. All unexercised SARs expire ten
years from the grant date. The exercise price of a SAR is equal to the fair
market value of DaimlerChrysler's Ordinary Shares on the date of grant. On
February 24, 1999, the Group issued 11.4 million SARs at an exercise price of
[EURO]89.70.
As discussed below, in the second quarter of 1999 DaimlerChrysler converted
all options granted under its existing stock option plans from 1997 and 1998
into SARs.
In conjunction with the consummation of the Merger in 1998, the Group
implemented a SAR plan (22.3 million SARs at an exercise price of $75.56 each).
The initial grant of SARs replaced Chrysler fixed stock options that were
converted to DaimlerChrysler Ordinary Shares as of the consummation of the
Merger. SARs which replaced stock options that were exercisable at the time of
the consummation of the Merger were immediately exercisable at the date of
grant. SARs related to stock options that were not exercisable at the date of
consummation of the Merger became exercisable in two installments; 50% on the
six-month and one-year anniversaries of the consummation date.
F-33
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
A summary of the activity related to the Group's SAR plans as of and for the
years ended December 31, 2000, 1999 and 1998 is presented below (SARs in
millions):
2000 1999 1998
---------------------------- ---------------------------- ----------------------------
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SARS PRICE SARS PRICE SARS PRICE
------------- ------------- ------------- ------------- ------------- -------------
Outstanding at beginning of year........ 45.8 [EURO] 80.25 22.2 [EURO] 64.58 -- [EURO] --
Granted................................. -- -- 11.4 89.70 22.3 64.58
Exchange of stock options for SARs...... -- -- 15.2 79.79 -- --
Exercised............................... (.) 82.42 (2.2) 64.91 (0.1) 64.58
Forfeited............................... (1.3) 78.52 (0.8) 76.07 -- --
--------- ----------- --------- ----------- --------- -----------
Outstanding at year-end................. 44.5 82.87 45.8 80.25 22.2 64.58
========= =========== ========= =========== ========= ===========
SARs exercisable at year-end............ 33.6 [EURO] 80.63 26.8 [EURO] 72.77 11.3 [EURO] 64.58
========= =========== ========= =========== ========= ===========
The Group grants performance-based stock awards to certain eligible
employees with performance periods of up to three years and track the value of
DaimlerChrysler Ordinary Shares. The amount ultimately earned in cash
compensation at the end of a performance period is based on the degree of
achievement of corporate goals. The Group issued 0.7 million performance-based
stock awards in both 2000 and 1999.
Compensation expense or benefit on SARs and performance-based stock awards
is recorded based on changes in the market price of DaimlerChrysler Ordinary
Shares and, in the case of performance-based stock awards, the attainment of
certain performance goals. For the years ended December 31, 2000 and 1999, the
Group recognized compensation benefit of [EURO]44 and [EURO]106, respectively,
and for the year ended December 31, 1998 recognized compensation expense of
[EURO]251 for SARs and performance-based stock awards.
STOCK OPTION PLANS
In April 2000, the Group's shareholders approved the DaimlerChrysler Stock
Option Plan 2000 (the "Plan") which provides for the granting of stock options
for the purchase of DaimlerChrysler Ordinary Shares to eligible employees.
Options granted under the Plan are exercisable at a reference price per
DaimlerChrysler Ordinary Share determined by the Supervisory Board plus a 20%
premium. The options become exercisable in equal installments on the second and
third anniversaries from the date of grant. All unexercised options expire ten
years from the date of grant. If the market price per DaimlerChrysler Ordinary
Share on the date of exercise is at least 20% higher than the reference price,
the holder is entitled to receive a cash payment equal to the original exercise
premium of 20%. During the first half of 2000, the Group issued 15.2 million
options at a reference price of [EURO]62.30. In May 2000, certain shareholders
challenged the approval of the Plan at the stockholders' meeting on April 19,
2000. In October 2000, a regional court in Stuttgart (the Landgericht) dismissed
the case. The shareholders have subsequently appealed the decision.
DaimlerChrysler established, based on shareholder approvals, the 1998, 1997
and 1996 Stock Option Plans (former Daimler-Benz plans), which provide for the
granting of options for the purchase of DaimlerChrysler Ordinary Shares to
certain members of management. The options granted under the Plans are evidenced
by non-transferable convertible bonds with a principal amount of [EURO]511 per
bond due ten years after issuance. During certain specified periods each year,
each convertible bond may be converted into 201 DaimlerChrysler Ordinary
F-34
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Shares, if the market price per share on the day of conversion is at least 15%
higher than the predetermined conversion price and the options (granted in 1998
and 1997) have been held for a 24 month waiting period. The specific terms of
these plans are as follows:
BONDS
GRANTED IN DUE STATED INTEREST RATE CONVERSION PRICE
- ----------- ---------- --------------------- ----------------
1996 July 2006 5.9% [EURO] 42.62
1997 July 2007 5.3% [EURO] 65.90
1998 July 2008 4.4% [EURO] 92.30
In the second quarter of 1999, DaimlerChrysler converted all options granted
under the 1998 and 1997 Stock 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 the exercise date rather than receiving DaimlerChrysler
Ordinary Shares.
Analysis of the stock options issued to eligible employees is as follows
(options in millions):
2000 1999 1998
-------------------------- -------------------------- --------------------------
AVERAGE AVERAGE AVERAGE
NUMBER CONVERSION NUMBER CONVERSION NUMBER CONVERSION
OF STOCK PRICE PER OF STOCK PRICE PER OF STOCK PRICE PER
OPTIONS SHARE OPTIONS SHARE OPTIONS SHARE
----------- ------------- ----------- ------------- ----------- -------------
Balance at beginning of year....... 0.1 [EURO] 42.62 15.5 [EURO] 79.63 7.5 [EURO] 65.60
Options granted.................... 15.2 74.76 -- -- -- --
Bonds sold......................... -- -- -- -- 8.2 92.30
Converted.......................... -- -- -- -- (.) 42.62
Forfeited.......................... (.) 74.76 -- -- -- --
Repayment.......................... -- -- (0.2) 79.10 (0.2) 72.22
Exchanged for SARs................. -- -- (15.2) 79.79 -- --
---------- ------------ ---------- ------------ ---------- ------------
Outstanding at year-end............ 15.3 74.65 0.1 42.62 15.5 79.63
========== ============ ========== ============ ========== ============
Exercisable at year-end............ 0.1 [EURO] 42.62 0.1 [EURO] 42.62 0.1 [EURO] 42.62
========== ============ ========== ============ ========== ============
Compensation expense of [EURO]13 was recognized in 2000 in connection with
the stock option plans (1998: [EURO]38). No compensation expense was recognized
in 1999.
F-35
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
CHRYSLER FIXED STOCK OPTION COMPENSATION PLANS
A summary of the status of fixed stock option grants under Chrysler's
stock-based compensation plans as of and for the year ended December 31, 1998 is
presented below (options in millions):
1998
---------------------
CHRYSLER WEIGHTED-
SHARES AVERAGE
UNDER CONVERSION
OPTION PRICE
-------- ----------
Outstanding at beginning of year......................... 30.7 $27.71
Granted.................................................. 9.2 39.82
Exercised................................................ (3.8) 23.38
Forfeited................................................ (0.1) 30.60
Converted to DaimlerChrysler shares...................... (36.0) 31.24
----- ------
Outstanding at end of year............................... -- --
===== ======
Options exercisable at year-end.......................... -- --
===== ======
No compensation expense was recognized for Chrysler fixed stock option
grants since the options had conversion prices of not less than the market value
of Chrysler's common stock at the date of grant.
CHRYSLER PERFORMANCE-BASED STOCK COMPENSATION PLAN
Chrysler's stock-based compensation plans also provided for the awarding of
Performance Shares, which rewarded attainment of performance objectives.
Performance Shares were awarded at the commencement of a performance cycle (two
to three years) to each eligible executive (officers and a limited number of
senior executives). At the end of each cycle, participants earned no Performance
Shares or a number of Performance Shares, ranging from a set minimum to a
maximum of 150% of the award for that cycle, as determined by a committee of
Chrysler's Board of Directors based on the Chrysler's performance in relation to
the performance goals established at the beginning of the performance cycle.
Compensation expense recognized for Performance Share awards was [EURO]65
for 1998. Unearned Chrysler Performance Share awards outstanding at the date of
the Merger were 1.9 million. As a result of the Merger, all Performance Shares
were vested and converted into DaimlerChrysler Ordinary Shares.
MISCELLANEOUS
If compensation expense for stock-based compensation had been based upon the
fair value at the grant date, consistent with the methodology prescribed under
SFAS 123, "Accounting for Stock Based Compensation," the Group's net income and
basic and diluted earnings per share would have been reduced by approximately
[EURO]12 and [EURO]127 (basic earnings per share: [EURO]0.01 and [EURO]0.13;
diluted earnings per share: [EURO]0.01 and [EURO]0.13) in 2000 and 1998,
respectively. No additional compensation expense would have been recorded for
the year ended December 31, 1999 under SFAS 123.
F-36
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The fair value of the DaimlerChrysler stock options issued in conjunction
with the 2000 and 1998 Stock Option Plans was calculated at the grant date based
on a trinomial tree option pricing model which considers the terms of the
issuance. The underlying assumptions and the resulting fair value per option are
as follows (at grant dates):
2000 1998
----------------- ------------------
Expected dividend yield..................................... 3.8% 2.45%
Expected volatility......................................... 25.0% 35.2%
Risk-free interest rate..................................... 4.8% 4.09%
Expected lives (in years)................................... 3 2
Fair value per option....................................... [EURO]9.50 [EURO]19.38
The fair value of each Chrysler fixed stock option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants and resulting fair values in 1998:
1998
--------
Expected dividend yield..................................... 4.0%
Expected volatility......................................... 29%
Risk-free interest rate..................................... 5.7%
Expected lives (in years)................................... 5
Fair value per option....................................... $9.20
The fair value of each Performance Share award was estimated at the date of
grant based on the market value of a share of Chrysler common stock on the date
of grant. Performance Share awards were recognized over performance cycles of
two to three years. However, because all outstanding fixed stock option and
Performance Share grants were vested as of the date of the Merger, for purposes
of SFAS 123, all remaining compensation expense was recognized in 1998.
24. ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
AT DECEMBER 31,
-------------------------------------------
2000 1999
-------------------- --------------------
DUE AFTER DUE AFTER
TOTAL ONE YEAR TOTAL ONE YEAR
-------- --------- -------- ---------
Pension plans and similar obligations
(see Note 24 a)........................ 11,151 10,200 14,048 13,075
Income and other taxes................... 2,192 474 2,281 77
Other accrued liabilities (see Note
24 b).................................. 23,098 7,901 21,366 7,813
------ ------ ------ ------
36,441 18,575 37,695 20,965
====== ====== ====== ======
F-37
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
A) PENSION PLANS AND SIMILAR OBLIGATIONS
Pension plans and similar obligations are comprised of the following
components:
AT DECEMBER 31,
-------------------
2000 1999
-------- --------
Pension liabilities (pension plans)........................ 1,838 5,588
Accrued postretirement health and life insurance
benefits................................................. 8,636 7,756
Other benefit liabilities.................................. 677 704
------ ------
11,151 14,048
====== ======
In the fourth quarter of 1999, DaimlerChrysler AG established the
"DaimlerChrysler Pension Trust" to provide for future pension benefit payments
in Germany. DaimlerChrysler AG contributed [EURO]4,059 of securities to the
Pension Trust, thereby reducing accrued pension liabilities. In 2000,
DaimlerChrysler AG contributed an additional [EURO]1,419 of cash and securities
to the Pension Trust. The reduction of the pension liabilities in 2000
principally results from the transactions involving dSH and DaimlerChrysler
Aerospace.
PENSION PLANS
The Group provides pension benefits to substantially all of its hourly and
salaried employees. Plan benefits are principally based upon years of service.
Certain pension plans are based on salary earned in the last year or last five
years of employment while others are fixed plans depending on ranking (both wage
level and position).
At December 31, 2000, plan assets were invested in diversified portfolios
that consisted primarily of debt and equity securities, including 8.2 million
shares of DaimlerChrysler Ordinary Shares with a market value of [EURO]361 in a
U.S. plan, which were contributed in connection with the Merger. Assets and
income accruing on all pension trust and relief funds are used solely to pay
pension benefits and administer the plans.
F-38
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The following information with respect to the Group's pension plans is
presented by German Plans and Non-German Plans (principally comprised of plans
in the U.S.):
AT DECEMBER 31, AT DECEMBER 31,
2000 1999
------------------- -------------------
NON- NON-
GERMAN GERMAN GERMAN GERMAN
PLANS PLANS PLANS PLANS
-------- -------- -------- --------
Change in Projected benefit obligations:
Projected benefit obligations at beginning of year....... 13,123 19,578 12,599 16,010
------ ------ ------ ------
Foreign currency exchange rate changes................. -- 1,403 -- 2,664
Service cost........................................... 242 433 267 430
Interest cost.......................................... 696 1,570 756 1,185
Plan amendments........................................ 2 148 -- 1,983
Actuarial gains........................................ (732) (257) (28) (2,142)
Dispositions........................................... (3,365) (31) -- --
Acquisitions and other................................. 144 411 68 518
Benefits paid.......................................... (531) (1,377) (539) (1,070)
------ ------ ------ ------
Projected benefit obligations at end of year............. 9,579 21,878 13,123 19,578
====== ====== ====== ======
Change in plan assets
Fair value of plan assets at beginning of year........... 7,034 25,823 2,898 19,424
------ ------ ------ ------
Foreign currency exchange rate changes................. -- 1,897 -- 3,309
Actual return on plan assets........................... 458 (755) 226 3,463
Employer contributions................................. 1,419 30 4,059 166
Plan participant contributions......................... -- 29 -- 27
Dispositions........................................... (579) -- -- --
Acquisitions and other................................. (15) 303 -- 498
Benefits paid.............................................. (409) (1,365) (149) (1,064)
------ ------ ------ ------
Fair value of plan assets at end of year................... 7,908 25,962 7,034 25,823
====== ====== ====== ======
F-39
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
A reconciliation of the funded status to the amounts recognized in the
consolidated balance sheets is as follows:
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999
-------------------- --------------------
NON- NON-
GERMAN GERMAN GERMAN GERMAN
PLANS PLANS PLANS PLANS
-------- --------- -------- ---------
Funded status*....................................... 1,671 (4,084) 6,089 (6,245)
Unrecognized actuarial net gains (losses).......... (123) 1,102 (691) 3,859
Unrecognized prior service cost.................... (8) (3,496) (7) (3,530)
Unrecognized net obligation at date of initial
application...................................... -- (153) -- (252)
----- ------ ----- ------
Net amount recognized................................ 1,540 (6,631) 5,391 (6,168)
===== ====== ===== ======
Amounts recognized in the consolidated balance sheets
consist of:
Prepaid pension cost............................... -- (6,799) -- (6,236)
Accrued pension liability.......................... 1,540 298 5,391 197
Intangible assets.................................. -- (95) -- (98)
Accumulated other comprehensive income............. -- (35) -- (31)
----- ------ ----- ------
Net amount recognized................................ 1,540 (6,631) 5,391 (6,168)
===== ====== ===== ======
- ------------------------
* Difference between the projected benefit obligations and the fair value of
plan assets.
The measurement dates for the Group's pension plans in Germany are
September 30 and in the U.S. are November 30 or December 31. 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 vary
according to the economic conditions of the country in which the pension plans
are situated. The weighted-average assumptions used in calculating the actuarial
values for the principal pension plans were as follows (in %):
NON-GERMAN
GERMAN PLANS PLANS
------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
Weighted-average assumptions:
Discount rate............................................. 6.5 6.0 6.0 7.7 7.5 6.5
Expected return on plan assets............................ 7.9 7.7 7.7 10.2 9.8 9.8
Rate of compensation increase............................. 3.0 2.8 3.0 5.5 5.9 6.0
F-40
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The components of net periodic pension cost were as follows:
2000 1999 1998
-------------------- -------------------- --------------------
NON- NON- NON-
GERMAN GERMAN GERMAN GERMAN GERMAN GERMAN
PLANS PLANS PLANS PLANS PLANS PLANS
-------- --------- -------- --------- -------- ---------
Service cost............................. 242 433 267 430 258 429
Interest cost............................ 696 1,570 756 1,185 732 1,033
Expected return on plan assets........... (625) (2,487) (223) (1,872) (203) (1,514)
Amortization of:
Unrecognized net actuarial losses
(gains).............................. 3 (18) 1 41 (2) 80
Unrecognized prior service cost........ 1 371 -- 214 -- 187
Unrecognized net obligation............ -- 146 -- 129 -- 126
Other.................................. 1 (6) 1 2 (3) 3
---- ------ ---- ------ ---- ------
Net periodic pension cost................ 318 9 802 129 782 344
==== ====== ==== ====== ==== ======
The projected benefit obligations and fair value of plan assets for pension
plans with accumulated benefit obligations in excess of plan assets were
[EURO]1,764 and [EURO]343, respectively, as of December 31, 2000 and
[EURO]13,934 and [EURO]7,818, respectively, as of December 31, 1999.
OTHER POSTRETIREMENT BENEFITS
Certain DaimlerChrysler operations in the U.S. and Canada provide
postretirement health and life insurance benefits to their employees. Upon
retirement from DaimlerChrysler the employees may become eligible for
continuation of these benefits. The benefits and eligibility rules may be
modified periodically.
At December 31, 2000, plan assets were invested in diversified portfolios
that consisted primarily of debt and equity securities.
F-41
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The following information is presented with respect to the Group's
postretirement benefit plans:
AT DECEMBER 31,
-------------------
2000 1999
-------- --------
Change in accumulated postretirement benefit obligations:
Accumulated postretirement benefit obligations at
beginning of year....................................... 10,527 9,886
------ ------
Foreign currency exchange rate changes.................. 829 1,645
Service cost............................................ 208 209
Interest cost........................................... 873 702
Plan amendments......................................... 444 246
Actuarial (gains) losses................................ 523 (1,687)
Acquisitions and other.................................. 107 51
Benefits paid........................................... (654) (525)
------ ------
Accumulated postretirement benefit obligations at end of
year.................................................... 12,857 10,527
====== ======
Change in plan assets:
Fair value of plan assets at beginning of year............ 2,816 1,574
------ ------
Foreign currency exchange rate changes.................. 224 273
Actual return on plan assets............................ (55) 241
Employer contributions.................................. 16 732
Benefits paid........................................... (6) (4)
------ ------
Fair value of plan assets at end of year.................. 2,995 2,816
====== ======
A reconciliation of the funded status to the amounts recognized in the
consolidated balance sheets is as follows:
AT DECEMBER 31,
-------------------
2000 1999
-------- --------
Funded status*.............................................. 9,862 7,711
Unrecognized actuarial net gains (losses)................. (270) 574
Unrecognized prior service cost........................... (956) (529)
----- -----
Net amount recognized....................................... 8,636 7,756
===== =====
- ------------------------
* Difference between the accumulated postretirement obligations and the fair
value of plan assets.
F-42
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Assumed discount rates and rates of increase in remuneration used in
calculating the accumulated postretirement benefit obligations together with
long-term rates of return on plan assets vary according to the economic
conditions of the country in which the plans are situated. The weighted-average
assumptions used in calculating the actuarial values for the postretirement
benefit plans were as follows (in %):
2000 1999 1998
-------- -------- --------
Weighted-average assumptions as of December 31:
Discount rate............................................. 7.7 7.7 6.5
Expected return on plan assets.............................. 10.4 10.0 10.0
Health care inflation rate in following (or "base") year.... 7.5 5.8 6.0
Ultimate health care inflation rate (2005).................. 5.0 5.0 5.0
The components of net periodic postretirement benefit cost were as follows:
2000 1999 1998
-------- -------- --------
Service cost................................................ 208 209 189
Interest cost............................................... 873 702 646
Expected return on plan assets.............................. (308) (169) (6)
Amortization of:
Unrecognized net actuarial losses......................... 5 10 14
Unrecognized prior service cost........................... 54 31 23
Other....................................................... (2) -- --
---- ---- ---
Net periodic postretirement benefit cost.................... 830 783 866
==== ==== ===
The following schedule presents the effects of a one-percentage-point change
in assumed health care cost trend rates:
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
Effect on total of service and interest cost components..... 141 (115)
Effect on accumulated postretirement benefit obligations.... 1,395 (1,163)
PREPAID EMPLOYEE BENEFITS
In 1996 DaimlerChrysler established a Voluntary Employees' Beneficiary
Association ("VEBA") trust for payment of non-pension employee benefits. At
December 31, 2000 and 1999, the VEBA had a balance of [EURO]3,586 and
[EURO]3,231, respectively, of which [EURO]2,864 and [EURO]2,698, respectively,
were designated and restricted for the payment of postretirement health care
benefits. Contributions to the VEBA trust during the years ended December 31,
1999 and 1998 were [EURO]727 and [EURO]292, respectively. No contributions to
the VEBA trust were made in 2000.
