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Daimler-Benz has a history that dates back more than one hundred years, a tradition marked by extraordinary earning power and social responsibility. We have paved the way for continuing that tradition. It has entailed a vigorous campaign with repercussions affecting our employees and shareholders alike. The road to our former earning power brings with it the loss of jobs and considerable costs for the company. But it is simultaneously the road to social responsibility, because only a healthy company will be able to act responsibly for its employees and for society over the long term. By focusing Daimler-Benz on profitable core businesses, we have chosen the road into a successful future. Letter to the Stockholders and Friends of our Company decisions were necessary to quickly On January 17, 1996, we decided bring Daimler-Benz back to an inter­ to restructure AEG, which will lead to nationally acceptable level of a merger of AEG Aktiengesellschaft profitability. with Daimler-Benz AG before the end of The primary aim of the Board of 1996. Finally, on January 22, we ended Management is to offer you, the share­ our financial support of Fokker. This holders in Daimler-Benz AG, attractive happened after the other major stock­ prospects for return on investment. holder, the Dutch government, was We continue to hold to the principle of unwilling to make an adequate contribut­ being open with you, even with sensitive ion to the rescue operation after seven decisions, and to provide information as months of negotiations. In view of our quickly as possible, offering you a trans­ 40% share in Fokker it was no longer parent view with which to judge our acceptable, in the interest of our stock­ course of action. holders, to continue shouldering the This includes the fact that we had to entire risk alone. On March 15 of this revise our anticipated profits to losses year Fokker filed for bankruptcy. at the end of June 1995, once it had We also decided to restructure our become clear, contrary to our expec­ business involvement in the French 1995 was a dramatic year in the tations at the time, that the devaluation software company Cap Gemini Sogeti. history of Daimler-Benz - a history that of the dollar, which affects our aviation We will now have more influence in goes back more than 100 years. We, business in particular, is not just a short- working together with debis Systemhaus the Board of Management that has been term change. The tremendous realign­ to bring about an internationalization of running the company since May 1995, ments between the European currencies the information technology business. decided to make a break. We made some also negatively impacted our profits in We have thus reached decisions decisions that will bring Daimler-Benz 1995. For us, as a company with inter­ on all of the topics which we presented back to the high profitability on which national activities, this is crystal clear as urgent in September. In the 1995 our company's outstanding reputation evidence of the need for a European financial statements, these streamlining is founded. currency union, even if only a few measures appear as extraordinary Our primary objective was to cut countries currently fulfill the pre­ charges and special influences amount­ losses. The Board of Management requisites for such an arrangement. ing to DM 5.1 billion. Some of these therefore analyzed the group portfolio At our release of our half-year results measures take the form of structural using strict criteria of profitability, and in New York, in September 1995, we expenditures and also cut into the took consistent steps to tighten up announced that the Board of Manage­ profits from business activities. At the structures wherever there was an urgent ment would introduce fundamental same time, the additional reserves set need. We also cut divested business solutions as quickly as possible for aside to cover impending losses in the areas in which further investment no two large unprofitable companies: AEG aircraft business are not included in longer made good economic sense. Daimler-Benz Industrie and the aircraft this figure. The Board of Management As a result of these decisions, your division - especially the Dutch aircraft is convinced that the groundwork has company, Daimler-Benz, now has a more manufacturer Fokker. In October we now been laid to put the group back concentrated group profile organized informed you of negotiations aimed at on a successful course as quickly around 28 fields instead of 35. This settling the problems of AEG Daimler- as possible. process is still in progress. These Benz Industrie. In mid-November we actions also called into question and, announced the final decision on the to a certain extent, reversed a number DASA competition initiative. Once this is of policy decisions from earlier periods. implemented, all DASA divisions will be Important changes in external factors profitable, even with the dollar as low forced us to take these actions. The as 1.35 marks over the long term. Letter to the Stockholders and Friends of our Company Due to the above factors, the The basis of our success is the Given this background, if we decide annual shortfall of DM 5.7 billion in the dedication of our employees to our in favor of foreign sites, for reasons of consolidated financial statements does ambitious goals. Their potential for currency or the market, this is not a not reflect the progress that the group advancement certainly does not go rejection of Germany as a business divisions were able to achieve in the unnoticed. In fact, advancement is location. Instead, we thereby secure past year through numerous new and guaranteed by the new and more jobs by supplying high-value compo­ successful products and services, efficient structures in the group nents to those production sites abroad. additional streamlining, and especially headquarters that were implemented We, the Board of Management of through increasing internationalization, in June 1995. Responsibility will be Daimler-Benz, will face up to this which will expand net productivity into transferred even more clearly than responsibility. This is evident in the future-oriented markets. Mercedes-Benz before to those employees close to results of negotiations between manage­ has set new standards in these areas. operations. Only such flat hierarchies, ment and employees in 1995 and again Despite operational improvements organized into decentralized, flexible in recent weeks, in which operating - results of operational activities were units, set free the entrepreneurial agreements, some of the many neces­ in the black again in the second half of initiative in which a corporate culture sary work alliances, were reached to the year - and the company's continu­ can develop. That also includes the confirm and secure German operations. ing high asset value, the Supervisory introduction of performance-based We will also display the necessary Board and the Board of Management compensation and new dimensions of pioneering spirit and the resolve have recommended that no dividend control, which measure the company's to follow new paths in 1996. be paid for 1995. results directly against the reference The course we have set will return A decisive measure of our manage­ figures produced according to U.S. the company back to the profit column ment, however, is the market price of standards. These reforms are being during this year. However, it is our desire our stock. Our goal is not to maximize pushed forward in all parts of the group. to satisfy both your justifiable expectat­ short-term profits, but to ensure high For many employees this is a ions and our ambitious goals. For that medium-and long-term profitability. challenge, but there are also some to reason we will continue to inform you of You will therefore also see in this whom it is a painful process, especially further forceful measures in the months report that despite forceful measures, if improving efficiency means eliminating to come. At the same time, we intend our investments were significantly their jobs. But we at Daimler-Benz are to be just as deliberate in building up higher in 1995 than in previous years. not the only ones who have had to learn businesses that meet our income and We have expanded sites or opened new that clinging to received traditions profit expectations. We are convinced ones, both at home and abroad, wher­ ultimately leads to a dead end. In the that we are on the right track with this ever we anticipate positive results. We future, our social structures, our work new orientation. have kept research spending at a high and production methods, our cost base level, in order to keep our position at must stand up much more consistently the forefront of pioneering innovations to those of successful international and continuing developments in our competitors. markets. We must therefore channel our entire creativity into inventing new structures and forms of cooperation. We must do everything in our power to make Germany an attractive and internationally competitive business site. Willingness to pursue such a dynamic course must be the standard by which we measure those who hold positions of responsibility in Germany, as well as the sense of sociopolitical responsibility of its business leaders. Letter to the Stockholders and Friends of our Company JÜRGEN E. SCHREMPP DR. JUR. MANFRED GENTZ HELMUT WERNER born 1944 in Freiburg, born 1942 in Riga, born 1936 in Cologne, Member of the Board of Management Member of the Board of Management Member of the Board of Management since 1987, since 1983, since 1987, until 1988 responsible for the until 1990 responsible for Personnel, until 1992 responsible for the Commercial Vehicle Division, until 1995 responsible for Commercial Vehicle Division, until 1995 responsible for Daimler-Benz InterServices (debis), since 1992 responsible for Daimler-Benz Aerospace, since 1995 responsible for Finance Mercedes-Benz, since 1995 Chairman, and Human Resources, under contract until 1997.

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