<Page>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of October 2003
DAIMLERCHRYSLER AG
(Translation of registrant's name into English)
EPPLESTRASSE 225, 70567 STUTTGART, GERMANY
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.]
Form 20-F /X/ Form 40-F / /
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.]
Yes / / No /X/
[If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-______________]
----------------------------
This report on Form 6-K is hereby incorporated by reference in the registration
statement on Form F-3 of DaimlerChrysler North America Holding Corporation
(Registration Statement No. 333-13160) and the registration statements
on Form S-8 (Nos. 333-5074, 333-7082, 333-8998, 333-86934 and 333-86936)
of DaimlerChrysler AG
<Page>
DAIMLERCHRYSLER AG
FORM 6-K: TABLE OF CONTENTS
1. Interim Report to Stockholders for the three and nine month periods ended
September 30, 2003
<Page>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that reflect management's
current views with respect to future events. The words "anticipate," "assume,"
"believe," "estimate," "expect," "intend," "may," "plan," "project" and "should"
and similar expressions identify forward-looking statements. Such statements are
subject to risks and uncertainties, including, but not limited to: an economic
downturn in Europe or North America; changes in currency exchange rates and
interest rates; introduction of competing products; increased sales incentives;
and decline in resale prices of used vehicles. If any of these or other risks
and uncertainties occur (some of which are described under the heading "Risk
Factors" in DaimlerChrysler's most recent Annual Report on Form 20-F filed with
the Securities and Exchange Commission), or if the assumptions underlying any of
these statements prove incorrect, then actual results may be materially
different from those expressed or implied by such statements. We do not intend
or assume any obligation to update any forward-looking statement, which speaks
only as of the date on which it is made.
<Page>
1
<Page>
DAIMLERCHRYSLER
INTERIM REPORT
Q3 2003
<Page>
<Table>
3 | Business Review
5 | Mercedes Car Group
6 | Chrysler Group
7 | Commercial Vehicles
8 | Services
9 | Other Activities
11 | Analysis of the Financial Situation
16 | Consolidated Financial Statements
21 | Notes to Consolidated Financial Statements
35 | Financial Diary
</Table>
DAIMLERCHRYSLER
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- -----------------------------------------------------------------------------------------------
Amounts in millions US $(1) [EURO] [EURO] in %
- -----------------------------------------------------------------------------------------------
Revenues 40,294 34,587 36,338 -5(2)
- -----------------------------------------------------------------------------------------------
European Union 13,915 11,944 11,242 +6
- -----------------------------------------------------------------------------------------------
Germany 7,016 6,022 5,610 +7
- -----------------------------------------------------------------------------------------------
USA 19,133 16,423 19,334 -15
- -----------------------------------------------------------------------------------------------
Other markets 7,246 6,220 5,762 +8
- -----------------------------------------------------------------------------------------------
Employees (September 30) 375,213 370,385 +1
- -----------------------------------------------------------------------------------------------
Research and development costs 1,539 1,321 1,365 -3
- -----------------------------------------------------------------------------------------------
Investment in property, plant and equipment 1,856 1,593 1,472 +8
- -----------------------------------------------------------------------------------------------
Cash provided by operating activities 4,886 4,194 4,125 +2
- -----------------------------------------------------------------------------------------------
Operating profit 1,452 1,246 1,539 -19
- -----------------------------------------------------------------------------------------------
Net income (1,926) (1,653) 780 .
- -----------------------------------------------------------------------------------------------
per share (in US $/[EURO]) (1.90) (1.63) 0.77 .
- -----------------------------------------------------------------------------------------------
</Table>
(1) Rate of exchange: [EURO] l = US $1.1650 (based on the noon buying rate on
September 30, 2003).
(2) A 3% increase after adjusting for effects of currency translation.
<Table>
<Caption>
REVENUES OPERATING NET INCOME (LOSS) EARNINGS (LOSS)
In billions of [EURO] PROFIT (LOSS) In billions of [EURO] PER SHARE
In billions of [EURO] In [EURO]
2002 2003 2002 2003 2002 2003 2002 2003
- -----------------------------------------------------------------------------------------------
Q1 36.907 33.697 3.080 1.403 2.503 0.588 2.49 0.58
Q2 39.337 34.328 1.682 0.641 1.108 0.109 1.10 0.11
Q3 36.338 34.587 1.539 1.246 0.780 (1.653) 0.77 (1.63)
Q4 37.001 - 0.553 - 0.327 - 0.32 -
</Table>
DAIMLERCHRYSLER
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- -----------------------------------------------------------------------------------------------
Amounts in millions US $(1) [EURO] [EURO] in %
- -----------------------------------------------------------------------------------------------
Revenues 119,543 102,612 112,582 -9(2)
- -----------------------------------------------------------------------------------------------
European Union 41,648 35,749 34,385 +4
- -----------------------------------------------------------------------------------------------
Germany 20,598 17,681 16,590 +7
- -----------------------------------------------------------------------------------------------
USA 56,746 48,709 59,665 -18
- -----------------------------------------------------------------------------------------------
Other markets 21,149 18,154 18,532 -2
- -----------------------------------------------------------------------------------------------
Employees (September 30) 375,213 370,385 +1
- -----------------------------------------------------------------------------------------------
Research and development costs 4,964 4,261 4,226 +1
- -----------------------------------------------------------------------------------------------
Investment in property, plant and equipment 5,484 4,707 4,889 -4
- -----------------------------------------------------------------------------------------------
Cash provided by operating activities 16,443 14,114 14,073 +0
- -----------------------------------------------------------------------------------------------
Operating profit 3,833 3,290 6,301 -48
- -----------------------------------------------------------------------------------------------
Net income (1,114) (956) 4,391 .
- -----------------------------------------------------------------------------------------------
per share (in US $/[EURO]) (1.10) (0.94) 4.36 .
- -----------------------------------------------------------------------------------------------
</Table>
(1) Rate of exchange: [EURO] l = US $1.1650 (based on the noon buying rate on
September 30, 2003).
(2) A 3% increase after adjusting for effects of currency translation.
<Page>
Interim Report Q3 2003 | 3
BUSINESS REVIEW
DAIMLERCHRYSLER ACHIEVES GROUP OPERATING PROFIT OF [EURO] 1.25 BILLION IN THE
THIRD QUARTER OF 2003 (Q3 2002: [EURO] 1.54 BILLION)
- - Q3 REVENUES OF [EURO] 34.6 BILLION (Q3 2002: [EURO] 36.3 BILLION)
- - MERCEDES CAR GROUP INCREASES MARKET SHARE, OPERATING PROFIT REMAINS AT A HIGH
LEVEL ([EURO] 0.8 BILLION)
- - CHRYSLER GROUP RETURNS TO A POSITIVE OPERATING RESULT ([EURO] 0.1 BILLION)
- - CONTINUED POSITIVE PROFIT TREND AT COMMERCIAL VEHICLES ([EURO] 0.2 BILLION)
- - SERVICES DIVISION AGAIN POSTS A STRONG OPERATING PROFIT IN THE THIRD QUARTER
([EURO] 0.3 BILLION)
- - FULL-YEAR 2003: DAIMLERCHRYSLER STILL AIMS TO ACHIEVE A GROUP OPERATING
PROFIT FROM ITS ONGOING BUSINESS OF ABOUT [EURO] 5 BILLION, HOWEVER,
SIGNIFICANT MARKET RISKS REMAIN
Note: Starting with reporting for the year 2003, DaimlerChrysler has departed
from its previous practice of presenting earnings with and without one-time
effects; in the future only one figure will be reported for operating profit,
net income and earnings per share.
In order to ensure comparability with the prior year's figures, a reference
is made to the one-time effects included in the respective prior-year
quarters.
With this procedure, DaimlerChrysler is following the new rules adopted by
the US Securities and Exchange Commission (SEC), which must be applied for
the 2003 financial year and which deal with reporting of "one-time effects"
much more restrictively.
NO GROWTH STIMULUS FOR WORLD ECONOMY OR AUTOMOBILE MARKETS
- - Prospects for the global economy improved slightly during the third quarter
of 2003, but this has not yet had any impact on our markets. Economic
growth is still weak, particularly in the European Union.
- - During the third quarter, while unit sales of automobiles in the increasingly
competitive US market were only slightly lower than in Q3 2002, demand fell
significantly in most countries of Western Europe. However, demand from
automobile markets in Asia was generally strong.
OPERATING PROFIT OF [EURO] 1.2 BILLION
- - DaimlerChrysler achieved an operating profit of [EURO] 1.2 billion for the
third quarter (Q3 2002: [EURO] 1.5 billion) despite very challenging markets.
Operating profit for the third quarter of 2002 included expense for
special items of [EURO] 161 million.
- - The Mercedes Car Group division achieved an operating profit of [EURO] 793
million, equaling the result of the prior-year quarter despite a difficult
market environment and continued expenditures to prepare for the second
product offensive.
- - Chrysler Group returned to an operating profit of [EURO] 147 million
(Q3 2002: [EURO] 305 million) after an operating loss in the second quarter.
The result for the third quarter of this year includes restructuring
expenditures of [EURO] 37 million related to the turnaround plan of 2001.
The improvement over the second quarter is primarily due to the successful
implementation of additional cost-reduction programs and lower increases in
customer incentives than had originally been anticipated. However, earnings
were lower than in the third quarter of last year due to lower shipments to
dealers and the increased incentives.
- - The Commercial Vehicles division achieved a strong increase in third-quarter
operating profit, which rose from [EURO] 115 million to [EURO] 237 million.
This was partly due to the higher unit sales, but primarily a result of the
implementation of the efficiency-improving programs which were initiated in
the last few years in all business units.
- - The Services division increased its operating profit from [EURO] 170 million
to [EURO] 284 million. The result of the prior-year quarter included
special charges for risk provisions of [EURO] 113 million. Operating profit
for the third quarter of 2003 remained at a high level as a result of
improving margins and lower funding costs.
- - The Other Activities segment, which mainly consists of the MTU Aero Engines
business unit and our holdings in Mitsubishi Motors (MMC) and EADS, reported
an operating loss of [EURO] 143 million (Q3 2002: operating profit of [EURO]
207 million), due in particular to the negative contribution from MMC.
- - Net loss for the third quarter amounted to [EURO] 1.7 billion (Q3 2002:
[EURO] 0.8 billion income). The negative value is decisively influenced by
the impairment charge of [EURO] 2.0 billion relating to our holding in EADS
which was made in accordance with the requirements of US GAAP and the SEC.
Operating profit and cash flow are not affected by this charge. There was a
net loss per share of [EURO] 1.63 (Q3 2002: earnings per share of [EURO]
0.77)
1.1 MILLION VEHICLES SOLD WORLDWIDE
- - Despite the difficult automobile markets, particularly in North America and
Western Europe, DaimlerChrysler sold a total of 1.1 million vehicles during
the third quarter of this year (Q3 2002: 1.1 million).
- - The Mercedes Car Group performed well in this environment, achieving an
increased share of many markets and unit sales similar to last year's level.
While the Mercedes-Benz brand nearly equaled the prior-year figure (-2%),
smart actually increased its unit sales by 4%.
- - Chrysler Group shipped 629,000 passenger cars and light trucks to its dealers
in the third quarter (-3%). While there was strong demand for the Dodge
pickup trucks, unit sales of other models decreased, especially in the area
of minivans.
- - The Commercial Vehicles division increased its unit sales by 2% to 123,200
vehicles. Growth in the business units of Mercedes-Benz Trucks (+14%),
Freightliner/Sterling/Thomas Built Buses (+5%) and
<Page>
4 | Interim Report Q3 2003
DaimlerChrysler Buses & Coaches (+31%) were partially offset by a decrease
in the Vans business unit (-8%) due to the difficult situation in Western
Europe and postponed purchases in anticipation of the market launch of the
new Vito/Viano van family.
- - Third-quarter Group revenues of [EURO] 34.6 billion were not as high as for
the third quarter of last year (-5%) because of the appreciation of the euro
against the US dollar and the lower unit sales. Adjusted to exclude
currency-translation effects, revenues increased by 3%.
SLIGHT INCREASE IN SIZE OF WORKFORCE
- - At the end of the third quarter of 2003, DaimlerChrysler employed 375,200
people worldwide (end of Q3 2002: 370,400 people).
- - Compared with September 30, 2002, the size of the workforce increased
slightly in the divisions Mercedes Car Group (+2%), Commercial Vehicles
(+1%), and Services (+3%). The number of employees at Chrysler Group
decreased by 3% to 94,600 persons, primarily due to the implementation of
measures designed to cut costs and improve efficiency. The number of people
employed in the sales organization for Mercedes-Benz passenger cars and
commercial vehicles increased sharply to 45,300 (+10%), mainly due to the
acquisition of dealerships within the framework of the Metropolitan Strategy.
OUTLOOK
- - We anticipate a gradual recovery of the global economy during the fourth
quarter of 2003. A sustained and substantial revival of domestic consumption,
and especially investment, cannot be expected before 2004, however. This
should also then provide stimulus for the automotive industry.
- - For full-year 2003, the Mercedes Car Group still aims to attain revenues and
operating profit similar to the very good levels of the previous year. Given
the difficult market situation, unit sales are likely to be slightly lower
than last year, but increased market share will be achieved particularly in
the competitive classes, in some cases of a substantial magnitude.
- - Chrysler Group anticipates a continuation of intense competitive pressure and
high customer incentives in the US automobile market during the remainder of
2003 as well as in 2004. This year the total market is expected to reach a
volume of 16.9 million vehicles. This volume, however, reflects these
continuing incentive levels rather than a stabilization of economic
conditions. For the year as a whole Chrysler Group is still striving to
achieve a slightly positive operating profit on an ongoing basis. However,
there are substantial risks due to the competitive environment in the U.S.
The planned launch of nine new vehicles in 2004 will provide a positive
perspective.
Share Price Index
(as of December 30, 2002)
<Table>
<Caption>
DaimlerChrysler DAX DJ Auto
Index
December 30, 2002 100 100 100
January 2, 2003 109 107 107
January 15, 2003 99 105 101
February 3, 2003 100 95 100
February 17, 2003 97 94 95
March 3, 2003 97 88 95
March 17, 2003 91 86 87
April 1, 2003 91 85 85
April 16, 2003 100 100 96
May 2, 2003 99 103 98
May 15, 2003 94 103 95
June 2, 2003 93 106 95
June 16, 2003 98 113 101
July 1, 2003 101 109 103
July 15, 2003 110 118 110
August 1, 2003 107 119 108
August 15, 2003 113 119 113
September 1, 2003 122 123 121
September 15, 2003 114 122 117
October 1, 2003 105 115 110
October 15, 2003 110 123 116
</Table>
- - The Commercial Vehicles division expects no revival of overall demand in its
most important markets before the end of the year. However, with our
efficiency-improving programs and the new attractive product range, we have
laid a solid foundation for a continued positive earnings trend. For
full-year 2003, we expect operating profit to be significantly higher than
in 2002.
- - As a result of the positive business trend during 2003, the Services
division anticipates a significant increase in operating profit from ongoing
business compared with the prior year.
- - Based on the plans of our associated companies, MMC and EADS, and of our MTU
Aero Engines business unit, we expect the Other Activities segment to make a
smaller contribution to DaimlerChrysler's operating profit than it did last
year.
- - EADS anticipates in its financial year revenues and operating profit at
similar levels to the prior year. The company thus has unchanged targets
for the current financial year.
- - MMC assumes that the sales situation in Japan and the United States will
remain difficult. As a result of lower unit sales and significant sales
incentives in the United States, as well as impairment charges relating to
the US financial-services business, MMC revised its profit expectations
for the current financial year in July 2003. Earnings will be significantly
lower than in the prior year.
- - As a result of the appreciation of the euro against the US dollar and lower
unit sales, DaimlerChrysler expects total revenues in 2003 of approximately
[EURO] 138 billion, below the prior year's figure of [EURO] 149.6 billion.
- - DaimlerChrysler still aims to achieve a Group operating profit from ongoing
businesses of about [EURO] 5 billion for 2003. However, significant market
risks remain.
<Page>
Interim Report Q3 2003 | 5
MERCEDES CAR GROUP
- - THIRD-QUARTER OPERATING PROFIT AT LAST YEAR'S LEVEL, DESPITE SUBSTANTIAL
EXPENDITURE ON NEW PRODUCTS
- - UNIT SALES ALMOST UNCHANGED IN A DIFFICULT MARKET, INCREASED MARKET SHARES
- - REVENUES UP AGAIN, BY 4% TO [EURO] 12.7 BILLION
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- -----------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- -----------------------------------------------------------------
Operating profit 924 793 792 +0
- -----------------------------------------------------------------
Revenues 14,844 12,742 12,260 +4
- -----------------------------------------------------------------
Unit sales 305,443 310,927 -2
- -----------------------------------------------------------------
Production 298,324 317,229 -6
- -----------------------------------------------------------------
Employees (September 30) 105,380 103,406 +2
- -----------------------------------------------------------------
</Table>
UNIT SALES
<Table>
<Caption>
Q3 03 Q3 02 Change
- -----------------------------------------------------------
in %
- -----------------------------------------------------------
Total 305,443 310,927 -2
- -----------------------------------------------------------
Western Europe 208,231 213,820 -3
- -----------------------------------------------------------
Germany 103,574 112,741 -8
- -----------------------------------------------------------
United States 50,142 47,606 +5
- -----------------------------------------------------------
Japan 11,249 13,252 -15
- -----------------------------------------------------------
Other markets 35,821 36,249 -1
</Table>
UNIT SALES, REVENUES AND EARNINGS REMAIN AT HIGH LEVELS
- - The Mercedes Car Group's unit sales of 305,400 vehicles in the third quarter
of this year were only slightly lower than the very high level of Q3 2002 - a
strong performance considering the difficult market conditions. Due to a
higher-value model mix, revenues climbed 4% to [EURO] 12.7 billion.