F-43
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
B) OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
AT DECEMBER 31,
-------------------
2000 1999
-------- --------
Accrued warranty costs and price risks...................... 7,715 7,505
Accrued losses on uncompleted contracts..................... 804 993
Restructuring............................................... 260 595
Accrued personnel and social costs.......................... 2,503 3,409
Accrued sales incentives.................................... 3,588 2,429
Other....................................................... 8,228 6,435
------ ------
23,098 21,366
====== ======
Additions to and refunds from the accrued liability for sales incentives
amounted to [EURO]8,386 and [EURO]7,413, respectively, for the year ended
December 31, 2000.
Accruals for restructuring comprise certain employee termination benefits
and costs which are directly associated with plans to exit specified activities.
The changes in these provisions are summarized as follows:
TERMINATION EXIT TOTAL
BENEFITS COSTS LIABILITIES
----------- -------- -----------
Balance at January 1, 1998.................................. 555 173 728
Utilizations and transfers.................................. (242) (110) (352)
Reductions.................................................. (12) (19) (31)
Additions................................................... 259 31 290
---- ---- ----
Balance at December 31, 1998................................ 560 75 635
---- ---- ----
Utilizations and transfers.................................. (321) 21 (300)
Reductions.................................................. (15) (9) (24)
Additions................................................... 183 101 284
---- ---- ----
Balance at December 31, 1999................................ 407 188 595
---- ---- ----
Utilizations and transfers.................................. (229) (56) (285)
Reductions.................................................. (43) (34) (77)
Additions................................................... 16 11 27
---- ---- ----
Balance at December 31, 2000................................ 151 109 260
==== ==== ====
In connection with the Group's restructuring, provisions were recorded for
termination benefits of [EURO]16 (1999: [EURO]183; 1998: [EURO]259), in 2000
principally within the Automotive Business of the former Daimler-Benz Group, in
1999 principally within directly managed businesses and DaimlerChrysler
Aerospace and in 1998 principally within the Automotive Business of the former
Daimler-Benz Group and DaimlerChrysler Aerospace. In connection with these
restructuring efforts, the Group effected workforce reductions of approximately
2,600 employees (1999: 2,400; 1998: 7,100) and paid termination benefits of
[EURO]135 (1999: [EURO]239; 1998: [EURO]413), of which [EURO]120 (1999:
[EURO]168; 1998: [EURO]242) were charged against previously established
liabilities. At December 31, 2000 the Group had liabilities for estimated future
terminations for approximately 3,700 employees.
Exit costs in 2000, 1999 and 1998 primarily result from the restructuring of
directly managed businesses.
F-44
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
25. FINANCIAL LIABILITIES
AT DECEMBER 31,
-----------------------
2000 1999
-------- --------
Notes/Bonds................................................. 8,094 7,892
Commercial paper............................................ 19,917 20,879
Liabilities to financial institutions....................... 6,294 5,941
Liabilities to affiliated companies......................... 345 466
Loans, other financial liabilities.......................... 205 257
Liabilities from capital lease and residual value
guarantees................................................ 985 1,286
------ ------
Short-term financial liabilities (due within one year)...... 35,840 36,721
------ ------
MATURITIES
----------
Notes/Bonds................................................. 2002-2097 40,773 21,440
of which due in more than five years: [EURO]7,673 (1999:
[EURO]5,781)
Liabilities to financial institutions....................... 2002-2019 6,800 5,398
of which due in more than five years: [EURO]2,088 (1999:
[EURO]2,455)
Liabilities to affiliated companies......................... 149 145
of which due in more than five years: [EURO]-- (1999:
[EURO]--)
Loans, other financial liabilities.......................... 118 192
of which due in more than five years: [EURO]51 (1999:
[EURO]53)
Liabilities from capital lease and residual value
guarantees................................................ 1,103 592
of which due in more than five years: [EURO]226 (1999:
[EURO]258)
------ ------
Long-term financial liabilities............................. 48,943 27,767
------ ------
84,783 64,488
====== ======
Weighted average interest rates for notes/bonds, commercial paper and
liabilities to financial institutions are 7.0%, 6.3% and 5.6%, respectively, at
December 31, 2000.
Commercial paper is denominated in euros and U.S. dollars and includes
accrued interest. Bonds and liabilities to financial institutions are largely
secured by mortgage conveyance, liens and assignment of receivables of
approximately [EURO]1,858 (1999: [EURO]1,599).
Aggregate nominal amounts of financial liabilities maturing during the next
five years and thereafter are as follows:
THERE-
2001 2002 2003 2004 2005 AFTER
-------- -------- -------- -------- -------- --------
Financial liabilities.......................... 35,784 16,123 8,989 4,823 7,975 10,895
At December 31, 2000, the Group had unused short-term credit lines of
[EURO]15,216 (1999: [EURO]12,821) and unused long-term credit lines of
[EURO]12,819 (1999: [EURO]11,046). The credit lines include an $18 billion
revolving credit facility with a syndicate of international banks. The credit
agreement is comprised of a multi-currency revolving credit facility which
allows DaimlerChrysler AG and several subsidiaries to borrow up to $5 billion
until 2006 and a revolving credit facility which allows DaimlerChrysler North
America Holding Corporation, a wholly-owned subsidiary of DaimlerChrysler AG, to
borrow up to $13 billion ($6 billion until 2004 and $7 billion until 2001). The
$13 billion revolving credit facility serves as a back-up for commercial paper
drawings.
F-45
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
26. TRADE LIABILITIES
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999
--------------------------------- ---------------------------------
DUE AFTER DUE AFTER DUE AFTER DUE AFTER
TOTAL ONE YEAR FIVE YEARS TOTAL ONE YEAR FIVE YEARS
-------- --------- ---------- -------- --------- ----------
Trade liabilities............................. 15,257 33 1 15,786 26 1
27. OTHER LIABILITIES
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999
--------------------------------- ---------------------------------
DUE AFTER DUE AFTER DUE AFTER DUE AFTER
TOTAL ONE YEAR FIVE YEARS TOTAL ONE YEAR FIVE YEARS
-------- --------- ---------- -------- --------- ----------
Liabilities to affiliated companies............ 536 1 1 411 56 56
Liabilities to related companies............... 794 -- -- 1,193 3 --
Other liabilities.............................. 8,291 1,283 161 8,682 229 9
----- ----- --- ------ --- --
9,621 1,284 162 10,286 288 65
===== ===== === ====== === ==
In 1999, liabilities to related companies were primarily obligations to
Airbus Industrie G.I.E., Toulouse.
As of December 31, 2000, other liabilities include tax liabilities of
[EURO]683 (1999: [EURO]871) and social benefits due of [EURO]713 (1999:
[EURO]758).
28. DEFERRED INCOME
As of December 31, 2000, [EURO]1,057 of the total deferred income is to be
recognized after more than one year (1999: [EURO]907).
OTHER NOTES
29. LITIGATION AND CLAIMS
A number of shareholder lawsuits are pending in the United States against
DaimlerChrysler and certain members of its Supervisory Board and Board of
Management that allege the defendants violated U.S. securities law and committed
fraud in obtaining approval from Chrysler stockholders for the business
combination between Chrysler and Daimler-Benz AG in 1998. The complaints seek
relief ranging from substantial monetary damages to rescinding the business
combination. DaimlerChrysler believes that these claims are without merit and
intends to defend against them vigorously.
Various other claims and legal proceedings have been asserted or instituted
against the Group, including some purporting to be class actions, and some which
demand large monetary damages or other relief which could result in significant
expenditures. Litigation is subject to many uncertainties, and the outcome of
individual matters is not predictable with assurance. It is reasonably possible
that the final resolution of some of these matters may require the Group to make
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. The term
"reasonably possible" is used herein to mean that the chance of a future
transaction or event occurring is more than remote but less than likely.
Although the final resolution of any such matters could have a material effect
on the Group's consolidated operating results for the particular reporting
period in which an adjustment of the estimated reserve is recorded, the Group
believes that any resulting adjustment should not materially affect its
consolidated financial position.
F-46
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
30. COMMITMENTS AND CONTINGENCIES
Contingencies are presented at their contractual values and include the
following:
AT DECEMBER 31,
-----------------------
2000 1999
-------- --------
Guarantees................................................. 8,018 6,026
Notes payable.............................................. 21 33
Contractual guarantees..................................... 354 303
Pledges of indebtedness of others.......................... 455 373
----- -----
8,848 6,735
===== =====
Contingent liabilities principally represent guarantees of indebtedness of
non-consolidated affiliated companies and third parties and commitments by Group
companies as to contractual performance by joint venture companies and certain
non-incorporated companies, partnerships and project groups.
DaimlerChrysler is subject to potential liability under government
regulations and various claims and legal actions which are pending or may be
asserted against DaimlerChrysler concerning environmental matters. Estimates of
future costs of such environmental matters are inevitably imprecise due to
numerous uncertainties, including the enactment of new laws and regulations, the
development and application of new technologies, the identification of new sites
for which DaimlerChrysler may have remediation responsibility and the
apportionment and collectibility of remediation costs among responsible parties.
