Innovation for Sustainable MobilityAnnual Report 2008Key FiguresAmounts in millions of €Daimler Group2006 2007 08/07 2008C...
-7099,22246,99921,65227,85724,94324,366274,0243,0053,73371514,3374,9926313,7833,1663.663.061,5421.5099,39949,28922,58223,4...
26,611272,3822,9274,14899013,0888,7101,3803,9854,8553.834.671,9282.0095,87345,91621, 81721,13 917,92228,818273,2163,5594,4...
2,730(1,147)1,4141,7041.411.715560.60RevenueWestern Europethereof GermanyNAFTAthereof United StatesOther marketsEmployees ...
Earnings per share (in €)Earnings per share, continuing operations (in €)Total dividendDividend per share (in €)1 Adjusted...
6308,71127,61159,143296,7438078,10627,75457,030176,813+7+7+7+7+41+6EBITRevenueNew businessContract volumeInvestment in pro...
(1,239)14,9702703921327,78940,2551,95614,1232413682328,12239,9681,32713,1513784218305,00137,679.+6+12+7
-50-0+1EBITRevenueInvestment in property, plant and equipmentResearch and development expenditurethereof capitalizedUnit s...
1,293,18497,5261,78351, 4103.5%1,6982,2744961,251,79799,343-55-9.+18+10+50-2-01,60728,5725.6%9911,056326472,074
79,4152,12128,4667.5%7661,047283467,66780,0671,85131,7895.8%9121,038211516,08783,237-24+0.+29+1+15+1-1
EBITRevenueReturn on salesInvestment in property, plant and equipmentResearch and development expenditurethereof capitaliz...
technologies and high-quality products.Our philosophy is clear: we give of our best for customers who expectthe best – and...
Annual Report 2008| Contents | 3Contents2 - 39Overview of the Group4 Chairman’s Letter8 Board of Management10 Innovation f...
102 - 113Sustainability104 Sustainability at Daimler106 Innovation, Safety and the Environment110 Human Resources112 Socia...
219 Index220 International Representative OfficesInternet | Information | AddressesDaimler WorldwideFinancial Calendar 200...
In Europe and Latin America, Mercedes-Benz Trucks even set new records for unitsales. With the newly launched Actros, we a...
the short- and medium-term. In addition, this fall we will be the first German manu-facturer to launch aseries-produced ca...
Board of Management8Dieter Zetsche | 55Chairman of the Board of Management,Head of Mercedes-Benz CarsAppointed until 2010G...
Finance & Controlling,Daimler Financial ServicesAppointed until 2011Overview of the Group| Board of Management | 9Andreas ...
20,000,000,000kilometersare driven every day in worldwide personal transport:on the way to work, to school, or back home t...
the two drive units enhances the vehicle’s dynamismand gives it even more impressive torque and effort -less power deliver...
and timely deliveries.Every day, approximatelyMercedes-Benz Actros BlueTecThe world champion: With each liter of diesel fu...
2emissions to 20.5 grams per ton ofpayload per kilometer (g/t/km), making it the CO2world champion. The heavy-duty truck i...
efficiently.ApproximatelyOrion V ii Hybrid BusThe biggest fleet of hybrid buses in the world covers more than72,000 kilome...
batteries. This innovative drive technology has meanwhile gained great accept-ance in the NAFTAregion. The environmentally...
occurs, a spring system lifts the hood within milliseconds byfive centimeters, thus expanding the crumple zone.According t...
ATTENTION ASSIST helps drivers to recognize theirtiredness in good time, thus preventing seriousaccidents. The system was ...
types of application.… for  the future  of  mobility  Daimler’s  research  and  development expenditure  is  among  the  h...
consumption fell by  40 % compared with  pure  diesel  operation.  For  62 %   of   the   distance  covered,   only    ele...
… mobilize acompanyOur employees are the key to our success and our apprenticesare the basis for a successful future. Thes...
with a high-quality driving experience.FebruaryDaimler makes the breakthrough with battery technology.Daimler achieves a d...
Debut of new-generation Mercedes-Benz Hybrid Sprinter.The first vans of the second generation are handed over to custo-mer...
Financial and economic crisis reflected by quarterly results.The ongoing worsening of the world economy leads to lowerearn...
second place in the constructors’ championship.DecemberManagement and labor council agree on short-time work.In order to a...
4,40013,26515,30836194-60-40-44-34-42-45-72World economic slump affects development of global stockmarkets. Due to the spr...
dominant question became how long and how deep the recessionwould be. In this environment, the Dow Jones Euro STOXX 50,the...
Daimler’s earnings trend to be significantly impacted by theeconomic downturn during the rest of the year. The share price...
Dow Jones Euro STOXX 50Dow Jones Industrial AverageNikkeiDow Jones STOXX Auto IndexS&P Automobiles Industry IndexOverview ...
Xetra trading in Frankfurt and at US $38.28 in New York.This was equivalent to a market capitalization of €24.8 billionor ...
from Chrysler. The optimization of the capital structure has thegoal of reducing the use of equity capital, which is more ...
10002030405060708012/08 11/08 10/08 9/08 8/08 7/08 6/08 5/08 4/08 3/08 2/08 1/08Daimler share price (high/low), 2008in €Do...
12/31/07 2/29/08 4/30/08 6/30/08 8/29/08 10/31/08 12/31/0838Dividend reduced to €0.60 per share.In view of the effectsof t...
in 2008. At the end of the year, we had 37.1 million treasuryshares (own shares bought back), equivalent to 3.8% of the ou...
+808/072,7661,013.9067.41.28.16%2.80%BBB+A3A-A (low)End of 2007 End of 2008Statistics1.411.400.6033.9326.7064.6819.35% cha...
-10-60-17-5808/073.833.802.0037.7166.5077.7646.302007 2008Statistics per share% changeNet profit (basic)Net profit (dilute...
1 Closing pricesCapital stock (in millions of €)Number of shares (in millions)thereof treasury sharesMarket capitalization...
resources and social responsibility. On the basis of this assess-ment, Daimler was placed among the topfive companies in t...
changes at the Group via conference calls and Internet trans-missions.Further improvement of Investor Relations website. A...
By regionShareholder structure as of December 31, 2008Daimler sold 2.1 million vehicles in a difficult environment in2008 ...
49 Economy and the industry50 Business developments53 - 65Profitability53 EBIT55 Financial performance measures56 Value ad...
Events after the End of the 2008 Financial Year75 - 82Risk Report75 Risk management system76 Economic risks77 Industry and...
Management Report42The GroupDaimler can look back on a tradition covering more than onehundred years, which features pione...
apply our new green drive technologies in a broad portfolio ofvehicles while utilizing experience and expertise from all p...
vehicles within a global network under the brands Mercedes-Benz, Freightliner, Sterling, Western Starand Mitsubishi Fuso.T...
Its contract volume of €63.4 billion covers 2.5 million vehicles.Daimler Financial Services also holds a 45% interest in t...
Germany (see pages 116 ff). It is managed by a Board of Manage-ment, whose members are authorizedto represent it vis-à-vis...
Purpose of the company, amendment to the Articles ofIncorporation. The general purpose for which the company isorganized i...
individual registered shares of no par value. All shares grant equalrights to their holders. Each share confers one vote a...
a total amount of €1,449 million. The volume of the sharesbought back by December 31, 2008 on the basis of the authoriza-t...
the control of one person or several persons acting jointly.– A non-utilized syndicated credit line in a total amount of €...
Mercedes-BenzMercedes AMGMercedes-Benz McLaren (40%)MaybachsmartDaimler TrucksTrucks Europe/Latin AmericaTrucks NAFTATruck...
has the right of preemption under the same conditions as wereoffered by a third party. A change of control can also lead t...
– the Daimler target system – which, as shown in the diagram onthe next page, consists of six strategic dimensions and is ...
plant, we have been outstandingly successful in raising our pro-ductivity while simultaneously improvingour quality. Wehav...
the brand pledge of “Trucks you can trust,” the business unitMercedes-Benz Trucks Europe/Latin America stands for uncom-pr...
along the entire automotive value chain.Because the demands placed on mobility will become increas-ingly varied, in the fu...
the fuel cell. With more than 100 test vehicles and approximately4 million test kilometers driven, we have the world’s lar...
pilot phase of car2go started in Ulm in October 2008.48Portfolio changes. With the goal of strengthening our corebusiness ...
In Moscow in December 2008, Daimler AG, Kamaz, state-ownedcompany Russian Technologies, and Troika Dialog signed anagreeme...
its 19.9% equity interest in Chrysler Holding LLC. Those discus-sions had not yet been finalized when thisreport went to p...
the beginning of the year and the expansion of the emergingnations’ economies allowed the global economy to achieve totalg...
of recent years has been unusually high volatility, not only onstock markets, but also of raw-material prices and exchange...
the prior year, only 13.2 or nearly three million fewer were soldin 2008. Sales of sport-utility vehicles and pickup truck...
Passenger carsCommercial vehicles1 Segment passenger vehicles including light trucks Source: German Association of the Aut...
contracted, with a drop in sales of nearly 4% in 2008.In the major emerging markets of Asia, Eastern Europe and LatinAmeri...
conditions during 2008, leading to massive drops in unit salesin major markets in the second half of the year. Unit sales ...
A-/B-Class 20%C-/CLK-/SLK-Class 35%E-/CLS-Class 14%S-/CL-/SL-Class/SLR/Maybach 7%M-/R-/GL-/GLK-/G-Class 13%smart 11%Unit s...
sales by 5%, selling 197,700 vehicles. Although sales fell in Japanby 22% to 42,000 units, this was more than offset by st...
effects (see page 98).Order situation. The Mercedes-Benz Cars and Daimler Trucksdivisions and the Mercedes-Benz Vans and D...
sold (C-Class and smart) in the division’s total unit sales. Asexpected, the Daimler Trucks division’s revenue was higher ...
14,12395,87347,77228,5729,28214,9702008 08/07Daimler GroupMercedes-Benz CarsDaimler TrucksDaimler Financial ServicesVans, ...
20052006200720083021. 739.630.920.729.522.517.126.630.160.1Market share+0.3+0.3+0.1-0.1--0.1-1.8-2.0-1.2-1.1
+0.8+0.6+4.1+4.74.610.31.61.021.739.732.722.730.723.616.326.026.055.44.910.61.70.92008 08/07 2007Mercedes-Benz CarsWestern...
GermanyUnited StatesJapanDaimler TrucksMedium and heavy trucksWestern EuropeGermanyHeavy trucks NAFTA regionMedium trucks ...
€3,228 million related to our investment in Chrysler and thelower earnings achieved by Mercedes-Benz Cars. Another factori...