- - In a difficult market environment and despite expenditures incurred in the
run-up to the second Mercedes-Benz model offensive and for the smart forfour,
the division's third-quarter operating profit of [EURO] 793 million was at
the same level as last year.
MERCEDES-BENZ STRENGTHENS ITS MARKET POSITION
- - Conditions in the major passenger-car markets once again worsened during the
third quarter. As a result, Mercedes-Benz sold 273,900 units, not quite
equaling the figure for the third quarter of last year (-2%). However, with
its attractive model range Mercedes-Benz succeeded in increasing its market
share in many markets and further improved its position in the premium
segment worldwide.
- - Unit sales of the E-Class, the CLK coupe and the CLK convertible increased
significantly, and the ongoing success of the S-Class is particularly
positive in view of the tough competition in this segment. Unit sales of the
M-Class, A-Class and C-Class decreased for lifecycle reasons. Since their
respective launches, more than one million A-Class cars have been produced
and 500,000 M-Class vehicles have been sold.
- - Unit sales by the Mercedes-Benz brand in the United States rose by 5%, and
despite generally weak demand in Europe, unit sales also increased in the
United Kingdom (+15%), Italy (+7%) and Spain (+22%). Prior-year levels were
not equaled in Germany (-9%) and Japan (-9%).
- - At the Frankfurt Motor Show in September, we presented the Mercedes-Benz
SLR McLaren super-sports car and the Vision CLS, a four-door coupe concept.
The response to these models as well as to the entire range of vehicles we
presented was extremely positive.
GREAT INTEREST IN NEW SMART MODELS
- - The smart brand once again achieved increased unit sales in the third quarter
(31,500 vehicles, +4%). In particular, smart achieved significant growth in
the United Kingdom (4,200 units, +103%) and France (2,700 units, +42%).
Demand for the smart roadster and roadster-coupe, which were introduced in
April, was particularly positive: 7,500 of these models were sold in the
third quarter.
- - To great public acclaim we also presented the new smart model range, smart
forfour, at the Frankfurt Motor Show. To be launched in April 2004, this car
will set new standards in the mini-car segment with its typical smart design
features and its high standards of safety and comfort.
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- -----------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- -----------------------------------------------------------------
Operating profit 2,728 2,342 2,290 +2
- -----------------------------------------------------------------
Revenues 44,721 38,387 37,263 +3
- -----------------------------------------------------------------
Unit sales 914,573 932,359 -2
- -----------------------------------------------------------------
Production 931,509 950,067 -2
- -----------------------------------------------------------------
Employees (September 30) 105,380 103,406 +2
- -----------------------------------------------------------------
</Table>
UNIT SALES
<Table>
<Caption>
Q1-3 03 Q1-3 02 Change
- --------------------------------------------------------
in %
- --------------------------------------------------------
Total 914,573 932,359 -2
- --------------------------------------------------------
Western Europe 619,637 645,544 -4
- --------------------------------------------------------
Germany 294,667 320,453 -8
- --------------------------------------------------------
United States 158,775 153,105 +4
- --------------------------------------------------------
Japan 32,355 34,928 -7
- --------------------------------------------------------
Other markets 103,806 98,782 +5
- --------------------------------------------------------
</Table>
<Page>
6 | Interim Report Q3 2003
Chrysler Group
- - OPERATING RESULT POSITIVE AGAIN AT [EURO] 147 MILLION; SIGNIFICANTLY BETTER
THAN Q2 2003
- - HIGHER FLEXIBILITY DUE TO NEW AGREEMENT WITH UNITED AUTO WORKERS LABOR UNION
- - SUCCESSFUL PRODUCTION START OF THE NEW DODGE DURANGO
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- ---------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- ---------------------------------------------------------------
Operating profit 171 147 305 -52
- ---------------------------------------------------------------
Revenues 14,558 12,496 14,294 -13
- ---------------------------------------------------------------
Unit sales (shipments) 628,965 650,453 -3
- ---------------------------------------------------------------
Production 597,578 639,166 -7
- ---------------------------------------------------------------
Employees (September 30) 94,571 97,445 -3
- ---------------------------------------------------------------
</Table>
UNIT SALES
<Table>
<Caption>
Q3 03 Q3 02 Change
- -------------------------------------------------------------
in %
- -------------------------------------------------------------
Total 628,965 650,453 -3
- -------------------------------------------------------------
NAFTA 586,043 617,884 -5
- -------------------------------------------------------------
United States 517,435 554,205 -7
- -------------------------------------------------------------
Other markets 42,922 32,569 +32
- -------------------------------------------------------------
</Table>
SIGNIFICANT EARNINGS IMPROVEMENT IN THIRD QUARTER
- - Worldwide retail sales by Chrysler Group decreased to 630,400 vehicles in the
third quarter (Q3 2002: 681,600 vehicles). The decrease was primarily due to
lower sales of Dodge and Chrysler cars and minivans in the United States
(-17%), although this was partially offset by a significant increase in sales
of Dodge Ram pickups (+7%). The new Chrysler Pacifica is gaining increasing
market acceptance, posting sales of 21,900 units in the third quarter, and
the new Chrysler Crossfire has had a very positive reception since deliveries
started in June: 2,200 units have been sold in the United States so far.
Market share in the United States decreased from 12.4% to 11.4% in the third
quarter.
- - Chrysler Group shipped 629,000 vehicles to dealers in the third quarter, a
slight decrease compared with Q3 2002 (-3%). At the end of the period,
dealers' inventories in the United States totaled 528,300 vehicles (end of Q3
2002: 492,200 vehicles), equivalent to 86 days supply (end of Q3 2002:68
days).
- - Chrysler Group's revenues amounted to [EURO] 12.5 billion (Q3 2002: [EURO]
14.3 billion), reflecting the appreciation of the euro against the US
dollar. Measured in US dollars, revenues remained relatively constant.
Slightly lower shipments and higher incentives were offset by a better
product mix.
- - After a significant second-quarter loss of [EURO] 948 million, in the third
quarter Chrysler Group again attained an operating profit of [EURO] 147
million. This includes restructuring expenditures of [EURO] 37 million
related to the turnaround plan of 2001. The improvement over the second
quarter is primarily due to the successful implementation of additional
cost-reduction programs and lower increases in customer incentives than had
originally been planned. However, earnings were lower than in the third
quarter of last year due to lower shipments to dealers and increased
incentives.
- - In September 2003, Chrysler Group concluded a new agreement on pay and
conditions with over 60,000 employees in the UAW, the largest labor union for
the US automotive industry. On the one hand, the new labor contract includes
a pay increase for the workers, but on the other hand, it will allow the
company more flexibility in staff deployment and to adapt to changing
economic conditions.
STRONGER COMPETITIVE POSITION AS A RESULT OF NEW PRODUCTS
- - Production of the new Dodge Durango sport-utility vehicle commenced
successfully in September 2003 at the Newark Assembly Plant. The plant also
introduced new flexible and environmently-friendly manufacturing methods.
This vehicle will be available from dealerships by mid-November.
- - In addition to Chrysler Group's North American product offensive that
includes nine new model launches in the 2004 calendar year and 25 new models
over the next three years, Chrysler Group premiered the new Chrysler 300C
Touring Wagon concept at the Frankfurt Motor Show. This new vehicle will be
sold in Europe and will complement sales of the 300C sedan. These new
vehicles will start production early next year.
- - With new leadership in its Sales & Marketing organization, the Chrysler Group
is implementing various revenue management improvements, including more
efficient and targeted incentive spending, price repositioning of several new
vehicles, and improved fleet and dealer relationship management. Chrysler
Group is also implementing additional cost reduction actions, including
accelerating plans for the use of common components and shorter launch
curves.
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Operating profit (loss) (756) (649) 532 .
- --------------------------------------------------------------------
Revenues 43,115 37,009 46,684 -21
- --------------------------------------------------------------------
Unit sales 1,998,246 2,171,306 -8
- --------------------------------------------------------------------
Production 1,970,807 2,135,456 -8
- --------------------------------------------------------------------
Employees (September 30) 94,571 97,445 -3
- --------------------------------------------------------------------
</Table>
UNIT SALES
<Table>
<Caption>
Q1-3 03 Q1-3 02 Change
- -----------------------------------------------------------
in %
- -----------------------------------------------------------
Total 1,998,246 2,171,306 -8
- -----------------------------------------------------------
NAFTA 1,872,828 2,044,452 -8
- -----------------------------------------------------------
United States 1,630,568 1,779,815 -8
- -----------------------------------------------------------
Other markets 125,418 126,854 -1
- -----------------------------------------------------------
</Table>
<Page>
Interim Report Q3 2003 | 7
COMMERCIAL VEHICLES
- - POSITIVE EARNINGS TREND CONTINUES IN THIRD QUARTER
- - GREAT MARKET SUCCESS FOR NEW ACTROS
- - FREIGHTLINER TRUCKS AND BUSES GAIN MARKET SHARES
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- ------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- ------------------------------------------------------------------
Operating profit 276 237 115 +106
- ------------------------------------------------------------------
Revenues 8,355 7,172 7,137 +0
- ------------------------------------------------------------------
Unit sales 123,241 121,260 +2
- ------------------------------------------------------------------
Production 120,727 120,926 -0
- ------------------------------------------------------------------
Employees (September 30) 97,707 96,602 +1
- ------------------------------------------------------------------
</Table>
UNIT SALES
<Table>
<Caption>
Q3 03 Q3 02 Change
- ------------------------------------------------------------------
in %
- ------------------------------------------------------------------
Total 123,241 121,260 +2
- ------------------------------------------------------------------
Western Europe 58,561 62,838 -7
- ------------------------------------------------------------------
Germany 26,246 25,197 +4
- ------------------------------------------------------------------
United States 29,090 27,661 +5
- ------------------------------------------------------------------
South America 10,660 8,891 +20
- ------------------------------------------------------------------
Other markets 24,930 21,870 +14
- ------------------------------------------------------------------
</Table>
OPERATING PROFIT SIGNIFICANTLY HIGHER THAN IN PRIOR YEAR
- - In the third quarter of 2003, the Commercial Vehicles division sold 123,200
vehicles (+2%). Revenues of [EURO] 7.2 billion were at the same level as in
Q3 2002.
- - Operating profit increased to [EURO] 237 million (Q3 2002: [EURO] 115
million), due to the higher unit sales, but primarily as a result of the
efficiency-improving programs that were initiated and consistently
implemented in all business units.
- - The Freightliner/Sterling/Thomas Built Buses business unit increased its unit
sales to 33,400 vehicles (Q3 2002: 31,800 vehicles). Although markets overall
declined, we increased our shares of the US market for Class 5 to 8 vehicles
to 33.8% (Q3 2002:30.3%)and of the NAFTA market to 32.1% (Q3 2002: 29.1%).
- - Due in particular to the strong demand for the new Actros, unit sales at the
Mercedes-Benz Trucks business unit increased by 14% to 28,800 vehicles.
- - The Vans business unit sold 51,900 units, below the level of the third
quarter of last year (56,300 units). The decrease was related to the
generally difficult market situation in Western Europe and postponed
purchases in anticipation of the launch of the new models, Vito and Viano, in
September 2003.
- - Unit sales by the DaimlerChrysler Buses & Coaches business unit increased by
31% to 7,800 vehicles, with significant increases in exports from South
America and Turkey. Unit sales and market share in the static markets of
Western Europe also rose.
- - At Mitsubishi Fuso Truck and Bus Corporation (MFTBC), in which
DaimlerChrysler holds a 43% stake, developments so far this year have been
very positive. New exhaust-emission regulations for trucks in Japan allowed
MFTBC to increase its unit sales in the domestic market by 51% in the first
six months of its financial year, which began on April 1. As of April 2003,
MFTBC has been included in the Commercial Vehicle division's accounts at
equity with a time lag of one quarter.
MORE SAFETY AS STANDARD EQUIPMENT
- - As of October 1, 2003, DaimlerChrysler now supplies all Mercedes-Benz Travego
coaches and all Setra coaches in the Top Class 400 and Comfort Class 400
model ranges with the Electronic Stability Program (ESP) - the first
manufacturer to include this feature as standard equipment. With this move,
DaimlerChrysler once again underscores its pioneering role in the fields of
safety and leading-edge technology. The Mercedes-Benz Sprinter and the
recently launched Vito and Viano are also fitted with ESP as standard
equipment.
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- ------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- ------------------------------------------------------------------
Operating profit 538 462 23 .
- ------------------------------------------------------------------
Revenues 23,575 20,236 20,642 -2
- ------------------------------------------------------------------
Unit sales 355,974 352,057 +1
- ------------------------------------------------------------------
Production 360,455 363,726 -1
- ------------------------------------------------------------------
Employees (September 30) 97,707 96,602 +1
- ------------------------------------------------------------------
</Table>
UNIT SALES
<Table>
<Caption>
Q1-3 03 Q1-3 02 Change
- -----------------------------------------------------------
in %
- -----------------------------------------------------------
Total 355,974 352,057 +1
- -----------------------------------------------------------
Western Europe 175,722 190,024 -8
- -----------------------------------------------------------
Germany 70,402 70,130 +0
- -----------------------------------------------------------
United States 82,417 73,724 +12
- -----------------------------------------------------------
South America 28,750 28,506 +1
- -----------------------------------------------------------
Other markets 69,085 59,803 +16
- -----------------------------------------------------------
</Table>
<Page>
8 | Interim Report Q3 2003
SERVICES
- - STRONG RISE IN OPERATING PROFIT ONCE AGAIN IN THE
THIRD QUARTER
- - DAIMLERCHRYSLER BANK EXPANDS ITS RANGE OF SERVICES
- - EXTENDED START UP PHASE FOR TRUCK-TOLL SYSTEM
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Operating profit 331 284 170 +67
- --------------------------------------------------------------------
Revenues 4,043 3,470 3,892 -11
- --------------------------------------------------------------------
Contract volume 119,063 102,200 114,649 -11
- --------------------------------------------------------------------
New business 15,299 13,132 15,388 -15
- --------------------------------------------------------------------
Employees (September 30) 10,857 10,513 +3
- --------------------------------------------------------------------
</Table>
THIRD-QUARTER OPERATING PROFIT SIGNIFICANTLY HIGHER THAN LAST YEAR
- - DaimlerChrysler Services' revenues of [EURO] 3,5 billion in the third quarter
were 11% lower than in Q3 2002 particularly due to the appreciation of the
euro against the US dollar. After adjusting for currency translation
effects the decrease was 4%.
- - Operating profit increased from [EURO] 170 million to [EURO] 284 million.
The result of the prior-year quarter included special charges for risk
provisions of [EURO] 113 million. Operating profit for the third quarter of
2003 remained at a high level as a result of improving margins and lower
funding costs.
- - New business of [EURO] 13.1 billion in the third quarter did not reach the
previous year's level particularly due to the appreciation of the euro
against the US dollar. Adjusted to exclude currency-translation effects it
decreased by 6%.
- - Contract volume decreased from [EURO] 114.6 billion to [EURO] 102.2 billion.
Adjusted to exclude currency-translation effects contract volume was at the
previous year's level. Of the total contract volume, 61% was accounted for by
the United States and 22% by Western Europe.
COMPLETION OF SYSTEM INTEGRATION IN NORTH AMERICA
- - In North America, DaimlerChrysler Services has standardized and simplified
its routines for processing new contracts and maintaining contract volume.
The number of systems in use has been reduced significantly. The result is a
substantially improved cost position for DaimlerChrysler Services North
America. Reorganization of the regional sales structure and even closer
cooperation with sales partners will provide substantially stronger support
for the sale of vehicles and increased penetration rates.
FLEET MANAGEMENT SUPPORTS GROUP BRANDS
- - As a result of close cooperation with the fleet-sales activities of the
Group's brands, DaimlerChrysler Services Fleet Management succeeded in
gaining new customers and orders totaling more than 30,000 vehicles in
Germany, France, Italy and the United Kingdom, thus further strengthening its
leading position in Europe.
DAIMLERCHRYSLER BANK EXPANDS ITS PRODUCT RANGE
- - In Germany, DaimlerChrysler Bank has further expanded its range of products
in its core business of vehicle financing and in its direct banking
business. In the future, DaimlerChrysler Bank will make use of its customer
base of more than 800,000 customers for more effective customer-relationship
management. The bank is adding to its successful activities in the deposit
business with a new range of automobile savings plans applicable to all of
the DaimlerChrysler Group's passenger-car models, and with new investment
funds.
EXTENSION OF START-UP PHASE FOR ELECTRONIC TRUCK-TOLL SYSTEM
- - The eleven-month start-up phase for the electronic toll system for trucks
on autobahns in Germany has proved to be too short. The German Ministry of
Transport and the Toll Collect company agreed to extend the introductory
phase of the toll system.