DaimlerChrysler establishes reserves for these environmental matters when a
loss is probable and reasonably estimable. It is reasonably possible that the
final resolution of some of these matters may require DaimlerChrysler to make
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. Although the
final resolution of any such matters could have a material effect on
DaimlerChrysler's consolidated operating results for the particular reporting
period in which an adjustment of the estimated reserve is recorded,
DaimlerChrysler believes that any resulting adjustment should not materially
affect its consolidated financial position.
DaimlerChrysler periodically initiates voluntary service actions and recall
actions to address various customer satisfaction, safety and emissions issues
related to vehicles it sells. DaimlerChrysler establishes reserves for product
warranty, including the estimated cost of these service and recall actions, when
the related sale is recognized. The estimated future costs of these actions are
based primarily on prior experience. Estimates of the future costs of these
actions are inevitably imprecise due to numerous uncertainties, including the
enactment of new laws and regulations, the number of vehicles affected by a
service or recall action, and the nature of the corrective action which may
result in adjustments to the established reserves. It is reasonably possible
that the ultimate cost of these service and recall actions may require
DaimlerChrysler to make expenditures, in excess of established reserves, over an
extended period of time and in a range of amounts that cannot be reasonably
estimated. Although the ultimate cost of these service and recall actions could
have a material effect on DaimlerChrysler's consolidated operating results for
the particular reporting period in which an adjustment of the estimated reserve
is recorded, DaimlerChrysler believes that any such adjustment should not
materially affect its consolidated financial position.
In connection with certain production programs the Group has committed to
certain levels of outsourced manufactured parts and components over extended
periods at market prices. The Group may be required to compensate suppliers in
the event the committed volumes are not purchased. As discussed in Note 6, the
Group's
F-47
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
smart division recorded charges of [EURO]255 in December 2000 related to fixed
cost reimbursement agreements with suppliers. The Group has also committed to
investments in the construction and maintenance of production facilities to a
usual extent.
Total rentals under operating leases, charged as an expense in the statement
of income, amounted to [EURO]881 (1999: [EURO]964; 1998: [EURO]984). Future
minimum lease payments under rental and lease agreements which have initial or
remaining terms in excess of one year at December 31, 2000 are as follows:
OPERATING LEASES
----------------
2001.................................................. 590
2002.................................................. 429
2003.................................................. 339
2004.................................................. 258
2005.................................................. 194
thereafter............................................ 725
31. INFORMATION ABOUT FINANCIAL INSTRUMENTS AND DERIVATIVES
A) USE OF FINANCIAL INSTRUMENTS
The Group conducts business on a global basis in numerous major
international currencies and is, therefore, exposed to adverse movements in
foreign currency exchange rates. The Group also issues bonds, commercial paper
and medium-term-notes in various currencies. As a consequence of issuing these
types of financial instruments, the Group may be exposed to risks from changes
in interest and currency exchange rates. In the course of day-to-day financial
management, DaimlerChrysler purchases financial instruments, such as financial
investments, variable- and fixed-interest bearing securities and equity
securities. DaimlerChrysler uses derivative financial instruments to reduce
various types of market risks. Without the use of these instruments the Group's
market risks would be higher.
Based on regulations issued by regulatory authorities for financial
institutions, the Group has established guidelines for risk assessment
procedures and controls for the use of financial instruments, including a clear
segregation of duties with regard to operating financial activities, settlement,
accounting and controlling.
Market risk in portfolio management is quantified according to the
"value-at-risk" method which is commonly used among banks. Using historical
variability of market values, potential changes in value resulting from changes
of market prices are calculated on the basis of statistical methods. The maximum
acceptable market risk is established by the board of management in the form of
risk capital, approved for a period not exceeding one year. Adherence to risk
capital limitations is regularly monitored.
B) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the price at which one party
would assume the rights and/or duties of another party. Fair values of financial
instruments have been determined with reference to available market information
at the balance sheet date and the valuation methodologies discussed below.
Considering the variability of their value-determining factors, the fair values
presented herein may not be indicative of the amounts that the Group could
realize under current market conditions.
F-48
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
The carrying amounts and fair values of the Group's financial instruments
are as follows:
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
Financial instruments (other than derivative
instruments):
Assets:
Financial assets............................ 1,930 1,930 1,360 1,360
Receivables from financial services......... 48,673 49,377 38,735 38,835
Securities.................................. 5,378 5,378 8,969 8,969
Cash and cash equivalents................... 7,127 7,127 9,099 9,099
Other....................................... 5 5 133 133
Liabilities:
Financial liabilities....................... 84,783 86,265 64,488 64,954
Derivative instruments:
Assets:
Currency contracts.......................... 306 306 57 74
Interest rate contracts..................... 556 556 34 348
Liabilities:
Currency contracts.......................... 1,257 1,257 944 2,109
Interest rate contracts..................... 1,004 1,004 61 590
In determining the fair values of derivative instruments at December 31,
1999, certain compensating effects from underlying transactions (e.g. firm
commitments and anticipated transactions) were not taken into consideration. At
December 31, 1999, the Group had deferred net unrealized losses on forward
foreign exchange contracts and options of [EURO](1,148), purchased against firm
foreign currency denominated sales commitments.
The carrying amounts of cash and other receivables approximate fair values
due to the short-term maturities of these instruments.
The methods and assumptions used to determine the fair values of other
financial instruments are summarized below:
FINANCIAL ASSETS AND SECURITIES -- The fair values of securities in the
portfolio were estimated using quoted market prices. The Group has certain
equity investments in related and affiliated companies not presented in the
table, as certain of these investments are not publicly traded and determination
of fair values is impracticable.
RECEIVABLES FROM FINANCIAL SERVICES -- The carrying amounts of variable rate
finance receivables were estimated to approximate fair value since they are
priced at current market rates. The fair values of fixed rate finance
receivables were estimated by discounting expected cash flows using the current
interest rates at which comparable loans with identical maturity would be made
as of December 31, 2000 and 1999.
The fair values of residual cash flows and other subordinated amounts
arising from receivable sale transactions were estimated by discounting expected
cash flows at current interest rates.
FINANCIAL LIABILITIES -- The fair value of publicly traded debt was
estimated using quoted market prices. The fair values of other long-term notes
and bonds were estimated by discounting future cash flows using interest rates
currently available for debt with identical terms and remaining maturities. The
carrying amounts of commercial paper and borrowings under revolving credit
facilities were assumed to approximate fair value due to their short maturities.
F-49
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
INTEREST RATE CONTRACTS -- The fair values of existing instruments to hedge
interest rate risks (e.g. interest rate swap agreements) were estimated by
discounting expected cash flows using market interest rates over the remaining
term of the instrument. Interest rate options are valued on the basis of quoted
market prices or on estimates based on option pricing models.
CURRENCY CONTRACTS -- The fair values of forward foreign exchange contracts
were based on European Central Bank reference exchange rates adjusted for the
respective interest rate differentials (premiums or discounts). Currency options
were valued on the basis of quoted market prices or on estimates based on option
pricing models.
C) NOTIONAL AMOUNTS (PRIOR TO SFAS 133) AND CREDIT RISK
The contract or notional amounts shown below do not always represent amounts
exchanged by the parties and, thus, are not necessarily a measure for the
exposure of DaimlerChrysler through its use of derivatives.
At December 31, 1999 the notional amounts of off-balance sheet financial
instruments were as follows:
Currency contracts.......................................... 28,974
Interest rate contracts..................................... 25,911
The Group may be exposed to credit-related losses in the event of
non-performance by counterparties to financial instruments. Counterparties to
the Group's financial instruments represent, in general, international financial
institutions. DaimlerChrysler does not have a significant exposure to any
individual counterparty, based on the rating of the counterparties performed by
established rating agencies. The Group believes the overall credit risk related
to utilized derivatives is insignificant.
D) ACCOUNTING FOR AND REPORTING OF FINANCIAL INSTRUMENTS (OTHER THAN DERIVATIVE
INSTRUMENTS)
The income or expense of the Group's financial instruments (other than
derivative instruments), with the exception of receivables from financial
services and financial liabilities related to leasing and sales financing
activities, are recognized in financial income, net. Interest income on
receivables from financial services and gains and losses from sales of
receivables are recognized as revenues. Interest expense on financial
liabilities related to leasing and sales financing activities are recognized as
cost of sales. The carrying amounts of the financial instruments (other than
derivative instruments) are included in the consolidated balance sheets under
their related captions.
E) ACCOUNTING FOR AND REPORTING OF DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
(SFAS 133)
FOREIGN CURRENCY RISK MANAGEMENT
As a consequence of the global nature of DaimlerChrysler's businesses, its
operations and its reported financial results and cash flows are exposed to the
risks associated with fluctuations in the exchange rates between the euro, the
U.S. dollar and other world currencies. DaimlerChrysler's businesses are exposed
to transaction risk whenever revenues are denominated in a currency other than
the currency in which the costs relating to those revenues are incurred. This
risk exposure primarily affects the Mercedes-Benz Passenger Cars & smart
segment. In that segment, revenues are denominated in the currencies of the
countries in which cars are sold, but manufacturing costs are denominated
primarily in euros.
In order to mitigate the impact of currency exchange rate fluctuations,
DaimlerChrysler continually assesses its exposure to currency risks and hedges a
portion of those risks through the use of derivative financial instruments,
principally forward foreign exchange contracts and currency options. The Group
does not enter into
F-50
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
these types of derivative financial instruments for purposes other than risk
management. Responsibility for managing DaimlerChrysler's currency exposures and
use of currency derivatives is centralized within the Group's Currency
Committee. The Currency Committee is comprised of members of senior management
from each of the respective business units as well as from Corporate Treasury
and Risk Controlling. Decisions concerning foreign currency hedging taken by the
Currency Committee are implemented by Corporate Treasury. Risk Controlling
regularly informs the Board of Management of the decisions of the Currency
Committee as well as the actions of Corporate Treasury.
INTEREST RATE AND EQUITY PRICE RISK MANAGEMENT
DaimlerChrysler holds a variety of interest rate sensitive assets and
liabilities to manage the liquidity and cash needs of its day-to-day operations.