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Daimler benz annual report

  1. 1. Innovation for Sustainable MobilityAnnual Report 2008Key FiguresAmounts in millions of €Daimler Group2006 2007 08/07 2008Change in %-4-7-3-10-12+8+0+22+7+40-76-69.-65-65-63-63-71
  2. 2. -7099,22246,99921,65227,85724,94324,366274,0243,0053,73371514,3374,9926313,7833,1663.663.061,5421.5099,39949,28922,58223,49920,270
  3. 3. 26,611272,3822,9274,14899013,0888,7101,3803,9854,8553.834.671,9282.0095,87345,91621, 81721,13 917,92228,818273,2163,5594,4421,3873,205
  4. 4. 2,730(1,147)1,4141,7041.411.715560.60RevenueWestern Europethereof GermanyNAFTAthereof United StatesOther marketsEmployees (Dec. 31)Investment in property, plant and equipmentResearch and development expenditurethereof capitalizedCash provided by operating activities(including discontinued operations)EBITValue added(including discontinued operations)Net profitNet profit from continuing operations
  5. 5. Earnings per share (in €)Earnings per share, continuing operations (in €)Total dividendDividend per share (in €)1 Adjusted for the effects of currency translation and changes in the consolidated group, decrease inrevenue of 1% .Cover:Mercedes-Benz showed the way ahead in environmentally responsible electro-mobility in January 2009by presentingits near-series Concept BlueZEROat the North American International Auto Show in Detroit. Based on asingle vehiclearchitecture, this intelligent, modular concept allows three models with different drive configurations,all of which areable to meet customer requirements in terms of sustainable mobility: the BlueZERO E-CELL withbattery-electric drive,the BlueZERO F-CELL with fuel cell, the BlueZERO E-CELL PLUS with electric drive and additional internalcombustionengine as power generator.Daimler Divisions >Daimler at a glance >1Divisions6779,28229,51463,353417,116
  6. 6. 6308,71127,61159,143296,7438078,10627,75457,030176,813+7+7+7+7+41+6EBITRevenueNew businessContract volumeInvestment in property, plant and equipmentEmployees (Dec. 31)Daimler Financial Services
  7. 7. (1,239)14,9702703921327,78940,2551,95614,1232413682328,12239,9681,32713,1513784218305,00137,679.+6+12+7
  8. 8. -50-0+1EBITRevenueInvestment in property, plant and equipmentResearch and development expenditurethereof capitalizedUnit salesEmployees (Dec. 31)Vans, Buses, Other2,11747,7724.4%2,2462,9941,0601,273,01397,3034,75352,4309.1%1,9102,733705
  9. 9. 1,293,18497,5261,78351, 4103.5%1,6982,2744961,251,79799,343-55-9.+18+10+50-2-01,60728,5725.6%9911,056326472,074
  10. 10. 79,4152,12128,4667.5%7661,047283467,66780,0671,85131,7895.8%9121,038211516,08783,237-24+0.+29+1+15+1-1
  11. 11. EBITRevenueReturn on salesInvestment in property, plant and equipmentResearch and development expenditurethereof capitalizedUnit salesEmployees (Dec. 31)Amounts in millions of €2007 2008 2006 08/07% changeEBITRevenueReturn on salesInvestment in property, plant and equipmentResearch and development expenditurethereof capitalizedUnit salesEmployees (Dec. 31)Daimler TrucksMercedes-Benz CarsDaimler at a Glance. Fiscal Year 2008.We invented the automobile– now we are passionately shapingits future. As a pioneer of automotive engineering, we feel inspiredand obliged to continue this proud tradition with groundbreaking
  12. 12. technologies and high-quality products.Our philosophy is clear: we give of our best for customers who expectthe best – and we live a culture of excellence that is based on sharedvalues. Our corporate history is full of innovations and pioneeringachievements; they are the foundation and ongoing stimulus forour claim to leadership in the automotive industry.The principle of sustainable mobility underlies all of our thoughtsand actions. Our goal is to successfully meet the demands of futuremobility. And in doing so, we intend to create lasting value – for ourshareholders, customers and workforce, and for society in general.Dieter Zetsche Rüdiger Grube Günther FleigThomas Weber Bodo Uebber Andreas RenschlerWith this Annual Report 2008, we would like to giveyou an insight into our various activities designed tosecure sustainable mobility for the future. We havearranged the contents of the report in seven sections.The first section provides basic information and someexamples from the Daimler world, while the report’stitle subject is attractively presented in a series ofpictures on pages 10 to 33. The Management Reportincludes a description and analysis of the Group’sfinancial position, liquidity and capital resources, andprofitability. Other sections provide information onour divisions, the issue of sustainability and corporategovernance, as well as the detailed financial statements.
  13. 13. Annual Report 2008| Contents | 3Contents2 - 39Overview of the Group4 Chairman’s Letter8 Board of Management10 Innovation for Sustainable Mobility34 Important Events in 200836 Daimler Shares40 - 87Management Report42 Business and Strategy53 Profitability66 Liquidity and Capital Resources72 Financial Position74 Overall Assessment of the Economic Situation75 Events after the End of the 2008 Financial Year75 Risk Report82 Outlook88 - 101Divisions90 Mercedes-Benz Cars94 Daimler Trucks98 Daimler Financial Services100 Vans, Buses, Other
  14. 14. 102 - 113Sustainability104 Sustainability at Daimler106 Innovation, Safety and the Environment110 Human Resources112 Social Responsibility114 - 139Corporate Governance116 Corporate Governance Report120 Compliance122 Remuneration Report128 Declaration of Compliance with theGerman Corporate Governance Code130 Members of the Supervisory Board134 Report of the Supervisory Board138 Report of the Audit Committee140 - 215Consolidated Financial Statements142 Responsibility Statement143 Independent Auditors’ Report144 Consolidated Financial Statements216 - 220Additional Information216 Ten-Year Summary218 Glossary
  15. 15. 219 Index220 International Representative OfficesInternet | Information | AddressesDaimler WorldwideFinancial Calendar 2009Overview of the Group| Chairman’s Letter | 52008 was a year with two very different stories for Daimler. Our first-half resultswere very good. We achieved record unit sales of automobiles, vans and buses.That demonstrates your company’s capabilities under “normal circumstances.”In the second half of the year, circumstances were anything but normal. Theautomotive industry around the world was hit hard by the financial crisis – whichquickly became a global recession. We felt its effects on our unit sales, revenueand earnings in the third and fourth quarters, especially at our car division. In allof our businesses, we achieved a net profit of €1.4 billion in 2008. EBIT fromongoing operations (excluding Chrysler LLC) amounted to €6.2 billion.What were the most important developments in our divisions?Mercedes-Benz Carsperformed extremely well in the first two quarters. No otherpremium brand grew as fast during that period as the brand with the star. In thesecond half of the year, unit sales slumped as a result of the worldwide collapseof car markets. For the year as a whole, however, we gained market share in keymarkets. The Mercedes-Benz S-Class defended its worldwide leadership in theluxury segment. And for smart, 2008 was the best year ever.Daimler Trucks achieved modest increases in unit sales and revenue. In 2008it was, once again, the world’s biggest producer of heavy- and medium-duty trucks.
  16. 16. In Europe and Latin America, Mercedes-Benz Trucks even set new records for unitsales. With the newly launched Actros, we also set new standards for economy,environmental compatibility and safety. In North America, we realigned our busi-ness operations toadapt to the market reality of the region. Trucks Asia surpassedits prior-year unit sales despite difficult conditions. And we expanded our presencein major growth regions – especially in Russia and India.66Mercedes-Benz Vanssold more vehicles than ever before in the first half oflast year. At times, its plants were operating at capacity limits. Although the impactof the financial crisis significantly dampened market growth in the second half ofthe year, our vans still achieved the second-highest annual unit sales in their history.Daimler Busesset a new unit-sales record in 2008. Once again, we maintainedour worldwide leadership in the bus segment over eight tons. And our jointventure with Sutlej Motors Ltd. in India marks our entry into yet another importantgrowth market.Daimler Financial Servicesachieved a small increase in contract volumedespite the economic crisis. Its focus was on efficiency improvements and the neworganization of our activities in North and South America. We took effectivecountermeasures early on in order to minimize the risk of credit default.All of this shows that our foundation is solid and that we are well positioned.But it is also true that the world economic crisis is not over. A deep r ecessionseems likely in 2009.The best remedy in these hard times is strong products and pioneering techno-logies. We have both.The new E-Class is a leader in safety. Its innovative gasolineand diesel engines raise the bar for fuel efficiency and emissions. Continuedoptimization of the combustion engine delivers the biggest environmental benefits in
  17. 17. the short- and medium-term. In addition, this fall we will be the first German manu-facturer to launch aseries-produced car with hybrid drive: the S 400 BlueHYBRID.It will be the world CO2champion in the luxury class. And we are already themarket leader for environmentally friendly commercial vehicles.Overview of the Group| Chairman’s Letter | 7Furthermore, we will pass important milestones in 2009 on our way to emission-free driving. We willlaunch limited editions of an electric smart and a Mercedes-Benz with fuel-cell drive this year. A shorttime later, we will produce the firstMercedes-Benz with battery-electric drive. We are now directly involved inthe development and production of the latest lithium-ion technology, which willbe applied in all three of those vehicles. At the same time, we are cooperatingwith energy providers and other partners on the development of the infrastructurerequired for electric vehicles. That comes at a significant cost, but it is moneywell invested. We want to be the engine of sustainable mobility. In the currentsituation, we place top priority on investing in products, technologies andstrategically important markets.I would like to thank you, our shareholders, for your trust. Our thanks also goto our employees, whose skills and efforts allow us to meet the challenge of theglobal economic crisis from a position of relative strength. Our employees’ pursuitof excellence is also the key to achieving our goal of emerging stronger fromthis recession.This economic situation is unusual, but so is our determination. We will stay ontrack. To help us do so, I would like to ask for your continued support in the future.Yours sincerelyDieter Zetsche
  18. 18. Board of Management8Dieter Zetsche | 55Chairman of the Board of Management,Head of Mercedes-Benz CarsAppointed until 2010Günther Fleig | 60Human Resources &Labor Relations DirectorAppointed until 2009Bodo Uebber | 49Finance & Controlling,Daimler Financial ServicesAppointed until 2011Board of Management8Dieter Zetsche | 55Chairman of the Board of Management,Head of Mercedes-Benz CarsAppointed until 2010Günther Fleig | 60Human Resources &Labor Relations DirectorAppointed until 2009Bodo Uebber | 49
  19. 19. Finance & Controlling,Daimler Financial ServicesAppointed until 2011Overview of the Group| Board of Management | 9Andreas Renschler | 50Daimler TrucksAppointed until 2010Thomas Weber | 54Group Research &Mercedes-Benz Cars DevelopmentAppointed until 2010Rüdiger Grube | 57Corporate DevelopmentAppointed until 2010Overview of the Group| Board of Management | 9Andreas Renschler | 50Daimler TrucksAppointed until 2010Thomas Weber | 54Group Research &Mercedes-Benz Cars DevelopmentAppointed until 2010Rüdiger Grube | 57Corporate DevelopmentAppointed until 2010
  20. 20. 20,000,000,000kilometersare driven every day in worldwide personal transport:on the way to work, to school, or back home to the family.More thanMercedes-Benz S 400 Blue HyBridThe intelligent, high-performance engine management reacts very subtly;it optimally adjusts the drive system combining gasoline engine and electricmotor for varying requirements. This achieves significant reductions in fuelconsumption and emissions.… and everykilometer countsOverview of the Group | innovation for Sustainable Mobility | 13An important milestone on the way to sustainablemobility is the Mercedes-Benz S 400 BlueHyBrid;because the combination of a further developed V6gasoline engine and a compact electric motor makesthe S 400 Blue HyBrid the world’s most economicalluxury sedan with a gasoline engine: Fuel consumptionin the combined cycle is just 7.9 liters per 100 kilo-meters. The innovative drive system offers double bene-fits: On the one hand, it helps to save fuel and reduceemissions. On the other hand, the interplay between