- - The necessity to optimize the toll system's technical functionality and
infrastructure is now a key focus in order to secure stable and user-friendly
operations. In parallel, the required improvements to hardware and software
are being made so that the system can go into full operation as soon as
possible.
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Operating profit 1,208 1,037 2,952 -65
- --------------------------------------------------------------------
Revenues 12,333 10,586 11,805 -10
- --------------------------------------------------------------------
Contract volume 119,063 102,200 114,649 -11
- --------------------------------------------------------------------
New business 42,383 36,380 40,066 -9
- --------------------------------------------------------------------
Employees (September 30) 10,857 10,513 +3
- --------------------------------------------------------------------
</Table>
<Page>
Interim Report Q3 2003 | 9
OTHER ACTIVITIES
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Operating profit (loss) (167) (143) 207 -
- --------------------------------------------------------------------
</Table>
MTU AERO ENGINES
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Revenues 551 473 537 -12
- --------------------------------------------------------------------
Incoming orders 654 561 344 +63
- --------------------------------------------------------------------
Employees (September 30) 8,163 8,292 -2
- --------------------------------------------------------------------
</Table>
The Other Activities segment includes the MTU Aero Engines business unit as well
as the Group's holdings in EADS and Mitsubishi Motors Corporation. The segment
also includes Corporate Research, the Group's real-estate activities, and our
holding and finance companies.
The operating-profit contributions generated by our holdings in EADS and
Mitsubishi Motors are included in the operating profit of DaimlerChrysler with a
time lag of one quarter. DaimlerChrysler's operating profit for the third
quarter of 2003 therefore includes the contributions made by EADS and Mitsubishi
Motors in the period of April through June 2003.
This segment's substantial decrease in earnings is primarily due to the negative
contribution to earnings from Mitsubishi Motors Corporation.
AERO ENGINE BUSINESS STILL AFFECTED BY TROUBLED AIR-TRANSPORT INDUSTRY
- - Market conditions in the civil-aviation business have not yet improved
substantially. The ongoing strength of the euro against the US dollar is an
additional burden for European engine manufacturers.
- - The MTU Aero Engines business unit therefore posted a fall in revenues
to [EURO] 473 million (-12%). Significant decreases in revenues from the
maintenance of civil-aircraft engines and from transactions with national
governments were partially offset by higher sales of engines and spare
parts for civil aircraft.
- - However, incoming orders of [EURO] 561 million were much higher than the
level of the third quarter of last year. Order volumes increased
significantly, not only for engines for both civil and military aircraft,
but also for the maintenance of civil-aircraft engines.
OTHER ACTIVITIES
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Operating profit 221 190 618 -69
- --------------------------------------------------------------------
</Table>
MTU AERO ENGINES
<Table>
<Caption>
Q1-3 03 Q1-3 03 Q1-3 02 Change
- --------------------------------------------------------------------
Amounts in millions US $ [EURO] [EURO] in %
- --------------------------------------------------------------------
Revenues 1,615 1,386 1,571 -12
- --------------------------------------------------------------------
Incoming orders 2,710 2,326 1,685 +38
- --------------------------------------------------------------------
Employees (September 30) 8,163 8,292 -2
- --------------------------------------------------------------------
</Table>
<Page>
10 | Interim Report Q3 2003
EADS
- - The European Aeronautic Defence and Space Company (EADS) will publish its
figures on the third quarter of 2003 on November 6, 2003.
- - Despite the problems of the civil air-transport business, the aircraft
manufacturer Airbus, in which EADS holds an 80% stake, has affirmed its
forecast of 300 aircraft deliveries in full-year 2003. 129 firm orders and
purchase commitments have now been received for the A380 wide-body aircraft.
- - In the first nine months of 2003, Airbus delivered 199 aircraft (Q1-Q3 2002:
219 aircraft).
- - EADS gained several major orders in the defense business in the third
quarter of 2003. For example, in September the Spanish government approved
the signing of a contract for the procurement of 24 Tiger combat helicopters.
The Greek ministry of defense placed 20 firm orders and 14 options for the
NH 90 military transport helicopter. Furthermore, the Austrian government
approved a contract to purchase 18 Eurofighters in August.
- - In the EADS Space division, restructuring and reorganization are
progressing as planned. Turnaround is expected to be achieved during the
year 2004.
MITSUBISHI MOTORS CORPORATION
- - Mitsubishi Motors (MMC) sold 391,300 vehicles worldwide in the months of July
through September, equaling the result of the prior-year period.
- - Unit sales in the Japanese market during this period increased by 3% to
92,200 vehicles, primarily due to the availability of various versions of the
ek wagon mini car. MMC's market share for passenger cars including mini cars
increased from 6.4% to 7.0%.
- - In the North American market, unit sales by MMC decreased by 18% to 73,300
vehicles as a result of tougher competition and the company's
credit-tightening policy in the vehicle-financing business.
- - In Europe, unit sales in the third quarter increased by 11% to 51,200
vehicles. More than 6,000 of the Outlander sport-utility vehicle have already
been sold since this model was launched in European markets in March 2003,
exceeding MMC's own sales forecasts. Initial customer reactions to the Lancer
and Lancer Wagon, both launched in September, are also very positive.
- - Unit sales in Asia (excluding Japan) and in the other regions also improved,
rising by 7% to 174,500 vehicles, with particularly strong growth in China.
- - Due to difficult market conditions, increased price incentives and
anticipated lower earnings in the current financial year, MMC has implemented
a broad range of measures designed to improve its competitiveness, including
further cost reductions, the sale of certain assets and the postponement by
six months of capacity expansion in the United States. In order to stabilize
the financial services business in the United States, responsibilities have
been reassigned both locally as well as at headquarters, and organizational
changes have been implemented. In addition, the range of financial services
offered by MMC in North America has been reduced in line with its stricter
credit policy.
<Page>
Interim Report Q3 2003 | 11
ANALYSIS OF THE FINANCIAL SITUATION
- - THIRD-QUARTER GROUP OPERATING PROFIT OF [EURO] 1.2 BILLION COMPARED WITH
[EURO] 1.5 BILLION IN THE PREVIOUS YEAR
- - POSITIVE OPERATING RESULTS AT CHRYSLER GROUP, BUT LOWER THAN PRIOR-YEAR
QUARTER
- - SIGNIFICANT IMPROVEMENT IN EARNINGS IN THE COMMERCIAL VEHICLES AND SERVICES
SEGMENT
- - NEGATIVE EARNINGS CONTRIBUTION FROM MITSUBISHI MOTORS
- - GROUP NET LOSS IMPACTED BY WRITE-DOWN OF EQUITY INVESTMENT IN EADS
OPERATING PROFIT (LOSS) BY SEGMENTS
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Q1-3 03 Q1-3 03 Q1-3 02
- --------------------------------------------------------------- -------------------------------
In millions US $ [EURO] [EURO] US $ [EURO] [EURO]
- --------------------------------------------------------------- -------------------------------
Mercedes Car Group 924 793 792 2,728 2,342 2,290
- --------------------------------------------------------------- -------------------------------
Chrysler Group 171 147 305 (756) (649) 532
- --------------------------------------------------------------- -------------------------------
Commercial Vehicles 276 237 115 538 462 23
- --------------------------------------------------------------- -------------------------------
Services 331 284 170 1,208 1,037 2,952
- --------------------------------------------------------------- -------------------------------
Other Activities (167) (143) 207 221 190 618
- --------------------------------------------------------------- -------------------------------
Eliminations (83) (72) (50) (106) (92) (114)
- --------------------------------------------------------------- -------------------------------
DaimlerChrysler Group 1,452 1,246 1,539 3,833 3,290 6,301
- --------------------------------------------------------------- -------------------------------
</Table>
DEVELOPMENT OF GROUP OPERATING PROFIT AFFECTED BY VARIOUS FACTORS
- - In the third quarter of 2003, DaimlerChrysler achieved an operating profit of
[EURO] 1.2 billion, compared with [EURO] 1.5 billion in Q3 2002. The
operating profit of the prior-year period reflected impairment charges on a
portion of the Capital Services portfolio in the Services segment totaling
[EURO] 0.1 billion, other impairment charges totaling [EURO] 48 million, as
well as further restructuring activities.
- - The decrease in Group operating profit was primarily related to the negative
contribution to earnings from our investment in Mitsubishi Motors (MMC). This
negative contribution was primarily the result of lower unit sales in North
America and higher credit and residual value risk provisions in the financial
services business of the MMC Group. Despite the continuation of very tough
competitive pressure in the US market, Chrysler Group posted an operating
profit of [EURO] 0.1 billion for the third quarter, which was below its
operating profit for Q3 2002. Compared with the second quarter of this year,
Chrysler Group achieved a significant improvement in earnings. The Commercial
Vehicles segment once again improved its profit contribution compared with
the prior-year period, primarily due to the benefit of the continuation of
the cost cutting and efficiency improvement programs which commenced in
previous years. Also, the Services segment reported improved earnings
compared with the prior-year level primarily due to the continuation of
favorable refinancing conditions. The operating profit generated by the
Mercedes Car Group approximated the prior-year level.
- - In the first nine months of the year 2003, DaimlerChrysler posted an
operating profit of [EURO] 3.3 (Q1-Q3 2002: [EURO] 6.3) billion. The
prior-year result included income totaling [EURO] 2.6 billion from the sale
of shares in T-Systems ITS (formerly debis Systemhaus) and Conti Temic
microelectronic (formerly TEMIC). On the other hand, prior-year results
included charges totaling [EURO] 0.8 billion relating to the restructuring
activities at Chrysler Group and Commercial Vehicles, as well as charges in
the Services segment in connection with the sale of a portion of the Capital
Services portfolio ([EURO] 0.1 billion) and from the Argentine government's
reorganization of the country's finance and banking system ([EURO] 0.1
billion). Aside from these prior year's factors, operating profit decreased
primarily due to Chrysler Group's operating loss of [EURO] 0.9 billion in the
second quarter of this year. Additional negative factors were the
proportionate share of the operating loss from the Group's equity investment
in Mitsubishi Motors and the lower contribution from EADS, which resulted
primarily from a goodwill impairment charge at its aerospace business in the
first quarter of 2003. On the other hand, operating profit increased at
Commercial Vehicles and Services. Operating profit from the Mercedes Car
Group segment for the first nine months of 2003 was slightly higher than the
high level recorded in the prior year for the same period.
<Page>
12 | Interim Report Q3 2003
OPERATING PROFIT
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Q1-3 03 Q1-3 03 Q1-3 02
- ----------------------------------------------------------- ----------------------------------
In millions US $ [EURO] [EURO] US $ [EURO] [EURO]
- ----------------------------------------------------------- ----------------------------------
Industrial Businesses 1,066 915 1,360 2,578 2,213 5,803
- ----------------------------------------------------------- ----------------------------------
Financial Services 386 331 179 1,255 1,077 498
- ----------------------------------------------------------- ----------------------------------
DaimlerChrysler Group 1,452 1,246 1,539 3,833 3,290 6,301
- ----------------------------------------------------------- ----------------------------------
</Table>
MERCEDES CAR GROUP'S OPERATING PROFIT EQUALS THE HIGH PRIOR-YEAR LEVEL
- - In a difficult market environment, the Mercedes Car Group segment achieved an
operating profit of [EURO] 0.8 billion in the current period, which equaled
the high prior-year level. Expenditures for the products of the second model
offensive impacted the operating profit of the period under review. However,
strong unit sales of the E-Class, S-Class and SL-Class models improved the
overall model mix and had a stabilizing effect on earnings.
POSITIVE OPERATING RESULTS AT CHRYSLER GROUP IN THE THIRD QUARTER OF 2003
- - Chrysler Group posted an operating profit of [EURO] 0.1 billion in the third
quarter of 2003 compared with an operating profit of [EURO] 0.3 billion in
the prior-year period. The decrease in operating results is primarily due to
higher sales incentives and lower vehicle shipments reflecting the continuing
intense price competition in the US market. This decline was partially offset
by improvements from continuing cost reductions.
- - Compared with an operating loss of [EURO] 0.9 billion in the second quarter
of 2003, Chrysler Group improved its operating results by [EURO] 1.0 billion
to [EURO] 0.1 billion operating profit; in US dollars operating profit
improved by $1.2 billion to $0.2 billion. This improvement primarily
reflects lower than anticipated sales incentives due to more efficient,
targeted revenue management strategies by the Chrysler Group, as well as
incremental cost reductions.
- - During the third quarter of 2003, Chrysler Group and Services agreed to
adjusted rates charged on subsidized financing programs due to the
increasingly competitive financing options. This agreement reduced marketing
expenses by [EURO] 0.1 billion at Chrysler Group.
OPERATING PROFIT AT COMMERCIAL VEHICLES ABOVE PRIOR-YEAR LEVEL
- - The Commercial Vehicles segment increased its third-quarter operating profit
to [EURO] 0.2 billion, compared with [EURO] 0.1 billion in the prior year.
Although the market remained difficult, the segment succeeded in improving
its earnings, largely due to progress with the implementation of the cost
cutting and efficiency improvement programs in all its business units.
Freightliner in particular was able to realize substantial cost reductions.
In addition, the successful launch of the new Actros contributed to increased
earnings at Mercedes-Benz Trucks.
OPERATING PROFIT AT SERVICES REMAINED AT HIGH LEVEL
- - For the third quarter of the year 2003, the Services segment posted an
operating profit of [EURO] 0.3 billion, compared with [EURO] 0.2 billion in
Q3 2002. The result for the prior-year quarter included charges totaling
[EURO] 0.1 billion from allowances for doubtful accounts with respect to
finance-lease receivables and from impairments of assets under operating
leases related to the sale of a portion of the Capital Services portfolio.
- - As a result of improving margins and lower funding costs, the operating
profit for the period under review remained at a high level. A charge of
[EURO] 0.1 billion was taken in Q3 2003 due to an agreement between Services
and Chrysler Group to adjusted rates charged on subsidized financing
packages, resulting from the increasingly competitive financing options.
Sales incentives in the new-vehicle business led to an unchanged difficult
situation in the used-vehicle market, especially in North America. However,
due to improved risk management, charges from provisions for risks were
reduced compared with the prior-year quarter.
<Page>
Interim Report Q3 2003 | 13
RECONCILIATION TO OPERATING PROFIT
<Table>
<Caption>
Q3 03 Q3 03 Q3 02 Q1-3 03 Q1-3 03 Q1-3 02
- -------------------------------------------------------------------------- --------------------------------
In millions US $ [EURO] [EURO] US $ [EURO] [EURO]
- -------------------------------------------------------------------------- --------------------------------
Income before financial income 1,021 876 1,444 2,587 2,221 3,301
- -------------------------------------------------------------------------- --------------------------------
+ Pension and postretirement benefit
expenses other than service cost 262 225 (56) 784 673 (213)
- -------------------------------------------------------------------------- --------------------------------
+ Operating profit (loss) from affiliated
and associated companies and
financial income (loss) from related
operating companies (178) (153) 130 77 66 488
- -------------------------------------------------------------------------- --------------------------------
+ Gains from the sale of operating
businesses - - - - - 2,640
- -------------------------------------------------------------------------- --------------------------------
+ Miscellaneous items 347 298 21 385 330 85
- -------------------------------------------------------------------------- --------------------------------
Operating profit 1,452 1,246 1,539 3,833 3,290 6,301
- -------------------------------------------------------------------------- --------------------------------
</Table>
OPERATING LOSS FOR OTHER ACTIVITIES
- - In the third quarter of this year, the Other Activities realized an operating
loss of [EURO] 0.1 billion, after an operating profit of [EURO] 0.2 billion
in the same quarter of 2002. The main reason for this decrease was the
negative contribution to earnings from the Group's equity investment in
Mitsubishi Motors (MMC), which was primarily attributed to lower revenues in
North America and higher credit and residual value risk provisions in the US
financial services business of the MMC Group. MTU Aero Engines reported a
marginal operating loss mainly due to restructuring measures and was thus
below the prior-year's level. The positive contribution to operating profit
delivered by our equity investment in EADS could not reach the prior-year
level as a result of increased development expenditures for the A380 Airbus
and the general weakness of the airline business.
RECONCILIATION TO OPERATING PROFIT
- - "Pension and postretirement benefit expenses other than service cost" is the
sum of the interest cost, the expected return on plan assets and the
amortization of unrecognized net actuarial gains or losses. Operating profit
excludes these components of the pension costs, since they are driven by
financial factors and do not reflect the operating performance of the
segments. The change compared with the prior-year quarter was primarily a
result of a declining expected return on plan assets due to stock market
losses in the year 2002.
- - "Operating profit (loss) from affiliated and associated companies and
financial income (loss) from related companies" includes the contributions to
earnings from our operating investments, which are reported as component of
financial income in the statements of income. These contributions are
allocated to the operating profit of the respective segments. In the third
quarter of 2003 this resulted in a negative overall contribution to operating
profit of [EURO] 0.2 billion. The decrease compared with the prior-year
quarter was primarily the result of a negative contribution to earnings
from the Group's equity investment in Mitsubishi Motors.
- - "Gains and losses from the sale of operating businesses", which are presented
under financial income in the statements of income, are allocated to the
respective segments' operating profits.
- - Under "Miscellaneous items", income and expenses which do not relate to the
operating business are excluded. The increase compared with the third quarter
of last year was almost solely due to the settlement of a consolidated class
action case, which has been pending in connection with the merger of
Daimler-Benz and Chrysler to form DaimlerChrysler AG. In this regard, a
charge of [EURO] 275 million was recognized in the third quarter of 2003.