A substantial volume of interest rate sensitive assets and liabilities is
related to the leasing and sales financing business. In particular, the Group's
leasing and sales financing business enters into transactions with customers
resulting in fixed-rate or floating-rate receivables. DaimlerChrysler's policy
is to match funding in terms of maturities and interest rates for a substantial
portion of these assets using bank loans, bonds and commercial paper.
DaimlerChrysler uses derivative financial instruments including swaps,
swaptions, forward rate agreements, futures, caps and floors to achieve the
desired asset/liability structure. The Group does not enter into these types of
derivative financial instruments for purposes other than risk management.
The Group assesses interest rate risk by continually identifying and
monitoring changes in interest rate exposures that may adversely impact expected
future cash flows and by evaluating hedging opportunities. The Group maintains
risk management control systems independent of Corporate Treasury to monitor
interest rate risk attributable to both DaimlerChrysler's outstanding or
forecasted debt obligations as well as its offsetting hedge positions. The risk
management control systems involve the use of analytical techniques, including
value-at-risk analyses, to estimate the expected impact of changes in interest
rates on the Group's future cash flows.
The Group also holds investments in various equity and fixed income
securities to improve the return on its liquidity. These securities subject
DaimlerChrysler to risks due to changes in quoted market prices. Management
believes it is prudent to limit the variability of a portion of the potential
changes in market prices. To a much lesser extent than the risks from changing
interest rates, DaimlerChrysler uses derivative financial instruments including
futures and options to manage the risks arising from changes in equity prices.
The Group assesses equity price risk and fixed income securities price risk
(interest rate risk) by continually monitoring changes in key economic, industry
and market information and maintains risk management control systems independent
of Corporate Treasury to monitor risks attributable to both DaimlerChrysler's
investments as well as its offsetting hedge positions. The risk management
control systems involve the use of analytical techniques, including
value-at-risk analyses, to estimate the potential loss and manage the risks of
the Group's investments.
INFORMATION WITH RESPECT TO FAIR VALUE HEDGES
Gains and losses in fair value of recognized assets and liabilities and firm
commitments of operating transactions as well as gains and losses on derivative
financial instruments designated as fair value hedges of these recognized assets
and liabilities and firm commitments are recognized currently in revenues, as
the principal transactions being hedged involve sales of the Group's products.
Net gains and losses in fair value of both recognized financial assets and
liabilities and derivative financial instruments designated as fair value hedges
of these financial assets and liabilities are recognized currently in financial
income, net.
F-51
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
For the year ended December 31, 2000, net gains of [EURO]15 were recognized
in revenues and financial income, net, representing principally the component of
the derivative instruments' gain or loss excluded from the assessment of hedge
effectiveness and, to a much lesser extent, the amount of hedging
ineffectiveness.
INFORMATION WITH RESPECT TO CASH FLOW HEDGES
Changes in the value of forward foreign exchange contracts designated and
qualifying as cash flow hedges of forecasted transactions are reported in
accumulated other comprehensive income. These amounts are subsequently
reclassified into earnings, as a component of the value of the forecasted
transaction, in the same period as the forecasted transaction affects earnings.
Changes in the fair value of interest rate swaps designated as hedging
instruments of variability of cash flows associated with variable-rate long-term
debt or financing receivables are also reported in accumulated other
comprehensive income. These amounts are subsequently reclassified into interest
expense or financial income, respectively, as a yield adjustment in the same
period in which the related interest on the floating-rate debt obligations or
financing receivables affect earnings.
For the year ended December 31, 2000, net losses of [EURO]3, representing
principally the component of the derivative instruments' gain/loss excluded from
the assessment of the hedge effectiveness and, to a much lesser extent, the
amount of hedging ineffectiveness, were recognized in revenues and financial
income, net.
In 2000, DaimlerChrysler reclassified [EURO]267 of net losses (net of income
tax benefit of [EURO]268) from accumulated other comprehensive income into the
statement of income relating to the transition adjustment included in
accumulated other comprehensive income on January 1, 2000 because the underlying
transactions to which the reclassified amounts relate were recognized.
Also included in earnings are gains of [EURO]2 for the year ended
December 31, 2000, reclassified from accumulated other comprehensive income as a
result of the discontinuance of foreign currency cash flow hedges because it was
probable that the original forecasted transaction would not occur.
It is anticipated that [EURO]301 of net losses included in accumulated other
comprehensive income at December 31, 2000, will be reclassified into income
during the next year. As of December 31, 2000, DaimlerChrysler had purchased
derivative financial instruments with a maximum maturity of 48 months to hedge
its exposure to the variability in future cash flows with foreign currency
forecasted transactions.
INFORMATION WITH RESPECT TO HEDGES OF THE NET INVESTMENT IN A FOREIGN
OPERATION
In specific circumstances, DaimlerChrysler seeks to hedge the currency risk
inherent in certain of its long-term investments, where the functional currency
is other than the euro, through the use of derivative and non-derivative
financial instruments. For the year ended December 31, 2000, net gains of
[EURO]104 hedging the Group's net investments in certain foreign operations were
included in the cumulative translation adjustment.
F) ACCOUNTING FOR AND REPORTING OF FINANCIAL INSTRUMENTS (PRIOR TO SFAS 133)
For periods prior to January 1, 2000, financial instruments, including
derivatives, purchased to offset the Group's exposure to identifiable and
committed transactions with price, interest or currency risks were accounted for
together with the underlying business transactions ("hedge accounting"). Gains
and losses on forward contracts and options hedging firm foreign currency
commitments were deferred off-balance sheet and were recognized as a component
of the related transactions, when recorded (the "deferral method"). However, a
loss was not deferred if deferral would have lead to the recognition of a loss
in future periods.
In the event of an early termination of a currency exchange agreement
designated as a hedge, the gain or loss continued to be deferred and was
included in the settlement of the underlying transaction.
F-52
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Interest differentials paid or received under interest rate swaps purchased
to hedge interest risks on debt were recorded as adjustments to the effective
yields of the underlying debt ("accrual method").
In the event of an early termination of an interest rate related derivative
designated as a hedge, the gain or loss was deferred and recorded as an
adjustment to interest income, net over the remaining term of the underlying
financial instrument.
All other financial instruments, including derivatives, purchased to offset
the Group's net exposure to price, interest or currency risks, but which were
not designated as hedges of specific assets, liabilities or firm commitments
were marked to market and any resulting unrealized gains and losses were
recognized currently in financial income, net. The carrying amounts of
derivative instruments were included under other assets and accrued liabilities.
Derivatives purchased by the Group under macro-hedging techniques, as well
as those purchased to offset the Group's exposure to anticipated cash flows, did
not generally meet the requirements for applying hedge accounting and were,
accordingly marked to market at each reporting period with unrealized gains and
losses recognized in financial income, net. When the Group met the requirements
for hedge accounting and designated the derivative financial instrument as a
hedge of a committed transaction, subsequent unrealized gains and losses were
deferred and recognized along with the effects of the underlying transaction.
32. RETAINED INTERESTS IN SOLD RECEIVABLES, AT FAIR VALUE AND SALES OF FINANCE
RECEIVABLES
The fair value of retained interests in sold receivables was as follows:
AT DECEMBER 31,
-------------------
2000 1999
-------- --------
Fair value of estimated residual cash flows, net of
prepayments, from sold receivables, before expected future
net credit losses......................................... 4,319 3,588
Expected future net credit losses on sold receivables....... (389) (257)
----- -----
Fair value of net residual cash flows from sold
receivables............................................... 3,930 3,331
----- -----
Restricted cash accounts.................................... 202 169
Retained subordinated securities............................ 684 268
----- -----
Retained interests in sold receivables, at fair value....... 4,816 3,768
===== =====
At December 31, 2000, the significant assumptions used in estimating the
residual cash flows from sold receivables and the sensitivity of the current
fair value to immediate 10% and 20% adverse changes are as follows:
IMPACT ON FAIR VALUE
BASED ON ADVERSE
---------------------
ASSUMPTION 10% 20%
PERCENTAGE CHANGE CHANGE
---------- --------- ---------
Prepayment speed, annualized......................... 1.3% (3) (6)
Estimated net credit losses as a percentage of
receivables sold................................... 0.7% (31) (63)
Residual cash flow discount rate, annualized......... 12.0% (70) (138)
Interest rate on variable and adjustable notes....... 5.9% (38) (71)
These sensitivities are hypothetical and should be used with caution. The
effect of a variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption; in
reality, changes in one assumption may result in changes in another, which might
magnify or counteract the sensitivities.
F-53
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Actual and projected credit losses for receivables securitized were as
follows:
RECEIVABLES SECURITIZED IN
-----------------------------------------
ACTUAL AND PROJECTED CREDIT LOSSES PERCENTAGE AS OF: 1997 1998 1999 2000
- ---------------------------------------------------- -------- -------- -------- --------
December 31, 2000........................................... 3.0% 2.1% 1.1% 1.2%
December 31, 1999........................................... 2.7% 1.6% 1.0%
Static pool losses are calculated by summing the actual and projected future
credit losses and dividing them by the original balance of each pool of assets.
The amount shown above for each year is a weighted average for all
securitizations during that year and outstanding at December 31, 2000.
Certain cash flows received and paid to securitization trusts for the year
ended December 31, 2000:
Proceeds from new securitizations........................... 15,883
Proceeds from collections reinvested in previous wholesale
securitizations........................................... 46,285
Amounts reinvested in previous wholesale securitizations.... (46,122)
Servicing fees received..................................... 283
Receipt of cash flows on retained interest in securitized
receivables............................................... 435
The outstanding balance, delinquencies and net credit losses of sold
receivables and other receivables, of those financial services businesses that
sell receivables, as of and for the year ended December 31, 2000, were as
follows:
OUTSTANDING DELINQUENCIES NET CREDIT LOSSES
BALANCE AT >60 DAYS AT FOR THE YEAR ENDED
----------- ------------- ------------------
Retail receivables................... 46,377 232 576
Wholesale receivables................ 17,747 19 2
------- ---- ----
Total receivables managed............ 64,124 251 578
------- ---- ----
Less: receivables sold............... (37,904) (117) (251)
------- ---- ----
Receivables held in portfolio........ 26,220 134 327
======= ==== ====
During the year ended December 31, 2000, DaimlerChrysler sold [EURO]17,122
and [EURO]38,778 retail and wholesale receivables, respectively. From these
transactions, the Group recognized gains of [EURO]181 and [EURO]156 on sales of
retail and wholesale receivables, respectively.