  21. 21. the two drive units enhances the vehicle’s dynamismand gives it even more impressive torque and effort -less power delivery. Specially developed lithium-ionhigh-voltage batteries, an extremely convenient andefficient start-stop function, recovery of braking energyand many more innovations are impressive proof of ourambition to provide customers with economical andenvironmentally compatible premium automobiles – butnot doing without the typical Mercedes-Benz attributesof safety, comfort and a superior driving experience.At daimler, every day approximately 19,000 research and develop-ment engineers face the challenge ofmaking future mobility safeand sustainable with innovative products. in the field of passengercars, we are pursuing this goal with our “road to the Future.”The compact hybrid moduleplaced between the transmis-sion and the engine also servesas starter and alternator.The disk-shaped electricmotor helps to save fuel andenhances driving pleasure.40,000,000tonsof goods are transported solely on the roads of Europe.Whether the goods are fruit, vegetables, clothing, constructionmaterials or other industrial goods – we depend on fresh
  22. 22. and timely deliveries.Every day, approximatelyMercedes-Benz Actros BlueTecThe world champion: With each liter of diesel fuel saved, it reducesCO2in the atmosphere by 2,640 grams. Today, more than 200,000Mercedes-Benz trucks are on the road with BLUETEC technology.Highly sensitive measuring and testing methodsensure that the emission and consumptionfigures of our commercial-vehicle engines arecontinuously improved.… environmentallyfriendly transportationOverview of the Group | innovation for Sustainable Mobility | 17After a seven-day test journey of 12,728 kilometers, itwas clear: The Mercedes-Benz Actros with BLUETECtechnology consumed an average of exactly 19.44 litersof diesel per 100 km, putting it into the Guinness Bookof records as “the most fuel-efficient 40 ton truck.”That saves money for logistics companies and fleetoperators in times of high fuel prices, and is also goodfor the environment. Because the new Mercedes-BenzActros reduces CO
  23. 23. 2emissions to 20.5 grams per ton ofpayload per kilometer (g/t/km), making it the CO2world champion. The heavy-duty truck is also aheadof the competition in everyday traffic, with fuelconsump tion of between 30 and 35 liters/100 kmand CO2emissions of 30 to 37 g/t/km.The basis for these excellent results is the constantoptimization of the conventional diesel engine, makingit into a high-tech drive system. BLUETEC technologyalone reduces diesel consumption by 2 to 5 percent,which can mean savings of up to 2,000 liters per truckeach year.Experts predict that transport volumes will double by 2030 com -pared with the year 2000. With our“Shaping Future Transportation”initiative, we want to maintain mobility for future generations andto make it as sustainable and safe as possible.280,000 new buseswent on the roads around the world in 2008. They connectemployees and employers, pupils and schools, students anduniversities, and take us to our destinations safely and cost-
  24. 24. efficiently.ApproximatelyOrion V ii Hybrid BusThe biggest fleet of hybrid buses in the world covers more than72,000 kilometers every day in New York. Compared to theirpredecessors, the buses’ lithium-ion batteries now have muchlonger lifetimes.On the way to an emission-free commercial vehicle, daimler hasstarted the “Shaping Future Transportation” initiative. Urban busessuch as the Orion V ii Hybrid or the Fuso Aero Star Eco Hybridare already helping to reduce fuel consumption and emissionsaround the world.… conservingresourcesyou can hardly hear them. And you don’t smell them. But you can see them:the latest-generation buses in New york. This US metropolis is the first city inthe world to order 850 Orion V ii Hybrid buses with environmentally friendlylithium-ion hybrid technology, which are now being put into operation. The newvehicles with alternative drive technology consume up to 30 % less fuel thanconventional buses and emit up to 30 % less carbon dioxide.Hardly noticed by the passengers, under the hood an extremely efficient com -bustion engine operateswith constant revolutions to generate electricity forthe electric drive system. i n addition, every time the brakes are applied, thewaste energy is used to recharge the extremely light and durable lithium-ion
  25. 25. batteries. This innovative drive technology has meanwhile gained great accept-ance in the NAFTAregion. The environmentally friendly Orion Hybrid Vii busesare now in operation also in Ottawa, Toronto and Houston. daimler continuesto work hard on replacing diesel engines with fuel cells as far as possibleby the year 2015.So the goal of daimler’s “Shaping Future Transportation” initiative is gettingcloser: emission-free drive systems in local public transport and goodstransport.A big step towards emission-freedrive systems in commercial trans -portation: The Orion VII Hybrid busreduces emissions significantlyand provides the driver with a cleanand pleasant workplace.Overview of the Group | innovation for Sustainable Mobility | 215,500,000,000peoplearound the world are actively or passively involved intransport: as pedestrians, cyclists, bus, truck or car driversor passengers.More thanMercedes-Benz E-ClassThe standard equipment of the new E-Class includes theactive hood, with which Mercedes-Benz demonstrates theactive role it plays for pedestrian protection: If an accident
  26. 26. occurs, a spring system lifts the hood within milliseconds byfive centimeters, thus expanding the crumple zone.According to scientific studies, approximately 25percent of all serious traffic accidents on highways arecaused by tired drivers. Because drivers often fail torecognize fatigue early enough, which can lead to dan -gerous microsleep at the wheel. The latestgenerationof safety technology from Mercedes-Benz now focuseson this alarming statistic; it recognizes dangeroussituations when they have only just begun and cantrigger an immediate response. For example, the newATTENTiON ASSiST safety system notices the driver’stiredness and requests him or her to take a break.We offer ATTENT i ON ASSi ST for the first time as anoptional extra in the new E-Class.The system constantly monitors the driver’s behaviorin terms not only of speed but also of steering-wheeland pedal movements and indicator operation, as wellas external influences such as road unevenness or sidewinds. This allows risky maneuvers and typical signsof fatigue to be recognized and the driver is effectivelywarned with an acoustic signal and unmistakableadvice displayed on the dashboard:“ATTENT iON ASSiST. Pause!” This and other innovativesafety systems from Mercedes-Benz are importantsteps on the way to accident-free driving.
  27. 27. ATTENTION ASSIST helps drivers to recognize theirtiredness in good time, thus preventing seriousaccidents. The system was comprehensively testedup to series launch in the new E-Class in Daimler’sresearch and development departments.… travelingsafelyThe vision of accident-free driving motivates daimler to makefuture mobility as safe as possible for all road users. With thenew Mercedes-Benz E-Class, we once again demonstrate ourpioneering role in the field of safety.Overview of the Group | innovation for Sustainable Mobility | 254,000,000,000euroseach year in research and development projects: in new, fascinatingautomobiles, economical commercial vehicles, environmentallyfriendly drive technologies, innovative safety systems – in convincingsolutions for safe, individualized and sustainable mobility.daimler invests more thanMercedes-Benz Sprinter Plug- in-HybridOn the way towards the future: The world’s biggest test fleet of vans with hybrid drivehas a star on the hood. The Sprinter Plug-In-Hybrid is in use as a box van or combinationvan, as a delivery or service vehicle or as a shuttle bus, and is thus tested in various
  28. 28. types of application.… for  the future  of  mobility  Daimler’s  research  and  development expenditure  is  among  the  highest  in  the industry  – and  we also  have  a leading  position for   inventiveness  with  a portfolio of  nearly 22,000  patents. Because as  the inventor  of  the automobile,  we are particularly   keen  also  to  shape its  future.  Overview  of  the Group | Innovation for Sustainable  Mobility | 29Developed in our Van Technology Centerin Stuttgart-Untertürkheim and testedall over the world: The innovative plug-intechnology from Mercedes-Benz allows theSprinter Plug-In-Hybrid’s batteries to becharged from an electric socket.It’s economical,  it’s light,  it’s powerful,  and  it  runs  on electricity: the new  Sprinter Plug-In-Hybrid.  In  summer 2008, Mercedes-Benz started  customer  trials with  the second  generation of  this  innovative concept for a  hybrid  commercial  vehicle  – with  the world’s  biggest  fleet  of  vans  with  hybrid  drive. This  van gets  its  energy  not only  from  the filling station  but also  from  an  electric  socket,  and  can drive  continu-ously  for  up  to   30  kilometers  purely  on electric  power.  In  real-life  operation  with  courier  company  FedEx on an   extremely   demanding  inner-city   route  in   Paris,  fuel  
  29. 29. consumption fell by  40 % compared with  pure  diesel  operation.  For  62 %   of   the   distance  covered,   only    electric  power   was  used.  The   van’s  batteries   can  be   charged in  three different ways: by  the combustion  engine  when it  is  in  operation, by  recovering braking  energy   when  the   brakes   are  operated,   and   the   Sprinter Plug-In-Hybrid  can also  be  charged from  an  electric  socket  – simply  plug  it  in.  The Plug-In-Hybrid  is  just  one of  the numerous results  of   the  research   and   development  work   carried   out  at  Daimler.  R&D   has  been   a   key  area   of   our  work   since   the beginning  of  the automobile’s history,  and  it  is  the most important  prerequisite  for future  mobility. 9,600apprenticessecure our future. An investment in training yields the best interest– for our employees and for the Group. Mobility of the future placeshigh demands on our employees and offers interesting prospectsfor our apprentices.ApproximatelyHighly trained employees apply theirknowledge and skills in our plants and ensuremaximum quality and efficiency.Overview of the Group | innovation for Sustainable Mobility | 33
  30. 30. … mobilize acompanyOur employees are the key to our success and our apprenticesare the basis for a successful future. These young people standbehind our future innovations and technologies, they ensurethat our products and services are competitive, and they acceleratethe development of the daimler Group all over the world.Our employees’ high personal commitment and skills are our biggest strengths. in orderto secure this basis over the long term, we place great emphasis on professional trainingand continuous further training, provide exemplary health care and optimal safety atwork, promote diversity at the Group, work for equal opportunities, and facilitate thecombination of career and family. in this way, we create the right conditions for maximumquality and efficiency – like at our plant in Sindelfingen, which received the PlatinumAward for the world’s best manufacturing quality from J. d . Power & Associates in 2008.We are convinced that we can only satisfy our customers with outstanding products andservices when we are the employer of choice for the best employees today and in thefuture. Because it is our employees who constantly drive the Group’s ongoing development.In our training center in Esslingen-Brühl,approximately 1,250 young people are receivingoccupational training for a variety of careers.34JanuaryPresentation of the new Mercedes-Benz CLC. The new sportcoupe impresses with its exclusive design, power and dynamism.It offers an attractive entry into the Mercedes-Benz coupe family
  31. 31. with a high-quality driving experience.FebruaryDaimler makes the breakthrough with battery technology.Daimler achieves a decisive breakthrough in the field of batterytechnology. The Group has succeeded in adapting lithium-ion bat-teries to the demanding requirementsof automotive applicati-ons (see page 108).MarchDebut of new Mercedes-Benz Actros. The third generation ofthe Mercedes-Benz Actros makes its debut. It sets new standardsin terms of economy, comfort, safety and design.AprilWorld premiere for the GLK in Beijing. A distinctive design,superior performance and a maximum of safety and ride comfort:The GLK sets a new benchmark in the segment of compact SUVs.Joint venture Daimler Hero Commercial Vehicles Ltd is foun-ded. Daimler holds 60% of this joint venturewith the IndianHero Group. Commercial vehicles are to be produced for theIndian volume market under a new brand name.Daimler becomes a key shareholder in Tognum. Daimler AGtakes a 22.3% equity interest in Tognum AG. This acquisition isintended to secure long-term supply relations. Additional Tognumshares are later acquired on the stock exchange.JuneMercedes-Benz Bank surpasses €5 billion mark for customerdeposits.Growth continues in the direct banking business.More than 280,000 customers have call-money accounts or fixed-term deposit accounts with theMercedes-Benz Bank.