DaimlerChrysler has applicable insurance policies aggregating [EURO]
200 million (approximately $220 million) to which extent it is seeking
reimbursement of the settlement payment. Such reimbursement will be
recognized into earnings in the period received.
<Page>
14 | Interim Report Q3 2003
FINANCIAL INCOME AND NET INCOME BOTH NEGATIVE DUE TO WRITE-DOWN OF EQUITY
INVESTMENT IN EADS
- - The financial loss for the third quarter of this year was [EURO] 2.2 billion,
compared with a financial loss of [EURO] 0.2 billion in Q3 2002. The
substantial decline in financial income was almost solely due to the
[EURO] 2.0 billion non tax deductible write-down of the Group's equity
investment in EADS to its fair value at September 30, 2003. Although the
Group believes that the value of the EADS investment is still higher than
its carrying value, US GAAP and SEC rules require that an investment be
written down to its fair value, with a charge taken to earnings, when an
impairment in the carrying amount of an investment is considered to be
other-than-temporary. The Group's proportionate share of the loss incurred
at Mitsubishi Motors also had a negative impact on income from investments,
compared with the prior year. Net interest income and other financial
income added up to a loss of [EURO] 0.1 billion at similar level compared to
the prior-year period.
- - Third-quarter income before income taxes decreased by [EURO] 2.6 billion to a
loss of [EURO] 1.4 billion. This was primarily due to the aforementioned
write-down of the Group's equity investment in EADS, but was also influenced
by the other factors described under operating profit and financial income.
For the first nine months of the year 2003, the Group posted a loss before
income taxes of [EURO] 0.1 billion (Q1-Q3 2002: income of [EURO] 5.7
billion). The figure for the prior-year was influenced by major factors
(restructuring expenditure at Chrysler Group and Commercial Vehicles,
impairment charges on parts of the Capital Services portfolio, the impact of
the Argentina crisis on the Services segment, as well as income from the sale
of shares in T-Systems ITS and Conti Temic microelectronic) with a net
positive effect of [EURO] 1.6 billion.
- - Net loss and loss per share for the third quarter of this year amounted to
[EURO] 1.7 billion and [EURO] 1.63, respectively (Q3 2002: net income of
[EURO] 0.8 billion and earnings per share of [EURO] 0.77). The write-down
of our equity investment in EADS impacted third-quarter net loss and loss per
share by [EURO] 2.0 billion and [EURO] 1.94, respectively.
For the first nine months of the year 2003, net loss was [EURO] 1.0 billion
and loss per share was [EURO] 0.94 (Q1-Q3 2002: net income of [EURO] 4.4
billion and earnings per share of [EURO] 4.36).
TOTAL ASSETS IN THE THIRD QUARTER OF 2003 STILL VIRTUALLY UNCHANGED
- - Compared with December 31, 2002, total assets decreased by [EURO] 1.9 billion
to [EURO] 185.4 billion. The decline was mainly due to currency translation
effects from the continued depreciation of the US dollar against the euro.
These currency translation effects were partially offset by higher
receivables from financial services, higher inventories and increased trade
liabilities. The development of receivables from financial services was
primarily caused by reduced sales of finance receivables and a shift from
operating lease contracts to sales financing and finance lease contracts. In
addition, the higher level of cash and cash equivalents, which was partly
attributable to higher customer deposits at DaimlerChrysler Bank, increased
total assets. The decrease in financial assets was caused by the impairment
of EADS. This impact was partially offset by the acquisition of Mitsubishi
Fuso Truck and Bus Corporation.
- - Stockholders' equity at September 30, 2003 decreased from [EURO] 35.0 billion
to [EURO] 33.2 billion. The main reasons for the decrease in stockholder's
equity were the Net Loss of [EURO] 1.0 billion, the dividend distribution of
[EURO] 1.5 billion for 2002 that took place in the second quarter of 2003, as
well as negative effects from currency translation. However, these effects
were partially offset by unrealized gains from the mark-to-market valuation
of the Group's derivative financial instruments.
The equity ratio, as of September 30, 2003 was 17.9%, unchanged compared to
December 31, 2002. The equity ratio for the industrial business was 24.4
(December 31, 2002: 24.9)%. For the calculation of both ratios, a
proportionate share of a dividend for the fiscal year 2003, which would
reduce equity accordingly, was not included.
<Page>
Interim Report Q3 2003 | 15
STATEMENT OF CASH FLOWS IMPACTED BY CHANGES IN WORKING CAPITAL AND BY THE
ACQUISITION OF SHARES IN MITSUBISHI FUSO TRUCK AND BUS CORPORATION
- - Cash provided by operating activities of [EURO] 14.1 billion in the first
nine months of 2003 was on the same level as in the prior-year period. The
decrease of cash inflows from operating results was primarily offset by
higher changes in net working capital.
- - Cash used for investing activities rose [EURO] 4.3 billion to [EURO] 11.9
billion in the period under review. The figure for the respective period of
the year 2002 was affected by the proceeds from the sale of shares in
T-Systems ITS, while cash outflows in 2003 include cash utilized for the
purchase of shares in Mitsubishi Fuso Truck and Bus Corporation. Lower net
increases in receivables from financial services and equipment on operating
leases partially offset the effects from the sale and acquisition of
participations.
- - Financing activities provided cash of [EURO] 0.5 billion. Beside cash inflows
from the increase of financial liabilities, financing activities were
affected by the payment of the dividend for the 2002 business year in April
2003 ([EURO] 1.5 billion).
- - Cash and cash equivalents with an original maturity of three months or less
increased by [EURO] 2.1 billion to [EURO] 11.2 billion compared to
December 31, 2002. Total liquidity, which also includes investments with a
maturity over three months as well as securities, increased from [EURO] 12.4
billion to [EURO] 14.7 billion partly due to deposits from direct banking
business of DaimlerChrysler Bank.
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT MANAGEMENT'S
CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS. THE WORDS "ANTICIPATE," "ASSUME,"
"BELIEVE," "ESTIMATE," "EXPECT," "INTEND," "MAY," "PLAN," "PROJECT" AND "SHOULD"
AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO: AN ECONOMIC
DOWNTURN IN EUROPE OR NORTH AMERICA; CHANGES IN CURRENCY EXCHANGE RATES AND
INTEREST RATES; INTRODUCTION OF COMPETING PRODUCTS; INCREASED SALES INCENTIVES;
AND DECLINE IN RESALE PRICES OF USED VEHICLES. IF ANY OF THESE OR OTHER RISKS
AND UNCERTAINTIES OCCUR (SOME OF WHICH ARE DESCRIBED UNDER THE HEADING "RISK
FACTORS" IN DAIMLERCHRYSLER'S MOST RECENT ANNUAL REPORT ON FORM 20-F FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION), OR IF THE ASSUMPTIONS UNDERLYING ANY OF
THESE STATEMENTS PROVE INCORRECT, THEN ACTUAL RESULTS MAY BE MATERIALLY
DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. WE DO NOT INTEND
OR ASSUME ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENT, WHICH SPEAKS
ONLY AS OF THE DATE ON WHICH IT IS MADE.
<Page>
16 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) Q3
<Table>
<Caption>
Consolidated Industrial Business Financial Services
Q3 2003 Q3 2003 Q3 2002 Q3 2003 Q3 2002 Q3 2003 Q3 2002
- -------------------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) (NOTE 1)$ [EURO] [EURO] [EURO] [EURO] [EURO] [EURO]
- -------------------------------------------------------------------------------------------------------------------------
Revenues 40,294 34,587 36,338 31,116 32,445 3,471 3,893
- -------------------------------------------------------------------------------------------------------------------------
Cost of sales (32,423) (27,831) (29,283) (25,144) (25,953) (2,717) (3,330)
- -------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN 7,871 6,756 7,055 6,002 6,492 754 563
- -------------------------------------------------------------------------------------------------------------------------
Selling, administrative and other expenses (5,403) (4,638) (4,415) (4,299) (4,029) (339) (386)
- -------------------------------------------------------------------------------------------------------------------------
Research and development (1,539) (1,321) (1,365) (1,321) (1,365) - -
- -------------------------------------------------------------------------------------------------------------------------
Other income 135 116 175 103 154 13 21
- -------------------------------------------------------------------------------------------------------------------------
Turnaround plan expenses - Chrysler Group (43) (37) (6) (37) (6) - -
- -------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FINANCIAL EXPENSE,NET 1,021 876 1,444 448 1,246 428 198
- -------------------------------------------------------------------------------------------------------------------------
Impairment of investment in EADS (2,283) (1,960) - (1,960) - - -
- -------------------------------------------------------------------------------------------------------------------------
Other financial expense, net (321) (275) (175) (231) (174) (44) (1)
- -------------------------------------------------------------------------------------------------------------------------
Financial expense, net (2,604) (2,235) (175) (2,191) (174) (44) (1)
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (1,583) (1,359) 1,269 (1,743) 1,072 384 197
- -------------------------------------------------------------------------------------------------------------------------
Income taxes (337) (289) (490) (135) (390) (154) (100)
- -------------------------------------------------------------------------------------------------------------------------
Minority interests (6) (5) 1 (3) 1 (2) -
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1,926) (1,653) 780 (1,881) 683 228 97
- -------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE
- -------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share (1.90) (1.63) 0.77 - - - -
- -------------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per share (1.90) (1.63) 0.77 - - - -
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The accompanying notes are an integral part of these Unaudited Interim Condensed
Consolidated Financial Statements.
<Page>
Interim Report Q3 2003 | 17
DAIMLERCHRYSLER AG AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) Q1-3
<Table>
<Caption>
Consolidated Industrial Business Financial Services
Q1-3 2003 Q1-3 2003 Q1-3 2002 Q1-3 2003 Q1-3 2002 Q1-3 2003 Q1-3 2002
- ------------------------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) (NOTE 1)$ [EURO] [EURO] [EURO] [EURO] [EURO] [EURO]
- ------------------------------------------------------------------------------------------------------------------------------
Revenues 119,543 102,612 112,582 92,024 100,776 10,588 11,806
- ------------------------------------------------------------------------------------------------------------------------------
Cost of sales (96,844) (83,128) (91,600) (74,804) (81,568) (8,324) (10,032)
- ------------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN 22,699 19,484 20,982 17,220 19,208 2,264 1,774
- ------------------------------------------------------------------------------------------------------------------------------
Selling, administrative and other expenses (15,616) (13,404) (13,263) (12,375) (12,085) (1,029) (1,178)
- ------------------------------------------------------------------------------------------------------------------------------
Research and development (4,964) (4,261) (4,226) (4,261) (4,226) - -
- ------------------------------------------------------------------------------------------------------------------------------
Other income 517 444 502 410 455 34 47
- ------------------------------------------------------------------------------------------------------------------------------
Turnaround plan expenses - Chrysler Group (49) (42) (694) (42) (694) - -
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FINANCIAL INCOME (EXPENSE), NET 2,587 2,221 3,301 952 2,658 1,269 643
- ------------------------------------------------------------------------------------------------------------------------------
Impairment of investment in EADS (2,283) (1,960) - (1,960) - - -
- ------------------------------------------------------------------------------------------------------------------------------
Other financial income (expense), net (472) (405) 2,382 (363) 2,395 (42) (13)
- ------------------------------------------------------------------------------------------------------------------------------
Financial income (expense), net (2,755) (2,365) 2,382 (2,323) 2,395 (42) (13)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (168) (144) 5,683 (1,371) 5,053 1,227 630
- ------------------------------------------------------------------------------------------------------------------------------
Income taxes (923) (792) (1,121) (274) (830) (518) (291)
- ------------------------------------------------------------------------------------------------------------------------------
Minority interests (23) (20) (12) (15) (10) (5) (2)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (1,114) (956) 4,550 (1,660) 4,213 704 337
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle, net
of tax - - (159) - (124) - (35)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1,114) (956) 4,391 (1,660) 4,089 704 302
- ------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of change in
accounting principle, net of tax (1.10) (0.94) 4.52 - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle - - (0.16) - - - -
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1.10) (0.94) 4.36 - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per share -
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of change in
accounting principle, net of tax (1.10) (0.94) 4.50 - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle - - (0.16) - - - -
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1.10) (0.94) 4.34 - - - -
</Table>
The accompanying notes are an integral part of these Unaudited Interim Condensed
Consolidated Financial Statements.
<Page>
18 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
Consolidated Industrial Business Financial Services
SEPT.30, SEPT.30, DEC.31, SEPT.30, DEC.31, SEPT.30, DEC.31,
2003 2003 2002 2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
(in millions) (NOTE 1)$ [EURO] [EURO] [EURO] [EURO] [EURO] [EURO]
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Goodwill 2,301 1,975 2,071 1,916 2,009 59 62
- ------------------------------------------------------------------------------------------------------------------------------------
Other intangible assets 3,066 2,632 2,855 2,531 2,755 101 100
- ------------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 40,276 34,572 36,269 34,408 36,111 164 158
- ------------------------------------------------------------------------------------------------------------------------------------
Investments and long-term financial assets 10,186 8,743 9,291 8,392 8,922 351 369
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment on operating leases, net 29,830 25,605 28,243 3,339 3,313 22,266 24,930
- ------------------------------------------------------------------------------------------------------------------------------------
FIXED ASSETS 85,659 73,527 78,729 50,586 53,110 22,941 25,619
====================================================================================================================================
Inventories 19,285 16,554 15,642 15,314 13,965 1,240 1,677
- ------------------------------------------------------------------------------------------------------------------------------------
Trade receivables 7,660 6,575 6,297 6,297 6,005 278 292
- ------------------------------------------------------------------------------------------------------------------------------------
Receivables from financial services 61,786 53,035 52,088 2 10 53,033 52,078
- ------------------------------------------------------------------------------------------------------------------------------------
Other receivables 18,927 16,247 17,573 10,713 11,159 5,534 6,414
- ------------------------------------------------------------------------------------------------------------------------------------
Securities 3,944 3,385 3,293 2,881 2,911 504 382
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 13,158 11,294 9,130 9,564 8,191 1,730 939
- ------------------------------------------------------------------------------------------------------------------------------------
NON-FIXED ASSETS 124,760 107,090 104,023 44,771 42,241 62,319 61,782
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED TAXES 4,442 3,813 3,613 3,697 3,496 116 117
- ------------------------------------------------------------------------------------------------------------------------------------
PREPAID EXPENSES 1,187 1,019 962 922 866 97 96
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 216,048 185,449 187,327 99,976 99,713 85,473 87,614
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================================================================================================================
Capital stock 3,067 2,633 2,633
- ------------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 9,190 7,888 7,819
- ------------------------------------------------------------------------------------------------------------------------------------
Retained earnings 32,248 27,681 30,156
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive loss (5,861) (5,031) (5,604)
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury stock - - -
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 38,644 33,171 35,004 24,423 26,384 8,748 8,620
- ------------------------------------------------------------------------------------------------------------------------------------
MINORITY INTERESTS 532 457 432 438 414 19 18
- ------------------------------------------------------------------------------------------------------------------------------------
ACCRUED LIABILITIES 50,335 43,206 43,622 42,293 42,619 913 1,003
- ------------------------------------------------------------------------------------------------------------------------------------
Financial liabilities 89,103 76,483 79,112 11,398 12,201 65,085 66,911
- ------------------------------------------------------------------------------------------------------------------------------------
Trade liabilities 16,724 14,355 12,342 14,161 12,106 194 236
- ------------------------------------------------------------------------------------------------------------------------------------
Other liabilities 10,983 9,428 8,843 6,747 6,152 2,681 2,691
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES 116,810 100,266 100,297 32,306 30,459 67,960 69,838
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED TAXES 3,201 2,748 2,312 (3,871) (4,425) 6,619 6,737
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME 6,526 5,601 5,660 4,387 4,262 1,214 1,398
====================================================================================================================================
TOTAL LIABILITIES 177,404 152,278 152,323 75,553 73,329 76,725 78,994
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 216,048 185,449 187,327 99,976 99,713 85,473 87,614
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
The accompanying notes are an integral part of these Unaudited Interim Condensed
Consolidated Financial Statements.