Significant assumptions used in measuring the residual interest resulting
from the sale of retail and wholesale receivables, were as follows (weighted
average rates for securitizations completed during the year) for the year ended
December 31, 2000:
RETAIL WHOLESALE
-------- ---------
Prepayment speed assumption (annual rate)................ 1.0-1.5% *
Estimated remaining lifetime net credit losses (an
average percentage of sold receivables)................ 1.2% 0.0%
Residual cash flows discount rate (annual rate).......... 12.0% 10.0%
- ------------------------
* For the calculation of wholesale gains, the Group estimated the average
wholesale loan liquidated in 210 days.
F-54
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
33. SEGMENT REPORTING
Information with respect to the Group's industry segments follows:
MERCEDES-BENZ PASSENGER CARS & SMART. This segment includes activities
related mainly to the development, manufacture and sale of passenger cars and
off-road vehicles under the brand names Mercedes-Benz and smart as well as
related parts and accessories.
CHRYSLER GROUP. This segment includes the research, design, manufacture,
assembly and sale of cars and trucks under the brand names Chrysler, Plymouth,
Jeep-Registered Trademark- and Dodge and related automotive parts and
accessories.
COMMERCIAL VEHICLES. This segment is involved in the development,
manufacture 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 and Freightliner.
SERVICES. The activities in this segment extend to the marketing of
services related to financial services (principally retail and lease financing
for vehicles and dealer financing), insurance brokerage, trading, information
technology and telecommunications and media in 1998. In October 2000, the
information technology activities were contributed into a joint venture. The
Group's 49.9% interest in dSH is included at equity subsequent to that date.
AEROSPACE. The Aerospace segment is comprised of the continuing activities
of the MTU Aero Engines business unit and, through July 10, 2000, the date that
the Group's controlling interest in DaimlerChrysler Aerospace was exchanged for
shares in EADS (see Note 11), the activities of the aerospace business.
Subsequent to that date, the Group's 33% interest in EADS is accounted for using
the equity method. In 1999 and 1998, this division comprised the development,
manufacture and sale of commercial and military aircraft and helicopters,
satellites and related space transportation systems, defense-related products,
including radar and radio systems, and propulsion systems.
OTHER. Represents principally the directly managed businesses including the
Group's share in MMC, rail systems (including 50% interest in Adtranz in 1998),
automotive electronics and MTU/Diesel Engines. Other also contains corporate
research, real estate activities and holding and financing companies.
The Group's management reporting and controlling systems are substantially
the same as those described in the summary of significant accounting policies
(U.S. GAAP). The Group measures the performance of its operating segments
through "Operating Profit." Segment Operating Profit is defined as income before
financial income included in the consolidated statement of income, modified to
exclude certain pension and postretirement benefit costs, to include certain
financial income, net and to include or exclude certain miscellaneous items,
principally representing merger costs in 1998. The pre-tax gains on the sales of
shares in debitel of [EURO]1,140 (see Note 11) have been included in the
measurement of the Services segment operating profit in 1999 since such amounts
were included in the Group's measurement of the segment's performance. In 2000,
in particular gains of [EURO]3,303 on the exchange of the Group's controlling
interest in DaimlerChrysler Aerospace for shares of EADS and of [EURO]2,315 on
the transaction involving debis Systemhaus were included in the Aerospace
segment and the Services segment, respectively (see Note 11).
Sales and revenues related to transactions between segments are generally
recorded at values that approximate third-party selling prices.
Revenues are allocated to countries based on the location of the customer;
long-term assets, according to the location of the respective units.
Capital expenditures represent the purchase of property, plant and
equipment.
F-55
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Segment information as of and for the years ended December 31, 2000, 1999
and 1998 follows:
MERCEDES
BENZ
PASSENGER
CARS CHRYSLER COMMERCIAL AERO- ELIMI- CONSOLI-
& SMART GROUP VEHICLES SERVICES SPACE OTHER NATIONS DATED
--------- -------- ----------- -------- -------- -------- -------- --------
2000
Revenues.............................. 40,822 67,405 27,621 15,322 5,368 5,846 -- 162,384
Intersegment sales.................... 2,878 967 1,197 2,204 19 416 (7,681) --
------- ------- ------- ------- ------- ------- -------- --------
Total revenues........................ 43,700 68,372 28,818 17,526 5,387 6,262 (7,681) 162,384
Operating Profit (Loss)............... 2,145 501 1,110 2,457 3,754 (62) (153) 9,752
Identifiable segment assets........... 19,355 53,660 14,826 94,369 8,435 26,916 (18,287) 199,274
Capital expenditures.................. 2,096 6,339 1,091 282 229 355 -- 10,392
Depreciation and amortization......... 2,038 3,878 809 6,603 166 297 (204) 13,587
1999
Revenues.............................. 35,592 63,666 25,480 10,662 9,144 5,441 -- 149,985
Intersegment sales.................... 2,508 419 1,215 2,270 47 411 (6,870) --
------- ------- ------- ------- ------- ------- -------- --------
Total revenues........................ 38,100 64,085 26,695 12,932 9,191 5,852 (6,870) 149,985
Operating Profit (Loss)............... 2,703 5,051 1,067 2,039 730 (399) (179) 11,012
Identifiable segment assets........... 17,611 49,825 11,549 77,266 11,934 26,970 (20,488) 174,667
Capital expenditures.................. 2,228 5,224 770 324 336 589 (1) 9,470
Depreciation and amortization......... 1,580 3,346 677 3,348 290 275 (187) 9,329
1998
Revenues.............................. 30,859 56,350 22,374 10,371 8,722 3,106 -- 131,782
Intersegment sales.................... 1,728 62 788 1,039 48 420 (4,085) --
------- ------- ------- ------- ------- ------- -------- --------
Total revenues........................ 32,587 56,412 23,162 11,410 8,770 3,526 (4,085) 131,782
Operating Profit (Loss)............... 1,993 4,255 946 985 623 (130) (79) 8,593
Identifiable segment assets........... 17,098 38,121 11,936 49,625 12,970 20,055 (13,656) 136,149
Capital expenditures.................. 1,995 3,920 832 285 326 797 -- 8,155
Depreciation and amortization......... 1,310 2,837 692 2,038 289 293 (168) 7,291
Capital expenditures for equipment on operating leases for 2000, 1999 and
1998 for the Services segment amounted to [EURO]15,551, [EURO]16,401 and
[EURO]7,707, respectively.
For the year ended December 31, 2000, Operating Profit (Loss) of the
Services segment, the Aerospace segment and Other includes [EURO]l, [EURO]2 and
[EURO](46) from significant companies accounted for under the equity method,
representing the Group's percentage share of those companies' Operating Profit
(see Note 4). At December 31, 2000, the identifiable assets of the Services
segment, the Aerospace segment and Other segment include investments in
significant equity method investees of [EURO]2,152, [EURO]3,286 and [EURO]1,857,
respectively.
F-56
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
A reconciliation to Operating Profit follows:
2000 1999 1998
-------- -------- --------
Income before financial income.............................. 4,320 9,324 7,330
Pension and postretirement benefit expenses other than
service cost............................................ (281) 379 688
Operating income from affiliated, associated and related
companies............................................... (35) 17 (15)
Gains on disposals of businesses.......................... 5,832 1,140 --
Miscellaneous............................................. (84) 152 590
----- ------ -----
Consolidated operating profit............................... 9,752 11,012 8,593
===== ====== =====
Revenues from external customers presented by geographic region are as
follows:
OTHER
EUROPEAN AMERICAS OTHER CONSOLI-
GERMANY UNION* U.S. COUNTRIES ASIA COUNTRIES DATED
-------- -------- -------- --------- -------- --------- --------
2000................... 25,988 24,360 84,503 14,762 5,892 6,879 162,384
1999................... 28,393 21,567 78,104 11,727 4,796 5,398 149,985
1998................... 24,918 20,072 65,300 11,519 4,311 5,662 131,782
- ------------------------
* Excluding Germany.
Germany accounts for [EURO]17,450 of long-term assets (1999: [EURO]14,711;
1998: [EURO]12,953), the U.S. for [EURO]51,996 (1999: [EURO]43,036; 1998:
[EURO]25,344) and other countries for [EURO]19,633 (1999: [EURO]12,701; 1998:
[EURO]11,309).
34. EARNINGS PER SHARE
The computation of basic and diluted earnings per share for "Income before
extraordinary items and cumulative effects of changes in accounting principles"
is as follows (in millions of [EURO] or millions of shares, except earnings per
share):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Income before extraordinary items and cumulative effects of
changes in accounting principles--basic.................. 2,465 5,106 4,949
======= ======= =====
Interest expense on convertible bonds and notes (net of
tax).................................................... 18 18 20
------- ------- -----
Income before extraordinary items and cumulative effects of
changes in accounting principles--diluted................ 2,483 5,124 4,969
======= ======= =====
Weighted average number of shares outstanding--basic....... 1,003.2 1,002.9 959.3
======= ======= =====
Dilutive effect of convertible bonds and notes........... 10.7 10.7 19.8
Shares issued on exercise of dilutive options............ -- -- 18.3
Shares purchased with proceeds of options................ -- -- (11.8)
Shares applicable to convertible preferred stock......... -- -- 0.2
Shares contingently issuable............................. -- -- 1.3
------- ------- -----
Weighted average number of shares outstanding--diluted..... 1,013.9 1,013.6 987.1
======= ======= =====
Earnings per share before extraordinary items and
cumulative effects of changes in accounting principles
Basic.................................................... 2.46 5.09 5.16
======= ======= =====
Diluted.................................................. 2.45 5.06 5.04
======= ======= =====
F-57
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
Options issued in connection with the 2000 Stock Option Plan were not
included in the computation of diluted earnings per share because the options'
underlying exercise price was greater than the average market price for
DaimlerChrysler Ordinary Shares on December 31, 2000.