  32. 32. Debut of new-generation Mercedes-Benz Hybrid Sprinter.The first vans of the second generation are handed over to custo-mers for trials in the United States.Mercedes-Benz announces construction of a new plant inHungary. New capacities are to be created in Kecskemét for thefuture expansion of the model range of premium compact cars.The first cars are to be assembled there in 2012 (see page 93).Important Events in 200834JulyEarnings outlook impacted by global economic slowdown.On the occasion of publishing its financial results for the secondquarter, Daimler reduces its full-year target for EBIT from ongoingoperations (excluding Chrysler) to over €7 billion.SeptemberAlternative drive systems presented at IAA Trucks. Daimlerpresents eleven commercial vehicles with alternative drive systemsin Hanover, including three world premieres from Mercedes-Benz Trucks: the Axor BlueTec Hybrid, theEconic NGT Hybrid withnatural-gas drive and the Econic BlueTec Hybrid using a dieselengine.E-mobility project starts in Berlin.In a shared initiative, Daimlerand RWE start the world’s biggest joint venture for climate-friendly electric vehicles. This c ooperationbetween companiesin different sectors combines the specialized expertise of twokey industries (see page 92).October
  33. 33. Financial and economic crisis reflected by quarterly results.The ongoing worsening of the world economy leads to lowerearnings and an adjustment of full-year EBIT anticipated fromcontinuing operations excluding Chrysler to over €6 billion.Prizes for the Sindelfingen plant.The Sindelfingen plant recei-ves the J.D. Power Platinum Award for thebest quality shippedworldwide. And the trade magazine “Production” awards it the titleof “Factory of the Year” for excellent quality management.Daimler Truck North America presents its plan for optimiza-tion and repositioning. With thiscomprehensive program, theGroup is reacting to sustained weakness of demand in the entireindustry and structural changes in its core markets (see page 48).Series production of new four-cylinder diesel engine starts inUntertürkheim. The new-generation engine combines drivingpleasure with excellent fuel consumption of 5.2 liters per 100 kilo-meters and carbon-dioxide emissionsof 138 grams of CO2perkilometer. The engine’s modular construction allows a wide rangeof applications.Start of car2go mobility concept . With car2go, Daimler gives apioneering answer to the problem of rising traffic volumes in urbanareas. The pilot phase begins in Ulm and tests the concept withthe smart fortwo under real conditions (see page 92).NovemberWorld champion for Vodafone McLaren Mercedes.LewisHamilton clinches the drivers’ world championship in the last cornerof the Brazil Grand Prix. Vodafone McLaren Mercedes takes
  34. 34. second place in the constructors’ championship.DecemberManagement and labor council agree on short-time work.In order to adjust production to the difficult market situation,plant-specific reductions in working time are agreed upon withthe employee representatives for the first quarter of 2009.This includes the introduction of short-time work.Daimler concludes strategic partnership with Kamaz. Our10% equity interest in Russias biggest-selling truck manufactu-rer represents Daimlers entry into thehigh-volume Russianmarket and is part of our growth strategy in the BRIC markets.Daimler and Evonik establish strategic alliance. A new part-nership is formed to accelerate the research,developmentand production of cells for lithium-ion batteries: a milestone onthe way to the series production of electric vehicles.Daimler Wichtige Ereignisse 35 Overview of the Group| Important Events | 35 Overview of the Group|Important Events | 353626.704,8102,4518,7768,8602002666.508,067
  35. 35. 4,40013,26515,30836194-60-40-44-34-42-45-72World economic slump affects development of global stockmarkets. Due to the spread of the US subprime crisis to theinternational financial markets and the resulting worldwide eco-nomic slump, share prices fell drasticallyon all major stockmarkets in 2008. This development already started in spring, whenincreasing numbers of investors became convinced that thefinancial crisis would have significant effects on economic devel-opments in the triad markets (WesternEurope, North Americaand Japan) and in the emerging markets. However, only slighteffects on the real economy were expected at that point in time.But as the year progressed, many investors became afraid thateconomic growth would fall much more sharply than had beenassumed and that this phase of weak growth might last muchlonger than in previous downturns. And in last autumn, the
  36. 36. dominant question became how long and how deep the recessionwould be. In this environment, the Dow Jones Euro STOXX 50,the Dow Jones Industrial Average, the S&P 500 and the Nikkei allfell significantly. Indices in the triad markets were also muchmore volatile. The DAX performed relatively well in autumn; itsperformance was substantially boosted by the special develop-ment of VW’s share price.Shares were sold of companies in all sectors, although sellingpressure was particularly high for shares in European manufac-turers of automobiles and commercialvehicles in expectation ofa global recession; many portfolio managers decided to giveauto stocks a lower weighting in their portfolios or to sell them.Another reason for investors’ aversion to auto stocks was uncer-tainty concerning the effects of futureCO2legislation on customerdemand and carmakers’ profitability.Unsatisfactory development of Daimler’s share price. In thisnegative environment, Daimler’s share price fell by 60% overthe year, a significantly weaker development than the industryindex, although the Dow Jones STOXX Auto Index was sub-stantially influenced by the sharp rise in VW’sshare price causedby Porsche increasing its stake in VW.After closing the year 2007 at €66.50, Daimler’s share price cameunder significant pressure in January due to strong market tur-bulence and fell below €50. The increasedvolatility was primarilyrelated to index transactions and had little basis in fundamentals.Nonetheless, even in this early phase some investors expected
  37. 37. Daimler’s earnings trend to be significantly impacted by theeconomic downturn during the rest of the year. The share pricestabilized again during the spring, but investors remained cau-tious with regard to auto stocks.Daimler Shares. Global financial crisis causes high stock-marketvolatility. Daimler’s share price falls sharply in a difficult environment.Dividend reduced to €0.60 per share. Comprehensive investorrelations activities.% change08/07 End of 2007DE0007100000710000D1668R123DAIDAIGn.DEDAI:GRStock-exchange data for Daimler shares Development of Daimler’s share price and relevant indicesEnd of 2008ISINGerman securities identification numberCUSIPStock-exchange abbreviationReuters ticker symbolBloomberg ticker symbolDaimler’s share price (in €)DAX 30
  38. 38. Dow Jones Euro STOXX 50Dow Jones Industrial AverageNikkeiDow Jones STOXX Auto IndexS&P Automobiles Industry IndexOverview of the Group| Daimler Shares| 37As the second quarter progressed, many investors increasinglyassumed that economic growth would slow down more than hadbeen expected and that the period of economic weakness wouldlast longer than in previous downturns. The share price was alsodepressed by high raw-material costs, the ongoing rise in theprice of oil, and the extremely weak dollar. In this negative envi-ronment, Daimler’s share price fell tojust below €40 at the endof June and remained around this level during the third quarter.Although shares were attractively priced, increasing indicationsthat the financial market crisis was affecting the real economyled to low levels of stock purchases by institutional investors inthe fourth quarter of 2008. Share prices fluctuated sharply, notonly due to significantly reduced expectations for profits and cashflows on the part of invest ors and analysts because of the eco-nomic downturn, but also resulting frommarket and portfoliotrading strategies. For example, many investors who hadfinanced their shareholdings in Daimler with borrowed capitalwere forced to sell some or all of their Daimler shares with highlosses because their banks demanded repayment of their loans.At the end of 2008, Daimler’s share price closed at €26.70 in
  39. 39. Xetra trading in Frankfurt and at US $38.28 in New York.This was equivalent to a market capitalization of €24.8 billionor US $35.5 billion. In the first few weeks of the year 2009,markets were unable to defend the gains made at the end of lastyear. Due to the renewed weakening of the financial sector,stock markets generally came under pressure. Daimler’s shareprice was unable to avoid this trend.Although the market is aware that Daimler’s share price is verylow in historical terms at the time of this report being prepared inFebruary 2009, investors are still unwilling to purchase ourshares. Most of the institutional investors are waiting until a clearpicture emerges of the future development of our earnings andcash flows. The credit crisis has also caused uncertainty abouthow and at what costs the automobile manufacturers will beable to refinance their financial services business in the future.From today’s perspective, it is not possible to reliably predictwhen the stock markets will return to a long-term upward trend.This very much depends upon when investors start to assumethat the general economic situation will improve once again.Optimization of capital structure with share buyback pro-gram. In order to optimize Daimler’s capitalstructure, on thebasis of the authorization granted by the Annual Meeting on April4, 2007, the Board of Management and the Supervisory Boardapproved a share buyback program in August 2007. The back-ground to this decision was the high netliquidity and highequity ratio in the industrial business following the separation
  40. 40. from Chrysler. The optimization of the capital structure has thegoal of reducing the use of equity capital, which is more expen-sive than borrowed capital. This shouldprevent investmentdecisions being limited and growth opportunities not being uti-lized due to the excessive cost of capital.In exercise of the authorization granted by the Annual Meeting onApril 4, 2007, 49.8 million shares were bought back for a totalof €2.7 billion in the months of February and March 2008. All ofthose shares were cancelled without any reduction in the capitalstock by April 2008. As a result, the proportionate share in thecapital stock of each no par value share increased from €2.73to €2.87.The Annual Meeting of the shareholders held on April 9, 2008approved a new authorization to buy back a maximum of 10% orapproximately 96.4 million of the outstanding shares. In the peri-od of June through October 2008, webought back 37.3 millionshares for €1.4 billion under this authorization. Due to the wors-ening of the worldwide financial andeconomic crisis and itsimpact on the real economy, Daimler discontinued implementa-tion of the share buyback program onOctober 24, 2008.Employee share program with enhanced attractiveness. Intwo offers made in the year 2008, eligible members of the work-force were once again able to acquireemployee shares with taxadvantages. In the second action in October, Daimler made aone-time offer of up to two bonus shares per person, thus provid-ing a bigger incentive for employees toacquire shares in theircompany. The response was strong: In 2008, approximately41,300 employees (or 24% of those eligible) purchased a total of973,000 employee shares.