<Page>
Interim Report Q3 2003 | 19
DAIMLERCHRYSLER AG AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<Table>
<Caption>
Accumulated other comprehensive income (loss)
------------------------------------------------------
CUMULA-
TIVE TRANS- DERIVATIVE
ADDITIONAL LATION AVAILABLE- FINANCIAL MINIMUM
CAPITAL PAID-IN RETAINED ADJUST- FOR-SALE INSTRU- PENSION
(IN MILLIONS OF EURO) STOCK CAPITAL EARNINGS MENT SECURITIES MENTS LIABILITY
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 2002 2,609 7,319 26,441 3,850 61 (337) (906)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income - - 4,391 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) - - - (2,172) (107) 1,143 5
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME
===================================================================================================================================
Stock based compensation - 39 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of shares upon conversion
of notes 24 482 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of capital stock - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Re-issuance of treasury stock - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends - - (1,003) - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2002 2,633 7,840 29,829 1,678 (46) 806 (901)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 2003 2,633 7,819 30,156 600 (74) 1,065 (7,195)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss - - (956) - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) - - - (1,186) 208 1,041 510
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE LOSS
- -----------------------------------------------------------------------------------------------------------------------------------
Stock based compensation - 68 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of shares upon exercise
of options - 1 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of capital stock - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Re-issuance of treasury stock - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends - - (1,519) - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2003 2,633 7,888 27,681 (586) 134 2,106 (6,685)
<Caption>
TREASURY
(IN MILLIONS OF EURO) STOCK TOTAL
- ------------------------------------------------------------
BALANCE AT JANUARY 1, 2002 - 39,037
- ------------------------------------------------------------
Net income - 4,391
- ------------------------------------------------------------
Other comprehensive income (loss) - (1,131)
- ------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME 3,260
============================================================
Stock based compensation - 39
- ------------------------------------------------------------
Issuance of shares upon conversion
of notes - 506
- ------------------------------------------------------------
Purchase of capital stock 30 30
- ------------------------------------------------------------
Re-issuance of treasury stock (30) (30)
- ------------------------------------------------------------
Dividends - (1,003)
- ------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2002 - 41,839
- ------------------------------------------------------------
BALANCE AT JANUARY 1, 2003 - 35,004
- ------------------------------------------------------------
Net loss - (956)
- ------------------------------------------------------------
Other comprehensive income (loss) - 573
- ------------------------------------------------------------
TOTAL COMPREHENSIVE LOSS (383)
- ------------------------------------------------------------
Stock based compensation - 68
- ------------------------------------------------------------
Issuance of shares upon exercise
of options - 1
- ------------------------------------------------------------
Purchase of capital stock (28) (28)
- ------------------------------------------------------------
Re-issuance of treasury stock 28 28
- ------------------------------------------------------------
Dividends - (1,519)
- ------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2003 - 33,171
- ------------------------------------------------------------
</Table>
The accompanying notes are an integral part of these Unaudited Interim Condensed
Consolidated Financial Statements.
<Page>
20 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
Consolidated Industrial Business Financial Services
Q1-3 2003 Q1-3 2003 Q1-3 2002 Q1-3 2003 Q1-3 2002 Q1-3 2003 Q1-3 2002
- --------------------------------------------------------------------------------------------------------------------------------
(in millions) (NOTE 1) $ [EURO] [EURO] [EURO] [EURO] [EURO] [EURO]
- --------------------------------------------------------------------------------------------------------------------------------
Net income (loss) (1,114) (956) 4,391 (1,660) 4,089 704 302
- --------------------------------------------------------------------------------------------------------------------------------
Income applicable to minority interests 23 20 12 16 10 4 2
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle - - 159 - 124 - 35
- --------------------------------------------------------------------------------------------------------------------------------
Gains on disposals of businesses (94) (81) (2,610) (81) (2,610) - -
- --------------------------------------------------------------------------------------------------------------------------------
Impairment of investment in EADS 2,283 1,960 - 1,960 - - -
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization of equipment on
operating leases 4,914 4,218 5,316 438 273 3,780 5,043
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization of fixed assets 5,084 4,364 4,601 4,288 4,531 76 70
- --------------------------------------------------------------------------------------------------------------------------------
Change in deferred taxes (230) (197) 1,012 (678) 314 481 698
- --------------------------------------------------------------------------------------------------------------------------------
Equity (income) loss from associated companies 247 212 (62) 222 (67) (10) 5
- --------------------------------------------------------------------------------------------------------------------------------
Change in financial instruments 340 292 (96) 249 (217) 43 121
- --------------------------------------------------------------------------------------------------------------------------------
Gains on disposals of fixed assets/securities (400) (343) (473) (343) (473) - -
- --------------------------------------------------------------------------------------------------------------------------------
Change in trading securities 45 39 404 44 404 (5) -
- --------------------------------------------------------------------------------------------------------------------------------
Change in accrued liabilities 2,459 2,111 2,721 2,104 2,606 7 115
- --------------------------------------------------------------------------------------------------------------------------------
Turnaround plan expenses - Chrysler Group 49 42 694 42 694 - -
- --------------------------------------------------------------------------------------------------------------------------------
Turnaround plan payments - Chrysler Group (254) (218) (394) (218) (394) - -
- --------------------------------------------------------------------------------------------------------------------------------
Changes in other operating assets and
liabilities:
- --------------------------------------------------------------------------------------------------------------------------------
- - Inventories, net (1,579) (1,355) (1,358) (1,643) (1,168) 288 (190)
- --------------------------------------------------------------------------------------------------------------------------------
- - Trade receivables (557) (478) (902) (490) (872) 12 (30)
- --------------------------------------------------------------------------------------------------------------------------------
- - Trade liabilities 3,344 2,870 1,434 2,909 1,567 (39) (133)
- --------------------------------------------------------------------------------------------------------------------------------
- - Other assets and liabilities 1,883 1,614 (776) 1,319 (1,290) 295 514
- --------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 16,443 14,114 14,073 8,478 7,521 5,636 6,552
================================================================================================================================
Purchases of fixed assets:
- --------------------------------------------------------------------------------------------------------------------------------
- - Increase in equipment on operating leases (13,806) (11,851) (13,476) (3,143) (3,818) (8,708) (9,658)
- --------------------------------------------------------------------------------------------------------------------------------
- - Purchases of property, plant and equipment (5,484) (4,707) (4,889) (4,649) (4,827) (58) (62)
- --------------------------------------------------------------------------------------------------------------------------------
- - Purchases of other fixed assets (248) (213) (91) (166) (40) (47) (51)
- --------------------------------------------------------------------------------------------------------------------------------
Proceeds from disposals of equipment on operating
leases 11,168 9,586 12,796 3,576 4,929 6,010 7,867
- --------------------------------------------------------------------------------------------------------------------------------
Proceeds from disposals of fixed assets 323 277 377 253 346 24 31
- --------------------------------------------------------------------------------------------------------------------------------
Payments for investments in businesses (947) (813) (381) (764) (368) (49) (13)
- --------------------------------------------------------------------------------------------------------------------------------
Proceeds from disposals of businesses 270 232 5,573 185 5,106 47 467
- --------------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in receivables from
financial services, net (4,870) (4,180) (7,350) 33 - (4,213) (7,350)
- --------------------------------------------------------------------------------------------------------------------------------
(Acquisition) disposition of securities (other
than trading), net (252) (216) (94) (152) 79 (64) (173)
- --------------------------------------------------------------------------------------------------------------------------------
Change in other cash 38 33 (18) (38) (179) 71 161
- --------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (13,808) (11,852) (7,553) (4,865) 1,228 (6,987) (8,781)
================================================================================================================================
Change in financial liabilities (including
amounts for commercial paper borrowings,
net of [EURO] (731) ($(852) and [EURO] (818) in
2003 and 2002, respectively) 2,331 2,001 (6,364) (159) (6,104) 2,160 (260)
- --------------------------------------------------------------------------------------------------------------------------------
Dividends paid (incl. profit transferred from
subsidiaries) (1,788) (1,535) (1,011) (1,522) (972) (13) (39)
- --------------------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of capital stock
(incl. minority interests) 33 28 30 (11) (116) 39 146
- --------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (33) (28) (30) (28) (30) - -
- --------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 543 466 (7,375) (1,720) (7,222) 2,186 (153)
================================================================================================================================
Effect of foreign exchange rate changes on cash
and cash equivalents (maturing within 3 months) (676) (580) (983) (530) (912) (50) (71)
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (MATURING WITHIN 3 MONTHS)
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS (MATURING WITHIN 3
MONTHS) 2,502 2,148 (1,838) 1,363 615 785 (2,453)
- --------------------------------------------------------------------------------------------------------------------------------
AT BEGINNING OF PERIOD 10,602 9,100 10,715 8,161 7,344 939 3,371
- --------------------------------------------------------------------------------------------------------------------------------
AT END OF PERIOD 13,104 11,248 8,877 9,524 7,959 1,724 918
================================================================================================================================
</Table>
The accompanying notes are an integral part of these Unaudited Interim
Condensed Consolidated Financial Statements.
<Page>
Interim Report Q3 2003 | 21
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim condensed consolidated financial statements ("interim
financial statements") of DaimlerChrysler AG and subsidiaries ("DaimlerChrysler"
or the "Group") have been prepared in accordance with Accounting Principles
Generally Accepted in the United States of America ("U.S. GAAP"). All amounts
herein are presented in millions of euros ("[EURO]") and, for amounts as of and
for the three and nine months ended September 30, 2003, also in millions of U.S.
dollars ("$"), the latter being presented solely for the convenience of the
reader, which is converted at the rate of [EURO] 1= $1.1650, the Noon Buying
Rate of the Federal Reserve Bank of New York on September 30, 2003.
Certain prior period amounts have been reclassified to conform to the current
period presentation.
All significant intercompany accounts and transactions have been eliminated.
In the opinion of management, the interim financial statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position, results of operations and cash
flows of the Group for the periods presented. Operating results for the interim
periods presented are not necessarily indicative of the results that may be
expected for any future period or the full fiscal year. The interim financial
statements should be read in conjunction with the December 31, 2002 audited
consolidated financial statements and notes thereto included in
DaimlerChrysler's 2002 Annual Report and its Form 20-F which was filed with the
United States Securities and Exchange Commission on February 20, 2003.
The preparation of the financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the amounts
recorded in the interim financial statements and accompanying notes. Actual
amounts could differ from those estimates.
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 also significantly influenced by
activities of the financial services business. To enhance the readers'
understanding of the Group's interim financial statements, the accompanying
financial statements present, in addition to the interim 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.
In November 2002, the Emerging Issues Task Force ("EITF") reached a final
consensus on EITF 00-21, "Revenue Arrangements with Multiple Deliverables." The
scope provisions of EITF 00-21 were slightly modified in May 2003. EITF 00-21
addresses certain aspects of the accounting of revenue arrangements with
multiple deliverables by a vendor. EITF 00-21 outlines an approach to determine
when a revenue arrangement that contains multiple deliverables should be divided
into separate units of accounting and, if separation is appropriate, how the
arrangement consideration should be allocated to the identified accounting
units. EITF 00-21 became effective for DaimlerChrysler in its financial
statements beginning July 1, 2003 and DaimlerChrysler applied the consensus
prospectively to all transactions occurring after June 30, 2003. The adoption of
EITF 00-21 did not have a significant impact on the Group's consolidated
financial statements.
In November 2002, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. ("FIN") 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others - an interpretation of FASB Statements No. 5, 57, and 107 and rescission
of FASB Interpretation No. 34." FIN 45 elaborates on the disclosures to be made
by a guarantor in its financial statements regarding obligations under certain
guarantees that it has issued. FIN 45 also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability for the fair
value of the non-contingent portion of the obligation due to the issuance of the
guarantee or, if higher, a probable loss under Statement of Financial Accounting
Standards No. ("SFAS") 5, "Accounting for Contingencies." Disclosure
requirements are effective for financial statements of interim and annual
periods ending after December 15, 2002. The recognition and measurement
provisions are effective for guarantees issued or modified after December 31,
2002.
DaimlerChrysler determines fair value of the non-contingent portion of
guarantees issued primarily based on market information including third party
offers. In the absence of reliable market information, the Group uses the
present value of expected future cash flows. The offsetting entry made at the
initial recognition of a guarantee liability depends on the nature of the
guarantee, but generally would be to expense. A systematic
<Page>
22 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
and rational method for subsequent measurement of the liability is determined in
connection with information developed for initial measurement except for changes
in the liability due to losses recognized under SFAS 5. DaimlerChrysler adopted
the disclosure requirements in its 2002 consolidated financial statements.
DaimlerChrysler adopted the recognition and measurement provisions prospectively
beginning January 1, 2003 without significant impact on the Group's consolidated
financial statements.
In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 requires disclosures in both interim and annual financial
statements of the method of accounting used for stock-based employee
compensation and the effect of the method used on reported results (see Note
12).
During the second quarter of 2003, DaimlerChrysler adopted the fair value
recognition provisions of SFAS 123 prospectively to all employee awards granted,
modified, or settled after January 1, 2003. Compensation expense for all awards
granted prospectively from December 31, 2002 will be measured at the grant date
based on the fair value of the equity award using a modified Black-Scholes
option-pricing model. Compensation expense will be recognized over the employee
service period with an offsetting credit to equity (paid-in capital).
DaimlerChrysler options granted prior to January 1, 2003, will continue to be
accounted for using the intrinsic value based approach under Accounting
Principles Board Opinion No. ("APB") 25, "Accounting for Stock Issued to
Employees" and related Interpretations. Compensation expense under APB 25 was
measured at the grant date based on the difference between the strike price of
the equity award and the fair value of the underlying stock as of the date of
grant. The adoption of the fair value based method for awards granted in April
2003 resulted in additional compensation expense in the Group's statement of
income (loss) of [EURO] 12.3 million for the three month period ended September
30, 2003, ([EURO] 7.5 million, net of taxes, or [EURO] 0.01 per share,
respectively) and [EURO] 25.1 million ([EURO] 15.4 million, net of taxes, or
[EURO] 0.02 per share, respectively) for the nine month period ended September
30, 2003. Note 12 includes a table that illustrates the effect on net income and
earnings per share if the fair value based method had been applied to all
outstanding and unvested awards in each period.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities - an interpretation of ARB No. 51," which clarifies the application of
the consolidation rules to certain variable interest entities. FIN 46
established a new multi-step model for the consolidation of variable interest
entities when a company has a controlling financial interest based either on
voting interests or variable interests. Consolidation based on variable
interests is required by the primary beneficiary if the equity investors lack
essential characteristics of a controlling financial interest or if the equity
investment at risk is not sufficient for the entity to finance its activities
without additional subordinated financial support from other parties. FIN 46
also provides disclosure requirements related to significant investments in
variable interest entities, whether or not those entities are consolidated.
On October 9, 2003, the FASB issued FASB Staff Position FIN 46-6 ("FSP FIN
46-6"), "Effective Date of FASB Interpretation No. 46, Consolidation of Variable
Interest Entities." FSP FIN 46-6 defers the effective date for applying the
provisions of FIN 46 for interests held by public entities in variable interest
entities or potential variable interest entities created before February 1,
2003. Therefore, for all potential variable interest entities created prior to
February 1, 2003, DaimlerChrysler decided to adopt FIN 46 as of December 31,
2003. DaimlerChrysler is required to apply FIN 46 immediately for variable
interest entities created subsequent to January 31, 2003, however, there were no
significant variable interest entities created after this date that were
required to be consolidated by DaimlerChrysler. See Note 2 for further
information about the expected impact of FIN 46 on the DaimlerChrysler Group.
In March 2003, the EITF reached consensuses on the remaining issues of
EITF 02-9, "Accounting for Changes That Result in a Transferor Regaining Control
of Financial Assets Sold." EITF 02-9 requires the transferor to recognize at
fair value financial assets previously sold when control over the financial
assets is regained as if the transferor had repurchased the assets, together
with a corresponding liability to the transferee. Gain or loss recognition by
the transferor will be precluded if control is regained over assets sold.
EITF 02-9 also applies to any beneficial interest or to qualifying special
purpose entities that become non-qualifying. Servicing assets or liabilities
and other retained interests continue to be accounted for separately. Loan loss
allowances may not be recognized as of the repurchase date. EITF 02-9 is
applicable for changes occurring after April 2, 2003, that result in the
transferor regaining control over financial assets previously sold. The
application of EITF 02-9 did not have a material effect on the Group's
consolidated financial statements.
<Page>
Interim Report Q3 2003 | 23
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." The Statement amends and
clarifies accounting for derivative instruments and hedging activities under
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
149 is generally effective for contracts entered into or modified after
June 30, 2003. However, the provisions of SFAS 149 that relate to SFAS 133
Implementation Issues that have been effective for fiscal quarters that began
prior to June 15, 2003, shall continue to be applied in accordance with their
respective effective dates. The application of SFAS 149 did not have a
significant impact on the Group's consolidated financial statements.
In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
amends the accounting and classification for certain financial instruments, such
as those used in most stock buy-back programs that previously were accounted for
and classified as equity. SFAS 150 requires that certain types of freestanding
financial instruments that have characteristics of both liabilities and equity
be classified as liabilities with, in most cases, changes in fair value flowing
through the income statement. SFAS 150 could affect companies' ratios,
performance measures and certain stock buy-back programs. DaimlerChrysler
applies the provisions of SFAS 150 to all financial instruments entered into or
modified after May 31, 2003. The adoption of SFAS 150 did not have an impact on
the Group's consolidated financial statements.
In May 2003, the EITF reached a consensus on EITF 01-8, "Determining
Whether an Arrangement Contains a Lease". EITF 01-8 clarifies
certain provisions of SFAS 13, "Accounting for Leases," with respect to the
identification of lease elements in arrangements that do not explicitly
include lease provisions. Any lease element identified under the model of
EITF 01-8 should be accounted for under current lease accounting literature.
EITF 01-8 should be applied prospectively for lessees and lessors to
arrangements newly agreed to, modified, or acquired in a business combination
beginning with the first reporting period after May 28, 2003. DaimlerChrysler
applied the provisions of EITF 01-8 beginning July 1, 2003. Initial adoption
of EITF 01-8 did not have a significant impact on the Group's consolidated
financial statements.