An income tax charge of [EURO]263 and [EURO]812 relating to changes in
German tax laws was included in the consolidated statement of income for the
years ended December 31, 2000 and 1999, respectively, and resulted in a
reduction of basic and diluted earnings per share of [EURO]0.26 and [EURO]0.26
in 2000 and [EURO]0.81 and [EURO]0.80 in 1999, respectively (see Note 9). In
1998, merger costs of [EURO]401 (net of tax) impacted basic and diluted earnings
per share by a decrease of [EURO]0.42 and [EURO]0.41.
In 1998, convertible bonds issued in connection with the 1998 Stock Option
Plan were not included in the computation of diluted earnings per share because
the options' underlying target stock price was greater than the market price for
DaimlerChrysler Ordinary Shares on December 31, 1998.
35. PENDING TRANSACTION
In August 2000, DaimlerChrysler signed a sale and purchase agreement with
the Canadian company Bombardier Inc. for the acquisition of DaimlerChrysler Rail
Systems GmbH ("Adtranz"), for cash consideration. According to the sale and
purchase agreement, the purchase price of $725 is subject to adjustments to
reflect the proceeds from potential disposals of Adtranz' fixed installations
and signaling businesses and adjustments based on the financial performance of
Adtranz through the closing date of the transaction. The sale of Adtranz to
Bombardier is still subject to appropriate regulatory approval by the European
Commission.
36. SUBSEQUENT EVENTS
In January 2001, DaimlerChrysler decided to restructure the operations of
the Chrysler Group. During January, discussions were held with Chrysler's
unions, suppliers and certain of its business partners. The results were
announced on January 29, 2001. DaimlerChrysler expects to reduce the segment's
workforce by approximately 26,000 people through a combination of retirements,
special programs, layoffs and attrition. In addition, management intends to idle
six manufacturing plants over the next two years and to reduce shifts and line
speeds at other facilities. When the detailed restructuring plan is sufficiently
determined, management intends to make a formal announcement and recognize the
related charges in the Group's consolidated financial statements.
On January 18, 2001, the Group issued five separate tranches of euro, Pound
Sterling and US dollars denominated notes bearing interest at rates ranging
between 6.0% and 8.5% with maturity dates between 2004 and 2031 for net proceeds
of approximately [EURO]7,500.
In January 2001, the Group sold its remaining 10% interest in debitel AG to
Swisscom for proceeds of approximately [EURO]300.
37. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
DaimlerChrysler AG, the parent company of the Group, fully and
unconditionally guarantees certain publicly issued debt of its 100% owned
subsidiary DaimlerChrysler North America Holding Corporation. The following
condensed consolidating financial information for DaimlerChrysler AG,
DaimlerChrysler North America Holding Corporation and all other subsidiaries on
a combined basis set forth below is intended to provide investors with
meaningful and comparable financial information about DaimlerChrysler AG and its
subsidiary issuer. Investments and long-term financial assets includes the
investments in consolidated subsidiaries recorded under the equity method for
purposes of the condensed consolidating financial information. Financial income,
net includes the income or loss related to such investments.
F-58
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
DAIMLERCHRYSLER OTHER
2000 DAIMLERCHRYSLER AG NORTH AMERICA SUBSIDIARIES CONSOLIDATING DAIMLERCHRYSLER AG
(IN MILLIONS OF [EURO]) (PARENT COMPANY) HOLDING CORPORATION (COMBINED) ADJUSTMENTS (CONSOLIDATED)
- --------------------------------- ------------------ ------------------- ------------ ------------- ------------------
ASSETS
Intangible assets............ 47 -- 3,066 -- 3,113
Property, plant and
equipment, net............. 5,504 -- 34,641 -- 40,145
Investments and long-term
financial assets........... 41,734 66,688 9,205 (105,520) 12,107
Equipment on operating
leases, net................ 2,832 -- 30,939 (57) 33,714
------- ------- -------- -------- --------
FIXED ASSETS................... 50,117 66,688 77,851 (105,577) 89,079
------- ------- -------- -------- --------
Inventories.................. 4,859 -- 12,052 (628) 16,283
Trade, finance and other
receivables................ 10,059 958 72,199 (12,152) 71,064
Securities................... 2,014 2 3,362 -- 5,378
Cash and cash equivalents.... 1,508 1,968 3,651 -- 7,127
------- ------- -------- -------- --------
NON-FIXED ASSETS............... 18,440 2,928 91,264 (12,780) 99,852
------- ------- -------- -------- --------
DEFERRED TAXES AND PREPAID
EXPENES...................... 2,367 13 12,355 (4,392) 10,343
------- ------- -------- -------- --------
TOTAL ASSETS................... 70,924 69,629 181,470 (122,749) 199,274
======= ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
STOCKHOLDERS' EQUITY........... 42,409 21,838 82,886 (104,724) 42,409
------- ------- -------- -------- --------
MINORITY INTERESTS............. -- -- 519 -- 519
------- ------- -------- -------- --------
ACCRUED LIABILITIES............ 7,368 654 28,663 (244) 36,441
------- ------- -------- -------- --------
Financial liabilities........ 12,402 46,534 36,874 (11,027) 84,783
Trade liabilities............ 4,160 -- 11,097 -- 15,257
Other liabilities............ 1,570 603 9,441 (1,993) 9,621
------- ------- -------- -------- --------
LIABILITIES.................... 18,132 47,137 57,412 (13,020) 109,661
------- ------- -------- -------- --------
DEFERRED TAXES AND DEFERRED
INCOME....................... 3,015 -- 11,990 (4,761) 10,244
------- ------- -------- -------- --------
TOTAL LIABILITIES.............. 28,515 47,791 98,584 (18,025) 156,865
------- ------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY......... 70,924 69,629 181,470 (122,749) 199,274
======= ======= ======== ======== ========
Revenues....................... 50,946 -- 147,457 (36,019) 162,384
Cost of sales.................. (39,954) -- (130,253) 35,399 (134,808)
------- ------- -------- -------- --------
GROSS MARGIN..................... 10,992 -- 17,204 (620) 27,576
Selling, administrative and
other expenses............... (6,002) (12) (12,551) 700 (17,865)
Research and development....... (2,728) -- (3,753) 144 (6,337)
Other income................... 404 -- 997 (455) 946
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE FINANCIAL
INCOME......................... 2,666 (12) 1,897 (231) 4,320
Financial income (expense),
net............................ 6,348 (153) 2,950 (8,989) 156
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES.......................... 9,014 (165) 4,847 (9,220) 4,476
Income taxes................... (1,141) 1,048 (2,000) 94 (1,999)
Minority interests............. -- -- (12) -- (12)
------- ------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING
PRINCIPLES..................... 7,853 883 2,835 (9,126) 2,465
Extraordinary items............ 14 -- 5,502 -- 5,516
Cumulative effects of changes
in accounting principles..... 7 (6) (88) -- (87)
------- ------- -------- -------- --------
NET INCOME....................... 7,894 877 8,249 (9,126) 7,894
======= ======= ======== ======== ========
F-59
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
DAIMLERCHRYSLER OTHER
2000 DAIMLERCHRYSLER AG NORTH AMERICA SUBSIDIARIES CONSOLIDATING DAIMLERCHRYSLER AG
(IN MILLIONS OF [EURO]) (PARENT COMPANY) HOLDING CORPORATION (COMBINED) ADJUSTMENTS (CONSOLIDATED)
- --------------------------------- ------------------ ------------------- ------------ ------------- ------------------
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES........... 7,370 (1,725) 12,726 (2,354) 16,017
------- ------- -------- -------- --------
Increase in equipment on
operating leases............. (2,120) -- (17,032) 35 (19,117)
Purchases of other fixed
assets....................... (2,267) -- (8,605) -- (10,872)
Proceeds from disposals of
equipment on operating
leases....................... 1,455 -- 6,830 -- 8,285
Proceeds from disposals of
other fixed assets........... 252 -- 610 -- 862
Payments for investments in
businesses................... (3,113) (3) (1,854) 87 (4,883)
Proceeds from disposals of
businesses................... 46 12 340 (87) 311
Increase in receivables from
financial services, net...... (142) -- (8,447) 7 (8,582)
Dispositions of securities
(other than trading), net.... 519 420 1,499 -- 2,438
Other.......................... (336) (11,367) (1,633) 12,185 (1,151)
------- ------- -------- -------- --------
CASH USED FOR INVESTING
ACTIVITIES..................... (5,706) (10,938) (28,292) 12,227 (32,709)
------- ------- -------- -------- --------
Change in financial
liabilities.................. 812 14,688 1,568 (201) 16,867
Dividends paid................. (2,358) (390) (2,968) 3,337 (2,379)
Other.......................... 24 -- 13,009 (13,009) 24
------- ------- -------- -------- --------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES........... (1,522) 14,298 11,609 (9,873) 14,512
------- ------- -------- -------- --------
Effect of foreign exchange rate
changes on cash................ -- 13 488 -- 501
------- ------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS......... 142 1,648 (3,469) -- (1,679)
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD......... 1,366 320 7,075 -- 8,761
------- ------- -------- -------- --------
AT END OF PERIOD............... 1,508 1,968 3,606 -- 7,082
======= ======= ======== ======== ========
F-60
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
DAIMLERCHRYSLER OTHER
1999 DAIMLERCHRYSLER AG NORTH AMERICA SUBSIDIARIES CONSOLIDATING DAIMLERCHRYSLER AG
(IN MILLIONS OF [EURO]) (PARENT COMPANY) HOLDING CORPORATION (COMBINED) ADJUSTMENTS (CONSOLIDATED)
- --------------------------------- ------------------ ------------------- ------------ ------------- ------------------
ASSETS
Intangible assets............ 37 9 2,777 -- 2,823
Property, plant and
equipment, net.............. 5,347 -- 31,087 -- 36,434
Investments and long-term
financial assets............ 31,871 48,679 2,468 (79,076) 3,942
Equipment on operating
leases, net................. 2,461 -- 24,829 (41) 27,249
------- ------- -------- -------- --------
FIXED ASSETS................... 39,716 48,688 61,161 (79,117) 70,448