  41. 41. 10002030405060708012/08 11/08 10/08 9/08 8/08 7/08 6/08 5/08 4/08 3/08 2/08 1/08Daimler share price (high/low), 2008in €Dow Jones STOXX Auto IndexDAXDaimler AG10090807060504030110Share price index, 2008
  42. 42. 12/31/07 2/29/08 4/30/08 6/30/08 8/29/08 10/31/08 12/31/0838Dividend reduced to €0.60 per share.In view of the effectsof the global economic crisis on Daimler’s earnings situation,the Board of Management and the Supervisory Board suggesta smaller dividend distribution this year. We will propose to theAnnual Meeting to be held on Apr il 8, 2009 t hat the dividendfor the year 2008 be reduced from €2.00 per share to €0.60 pershare. Based on the number of shares entitled to a dividendas of December 31, 2008, this represents a dividend payout of€556 million (prior year: €1,928 million). The main reasonsfor the dividend adjustment are the level of earnings in the year2008 and the difficulty in estimating the further developmentof the world economy and the automotive markets.Broad shareholder base.Daimler continues to have a broad share-holder base of approximately 1.3million shareholders. At the endof 2008, the largest shareholder was the Kuwait Investment Author-ity with a holding of 7.6%. Inaddition, on February 20, 2008,Capital Research and Management Company informed us that ithad exceeded the statutory disclosure threshold of 3% of votingrights and now held 3.03% of our shares.In total, institutional investors held 69% of our equity and privateinvestors held 24%. Approximately 76% of our stock was in thehands of European investors and approximately 16% was held byUS investors. After falling for several years, the number of privateinvestors entered in Daimler’s share register increased once again
  43. 43. in 2008. At the end of the year, we had 37.1 million treasuryshares (own shares bought back), equivalent to 3.8% of the out-standing shares. The weighting ofDaimler shares in majorindices decreased during the year due to the share-price devel-opment. In the German DAX 30 index,our stock was rankedin 9th position with a weighting of 5.38% (end of 2007: 8.16%).In the Dow Jones Euro STOXX 50 index, Daimler shares wererepresented with a weighting of 1.88% (end of 2007: 2.80%).The global trading volume in Daimler stock amounted to 2.9 billionshares in 2008 (2007: 2.7 billion), of which 2,791 million weretraded at German stock exchanges (2007: 2,511 million) and 120million were traded on the New York Stock Exchange (2007:154 million).2,768964.637.124.81.35.38%1.88%A-A3A-A (low)+0-5.-63
  44. 44. +808/072,7661,013.9067.41.28.16%2.80%BBB+A3A-A (low)End of 2007 End of 2008Statistics1.411.400.6033.9326.7064.6819.35% change-63-63-70
  45. 45. -10-60-17-5808/073.833.802.0037.7166.5077.7646.302007 2008Statistics per share% changeNet profit (basic)Net profit (diluted)DividendShareholders’ equity (Dec. 31)Xetra share price: year-end1Xetra high1Xetra low1
  46. 46. 1 Closing pricesCapital stock (in millions of €)Number of shares (in millions)thereof treasury sharesMarket capitalization(in billions of €)Number of shareholders(in millions)Weightings in share indicesDAX 30Dow Jones Euro STOXX 50Long-term credit ratingsStandard & Poor’sMoody’sFitchDBRSAmounts in €Overview of the Group| Daimler Shares | 39Continued inclusion in important sustainability indices. Ourefforts to organize our strategy and operations also in line withthe principle of sustainability were rewarded by external appraisalsonce again in 2008. Daimler’s stock was included for the fourthtime in the Dow Jones Sustainability Index (DJSI), one of the world’sleading indices of its kind. The Group’s commitment to sustain-ability was assessed in the areas ofeconomics, ecology, human
  47. 47. resources and social responsibility. On the basis of this assess-ment, Daimler was placed among the topfive companies in theautomotive industry in terms of sustainability. Our ongoing listingin the DJSI is one of our accomplishments on the way to achievingmore sustainable management. However, Daimler is no longerlisted in the European DJSI STOXX, because that index has beenreduced to include only two companies in the European auto-motive industry. Daimler will furtherintensify its efforts in thefield of sustainability.Daimler Annual Meeting in 2008.Following the change of nameto Daimler AG in October 2007, the first Annual Meeting washeld with the new name at the International Congress Center (ICC)in Berlin on April 9, 2008. It was attended by approximately6,500 shareholders. With 42.5% of the equity capital representedat the Annual Meeting, shareholder representation increasedonce again (2007: 39.2%). In the voting on the items of the agenda,the shareholders adopted the recommendations of the manage-ment with large majorities.Comprehensive investor relations activities.Once again inthe past year, the Investor Relations department provided timelyinformation on the development of the Group to institutionalinvestors, analysts, rating agencies and private shareholders.Our communication activities for institutional investors and ana-lysts included roadshows in the majorfinancial centers of Europe,North America and Asia, as well as large numbers of one-on-onemeetings. We carried out presentations of the Group at the inter-national motor shows in Detroit,Geneva, Hanover and Paris.We regularly reported on our quarterly results and on important
  48. 48. changes at the Group via conference calls and Internet trans-missions.Further improvement of Investor Relations website. At theInternational ARC Awards for the world’s best annual reports, ourinteractive annual report was awarded the prize for the bestonline annual report in the Automobiles & Trucks category for thethird time in succession. In addition, we further improved theentire IR section of the Daimler website in 2008.Increased number of online shareholders. The popularity ofour electronic information and communication service was con-firmed once again last year. The numberof shareholders regis-tered in Daimler’s e-service increased to approximately 95,000by the end of 2008.Of that total, approximately 80,000 shareholders received theirinvitations to the Annual Meeting by e-mail instead of by post lastyear, thus helping to protect the environment and reduce costs.Access to the e-service for shareholders and further informationon it can be found on our website athttps://register.daimler.com.Kuwait Investment Authority 7.6%Institutional investors 68.8%Retail investors 23.6%By type of shareholderShareholder structure as of December 31, 2008Germany 48.6%Europe, excluding Germany 27.7%USA 15.7%Rest of the world 8.0%
  49. 49. By regionShareholder structure as of December 31, 2008Daimler sold 2.1 million vehicles in a difficult environment in2008 (2007: 2.1 million vehicles). Revenue decreased by 4%to €95.9 billion, operating profit (EBIT) was down to €2.7 billion(2007: €8.7 billion) and net profit fell to €1.4 billion (2007:€4.0 billion). The main reasons for the lower earnings werenot only the dramatic effects on automotive markets of theworldwide financial and economic crisis, but also the veryhigh level of raw -material prices on average over the year, weakcurrencies and charges relating to Chrysler. In order to improveour earnings situation once again, we continued and intensifiedour efficiency- enhancing actions. The year 2009 will also beextremely difficult for Daimler, but we have a good startingposition due to our efforts in recent years: Daimler has strongbrands, exciting pro ducts, the right technologies and a soundfinancial basis. These are the best preconditions for us tosuccessfully meet the challenges ahead.Management Report| Contents | 4142 - 52Business and Strategy42 The Group43Report and explanation of details provided pursuant toSection 315, Subsection 4 of the German Commercial Code45 Strategy
  50. 50. 49 Economy and the industry50 Business developments53 - 65Profitability53 EBIT55 Financial performance measures56 Value added58 Statements of income60 Dividend61 Research and development63 Workforce64 Procurement65 Information technology (IT)66 - 71Liquidity and Capital Resources66 Principles and objectives of financial management67 Cash flows69 Capital expenditure70 Refinancing71 Credit ratings72Financial Position74Overall Assessment of the Economic Situation75
  51. 51. Events after the End of the 2008 Financial Year75 - 82Risk Report75 Risk management system76 Economic risks77 Industry and business risks80 Financial market risks81 Liquidity risks81 Risks connected with pension plans82 Risks from changes in credit ratings82 Legal risks82 Overall risk82 - 87Outlook82 The world economy83 Automotive markets84 Unit sales85 Revenue and earnings86 Capital expenditure86 Research and development87 Workforce122 - 127Remuneration ReportThe Remuneration Report in the Corporate Governance section onpages 122 ff is also part of the Management Report.
  52. 52. Management Report42The GroupDaimler can look back on a tradition covering more than onehundred years, which features pioneering achievements in auto-motive engineering and extends back toGottlieb Daimler andCarl Benz, the inventors of the automobile. Today, the DaimlerGroup is a leading supplier of superior premium automobilesand the world’s biggest manufacturer of heavy and medium trucks,with a wide range of first-class trucks, vans and buses. Theproduct portfolio is completed by a range of tailored automotiveservices. Daimler holds a 22.5% equity interest in the EuropeanAeronautic Defence and Space Company (EADS), a leading com-pany in the aerospace and defenseindustries. In addition, during2008 Daimler acquired 28.4% of the shares in Tognum AG, one ofthe world’s leading producers of off-highway engines. Followingthe transfer of a majority interest in Chrysler to Cerberus CapitalManagement in August 2007, Daimler AG holds an equity inte-rest of 19.9% in Chrysler, a US automobilemanufacturer.Daimler is active in nearly all of the countries in the world, withstrong brands and a comprehensive portfolio of vehicles rangingfrom small cars to heavy trucks, complemented by services alongthe automotive value chain. The Group has production facilitiesin a total of 19 countries and approximately 7,300 sales centersworldwide. The global networking of research and developmentactivities and of production and sales locations gives Daimler con-siderable potential to enhanceefficiency and to gain advanta-ges in an internationally competitive market. For example, we can
  53. 53. apply our new green drive technologies in a broad portfolio ofvehicles while utilizing experience and expertise from all parts ofthe Group.Of Daimler’s total revenue of €95.9 billion in the year 2008,49% was generated by Mercedes-Benz Cars, 27% by DaimlerTrucks, 9% by the Daimler Financial Services division and 15%by the Vans, Buses, Other segment.At the end of 2008, Daimler employed a total workforce of morethan 270,000 people worldwide.The products supplied by the Mercedes-Benz Cars divisionrange from the high-quality small cars of the smart brand to thepremium automobiles of the Mercedes-Benz and AMG brandsand to the Maybach luxury sedans. Most of these vehicles areproduced in Germany, but the division also has productionfacilities in the United States, France, South Africa, Brazil, India,Vietnam, Indonesia and China. Worldwide, Mercedes-Benz Carshas 17 production sites at present. In order to extend our modelrange in the compact-car segment, we decided in June 2008to build a new plant in Hungary, which is to go into operation in2012. The most important markets for Mercedes-Benz Cars in2008 were Germany with 26% of unit sales, the other markets ofWestern Europe (31%), the United States (20%), China (4%) andJapan (3%).As the world’s leading manufacturer of heavy-duty and medium-duty trucks, the Daimler Trucks divisiondevelops and produces
  54. 54. vehicles within a global network under the brands Mercedes-Benz, Freightliner, Sterling, Western Starand Mitsubishi Fuso.The division’s 33 production facilities are in the NAFTA region(16), Europe (7), South America (1), Asia (8) and Africa (1). In thecontext of repositioning our North American truck business,we will cease production of the Sterling brand in March 2009 andwill close the plants in St. Thomas, Canada in March 2009 andin Portland, USA in June 2010. In February 2009, we opened anew plant for the production of heavy trucks in Saltillo, Mexico.Daimler Trucks’ product range covers light, medium and heavy-duty trucks for local and long-distancedeliveries and cons-truction sites, as well as special vehicles for municipal applications.Due to close links in terms of production technology, the pro-duct range also includes the buses of theThomas Built Buses andMitsubishi Fuso brands. The division’s most important salesmarkets in 2008 were Asia (with 33% of unit sales), the NAFTAregion (21%), Western Europe (18%) and Latin America excludingMexico (13%).Business and StrategyManagement Report | Business and Strategy | 43The Daimler Financial Services division supports the sales ofthe Daimler Group’s automotive brands in more than 40 countries.Its product portfolio mainly comprises tailored financing andleasing packages for customers and dealers, but it also providesservices such as insurance, fleet management, investment prod-ucts and credit cards. The main areas ofthe division’s activitiesare Western Europe and North America. In 2008, every thirdvehicle sold by Daimler was financed by Daimler Financial Services.