2. POTENTIAL VARIABLE INTEREST ENTITIES
As described in Note 1, for all potential variable interest entities created
prior to February 1, 2003, DaimlerChrysler decided to adopt FIN 46 as of
December 31, 2003. The initial impact of the adoption of FIN 46 for these
entities will be reflected as the cumulative effect of a change in accounting
principle in DaimlerChrysler's December 31, 2003 consolidated statement of
income. The implementation of FIN 46 for potential variable interest entities
created prior to February 1, 2003, is expected to have the following impact on
the Group's consolidated financial statements:
LEASING ARRANGEMENTS
DaimlerChrysler identified several leasing arrangements that were previously
off-balance-sheet and will be required to be consolidated under FIN 46. Under
these arrangements, variable interest entities were established and owned by
third parties. The variable interest entities raised funds by issuing either
debt or equity securities to third party investors. The variable interest
entities used the debt and equity proceeds to purchase property and
equipment, which is leased by the Group and used in the normal course of
business. At the end of the lease term, DaimlerChrysler generally has the
option to purchase the property and equipment or re-lease the property and
equipment under new terms. DaimlerChrysler will begin to consolidate these
variable interest entities on December 31, 2003. The entities that have been
identified for consolidation in accordance with FIN 46 have total assets and
liabilities of approximately [EURO] 500 million. The assets consist primarily
of property, plant and equipment that generally serves as collateral for the
entities' long-term borrowings and represents the Group's maximum exposure to
loss as a result of its involvement with these entities. The creditors of
these entities do not have recourse to the general credit of the Group,
except to the extent of guarantees provided.
ARRANGEMENTS WITH BANK CONDUITS
DaimlerChrysler sells automotive receivables to multi-seller and
multi-collateralized bank conduits, which are considered variable interest
entities, in the ordinary course of business. A bank conduit generally receive
substantially all of its funding from issuing asset-backed securities that are
cross collateralized by the assets held by the entity. DaimlerChrysler generally
remains as servicer. DaimlerChrysler also retains residual beneficial interests
in the receivables sold, which are designed to absorb substantially all of the
credit, prepayment, and interest-rate risk of the receivables transferred to the
conduits. Although its interest in these variable interest entities is
significant, DaimlerChrysler has concluded that it is not the primary
beneficiary of these bank conduits and therefore is not required to consolidate
them under FIN 46. The outstanding balance of receivables sold to conduits and
the corresponding retained interest balance as of September 30, 2003, are
approximately [EURO] 5.4 billion and [EURO] 1.0 billion, respectively, which
represents the Group's maximum exposure to loss as a result of its involvement
with these variable interest entities.
<Page>
24 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT INTERESTS IN ASSOCIATED COMPANIES
As described in more detail in Note 4 to the Group's 2002 annual consolidated
financial statements, DaimlerChrysler first invested in Mitsubishi Motors
Corporation ("MMC") in October 2000 and later increased its equity investment in
June 2001. DaimlerChrysler is currently MMC's largest shareholder. MMC is a
global company headquartered in Japan whose activities consist principally of
development, design, manufacture, assembly, sales and purchase, importing and
other transactions (including financing) relating to automobiles and to
component parts and replacement parts. Approximately 30% of MMC outstanding
common shares are publicly traded. Summary U.S. GAAP financial information for
MMC as of December 31, 2002 and 2001 is included in Note 3 to the Group's 2002
annual consolidated financial statements. DaimlerChrysler's involvement with MMC
is comprised of its 37% equity ownership that is currently included in the
Group's consolidated financial statements using the equity method of accounting,
its shared ownership interests in Mitsubishi Fuso Truck and Bus Corporation
("MFTBC"), as well as other interests through various joint venture and
similar arrangements, and technology sharing arrangements. DaimlerChrysler
believes that its maximum exposure to loss as a result of its involvement
with MMC is not unlimited, but could extend beyond the carrying value of its
investments in MMC, which was [EURO] 1.1 billion at September 30, 2003.
DaimlerChrysler is currently evaluating the effects of the issuance of FIN 46
on the accounting for its interests in MMC.
In November 1995, DaimlerChrysler assumed a 45% equity ownership interest in
debis AirFinance ("dAF"), an Amsterdam registered Private Limited Liability
Company that was established for purposes of leasing aircraft and related
technical equipment to airlines and financial intermediaries. Several banks
hold the remaining ownership interests in dAF. dAF's consolidated total assets,
financial liabilities, total liabilities, and net shareholders' equity at
September 30, 2003 were [EURO] 2.9 billion, [EURO] 2.0 billion, [EURO] 2.8
billion and [EURO] 0.1 billion, respectively. dAF's consolidated revenues for
the three-month period ending September 30, 2003, were [EURO] 0.1 billion.
DaimlerChrysler's involvement with dAF includes primarily its equity interest
that is included in the Group's consolidated financial statements using the
equity method of accounting, and also subordinated loans receivable and
unsecured loans that have been provided to dAF. DaimlerChrysler believes that
its maximum exposure to loss as a result of its involvement with dAF is
primarily limited to the carrying value of its total investments (including
loans) in dAF, which was [EURO] 0.6 billion at September 30, 2003.
DaimlerChrysler is currently evaluating the effects of the issuance of FIN 46
on the accounting for its interests in dAF.
In September 2002, DaimlerChrysler, Deutsche Telekom AG ("Deutsche Telekom"),
and Compagnie Financiere et Industrielle des Autoroutes S.A. ("Cofiroute")
entered into an agreement with the Federal Republic of Germany to develop and
operate a toll collection system for the use of German roadways by certain
commercial vehicles. These activities are conducted through the operating
entity Toll Collect GmbH ("Toll Collect"), for which DaimlerChrysler has a
45% equity ownership interest. Deutsche Telekom also holds a 45% equity
ownership interest and Cofiroute holds the remaining 10% equity ownership
interest in Toll Collect. Toll Collect's total assets, financial liabilities,
total liabilities, and net shareholders' equity at September 30, 2003 were
[EURO] 0.6 billion, [EURO] 0.5 billion, [EURO] 0.6 billion and
[EURO] 7 million, respectively. DaimlerChrysler's involvement with Toll
Collect includes its equity interest that is included in the Group's
consolidated financial statements using the equity method of accounting,
receivables from cost transfers and certain guarantees. DaimlerChrysler
believes its maximum exposure to loss as a result of its involvement with
Toll Collect could extend beyond the carrying value of its investments in
Toll Collect, including receivables from cost transfers, which together
aggregated [EURO] 121 million at September 30, 2003, because of the risks
associated with certain guarantees that are described in more detail in Note
17. DaimlerChrysler is currently evaluating the effects of the issuance of
FIN 46 on the accounting for its interests in Toll Collect, but does not
expect that it will be required to consolidate Toll Collect as of December
31, 2003.
OTHER SIGNIFICANT INTERESTS IN INVESTMENTS, DEALERSHIPS, AND EXECUTORY
CONTRACTS
DaimlerChrysler has equity or other interests in entities that were created
prior to February 1, 2003, including investments fully consolidated, accounted
for under the equity method or cost method of accounting, dealerships,
suppliers, and service providers. Entities in which DaimlerChrysler does not
hold any voting equity interests, including most dealerships, suppliers or
service providers, are generally not included in the Group's consolidated
financial statements. Substantially all of these entities are substantive
operating businesses and were not created for special or limited purposes. Due
to the number of entities and the varying nature of the Group's involvement,
DaimlerChrysler has not yet finalized its evaluation to determine if any of
these entities would need to be consolidated or de-consolidated under FIN 46.
Except to the extent of guarantees provided by the Group, DaimlerChrysler
believes that any additional liabilities recognized as a result of consolidating
under FIN 46 any previously unconsolidated entities would not represent
additional claims on the Group's general assets;
<Page>
Interim Report Q3 2003 | 25
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
rather, they would represent claims against the additional assets recognized
as a result of consolidating these entities. Conversely, DaimlerChrysler
believes additional assets recognized as a result of consolidating under FIN
46 any previously unconsolidated entities would not represent additional
assets that could be used to satisfy claims against the Group's general
assets.
Individual associated companies included in the Group's consolidated
financial statements using the equity method are also subject to the
requirements of FIN 46 at the investee level. These associated companies are
currently evaluating whether they are the primary beneficiary of certain
variable interest entities created prior to February 1, 2003, and therefore
would be required to consolidate them as of December 31, 2003.
DaimlerChrysler accounts for its equity in the earnings and losses of certain
associated companies such as EADS, MMC, and MFTBC on a three-month lag. The
initial impact, if any, of adoption of FIN 46 at the investee level for these
associated companies will be recognized as the cumulative effect of a change
in accounting principle in the Group's consolidated statement of income for
the three-month period ending March 31, 2004. Otherwise, the initial impact,
if any, of adoption of FIN 46 at the investee level for associated companies
not accounted for on a three-month lag will be recognized as the cumulative
effect of a change in accounting principle in the Group's December 31, 2003
consolidated statement of income.
3. TURNAROUND PLAN FOR THE CHRYSLER GROUP
The DaimlerChrysler Supervisory Board approved a multi-year turnaround plan
for the Chrysler Group in 2001. Key initiatives for the turnaround plan over
the period 2001 through 2003 include a workforce reduction and an elimination
of excess capacity. The workforce reduction affected represented and
non-represented hourly and salary employees. To eliminate excess capacity,
the Chrysler Group has or is in the process of idling, closing or disposing
of certain manufacturing plants, eliminating shifts and reducing line speeds
at certain manufacturing facilities, and adjusting volumes at component,
stamping and powertrain facilities.
The net charges recorded for the plan in the year ended December 31, 2001 were
[EURO] 3,064 million ([EURO] 1,934 million net of taxes), including [EURO] 1,374
million related to workforce reductions, [EURO] 984 million related to asset
write-downs and [EURO] 706 million related to other costs.
The charges recorded for the plan in the nine months ended September 30, 2002
were [EURO] 694 million ([EURO] 447 million net of taxes) and are presented as a
separate line item on the accompanying consolidated statements of income (loss)
([EURO] 689 million and [EURO] 5 million would have otherwise been reflected
in cost of sales and selling, administrative and other expenses,
respectively). These additional charges and adjustments were for costs
associated with the idling, closing or disposal of certain manufacturing
facilities in 2002 and 2003 and ongoing workforce reduction measures as well
as revisions of estimates based upon information currently available or
actual settlements.
The charges recorded for the plan in the nine months ended September 30, 2003
were [EURO] 42 million ([EURO] 21 million net of taxes) and are presented as a
separate line item on the accompanying consolidated statements of income (loss)
([EURO] 30 million and [EURO] 11 million would have otherwise been reflected
in cost of sales and selling, administrative and other expenses,
respectively). These additional charges and adjustments were recorded for
workforce reductions and facility deactivation costs.
The pre-tax amounts for turnaround plan charges are comprised of the following:
<Table>
<Caption>
ASSET
WORKFORCE WRITE- OTHERS
(IN MILLIONS OF [EURO]) REDUCTIONS DOWNS COSTS TOTAL
- -----------------------------------------------------------------------------
RESERVE BALANCE
AT JANUARY 1, 2002 506 - 510 1,016
=============================================================================
Additional charges 353 267 87 707
- -----------------------------------------------------------------------------
Adjustments (6) 17 (30) (19)
- -----------------------------------------------------------------------------
Net charges 347 284 57 688
=============================================================================
Payments (133) - (123) (256)
- -----------------------------------------------------------------------------
Amount charged
against assets - (284) - (284)
- -----------------------------------------------------------------------------
Amount recognized by
and transferred to the
employee benefit plans (48) - - (48)
- -----------------------------------------------------------------------------
Currency trans-
lation adjustments (70) - (49) (119)
- -----------------------------------------------------------------------------
RESERVE BALANCE
AT JUNE 30, 2002 602 - 395 997
=============================================================================
Additional charges - - 12 12
- -----------------------------------------------------------------------------
Adjustments (17) - 11 (6)
- -----------------------------------------------------------------------------
Net charges (17) - 23 6
=============================================================================
Payments (98) - (40) (138)
- -----------------------------------------------------------------------------
Amount charged
against assets - - (1) (1)
- -----------------------------------------------------------------------------
Amount recognized by
and transferred to the
employee benefit plans (50) - - (50)
- -----------------------------------------------------------------------------
Currency trans-
lation adjustments 1 - (2) (1)
- -----------------------------------------------------------------------------
RESERVE BALANCE
AT SEPTEMBER 30, 2002 438 - 375 813
=============================================================================
</Table>
<Page>
26 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<Table>
Additional charges - 2 - 2
- -----------------------------------------------------------------------------
Adjustments (18) 13 3 (2)
- -----------------------------------------------------------------------------
Net charges (18) 15 3 -
=============================================================================
Payments (66) - (52) (118)
- -----------------------------------------------------------------------------
Amount charged
against assets - (15) (5) (20)
- -----------------------------------------------------------------------------
Amount recognized by
and transferred to the
employee benefit plans (54) - - (54)
- -----------------------------------------------------------------------------
Currency trans-
lation adjustment (20) - (16) (36)
- -----------------------------------------------------------------------------
RESERVE BALANCE
AT DECEMBER 31, 2002 280 - 305 585
=============================================================================
Additional charges 26 - - 26
- -----------------------------------------------------------------------------
Adjustments 5 - (26) (21)
- -----------------------------------------------------------------------------
Net charges 31 - (26) 5
=============================================================================
Payments (73) - (99) (172)
- -----------------------------------------------------------------------------
Amount charged
against assets - - (2) (2)
- -----------------------------------------------------------------------------
Amount recognized by
and transferred to the
employee benefit plans (47) - - (47)
- -----------------------------------------------------------------------------
Currency trans-
lation adjustment (12) - (18) (30)
- -----------------------------------------------------------------------------
RESERVE BALANCE
AT JUNE 30, 2003 179 - 160 339
=============================================================================
Additional charges 23 - 12 35
- -----------------------------------------------------------------------------
Adjustments 1 - 1 2
- -----------------------------------------------------------------------------
Net charges 24 - 13 37
=============================================================================
Payments (34) - (12) (46)
- -----------------------------------------------------------------------------
Currency trans-
lation adjustment (2) - (6) (8)
- -----------------------------------------------------------------------------
RESERVE BALANCE
AT SEPTEMBER 30, 2003 167 - 155 322
=============================================================================
</Table>
Workforce reduction charges during the nine months ended September 30, 2003 and
2002, relate to involuntary severance benefits ([EURO] 74 million and
[EURO] 215 million, respectively) and early retirement incentive programs
([EURO] (19) million and [EURO] 115 million, respectively). The voluntary
early retirement programs, accepted by 791 and 1,985 employees during the
nine months ended September 30, 2003 and 2002, respectively, are formula
driven based on salary levels, age and past service. In addition, 304 and
3,589 employees were involuntarily affected by the plan during the nine
months ended September 30, 2003 and 2002, respectively. The amount of
involuntary severance benefits paid and charged against the liability during
the nine months ended September 30, 2003 and 2002 was [EURO] 12 million and
[EURO] 151 million, respectively. The amount recognized by and transferred to
the employee benefit plans represents the cost of the special early
retirement programs and the curtailment of prior service costs actuarially
recognized by the pension and postretirement health and life insurance
benefit plans.
As a result of the planned idling, closing or disposal of certain
manufacturing facilities, the ability to recover the carrying values of certain
long-lived assets at these plants were determined to be impaired. Accordingly,
the Chrysler Group recorded impairment charges of [EURO] 284 million in the nine
months ended September 30, 2002. The impairment charges represent the amount by
which the carrying values of the property, plant, equipment and tooling exceeded
their respective fair market values as determined by third party appraisals or
comparative market analyses developed by the Chrysler Group.
Other costs primarily include supplier contract cancellation costs.
The Chrysler Group sold the Dayton Thermal Products facility on May 1, 2002,
to a joint venture company with Behr America, Inc. and will maintain a minority
interest for two years. In addition, the Chrysler Group sold the Graz, Austria,
plant to Magna International Inc. on July 12, 2002. The exit costs of these two
plant sales were previously provided for in the turnaround plan charges.
The Chrysler Group may recognize additional restructuring costs in the
remaining three months of 2003 primarily relating to the divestiture of
selected assets. The Chrysler Group expects cash payments of $0.4 billion in
2003 for the previously recorded charges.
4. IMPAIRMENT OF INVESTMENT IN EADS
At September 30, 2003, the carrying value of the Group's investment in EADS
approximated [EURO] 5.5 billion and its fair value (based on quoted market
price) approximated [EURO] 3.5 billion. U.S. GAAP and SEC rules require that
an investment be written down to its market value, with a charge taken to
earnings, when an impairment in the carrying amount of an investment is
considered to be other than temporary. As of September 30, 2003, the quoted
fair value of the investment in EADS was significantly below its carrying
value for a sustained period of time. Accordingly, DaimlerChrysler recognized
an impairment charge of approximately [EURO] 1.96 billion in the Group's
consolidated statement of income (loss) on September 30, 2003, to write-down
its investment in EADS to its quoted market value on that date.
<Page>
Interim Report Q3 2003 | 27
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
GOODWILL AND OTHER INTANGIBLE ASSETS. DaimlerChrysler adopted SFAS 142 on
January 1, 2002. The transitional goodwill impairment evaluation and the
recognition of the transition impairment charge of [EURO] 159 million
([EURO] 0.16 per share) were completed in December 2002. However, because
this transitional impairment charge relates to goodwill existing as of
January 1, 2002, the cumulative effect of the change in accounting principle
was recorded retroactively to DaimlerChrysler's first quarter 2002
consolidated financial statements.