------- ------- -------- -------- --------
Inventories.................. 4,306 -- 11,436 (757) 14,985
Trade, finance and other
receivables................. 9,970 264 64,908 (14,996) 60,146
Securities................... 3,539 417 5,013 -- 8,969
Cash and cash equivalents.... 1,659 320 7,120 -- 9,099
------- ------- -------- -------- --------
NON-FIXED ASSETS............... 19,474 1,001 88,477 (15,753) 93,199
------- ------- -------- -------- --------
DEFERRED TAXES AND PREPAID
EXPENES....................... 2,893 -- 11,712 (3,585) 11,020
------- ------- -------- -------- --------
TOTAL ASSETS................... 62,083 49,689 161,350 (98,455) 174,667
======= ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
STOCKHOLDERS' EQUITY........... 36,060 19,594 58,045 (77,639) 36,060
------- ------- -------- -------- --------
MINORITY INTERESTS............. -- -- 650 -- 650
------- ------- -------- -------- --------
ACCRUED LIABILITIES............ 7,668 -- 30,566 (539) 37,695
------- ------- -------- -------- --------
Financial liabilities........ 11,535 29,783 35,620 (12,450) 64,488
Trade liabilities............ 3,099 -- 12,687 -- 15,786
Other liabilities............ 1,423 200 13,928 (5,265) 10,286
------- ------- -------- -------- --------
LIABILITIES.................... 16,057 29,983 62,235 (17,715) 90,560
------- ------- -------- -------- --------
DEFERRED TAXES AND DEFERRED
INCOME........................ 2,298 112 9,854 (2,562) 9,702
------- ------- -------- -------- --------
TOTAL LIABILITIES.............. 26,023 30,095 103,305 (20,816) 138,607
------- ------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.......... 62,083 49,689 161,350 (98,455) 174,667
======= ======= ======== ======== ========
Revenues....................... 43,052 -- 135,124 (28,191) 149,985
Cost of sales.................. (34,713) -- (113,480) 28,111 (120,082)
------- ------- -------- -------- --------
GROSS MARGIN..................... 8,339 -- 21,644 (80) 29,903
Selling, administrative and
other expenses................ (5,599) (13) (10,802) 745 (15,669)
Research and development....... (2,563) -- (3,318) 144 (5,737)
Other income................... 657 -- 625 (455) 827
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE FINANCIAL
INCOME......................... 834 (13) 8,149 354 9,324
Financial income, net.......... 5,895 3,872 703 (10,137) 333
------- ------- -------- -------- --------
INCOME BEFORE INCOME TAXES....... 6,729 3,859 8,852 (9,783) 9,657
Income taxes................... (983) 328 (3,600) (278) (4,533)
Minority interests............. -- -- (18) -- (18)
------- ------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING
PRINCIPLES..................... 5,746 4,187 5,234 (10,061) 5,106
Extraordinary items............ -- -- 640 -- 640
Cumulative effects of changes
in accounting principles...... -- -- -- -- --
------- ------- -------- -------- --------
NET INCOME....................... 5,746 4,187 5,874 (10,061) 5,746
======= ======= ======== ======== ========
F-61
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
DAIMLERCHRYSLER OTHER
1999 DAIMLERCHRYSLER AG NORTH AMERICA SUBSIDIARIES CONSOLIDATING DAIMLERCHRYSLER AG
(IN MILLIONS OF [EURO]) (PARENT COMPANY) HOLDING CORPORATION (COMBINED) ADJUSTMENTS (CONSOLIDATED)
- --------------------------------- ------------------ ------------------- ------------ ------------- ------------------
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES........... 5,327 (152) 19,474 (6,626) 18,023
------- ------- -------- -------- --------
Increase in equipment on
operating leases.............. (2,219) -- (17,158) 41 (19,336)
Purchases of other fixed
assets........................ (1,901) -- (8,214) -- (10,115)
Proceeds from disposals of
equipment on operating
leases........................ 1,110 -- 5,492 (27) 6,575
Proceeds from disposals of
other fixed assets............ 178 -- 329 -- 507
Payments for investments in
businesses.................... (548) -- (800) 59 (1,289)
Proceeds from disposals of
businesses.................... 398 -- 997 (59) 1,336
Increase in receivables from
financial services, net....... 20 -- (8,396) 7 (8,369)
Dispositions (acquisitions) of
securities (other than
trading), net................. (834) (67) 225 -- (676)
Other.......................... 1,097 (17,811) (2,885) 18,856 (743)
------- ------- -------- -------- --------
CASH USED FOR INVESTING
ACTIVITIES..................... (2,699) (17,878) (30,410) 18,877 (32,110)
------- ------- -------- -------- --------
Change in financial
liabilities................... 239 18,350 (3,464) 2,937 18,062
Dividends paid................. (2,356) (94) (4,185) 4,257 (2,378)
Other.......................... 63 -- 19,460 (19,445) 78
------- ------- -------- -------- --------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES........... (2,054) 18,256 11,811 (12,251) 15,762
------- ------- -------- -------- --------
Effect of foreign exchange rate
changes on cash................ -- 25 780 -- 805
------- ------- -------- -------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS.................... 574 251 1,655 -- 2,480
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD......... 792 69 5,420 -- 6,281
------- ------- -------- -------- --------
AT END OF PERIOD............... 1,366 320 7,075 -- 8,761
======= ======= ======== ======== ========
F-62
DAIMLERCHRYSLER AG
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF [EURO], EXCEPT PER SHARE AMOUNTS)
DAIMLERCHRYSLER OTHER
1998 DAIMLERCHRYSLER AG NORTH AMERICA SUBSIDIARIES CONSOLIDATING DAIMLERCHRYSLER AG
(IN MILLIONS OF [EURO]) (PARENT COMPANY) HOLDING CORPORATION (COMBINED) ADJUSTMENTS (CONSOLIDATED)
- --------------------------------- ------------------ ------------------- ------------ ------------- ------------------
Revenues....................... 40,963 -- 116,683 (25,864) 131,782
Cost of sales.................. (32,494) -- (98,203) 25,394 (105,303)
------- ------- -------- -------- --------
GROSS MARGIN..................... 8,469 -- 18,480 (470) 26,479
Selling, administrative and
other expenses............... (5,295) (13) (10,645) 676 (15,277)*)
Research and development....... (2,463) -- (2,691) 183 (4,971)
Other income................... 521 -- 989 (411) 1,099
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE FINANCIAL
INCOME......................... 1,232 (13) 6,133 (22) 7,330
Financial income, net.......... 3,416 3,170 1,240 (7,063) 763
------- ------- -------- -------- --------
INCOME BEFORE INCOME TAXES....... 4,648 3,157 7,373 (7,085) 8,093
Income taxes................... 172 206 (3,056) (336) (3,014)
Minority interests............. -- -- (130) -- (130)
------- ------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING
PRINCIPLES..................... 4,820 3,363 4,187 (7,421) 4,949
Extraordinary items............ -- -- (129) -- (129)
Cumulative effects of changes
in accounting principles..... -- -- -- -- --
------- ------- -------- -------- --------
NET INCOME....................... 4,820 3,363 4,058 (7,421) 4,820
======= ======= ======== ======== ========
CASH PROVIDED BY OPERATING
ACTIVITIES................... 6,649 1,043 8,688 301 16,681
------- ------- -------- -------- --------
Increase in equipment on
operating leases............. (1,337) -- (8,924) 16 (10,245)
Purchases of other fixed
assets....................... (1,693) -- (6,767) -- (8,460)
Proceeds from disposals of
equipment on operating
leases....................... 778 -- 4,125 -- 4,903
Proceeds from disposals of
other fixed assets........... 485 -- 30 -- 515
Payments for investments in
businesses................... (125) -- (748) 16 (857)
Proceeds from disposals of
businesses................... 151 -- 550 (16) 685
Increase in receivables from
financial services, net...... (405) -- (6,060) 3 (6,462)
Acquisitions of securities
(other than trading), net.... (1,379) (263) (241) -- (1,883)
Other.......................... (3,238) (2,337) 1,879 2,055 (1,641)
------- ------- -------- -------- --------
CASH USED FOR INVESTING
ACTIVITIES................... (6,763) (2,600) (16,156) 2,074 (23,445)
------- ------- -------- -------- --------
Change in financial
liabilities.................. (571) 1,592 7,623 (776) 7,868
Dividends paid................. (5,707) (90) (1,760) 1,103 (6,454)
Other.......................... 5,394 -- 2,702 (2,702) 5,394
------- ------- -------- -------- --------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES......... (884) 1,502 8,565 (2,375) 6,808
------- ------- -------- -------- --------
Effect of foreign exchange rate
changes on cash.............. -- (31) (366) -- (397)
------- ------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS......... (998) (86) 731 -- (353)
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD......... 1,790 155 4,689 -- 6,634
------- ------- -------- -------- --------
AT END OF PERIOD............... 792 69 5,420 -- 6,281
======= ======= ======== ======== ========
- ----------------------------------
*) Including merger costs.
F-63
DAIMLERCHRYSLER AG
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(IN MILLIONS OF [EURO])
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AMOUNTS AT END
OF 2000 EXPENSES WRITTEN OFF OF 2000
---------- ---------- ----------- --------
Receivables from financial services................... 599 746 (455) 890
Trade receivables..................................... 798 (50) (37) 711
Other receivables..................................... 1,127 169 (339) 957
----- --- ---- -----
2,524 865 (831) 2,558
===== === ==== =====
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AMOUNTS AT END
OF 1999 EXPENSES WRITTEN OFF OF 1999
---------- ---------- ----------- --------
Receivables from financial services................... 364 510 (275) 599
Trade receivables..................................... 857 49 (108) 798
Other receivables..................................... 1,249 125 (247) 1,127
----- --- ---- -----
2,470 684 (630) 2,524
===== === ==== =====
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AMOUNTS AT END
OF 1998 EXPENSES WRITTEN OFF OF 1998
---------- ---------- ----------- --------
Receivables from financial services................... 401 452 (489) 364
Trade receivables..................................... 819 89 (51) 857
Other receivables..................................... 1,206 104 (61) 1,249
----- --- ---- -----
2,426 645 (601) 2,470
===== === ==== =====
S-1