  55. 55. Its contract volume of €63.4 billion covers 2.5 million vehicles.Daimler Financial Services also holds a 45% interest in the TollCollect consortium, which operates an electronic road-chargingsystem for trucks over 12 metric tons on highways in Germany.The Vans, Buses, Othersegment primarily comprises theMercedes-Benz Vans and Daimler Buses units and our share-holdings in the European AeronauticDefence and SpaceCompany (EADS), Tognum AG and Chrysler Holding LLC.The Mercedes-Benz Vans unit has production facilities at a totalof seven locations in Germany, Spain, the United States, Argentinaand Vietnam for the Vito/Viano, Sprinter and Vario series inweight classes ranging from 1.9 to 7.5 metric tons. An additionalplant is now being established in China. The main sales marketsfor vans are Europe (82%) and the NAFTA region (7%). The Sprinteris also sold under the Dodge and Freightliner brands in theUnited States and Canada.The product range of Daimler Buses, the world’s leading manu-facturer of omnibuses above 8 tons withthe brands Mercedes-Benz, Setra and Orion, comprises buses for tourist, urban and in-terurbanapplications as well as bus chassis. The most importantof the 15 production sites are in Germany, Turkey, Brazil and theNAFTA region. In 2008, 48% of the unit’s revenue was generatedin Western Europe, 15% in the NAFTA markets and 19% in LatinAmerica (excluding Mexico).Report and explanation of details provided pursuant toSection 315, Subsection 4 of the German Commercial CodeManagement. Daimler AG is a stock corporation domiciled in
  56. 56. Germany (see pages 116 ff). It is managed by a Board of Manage-ment, whose members are authorizedto represent it vis-à-visthird parties. The Board of Management must have at least twomembers, who, in accordance with Section 84 of the GermanStock Corporation Act (AktG), are appointed by the SupervisoryBoard for a maximum period of office of five years. Reappoint-ment or the extension of a period ofoffice, in each case for a maxi-mum of five years, is permissible. However, the SupervisoryBoard of Daimler AG has resolved generally to limit both initialappointments and reappointments to a maximum of three yearsin the future. Appointments and reappointments can only be madeby a resolution of the Supervisory Board; reappointments maygenerally not be made more than one year before the end of aBoard of Management member’s current period of office. TheSupervisory Board appoints one of the members of the Board ofManagement as the Chairman of the Board of Management.In exceptional cases, a member of the Board of Management canbe appointed by the court in accordance with Section 85 of theGerman Stock Corporation Act.The Supervisory Board can revoke the appointment of a memberof the Board of Management and of the Chairman of the Board ofManagement if there is an important reason to do so.Remuneration. A description of the system of remunerationand the individualized details of the remuneration of the membersof the Board of Management and Supervisory Board are shownin the Remuneration Report on pages 122 ff. This is part of theManagement Report.
  57. 57. Purpose of the company, amendment to the Articles ofIncorporation. The general purpose for which the company isorganized is defined in Article 2 of the Articles of Incorporation.Pursuant to Section 179 of the German Stock Corporation Act, theArticles of Incorporation can only be amended by a resolutionof the Annual Meeting. In accordance with Section 133 of the Ger-man Stock Corporation Act and Article19, Paragraph 1 of theArticles of Incorporation, resolutions of the Annual Meeting arepassed with a simple majority of the votes cast, unless otherwiserequired by binding provisions of applicable law, and with a simplemajority of the capital stock represented at the Annual Meetingif this be required. Pursuant to Section 179, Subsection 2, Sentence 2of the German Stock Corporation Act, any amendment to the pur-pose of the company requires a 75%majority of the capital stockrepresented at the Annual Meeting. Amendments to the Articlesof Incorporation that only affect the wording can be decided uponby the Supervisory Board in accordance with Article 7, Paragraph 3of the Articles of Incorporation.Mercedes-Benz Cars 49%Daimler Trucks 27%Daimler Financial Services 9%Vans, Buses, Other 15%Consolidated revenue by division44Capital.The subscribed capital of Daimler AG amounts to €2,768million as of December 31, 2008. It is divided into 964,557,432
  58. 58. individual registered shares of no par value. All shares grant equalrights to their holders. Each share confers one vote and an equalshare of profits. The rights and duties arising from the shares arederived from the provisions of applicable law. There were 37,116,831treasury shares at December 31, 2008. The company does nothave any rights from treasury shares.Share buyback, approved and conditional capital. By resolutionof the Annual Meeting of April 4, 2007, the Board of Managementwas authorized until October 4, 2008 to acquire the company’s ownshares for certain purposes up to a maximum correspondingamount of the capital stock of €267 million, which was nearly 10%of the capital stock. During the period from August 30, 2007until March 28, 2008, this authorization was utilized to buy back99.77 million shares for a total amount of €6,197 million. The vol-ume of the shares bought back on thebasis of the authorizationgranted by the Annual Meeting on April 4, 2007 was equivalentto €267 million of the capital stock or 10% of the shares out-standing at the time when the resolutionwas passed at the AnnualMeeting in 2007. Following their acquisition, the shares werecancelled without any reduction of the capital stock, the last can-cellation taking effect at midnight onApril 3, 2008.On April 9, 2008, the Annual Meeting authorized the Board ofManagement until October 9, 2009 to acquire own shares for cer-tain purposes up to a maximum of10% of the capital stock of€2,766 million at the time of the resolution by the Annual Meeting.During the period from June 18, 2008 until October 23, 2008,this authorization was utilized to buy back 37.28 million shares for
  59. 59. a total amount of €1,449 million. The volume of the sharesbought back by December 31, 2008 on the basis of the authoriza-tion of April 9, 2008 is equivalent to3.87% of the shares out-standing at the time of the resolution.By resolution of the Annual Meeting of April 9, 2008, the Board ofManagement was authorized, with the consent of the SupervisoryBoard, to increase the capital stock during the period until April 8,2013 by up to €500 million through the issue of new registered nopar value shares in exchange for cash contributions and by upto €500 million through the issue of new registered no par valueshares in exchange for non-cash contributions.In addition, the Board of Management was authorized by resolutionof the Annual Meeting granted on April 6, 2005, with the consentof the Supervisory Board, during the period until April 5, 2010 toissue convertible and/or option bonds in a total nominal amountof up to €15 billion with a maximum term of 20 years and to grantthe owners/lenders of these bonds conversion or option rightsto new shares in Daimler AG with a corresponding amount of thecapital stock of up to €300 million, in accordance with the termsand conditions of the bonds.Change-of-control clause.Daimler AG has concluded variousmaterial agreements, as listed below, that include clauses regu-lating the possible occurrence of achange of control, as canoccur as a r esult of a takeover bid:– A non-utilized syndicated credit line in a total amount of US $5billion, which the lenders are entitled to terminate if DaimlerAG becomes a subsidiary of another company or comes under
  60. 60. the control of one person or several persons acting jointly.– A non-utilized syndicated credit line in a total amount of €3billion, which the lenders are entitled to terminate if DaimlerAG becomes a subsidiary of another company or comes underthe control of one person or several persons acting jointly.– A joint venture with Ford Motor Company for the developmentof fuel-cell systems; this joint venture can be terminated byeither of the contracting parties if the other party is subject toa change of control. A change of control is defined here asthe right to give instructions to the Board of Management andto determine the company’s guiding principles, the possibilityto elect the majority of the members of the Supervisory Board,or possession of at least 40% of the voting rights.– An agreement concerning the acquisition of a majority (50.1%)of the “AFCC Automotive Fuel Cell Cooperation Corp,” which hasthe goal of further developing fuel cells for automotive appli-cations and making them marketable. Inthe case of a changeof control of Daimler AG, the agreement allows the right oftermination by the other main shareholder, Ford Motor Company,as well as a put option for the minority shareholder, BallardPower Systems. Control as defined by this agreement is thebeneficial ownership of the majority of the voting rights andthe resulting right to appoint the majority of the members ofthe Board of Management.Daimler Group – business portfolioMercedes-Benz Cars
  61. 61. Mercedes-BenzMercedes AMGMercedes-Benz McLaren (40%)MaybachsmartDaimler TrucksTrucks Europe/Latin AmericaTrucks NAFTATrucks AsiaDaimler Financial ServicesAmericasEurope, Africa & Asia/PacificVans, Buses, OtherMercedes-Benz VansDaimler BusesStake in EADSStake in TognumStake in Chrysler Holding LLCManagement Report | Business and Strategy | 45– An agreement regulating the exercise of voting rights inEADS N.V. In the case of a change of control, this agreementstipulates that Daimler AG is obliged, if so requested by theFrench party to the agreement, to make all efforts to disposeof its shares in EADS under appropriate conditions to a thirdparty that is not a competitor of EADS or of the French con-tracting partner of Daimler AG. In this case,the French party
  62. 62. has the right of preemption under the same conditions as wereoffered by a third party. A change of control can also lead tothe dissolution of the voting consortium. According to the EADSagreement, a change of control has taken place if a competitorof EADS N.V. or of the French contracting party either appointsso many members of the Supervisory Board of Daimler AGthat it can appoint the majority of the members of the Board ofManagement or holds an investment that enables it to controlthe day-to-day business of Daimler AG.StrategyWe invented the automobile and we intend to continue to shapeits future. As a pacemaker for technological progress in the auto-mobile industry, we build on ourtraditional strengths.We want to inspire our customers with:– exciting premium automobiles that set standards in theareas of design, safety, comfort, perceived value, reliabilityand environmental compatibility;– commercial vehicles that are the best in their respectivecompetitive environment; and– outstanding service solutions related to these products.Target system. We intend to achieve sustainable profitablegrowth in all of our divisions and thus to increase the value of theGroup. With our products and services, we aim to have a leadingmarket position in each relevant segment. We regard ourselves asone of the world’s leading automotive manufacturers. In orderto achieve these targets we have defined a strategic framework
  63. 63. – the Daimler target system – which, as shown in the diagram onthe next page, consists of six strategic dimensions and is basedon the four key values of passion, respect, integrity and disci-pline. We believe that these values are aprerequisite for excellentperformance – and we therefore act in accordance with them.Four strategic focus areas for action.In order to achieve ourstrategic targets, we have laid down four strategic focus areas forthe coming years in the framework of the Daimler target system:– Operational excellence and a high performance culture. Ourgoal is to develop, produce and sell superior products usingprocesses with above-average efficiency. We establish clearstructures and lean processes and use the opportunitiesof standardization and modularization for further productivityincreases in all businesses. Under the roof of the Daimlerexcellence process, we have established processes in all ouroperations with which we align the Group with the four stra-tegic focus areas and develop a sharedculture of excellence.We have included the key elements of the excellence processin the programs currently running in our business operations, forexample the GoFor10 program at Mercedes-Benz Cars, theGlobal Excellence initiative at Daimler Trucks, Captive #1 atDaimler Financial Services and Creating the Next at ourVans business unit. A good example of operational excellenceat Daimler is the Mercedes-Benz plant in Sindelfingen, whichwas awarded J.D. Power’s Platinum Award as the manufacturingplant with the best quality in the world. At the Sindelfingen