6. ACQUISITIONS AND DISPOSITIONS
In the fourth quarter of 2002, DaimlerChrysler entered into an agreement to
sell a controlling (51%) interest in VM Motori S.p.A., a wholly-owned
subsidiary of DaimlerChrysler. The execution and closing of this transaction
is still pending as of September 30, 2003. Accordingly, [EURO] 109 million of
total assets and [EURO] 91 million total liabilities have been classified as
held for sale at September 30, 2003. Once the sale is complete,
DaimlerChrysler expects to account for its remaining 49% interest in VM Motori
S.p.A. using the equity method.
On March 14, 2003, DaimlerChrysler acquired from Mitsubishi Motors
Corporation ("MMC") a 43% non-controlling interest of Mitsubishi Fuso Truck
and Bus Corporation ("MFTBC") for approximately [EURO] 710 million in cash,
of which [EURO] 674 million was paid in the first quarter of 2003. The total
purchase price is subject to a post-closing adjustment specified in an
agreement between DaimlerChrysler and MMC. Due to favorable euro-to-yen
exchange rate fluctuations since the announcement of the transaction, the
purchase price is expected to be approximately [EURO] 50 million less than
the initially planned [EURO] 760 million. Currently, approximately [EURO] 30
million of the purchase price has been allocated preliminarily to
investor-level goodwill (see Note 7). DaimlerChrysler accounts for its
investment in MFTBC using the equity method. Because DaimlerChrysler is
unable to obtain U.S. GAAP information on a timely basis from MFTBC, the
Group includes its proportionate share of MFTBC's results of operations on a
three month lag. Such results are included in the Group's Commercial Vehicles
segment beginning as of April 1, 2003. Also, on March 14, 2003, ten
Mitsubishi Group companies, including Mitsubishi Corporation, Mitsubishi
Heavy Industries and Bank of Tokyo-Mitsubishi, entered into a separate share
sale and purchase agreement with MMC pursuant to which they purchased from
MMC a total minority interest of 15% of MFTBC's shares for approximately
[EURO] 245 million in cash, subject to a post-closing adjustment. As a result
of the transactions described above, MMC now retains a 42% non-controlling
interest in MFTBC.
In December 2002, DaimlerChrysler exercised its option to acquire 50% of
the commercial vehicle business of Hyundai Motor Company ("HMC") for
approximately [EURO] 400 million in cash. DaimlerChrysler originally expected
to consummate the transaction by the end of February 2003. Due to ongoing
negotiations between HMC and the labor unions, DaimlerChrysler now expects
the transaction to be completed by the end of 2003 based primarily on its
original terms.
7. GOODWILL
During the nine months ended September 30, 2003, goodwill of [EURO] 53
million was recorded in connection with the acquisition of dealerships in
Europe and [EURO] 16 million was recorded in connection with certain other
acquisitions, each of which were immaterial individually and in the
aggregate. The remaining changes in the carrying amount of goodwill primarily
relate to currency translation adjustments.
As of September 30, 2003, goodwill relates to Mercedes Car Group ([EURO]
143 million), Chrysler Group ([EURO] 1,049 million), Commercial Vehicles ([EURO]
670 million), Services ([EURO] 59 million) and Other Activities ([EURO]
54 million).
DaimlerChrysler's investor-level goodwill in companies accounted for using
the equity method was [EURO] 572 million at September 30, 2003. Such goodwill
is not subject to the impairment tests required by SFAS 142. Instead, the
total investment, including investor-level goodwill, will continue to be
evaluated for impairment when conditions indicate that a decline in fair
value of the investment below the carrying amount is other than temporary.
Investor-level goodwill currently includes [EURO] 30 million recorded in
connection with the purchase of a 43% interest in MFTBC (see Note 6). As of
September 30, 2003, valuations to determine the fair values of certain
intangible assets of MFTBC had not yet been finalized. Consequently, the
purchase price allocation is preliminary and currently assumes that the
entire excess purchase price over DaimlerChrysler's proportionate share of
the net assets acquired of [EURO] 30 million represents investor-level
goodwill. The amount currently assigned to investor-level goodwill is subject
to change once the determination of a post-closing adjustment, if any, is
finalized and the fair values are established for certain intangible and
tangible assets and any related deferred tax effects. DaimlerChrysler
believes that the effects of these purchase price allocation adjustments will
not have a material impact on its consolidated net income.
<Page>
28 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. OTHER INTANGIBLE ASSETS
Other intangible assets comprise:
<Table>
<Caption>
At Sept. 30, At Dec. 31,
(in millions of [EURO]) 2003 2002
- ---------------------------------------------------------------------
Other intangible assets subject
to amortization
- ---------------------------------------------------------------------
Gross carrying amount 1,087 1,036
- ---------------------------------------------------------------------
Accumulated amortization (709) (634)
- ---------------------------------------------------------------------
Net carrying amount 378 402
=====================================================================
Other intangible assets not subject
to amortization 2,254 2,453
- ---------------------------------------------------------------------
2,632 2,855
=====================================================================
</Table>
DaimlerChrysler's other intangible assets subject to amortization primarily
represent software. During the nine months ended September 30, 2003,
additions of [EURO] 130 million were recognized, primarily relating to
software. The aggregate amortization expense for the three and nine months
ended September 30, 2003, was [EURO] 54 million and [EURO] 124 million,
respectively, and for the three and nine months ended September 30, 2002,
[EURO] 38 million and [EURO] 120 million, respectively.
Amortization expense for the gross carrying amount of other intangible
assets at September 30, 2003, is estimated to be [EURO] 37 million for the
remainder of 2003 and, for each of the next five years, is estimated to be
[EURO] 115 million in 2004, [EURO] 74 million in 2005, [EURO] 39 million in
2006, [EURO] 24 million in 2007 and [EURO] 14 million in 2008.
Other intangible assets not subject to amortization represent intangible
pension assets.
9. INVENTORIES
Inventories are comprised of the following:
<Table>
<Caption>
At Sept. 30, At Dec. 31,
(in millions of EURO) 2003 2002
- ---------------------------------------------------------------------
Raw materials and manufacturing
supplies 1,934 1,900
- ---------------------------------------------------------------------
Work-in-process 3,019 2,693
- ---------------------------------------------------------------------
Finished goods, parts and products
held for resale 12,162 11,567
- ---------------------------------------------------------------------
Advance payments to suppliers 72 63
- ---------------------------------------------------------------------
17,187 16,223
=====================================================================
Less: Advance payments received (633) (581)
- ---------------------------------------------------------------------
16,554 15,642
=====================================================================
</Table>
10. CASH AND CASH EQUIVALENTS
As of September 30, 2003 and December 31, 2002, cash and cash equivalents
include [EURO] 46 million and [EURO] 30 million, respectively, of deposits with
original maturities of more than three months.
11. STOCKHOLDERS' EQUITY
During the nine-month period ended September 30, 2003, DaimlerChrysler
purchased approximately 1.0 million of its Ordinary Shares for [EURO] 28.3
million and re-issued these shares for [EURO] 28.2 million in connection with
an employee share purchase plan.
Under the German Stock Corporation Law (Aktiengesetz), the amount of
dividends available for distribution to shareholders is based upon the
unappropriated accumulated 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, 2002, DaimlerChrysler AG made a distribution of
[EURO] 1,519 million ([EURO] 1.50 per share). The dividend was paid on April
10, 2003 to investors owning DaimlerChrysler shares on April 9, 2003.
On April 9, 2003, the annual meeting authorized the Board of Management
through April 8, 2008, upon approval of the Supervisory Board, to increase
capital stock by issuing new, no par value registered shares in exchange for
cash contributions totaling [EURO] 500 million as well as by issuing new, no
par value registered shares in exchange for non-cash contributions totaling
[EURO] 500 million and to increase capital stock by issuing Ordinary Shares
to employees totaling [EURO] 26 million. In addition, DaimlerChrysler AG is
authorized through October 9, 2004, to acquire treasury stock for certain
defined purposes up to a maximum nominal amount of [EURO] 263 million of
capital stock, representing approximately 10% of issued and outstanding
capital stock.
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] 613 million (with nominal
value of [EURO] 511 each), which entitled the bond holders to subscribe for a
total of 12,366,324 shares (7,728,048 of which represents newly issued shares
totaling [EURO] 383 million) of DaimlerChrysler. According to the note
agreements the option price per share was [EURO] 42.67 in consideration of
exchange of the notes or [EURO] 44.49 in cash. In the first six months of
2003, 20,698 options for the subscription of newly issued DaimlerChrysler
Ordinary Shares were exercised. The repayment for the remaining options was
made on July 5, 2003.
Total comprehensive income (loss) of the Group for the three-month periods
ended September 30, 2003 and 2002, was [EURO] (1,542) and [EURO] 1,225 million,
respectively.
<Page>
Interim Report Q3 2003 | 29
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK-BASED COMPENSATION
In April 2000, the Group's shareholders approved the DaimlerChrysler Stock
Option Plan 2000, which provides for the granting of stock options for the
purchase of DaimlerChrysler Ordinary Shares to eligible employees. Options
granted under the Stock Option Plan 2000 are exercisable at a reference price
per DaimlerChrysler Ordinary Share determined in advance 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%.
In May 2000, certain shareholders challenged the approval of the Stock Option
Plan 2000 at the stockholders' meeting on April 19, 2000. In October 2000, the
Stuttgart District Court (Landgericht Stuttgart) dismissed the case and the
Stuttgart Court of Appeals (Oberlandesgericht Stuttgart) dismissed an appeal in
June 2001. The shareholders appealed the decision of the Stuttgart Court of
Appeals to the Federal Supreme Court (Bundesgerichtshof) in July 2001. In March
2002, the Federal Supreme Court decided not to admit the appeal. In April 2002,
a constitutional appeal was filed against this decision. After that the Federal
Constitutional Court (Bundesverfassungsgericht) decided in May 2003 not to admit
the constitutional appeal.
During the nine months ended September 30, 2003, the Group issued 2.5 million
new options at a reference price of [EURO] 28.67 to eligible employees.
The following table illustrates the rollforward of the stock options granted
to the management during the nine-month period ended September 30:
<Table>
<Caption>
Nine months ended September 30,
2003 2002
- --------------------------------------------------------------------------------
(in millions of stock options)
- --------------------------------------------------------------------------------
Outstanding as of January 1 53.1 33.6
- --------------------------------------------------------------------------------
Granted 20.5 20.0
- --------------------------------------------------------------------------------
Forfeited (1.5) (0.2)
- --------------------------------------------------------------------------------
Outstanding as of September 30 72.1 53.4
- --------------------------------------------------------------------------------
Exercisable as of September 30 23.8 7.6
- --------------------------------------------------------------------------------
</Table>
As discussed in Note 1, DaimlerChrysler adopted the provisions of SFAS 123
prospectively to all awards granted after December 31, 2002. Awards granted in
previous periods will continue to be accounted for using the provisions of APB
25 and related Interpretations. The fair value of DaimlerChrysler stock options
issued in 2003 was calculated at the grant date with a modified Black-Scholes
option pricing model, which considers the terms of issuance.
The cost related to stock based employee compensation included in the
determination of the net loss for the three and nine month periods ended
September 30, 2003, is less than that which would have been recognized if the
fair value based method had been applied to all awards since the original
effective date of Statement 123. The following underlying assumptions were used
in calculating the fair value of DaimlerChrysler stock options granted in 2003:
expected dividend yield: 5.6%; expected volatility: 35.0%; risk free interest
rate: 2.9%; and expected life: 3 years. The total fair value of DaimlerChrysler
stock options granted in 2003 was [EURO] 123 million ([EURO] 6.00 per option).
The following table illustrates the effect on net income (loss) and earnings
(loss) per share for the three-month periods ended September 30, 2003 and 2002,
as if the fair value method of SFAS 123 had been applied to all outstanding and
unvested stock options when they were issued.
<Table>
<Caption>
Three months ended September 30,
- --------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------------
Net income (loss)(in millions of [EURO]):
- --------------------------------------------------------------------------------
Net income (loss) (1,653) 780
- --------------------------------------------------------------------------------
Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects 18 6
- --------------------------------------------------------------------------------
Deduct: Stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (35) (37)
- --------------------------------------------------------------------------------
Pro forma net income (loss) (1,670) 749
================================================================================
Earnings (loss) per share (in [EURO]):
- --------------------------------------------------------------------------------
Basic (1.63) 0.77
- --------------------------------------------------------------------------------
Basic - pro forma (1.65) 0.74
- --------------------------------------------------------------------------------
Diluted (1.63) 0.77
- --------------------------------------------------------------------------------
Diluted - pro forma (1.65) 0.74
- --------------------------------------------------------------------------------
</Table>
<Page>
30 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table illustrates the effect on net income (loss) and earnings
(loss) per share for the nine-month periods ended September 30, 2003 and 2002,
as if the fair value method of SFAS 123 had been applied to all outstanding and
unvested stock options when they were issued.
<Table>
<Caption>
Nine months ended September 30,
- --------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------------
Net income (loss)(in millions of [EURO]):
- --------------------------------------------------------------------------------
Net income (loss), as reported before
cumulative effect
of change in accounting principle (956) 4,550
- --------------------------------------------------------------------------------
Add: Stock-based employee
compensation expense included in
reported net income (loss), net of
related tax effects 44 36
- --------------------------------------------------------------------------------
Deduct: Stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (111) (121)
- --------------------------------------------------------------------------------
Pro forma net income (loss) (1,023) 4,465
================================================================================
Earnings (loss) per share (in [EURO]):
- --------------------------------------------------------------------------------
Basic - as reported before
cumulative effect of change in
accounting principle (0.94) 4.52
- --------------------------------------------------------------------------------
Basic - pro forma (1.01) 4.44
- --------------------------------------------------------------------------------
Diluted - as reported before
cumulative effect of change in
accounting principle (0.94) 4.50
- --------------------------------------------------------------------------------
Diluted - pro forma (1.01) 4.42
- --------------------------------------------------------------------------------
</Table>
Because the Group reported a loss respectively a loss before cumulative
effect of change in accounting principle for the three and nine-month periods
ended September 30, 2003, the diluted loss per share does not include
antidilutive effects.
Unearned compensation expense for all outstanding and unvested stock options
as of September 30, 2003 and 2002, totals to [EURO] 150 million and
[EURO] 122 million, respectively.
13. ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
<Table>
<Caption>
At Sept. 30, At Dec. 31,
(in millions of [EURO]) 2003 2002
- --------------------------------------------------------------------------------
Pension plans and similar obligations 15,423 15,909
- --------------------------------------------------------------------------------
Income and other taxes 3,483 3,621
- --------------------------------------------------------------------------------
Other accrued liabilities 24,300 24,092
- --------------------------------------------------------------------------------
43,206 43,622
================================================================================
</Table>
The Group issues various types of contractual product warranties under which it
generally guarantees the performance of products delivered and services rendered
for a certain period or term. In addition, the accrued liability for product
warranties covers expected costs for policy coverage, recall campaigns and
buyback commitments. The changes in provisions for those product warranties are
summarized as follows:
<Table>
<Caption>
(in millions of [EURO])
- --------------------------------------------------------------------------------
Balance at January 1, 2003 9,014
- --------------------------------------------------------------------------------
Currency change (457)
- --------------------------------------------------------------------------------
Utilizations and transfers (3,465)
- --------------------------------------------------------------------------------
Changes from product warranties issued in 2003 3,836
- --------------------------------------------------------------------------------
Changes from prior period product warranties issued (41)
- --------------------------------------------------------------------------------
Balance at September 30, 2003 8,887
================================================================================
</Table>
14. SEGMENT REPORTING
Segment information for the three-month periods ended September 30, 2003 and
2002, is as follows:
<Table>
<Caption>
Mercedes Chrysler Commercial Other Consoli-
(in millions of [EURO]) Car Group Group Vehicles Services Activities Eliminations dated
- -----------------------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------
Revenue 11,848 12,496 6,815 2,913 515 - 34,587
- -----------------------------------------------------------------------------------------------------------------------------
Intersegment sales 894 - 357 557 65 (1,873) -
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues 12,742 12,496 7,172 3,470 580 (1,873) 34,587
=============================================================================================================================
Operating Profit (Loss) 793 147 237 284 (143) (72) 1,246
- -----------------------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2002
- -----------------------------------------------------------------------------------------------------------------------------
Revenues 11,595 14,250 6,607 3,332 554 - 36,338
- -----------------------------------------------------------------------------------------------------------------------------
Intersegment sales 665 44 530 560 94 (1,893) -
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues 12,260 14,294 7,137 3,892 648 (1,893) 36,338
=============================================================================================================================
Operating Profit 792 305 115 170 207 (50) 1,539
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Interim Report Q3 2003 | 31
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Segment information for the nine-month periods ended September 30, 2003 and
2002, is as follows:
<Table>
<Caption>
Mercedes Chrysler Commercial Other Consoli-
(in millions of [EURO]) Car Group Group Vehicles Services Activities Eliminations dated
- -----------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------
Revenues 35,968 37,009 19,078 9,069 1,488 - 102,612
- -----------------------------------------------------------------------------------------------------------------------------
Intersegment sales 2,419 - 1,158 1,517 196 (5,290) -
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues 38,387 37,009 20,236 10,586 1,684 (5,290) 102,612
=============================================================================================================================
Operating Profit (Loss) 2,342 (649) 462 1,037 190 (92) 3,290
- -----------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2002
- -----------------------------------------------------------------------------------------------------------------------------
Revenue 35,089 46,216 19,275 10,343 1,659 - 112,582
- -----------------------------------------------------------------------------------------------------------------------------
Intersegment sales 2,174 468 1,367 1,462 237 (5,708) -
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues 37,263 46,684 20,642 11,805 1,896 (5,708) 112,582
=============================================================================================================================
Operating Profit 2,290 532 23 2,952 618 (114) 6,301
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
In the first quarter of 2003, the Chrysler Group and Services segments agreed
to a new arrangement regarding the sharing of risks associated with the
residual values of certain leased vehicles, which were previously expensed by
the Group in years prior to 2001, between the Chrysler Group and Services.