  64. 64. plant, we have been outstandingly successful in raising our pro-ductivity while simultaneously improvingour quality. Wehave also made considerable progress in administrative areasin recent years. For example, we successfully concluded thenew management model at the end of 2008. With this program,we improved administrative efficiency and achieved savings of€1.2 billion compared with the initial situation in the year 2004.Improving efficiency in all areas of the Group remains a keystrategic focus in the future, especially against the backdropof the global financial crisis.46– Expansion of core business in traditional market segmentsand utilization of new opportunities on a regional basis.Superior products and customer services are crucial for us tocontinue growing in our traditional core segments. Notwith-standing the current unfavorabledevelopment of important salesmarkets, we are on the right track with our products, serviceand market strategies. In June 2008, Mercedes-Benz receivedtwo Gold Awards in the J.D. Power quality survey for the bestvehicle quality in the respective segments for the E-Class and theCLK-Class. The excellent service quality of the Mercedes-Benzdealerships in Germany was confirmed several times by variousorganizations last year. This demonstrates the success ofour long-term quality and customer-satisfaction offensive in theMercedes-Benz Cars division. And at Daimler Trucks, the newActros received the award of “Truck of the Year 2009.” With
  65. 65. the brand pledge of “Trucks you can trust,” the business unitMercedes-Benz Trucks Europe/Latin America stands for uncom-promising quality, reliable products andservices, and fairand personal customer relations. Two examples of the excellentcustomer response to our products are the DEKRA Environ-mental Prize 2008 awarded to the Mercedes-Benz city bus CitaroG BlueTec Hybrid for its innovations and sustained contri-bution to better quality of life in urban areas,and the Sprintervan, which took first place in its category in the voting on“Commercial Vehicle of the Year.”&Management Report | Business and Strategy | 47We intend to further enhance our position in the markets of thefuture with products whose character and marketing aretailored to the special requirements of each market. In India forexample, we have entered into a joint venture for the produc-tion of trucks with the Hero Group andreached an agreementon the future production location. The joint venture betweenDaimler Buses and India’s Sutlej Motors already delivered itsfirst luxury coaches to customers in the third quarter of 2008.In Russia, we intend to further extend our market positionthrough the strategic partnership with Kamaz. In this context,we have acquired a 10% equity interest in Kamaz, Russia’sleading manufacturer of heavy trucks.– Further development of innovative and customer-orientedservices and technologies. We are working intensively onthe development of innovative, customer-oriented technologies
  66. 66. along the entire automotive value chain.Because the demands placed on mobility will become increas-ingly varied, in the future it is unlikely thatthere will only onetype of vehicle with one type of propulsion. In the context ofour “Roadmap to Sustainable Mobility,” we are therefore workingin parallel on several drive technologies and are consistentlyfurther improving our vehicles with combustion engines. At thesame time, we aim to continue improving the efficiency ofhybrid drive systems, while opening up the way to emission-freedriving with fuel-cell and battery-powered vehicles. We alsosupport the development, production and distribution of cleanfuels for combustion engines as well as alternative energysources for emission-free driving.We are implementing this strategy in the form of concreteproducts on the car side with our “Road to the Future” initia-tive and with commercial vehicles with“Shaping FutureTransport ation.” The most important milestones are BLUETECdiesel tec hnology, our worldwide leading position for com-mercial vehicles with hybrid drive,BlueEFFICIENCY cars fromMercedes-Benz, our S 400 BlueHYBRID – the world’s mostfuel-efficient luxury sedan with a gasoline engine, the smartfortwo electric drive, and the innovative “DIESOTTO” enginesdesigned to combine the economy of diesel engines with the lowemissions of modern gasoline engines. They all demonstrateour innovative power for environmentally friendly mobility.However, we believe the key technology for mobility that is inde-pendent of fossil fuels and sustainableover the long term is
  67. 67. the fuel cell. With more than 100 test vehicles and approximately4 million test kilometers driven, we have the world’s largestfleet of fuel-cell vehicles on the road. In 2009, we are startingproduction of our first small series of emission-free vehicles,the Mercedes-Benz B-Class F-CELL and the smart fortwo electricdrive.By means of the broad setup of the group, we have thepossibility to introduce our new technologies in all automobileactivities.Parallel to the technological development of our product range,we will expand the range of services we offer in connectionwith these products. In cooperation between Daimler FinancialServices and the automotive divisions, we are developing newmethods in order to utilize the promising business potentialoffered by the services sector. One example of this is Omniplus,a comprehensive, bus-specific range of services for ourMercedes-Benz and Setra omnibuses.– Development and innovation of new businesses in relatedareas. We will make targeted use of the results of the work doneby our research and development departments, our attractivecustomer base and our strong brands to utilize new businesspotential also in related areas. However, a precondition for thisis that the new business ideas are related to our core businessand contribute to our profitable growth. The Business Innova-tion Team formed in 2007 has the task ofdeveloping new busi-ness ideas and supporting their implementation. One of thefirst key projects is car2go, a new urban mobility concept. The
  68. 68. pilot phase of car2go started in Ulm in October 2008.48Portfolio changes. With the goal of strengthening our corebusiness and utilizing new growth potential, we took some impor-tant steps for the expansion of ourbusiness portfolio in 2008.In April 2008, Daimler AG and the Indian Hero Group signed thearticles of incorporation for a commercial-vehicle joint venture.Daimler Hero Commercial Vehicles Ltd., in which Daimler holds a60% stake, will at first produce light, medium and heavy-dutycommercial vehicles for the Indian volume market under a newbrand name in a newly built factory in Chennai. At a later date,the production of trucks for export markets is also planned.In June 2008, Daimler AG acquired a 22.3% equity interest inTognum AG from EQT, a Swedish financial investor, and purchaseda further 6.1% of Tognum’ shares on the stock exchange. Thetotal price paid amounted to €702 million. In the past two years,Tognum has become one of the world’s leading suppliers ofoff-highway engines with above-average operating margins. Thisbusiness has great growth potential. Another advantage of thisequity interest is that it will secure our long-term supply relation-ship with Tognum.In August 2008, Daimler AG and Beiqi Foton Motors Ltd. signed aletter of intent concerning the establishment of a joint venture.The objective is to produce medium and heavy trucks and tech-nologies for the Chinese market and in asecond step also to utilizeexpansion opportunities outside China. The approval of the Chineseauthorities is required for the establishment of the joint venture.
  69. 69. In Moscow in December 2008, Daimler AG, Kamaz, state-ownedcompany Russian Technologies, and Troika Dialog signed anagreement covering an exclusive strategic partnership. The agree-ment includes the acquisition byDaimler Trucks of a 10% stakein Kamaz from Troika Dialog, a Russian investment company. Thestrategic partnership with Kamaz, the market leader for heavy-duty trucks in Russia, is part of ourgrowth strategy in the BRICcountries. As a result of the technology transfer and variousjoint projects, both companies will benefit from this strategicpartnership.Also in December 2008, subject to the approval of the antitrustauthorities, Daimler AG acquired a 49.9% equity interest in Li-TecVermögensverwaltung GmbH (Li-Tec). Evonik Industries AGholds the remaining 50.1% stake. On the basis of Evonik’s lithium-ion technology and Daimler’s know-how, the two partners willpush forward with the research, development and production ofbattery cells and battery systems. Evonik is the technologyleader for high-tech battery cells capable of going into series pro-duction, and is significantly ahead ofthe competition in severalaspects of this technology. In recent years, Daimler has registeredmore than 230 patents in the field of lithium-ion batteries. Thetwo companies will together establish a joint venture, which willconcentrate on the development and production of batteriesand battery systems for automotive applications. 90% of this jointventure will belong to Daimler and 10% to Evonik.Since the middle of 2008, Daimler has been holding discussionswith Cerberus Capital Management concerning the transfer of
  70. 70. its 19.9% equity interest in Chrysler Holding LLC. Those discus-sions had not yet been finalized when thisreport went to pressat the end of February 2009.Repositioning of truck business in North America. In October2008, within the context of the Global Excellence Program,Daimler Trucks North America (DTNA) presented a far-reaching planfor the optimization and repositioning of its business operations.The Group thus reacted to the ongoing weak demand in the entireindustry and to the structural changes in key markets. As ofMarch 2009, production of Sterling brand trucks will be discon-tinued. DTNA will thus concentrate itsdevelopment and salesresources on the Freightliner and Western Star brands. This willallow increased innovation in the areas of safety, environmentalcompatibility and customer benefits. With the discontinuationof the Sterling brand, production will be ended at the plant inSt. Thomas, Ontario, and as of June 2010, the plant in Portland,Oregon will be closed. These actions should lead to annualearnings improvements of US $900 million as of the year 2011.In February 2009, a new plant was opened in Saltillo, Mexico,where the Cascadia, the new flagship of the Freightliner brand,is now produced.Management Report | Business and Strategy | 49Economy and the industryThe world economy. As a result of the worsening financial andreal-estate crisis, the world economy cooled off significantlyduring 2008. Only the relatively stable positive development at
  71. 71. the beginning of the year and the expansion of the emergingnations’ economies allowed the global economy to achieve totalgrowth of approximately 2.4% in 2008 (2007: 4.1%). Followingthe insolvency of Lehman Brothers investment bank, the crisisexacerbated in September. By that time, the financial crisis hadalready spread to the real economy in the industrialized countries.The high degree of consumer and investor uncertainty, sub-stantial asset losses due to falling shareprices, rising raw-materi-al prices and inflation rates until the middle of the year, andthe existing burdens from the credit crisis caused the majoreconomies to enter into recession. This also applies to the Germanindustrial sector, which successfully resisted the crisis forsome time but suffered a significant drop in demand towards theend of 2008. The main causes of this negative development innearly all industrialized countries were only slightly rising or actu-ally falling investment and weakprivate consumption. An addi-tional factor for the export-oriented German economy was theslump in demand from key sales markets. Overall, the industrial-ized countr ies achieved growth of justbelow 1.0% in 2008 (2007:2.4%), which is the weakest level since the early nineteen-nineties.By the summer of 2008 at the latest, global growth was drivensolely by economies outside the three major regions of the UnitedStates, Western Europe and Japan. It is becoming increasinglyapparent, however, that the emerging markets will not be indefi-nitely immune to the r eal economiceffects of the financial crisis.Although their growth rates are still relatively high, especiallyin Asia, they are well below the levels of their recent boom years.In total, the emer ging markets achieved economic growth ofapproximately 6%, compared with 7.8% in 2007. A striking feature
  72. 72. of recent years has been unusually high volatility, not only onstock markets, but also of raw-material prices and exchange rates.For example, the pr ice of crude oil climbed from US $90 perbarrel in January to an histor ical peak of approximately US $145in July, but subsequently fell as low as US $30-40.Exchange-rate fluctuations were also extremely strong in 2008.The euro for example reached a record level against the US dollarof $1.60 in July 2008. However, it then weakened significantlyto $1.40 at year-end, so that over 2008 as a whole the euro fell byapproximately 5.5% against the US dollar and by a sharp 23%against the Japanese yen. Against the British pound, however, theeuro appreciated by nearly 30%.Automotive markets.The weak world economy and the inter-national financial market crisis had asignificant impact on theautomotive industry in 2008. Global unit sales of cars decreasedby approximately 5%, the biggest drop in nearly 30 years.A sharp drop in demand in the volume markets of North America,Western Europe and Japan was partially offset by growth in theemerging markets. Demand for commercial vehicles also declinedin the NAFTA region, Western Europe and Japan. Although de-mand rose in some of the emergingmarkets despite weakeningtowards the end of the year, worldwide unit sales of commercialvehicles decreased slightly.As a result of the economic downturn and the severe financialcrisis, the US market for automobiles and so-called light trucksslumped during 2008. Whereas 16.1 million vehicles were sold in
  73. 73. the prior year, only 13.2 or nearly three million fewer were soldin 2008. Sales of sport-utility vehicles and pickup trucks sufferedin particular. The depth and speed of the slump were unusual:some of the monthly sales in the fourth quarter were at the lowestlevels of the past 25 years.Gross domestic product, growth rate (in %)Economic growth200720081086420Total NAFTA WesternEuropeJapan Asia excl.JapanOthermarketsSource: Global Insight-1Unit sales growth rate 2008/2007 (in %)Global automotive markets
  74. 74. Passenger carsCommercial vehicles1 Segment passenger vehicles including light trucks Source: German Association of the Automotive Industry (VDA)3020100-10-20-30Total WesternEuropeJapan China USA1SouthAmerica150The Western European automobile markets also suffered conside-rably from the financial crisis and thegeneral economic slow-down. The markets that were particularly hard hit were the volumemarkets of Spain (-28.1%), Italy (-13.4%) and the United Kingdom(-11.3%). Germany (-1.8%) and France (-0.7%) developed positivelyin the first half of the year, but were unable to escape the down-ward trend in the second half. In total,8.4% fewer automobileswere sold in Western Europe. The Japanese car market also
  75. 75. contracted, with a drop in sales of nearly 4% in 2008.In the major emerging markets of Asia, Eastern Europe and LatinAmerica – especially the BRIC countries (Brazil, Russia, Indiaand China), demand for cars increased again in the year as awhole, but growth rates slowed down also in those markets in thesecond half of 2008. Towards the end of the year, the BRIC coun-tries also recorded lower sales than inthe same months of 2007.There were varying developments in the major markets for com-mercial vehicles during 2008. Due tothe economic downturn,demand in all vehicle categories was lower than in the prior yearin the United States. In Western Europe, sales of medium andheavy-duty trucks almost reached the high level of 2007, but werealready declining significantly in the last few months of the year.In the segment of light-duty trucks, unit sales decreased in WesternEurope in 2008. In Japan, demand fell again significantly in allvehicle categories. Aggregate demand for commercial vehiclesexpanded slightly in the emerging markets, although growthrates also subsided in the second half and sales were falling insome markets at the end of the year.Business developmentsUnit sales. Despite extremely difficult market conditions, espe-cially in the second half of the year,Daimler sold a total of 2.1million vehicles in 2008, thus nearly equaling the prior-year level.The Mercedes-Benz Cars division sold 1,273,000 vehicles (2007:1,293,200). We therefore defended our worldwide market positionin the premium-car segment. However, the development ofbusiness was impacted by the rapid deterioration in economic
  76. 76. conditions during 2008, leading to massive drops in unit salesin major markets in the second half of the year. Unit sales of theMercedes-Benz brand fell to 1,125,900 cars (2007: 1,180,100).We were once again very successful in the C-Class segment(C-, CLK- and SLK-Class), attaining a 16% increase to sales of448,400 units (2007: 386,500) and gaining market share. This waslargely due to the C-Class sedan, which defended its marketleadership in its category. In the luxury segment (S-, CL-, SL-Class,SLR and Maybach), we were well ahead of our main competitorswith sales of 92,900 automobiles (2007: 107,000). Due to the up-coming model changeover for the E-Class, sales of the E- andCLS-Class fell to 172,900 units (2007: 230,900). 250,300 units ofthe A- and B-Class were sold (2007: 275,400) and in the SUVsegment we sold a total of 161,300 vehicles of the M-, R-, GL-, GLK-and G-Class (2007: 180,200). TheMercedes-Benz brand re-corded lower unit sales in each of its major markets: the UnitedStates (-11% to 223,600 vehicles), Western Europe (-8% to629,300) and Japan (-23% to 35,800). However, business develop-ments in many emerging marketswere generally positive onceagain. Growth rates were particularly high in China (+59%) andthe Middle East (+36%). The smart brand increased its unitsales significantly to 139,000 cars in the year under review (2007:103,100 cars). This was partially due to the great success ofthe smart fortwo in the United States, where 27,600 cars wereshipped in the first year of sales. The US is now the thirdbiggest market for smart, after Italy (34,600 units) and Germany(31,500) (see page 90).Unit sales structure of Mercedes-Benz Cars
  77. 77. A-/B-Class 20%C-/CLK-/SLK-Class 35%E-/CLS-Class 14%S-/CL-/SL-Class/SLR/Maybach 7%M-/R-/GL-/GLK-/G-Class 13%smart 11%Unit sales structure of Daimler TrucksTrucks Europe/Latin America 36%Trucks NAFTA 22%Trucks Asia 42%Management Report | Business and Strategy | 51Daimler Trucks sold a total of 472,100 heavy, medium and light-duty trucks in 2008, surpassing prior-year sales of 467,700vehicles. We also succeeded in defending our leading position inthe market for trucks above 6 tons. Trucks Europe/Latin Americaincreased its sales once again by 6% to 170,100 units, thus settinga new record. This positive development is primarily a reflectionof the ongoing market success of the Actros and the Axor. We achi-eved strong growth in Brazil (+23%)and the Middle East (+90%).Unit sales fell, however, in the NAFTA region and in Japan. The mar-ket recovery originally expected forthe United States and Cana-da in the second half of 2008 did not occur due to the weak eco-nomicdevelopments. The Trucks NAFTA unit was therefore un-able to increase its sales as planned; insteadthere was a decreaseto 104,300 units (2007: 119,000 units). But due to the marketsuccess of the Freightliner Cascadia, we succeeded in defendingour leading market position for heavy trucks in the NAFTA region.Trucks Asia reached a record level and surpassed its prior-year unit
  78. 78. sales by 5%, selling 197,700 vehicles. Although sales fell in Japanby 22% to 42,000 units, this was more than offset by strong growthin export markets such as Indonesia (+58%) and the Middle East(+9%) (see page 94).Mercedes-Benz Vans increased its market share in the segmentof medium-sized and large vans and further extended its leadingposition. In terms of unit sales, the number of 287,200 vans soldin 2008 did not quite match the record prior-year figure (289.100)due to the difficult market conditions in the second half of last year(see page 100).Daimler Busesalso achieved record unit sales in the year 2008,selling 40,600 buses and chassis worldwide (2007: 39,000), andsuccessfully defended its leading market position in the segmentof buses above 8 tons. In Europe, we increased our unit sales by11% to 10,100 vehicles. Despite the increasingly difficult marketconditions in the fourth quarter, unit sales in Latin America wereat the high level of 19,500 vehicles (2007: 20,100). Sales of 7,000units in the NAFTA region were significantly higher than the prior-year figure of 6,100 (see page 100).Daimler Financial Services’ business development was generallypositive in the year under review. Its global contract volume of€63.4 billion at the end of the year 2008 was 7% higher than theprior-year level. Several companies were consolidated for thefirst time during 2008, most of them in Asia and Eastern Europe.Without this effect and adjusted for exchange-rate effects, con-tract volume increased by 5%. Newbusiness increased by 7% to€29.5 billion, or by 6% when adjusted for the aforementioned
  79. 79. effects (see page 98).Order situation. The Mercedes-Benz Cars and Daimler Trucksdivisions and the Mercedes-Benz Vans and Daimler Buses unitsproduce vehicles to order in accordance with customers’ speci-fications. We endeavor to flexibly adjustthe production capacitiesof individual models to the changing levels of demand.As a result of the worldwide financial and economic crisis andthe ongoing debate about CO2emissions, volumes of orders re-ceived fell in the third and especially the fourth quarter of theyear, in some cases dramatically. The upcoming model change-over of the E-Class further reduced thelevel of demand forMercedes-Benz passenger cars. In line with the current develop-ment of demand for our products, wesignificantly reduced theproduction of aut omobiles in the second half of the year. Due tothe increasingly difficult market situation worldwide, volumesof orders received for trucks fell significantly in the second half ofthe year in our major markets of Europe, the NAFTA region andJapan.52Revenue. Daimler’s total revenue amounted to €95.9 billion in2008, compared with €99.4 billion in the prior year; adjusted forexchange-rate effects and changes in the consolidated group,there was a decrease of 1%. We therefore did not achieve the goalof moderate growth that we had set at the beginning of the year.Mercedes-Benz Cars’ volume of business decreased by 9% to€47.8 billion, primarily due to the larger proportion of smaller cars
  80. 80. sold (C-Class and smart) in the division’s total unit sales. Asexpected, the Daimler Trucks division’s revenue was higher than inthe prior year at €28.6 billion. This increase was mainly theresult of the favorable business developments in Latin Americaand various emerging markets. The Daimler Financial Servicesdivision contributed €9.3 billion to the Group’s total revenue(2007: €8.7 billion). The revenue g enerated by the Vans, Buses,Other segment increased by 6% to €15.0 billion.In regional terms, Daimler’s revenue in Western Europe decreasedby 7% to €45.9 billion; while revenue decreased by 3% in Ger-many, business volumes fell substantiallyin some of the WesternEuropean export markets. In the NAFTA region, revenue declinedby 10% to €21.1 billion. In the rest of the world, we expanded ourbusiness volume by 8% to €28.8 billion. Growth was particularlystrong in Asia, the Middle East and Eastern Europe.Amounts in millions of € % changeRevenue-4-9+0+7+699,39952,43028,4668,711
  81. 81. 14,12395,87347,77228,5729,28214,9702008 08/07Daimler GroupMercedes-Benz CarsDaimler TrucksDaimler Financial ServicesVans, Buses, Other2007in billions of €Consolidated revenue by region2520151050Germany Western Europe(excl. Germany)Other markets NAFTA
  82. 82. 20052006200720083021. 739.630.920.729.522.517.126.630.160.1Market share+0.3+0.3+0.1-0.1--0.1-1.8-2.0-1.2-1.1
  83. 83. +0.8+0.6+4.1+4.74.610.31.61.021.739.732.722.730.723.616.326.026.055.44.910.61.70.92008 08/07 2007Mercedes-Benz CarsWestern Europe
  84. 84. GermanyUnited StatesJapanDaimler TrucksMedium and heavy trucksWestern EuropeGermanyHeavy trucks NAFTA regionMedium trucks NAFTA regionMedium and heavy trucks BrazilTrucks JapanMercedes-Benz VansMedium and heavy vansWestern EuropeGermanyDaimler BusesHeavy buses Western EuropeGermanyIn %Change in%-pointsManagement Report | Profitability | 53EBITDaimlerachieved EBIT of €2.7 billion in 2008 (2007: €8.7 billion).The decrease in EBIT was mainly the result of expenses totaling
  85. 85. €3,228 million related to our investment in Chrysler and thelower earnings achieved by Mercedes-Benz Cars. Another factoris that prior-year EBIT included higher gains in connectionwith the transfer of portions of our equity interest in EADS (2008:€130 million; 2007: €1,573 million). Daimler Trucks did notachieve its prior-year earnings, primarily due to the difficult eco-nomic situation in the United States andexpenses incurred forthe repositioning of its activities in the NAFTA region. However,there was a positive development of earnings at DaimlerFinancial Services and the Mercedes-Benz Vans and DaimlerBuses units.Earnings in both years were affected by special items, as shownin the following table.ProfitabilityAmounts in millions of € % changeEBIT by segment-55-24+7.-42-694,7532,1216301,956

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