The non-cash effect of transferring such risks in the first quarter of 2003
resulted in [EURO] 70 million of additional revenue and operating profit for
the Chrysler Group and [EURO] 70 million of additional cost of sales and
reduced operating profit for Services.
During the third quarter of 2003, the Chrysler Group and Services
negotiated reduced pricing on certain retail financing programs offered by
the Chrysler Group as sales incentives. The adjusted pricing reflects the
current favorable funding environment as well as Services becoming the
exclusive provider of selected discount consumer financing for the Chrysler
Group. The pricing adjustment reduced marketing costs at the Chrysler Group
by [EURO] 0.1 billion and reduced finance revenue at Services by the same
amount. The pricing adjustment had no effect on the Group's consolidated
operating results.
The significant reconciling items between the Group's consolidated income
before financial income and the Group's consolidated operating profit are as
follows:
<Table>
<Caption>
Three months, Nine months,
ended Sept. 30, ended Sept. 30,
(in millions of [EURO]) 2003 2002 2003 2002
- ---------------------------------------------------------------------------------
Income before financial income (expense), net 876 1,444 2,221 3,301
- ---------------------------------------------------------------------------------
- -Pension and postretirement benefit
expenses other than service cost 225 (56) 673 (213)
- ---------------------------------------------------------------------------------
- -Operating profit (loss) from affiliated
and associated companies and financial
income (loss) from related operating companies (153) 130 66 488
- ---------------------------------------------------------------------------------
- -Gain from the sale of operating businesses - - - 2,640
- ---------------------------------------------------------------------------------
- -Miscellaneous items 298 21 330 85
- ---------------------------------------------------------------------------------
Consolidated operating profit 1,246 1,539 3,290 6,301
- ---------------------------------------------------------------------------------
</Table>
"Miscellaneous items" for the three and nine month periods ended September
30, 2003, includes [EURO] 0.3 billion related to the proposed settlement of a
class action lawsuit, which was pending in connection with the merger of
Daimler-Benz and Chrysler to form DaimlerChrysler AG (see Note 16).
DaimlerChrysler has applicable insurance policies aggregating [EURO] 200
million (approximately $220 million) to which extent it is seeking
reimbursement of the settlement payment. Such reimbursement will be
recognized into earnings in the period received.
<Page>
32 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15. EARNINGS (LOSS) PER SHARE
The computation of basic and diluted earnings (loss) per share for "Income
(loss) before cumulative effect of change in accounting principle" is as
follows:
<Table>
<Caption>
in millions of [EURO] or millions of Three months, Nine months,
shares, except earnings per ended Sept. 30, ended Sept. 30,
share 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of
change in accounting principle - basic (1,653) 780 (956) 4,550
- --------------------------------------------------------------------------------------------
Interest expense on convertible bonds and
notes (net of tax) - 1 - 12
- --------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of
change in accounting principle - diluted (1,653) 781 (956) 4,562
- --------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding - basic 1,012.8 1,012.8 1,012.7 1,006.9
- --------------------------------------------------------------------------------------------
Dilutive effect of convertible bonds and notes - 1.2 - 7.0
- --------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding - diluted 1,012.8 1,014.0 1,012.7 1,013.9
- --------------------------------------------------------------------------------------------
Earnings (loss) per share before cumulative
effect of change in accounting principle
- --------------------------------------------------------------------------------------------
Basic (1.63) 0.77 (0.94) 4.52
- --------------------------------------------------------------------------------------------
Diluted (1.63) 0.77 (0.94) 4.50
- --------------------------------------------------------------------------------------------
</Table>
Because the Group reported a loss before cumulative effect of change in
accounting principle for the three and nine month periods ended September 30,
2003, the diluted loss per share does not include the antidilutive effects of
convertible bonds and notes. Had the company reported income before cumulative
effect of change in accounting principles for the three and nine month periods
ended September 30, 2003, the weighted average number of shares outstanding
would have potentially been diluted by 1.1 million shares resulting from
conversion of bonds and notes.
Options issued in connection with the 2000 Stock Option Plan in 2000, 2001,
2002 and 2003 were not included in the computation of diluted earnings per share
for 2002 and 2003 because the options' underlying exercise price was greater
than the average market price for DaimlerChrysler Ordinary Shares for the three
and nine months ended September 30, 2003 and 2002.
16. LITIGATION AND CLAIMS
DaimlerChrysler's subsidiary, DaimlerChrysler Services North America LLC "DCSNA"
is subject to various legal proceedings in federal and state courts, some of
which allege violations of state and federal laws in connection with financing
motor vehicles. Some of these proceedings seek class action status, and may ask
for compensatory, punitive or treble damages and attorneys' fees. In October
2003, the Civil Rights Division of the Department of Justice and the United
States Attorney's Office for the Northern District of Illinois advised that they
are initiating an investigation of DCSNA's credit practices that focuses on
DCSNA's Chicago Zone Office. The investigation follows a lawsuit filed in
February, 2003, against DCSNA in Chicago with the United States District Court
for the Northern District of Illinois that alleges that the DCSNA Chicago Zone
Office engaged in racially discriminatory credit and collection practices in
violation of federal and state laws. In that lawsuit, six individuals filed a
purported class action complaint on behalf of African-Americans in the region
alleging that they were denied vehicle financing based on race. They seek
compensatory and punitive damages, and injunctive relief barring discriminatory
practices. The lawsuit was later amended to include Hispanic-Americans. DCSNA
believes that its practices are fair and not discriminatory. DSCNA intends to
defend itself vigorously against these claims.
As previously reported, the Antitrust Division of the U.S. Department of
Justice, New York Regional Office, opened a criminal investigation in connection
with the allegations made in a lawsuit filed in 2002 in the United States
District Court for the District of New Jersey against DaimlerChrysler's
subsidiary Mercedes-Benz USA, LLC "MBUSA" and its wholly-owned subsidiary
Mercedes-Benz Manhattan, Inc. The Department of Justice has advised those
companies that it has closed the investigation and will take no further action.
The lawsuit, subsequently certified as a class action, alleges that those
companies participated in a price fixing conspiracy among Mercedes-Benz dealers.
MBUSA and Mercedes-Benz Manhattan will continue to defend themselves vigorously.
As previously reported, 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 some of the members of its
supervisory board and board of management (Messrs. Kopper, Schrempp and
Gentz). Shortly thereafter, other plaintiffs filed a number of actions
against the same defendants, making similar claims to those in the Tracinda
complaint. Thus two individual lawsuits and one consolidated class action
lawsuit were pending. The plaintiffs, current or former DaimlerChrysler
shareholders, alleged that the defendants violated U.S. securities law and
committed
<Page>
Interim Report Q3 2003 | 33
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
fraud in obtaining approval from Chrysler stockholders of the business
combination between Chrysler and Daimler-Benz in 1998. The consolidated class
action complaint contained additional allegations that were later dismissed.
In March 2003, the Court granted Mr. Kopper's motion to dismiss each of the
complaints against him on the ground that the Court lacked jurisdiction over
him. In February 2003, the defendants filed motions seeking summary judgment
on all claims in the cases on several grounds, including that the claims are
barred by the statute of limitations. In June 2003, the Court denied the
defendants' motion relating to the statute of limitations and deferred
decision on the remaining grounds. In August 2003, DaimlerChrysler agreed to
settle the consolidated class action case. Subject to final approval by the
court, DaimlerChrysler will pay the class action plaintiffs $300 million
(approximately [EURO] 275 million). Shortly thereafter, DaimlerChrysler
concluded a settlement with Glickenhaus, one of the two individual
plaintiffs, as a result of which that case has been dismissed with prejudice
and is no longer pending. DaimlerChrysler believes that the settlements will
have no bearing on the Tracinda case which is presently scheduled for trial
in the fourth quarter of 2003 and parts of which are still awaiting summary
judgment. Tracinda claims to have suffered damages in the range of $856
million to $1.28 billion. DaimlerChrysler denies Tracinda's allegations of
wrongdoing and further denies that Tracinda suffered any damages.
DaimlerChrysler believes all claims against it relating to the 1998 merger,
including those in the Tracinda case, are without merit and the company
remains committed to a vigorous defense of this case. DaimlerChrysler has
applicable insurance policies aggregating [EURO] 200 million (approximately
$220 million) to which extent it is seeking reimbursement of the settlement
payment. Such reimbursement will be recognized into earnings in the period
received.
As reported in DaimlerChrysler's Annual Report as of December 31, 2002,
Freightliner LLC, DaimlerChrysler's North American commercial vehicles
subsidiary, acquired in September 2000 Western Star Trucks Holdings Ltd., a
Canadian company engaged in the design, assembly, and distribution of heavy duty
trucks and transit buses. Prior to its acquisition by Freightliner, Western Star
had completed the sale of ERF (Holdings) plc, a company organized in England and
Wales and engaged in the assembly and sale of heavy duty trucks, to MAN AG and
MAN Nutzfahrzeuge AG for CAD195 million. In September 2002, MAN filed a claim
against Freightliner Ltd. (formerly Western Star) with the London Commercial
Court for breach of representations and warranties in the share purchase
agreement, alleging that ERF's accounts and financial statements were misstated.
MAN seeks damages in excess of GBP300 million. Freightliner Ltd. intends to
defend itself vigorously against such claims and has filed a contribution claim
against Ernst & Young, ERF's auditors, with the London Commercial Court in the
second quarter of 2003.
As previously reported, in the first quarter of 2003, forty purported class
action lawsuits alleging violations of antitrust law were filed against
DaimlerChrysler, six other motor vehicle manufacturers, operating subsidiaries
of those companies in both the United States and Canada, the National Automobile
Dealers Association and the Canadian Automobile Dealers Association. Additional
lawsuits were filed during the second quarter of 2003 containing similar
allegations, bringing the total number of such lawsuits to approximately 70.
Some complaints were filed in federal courts in various states and others were
filed in state courts. The complaints allege that the defendants conspired to
prevent the sale to U.S. consumers of vehicles sold by dealers in Canada in
order to maintain new car prices at artificially high levels in the U.S. The
plaintiffs seek treble damages on behalf of everyone who bought or leased a new
vehicle in the U.S. since January 1, 2001. DaimlerChrysler believes the
complaints against it are without merit and plans to defend against them
vigorously.
17. COMMITMENTS AND CONTINGENCIES
Obligations from issuing guarantees as a guarantor (excluding product
warranties) are as follows:
<Table>
<Caption>
Maximum potential Amount recognized
future obligation as a liability
- --------------------------------------------------------------------------------
At Sept.30, At Dec. 31, At Sept. 30, At Dec. 31,
(in millions of [EURO]) 2003 2002 2003 2002
- --------------------------------------------------------------------------------
Guarantees for third
party liabilities 2,233 2,119 319 370
- --------------------------------------------------------------------------------
Guarantees under
buy-back commitments 2,085 2,663 604 724
- --------------------------------------------------------------------------------
Performance
guarantees and
environmental risks 838 581 343 370
- --------------------------------------------------------------------------------
Other 682 830 236 246
- --------------------------------------------------------------------------------
5,838 6,193 1,502 1,710
- --------------------------------------------------------------------------------
</Table>
The parent company of the Group (DaimlerChrysler AG) provides guarantees to
third parties of certain obligations of its consolidated subsidiaries. At
September 30, 2003, these guarantees amounted to [EURO] 49.4 billion. To a
lesser extent, consolidated subsidiaries provide guarantees to third parties
of obligations of other consolidated subsidiaries. All intercompany
guarantees are eliminated in consolidation and therefore are not reflected in
the above table.
On March 11, 2003, DaimlerChrysler signed an agreement with the City of
Hamburg, Germany, a holder of 6% of the common shares of DaimlerChrysler
Luft- und Raumfahrt
<Page>
34 | Interim Report Q3 2003
DAIMLERCHRYSLER AG AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Holding Aktiengesellschaft ("DCLRH"), a majority-owned subsidiary of the
Group. The agreement was approved by the Parliament of the Free and Hanseatic
City of Hamburg on May 21, 2003. Pursuant to the terms of the agreement,
DaimlerChrysler holds a call option and the City of Hamburg holds a put
option which, upon exercise by either party, will require the shares of DCLRH
held by the City of Hamburg to be transferred to DaimlerChrysler. In
consideration for these shares, DaimlerChrysler will pay the City of Hamburg
a minimum of [EURO] 450 million in cash or shares of EADS or a combination of
both. DaimlerChrysler's call option would become exercisable at January 1,
2005. The City of Hamburg's put option would become exercisable at the
earlier of October 1, 2007, or upon the occurrence of certain events which
are solely within the control of DaimlerChrysler. DaimlerChrysler believes
the likelihood that these certain events will occur is remote.
As described in more detail in Note 2, the Group holds a 45% equity ownership
interest in Toll Collect and has guaranteed, on a joint and several basis with
the other equity holders (collectively the "Consortium", individually the
"Partners"), certain current and future obligations of Toll Collect.
Pursuant to the Operating Agreement, the Partners have guaranteed, on a joint
and several basis, the successful completion and operation of the toll
collection system by Toll Collect until August 31, 2004.
In addition, the partners of Toll Collect, on a joint and several basis, have
the obligation to fund Toll Collect in order to maintain an equity ratio of
Toll Collect of 20 percent (based on German GAAP) until August 31, 2004, and
15 percent thereafter ("Equity Maintenance Undertaking") until the Operating
Agreement expires. These funding requirements would be triggered by, among
other events, losses incurred by Toll Collect due to penalties for delays in
the start of the operation of the toll collection system. The start of
operations was initially scheduled for August 31, 2003, but is delayed. In
the event the toll collection system is not operational by December 1, 2003,
Toll Collect will become liable for contractual penalties of [EURO] 250,000
per day until the end of February 2004 and [EURO] 500,000 per day thereafter.
Beside these penalties, further penalties or liability for fault is excluded.
Further funding requirements could arise during the operational phase after
having obtained the preliminary operating permit through additional penalties or
revenue reductions Toll Collect may be exposed to in the event that in a
particular case certain contractual obligations are violated or the toll
collection system does not operate effectively after the completion of the
system. The penalties are limited during the first nine months following the
issuance of the preliminary operating permit, to an aggregate of [EURO] 56.25
million, then to [EURO] 150 million per annum until the issuance of the final
operating permit, and thereafter to [EURO] 100 million per annum, with these
amounts increased by 3% per business year of operation. For revenue reductions
the same system of limitations does apply. In case of a culpable violation of
contractual duties within the operational phase, the Federal Republic of Germany
will not be prevented to claim - without any limitation - further damages from
Toll Collect. If such penalties, revenue reductions and other events eventually
result in an equity ratio below the ratio agreed upon in the Equity Maintenance
Undertaking, the partners are obligated to fund operations to an extent that is
sufficient to reach those equity levels.
The operating agreement can be terminated from both sides in case of
violation of defined substantial contractual obligations (e.g.: deadlines,
non-performance of specific requirements or duties of cooperation). The
violating party has the right to remove the reasons for termination within
appropriate time.
Until funds become available through the operating performance of the toll
collection system, Toll Collect will continue to require capital through bridge
loans provided by various banks. These loans are guaranteed by DaimlerChrysler
AG on a several and independent basis to the extent of the Group's 45% equity
interest in Toll Collect. For these guarantees, DaimlerChrysler AG receives
market equivalent remuneration from Toll Collect.
Only the guarantee for the bridge loan is included in the above table. The
maximum potential future obligations resulting from the remaining guarantees
provided for Toll Collect's obligations have not been included in the above
table because those amounts cannot be reasonably estimated.
<Page>
INVESTOR RELATIONS
contact
STUTTGART
Phone (+49) 711 17 92261, 17 95277 or 17 95256
Fax (+49) 711 17 94109 or 17 94075
NEW YORK
Phone (+1) 212 909 9080
Fax (+1) 212 909 9085
This report and additional information on
DaimlerChrysler are available on the Internet at:
www.daimlerchrysler.com
FINANCIAL DIARY 2004
ANNUAL RESULTS PRESS CONFERENCE /
ANALYSTS' AND INVESTORS' CONFERENCE CALL
February 19, 2004
ANNUAL MEETING
April 07, 2004
Messe Berlin (Berlin Exhibition Center)
CONCEPT AND CONTENT:
DaimlerChrysler AG,
Investor Relations
DaimlerChrysler AG
Stuttgart, Germany
Auburn Hills, USA
www.daimlerchrysler.com
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DaimlerChrysler AG
By: /s/ ppa. Robert Koethner
--------------------------------
Name: Robert Koethner
Title: Vice President
Chief Accounting Officer
By: /s/ i.V. Silvia Nierbauer
--------------------------------
Name: Silvia Nierbauer
Title: Director
Date: October 21, 2003