Key Figures 99 99 98 97 99:98 DaimlerChrysler Group in millions in millions in millions in millions change of US $1) of € of € of € in % Revenues 151,035 149,985 131,782 117,572 +14 European Union 50,310 49,960 44,990 38,449 +11 of which Germany 28,592 28,393 24,918 21,317 +14 NAFTA 87,693 87,083 72,681 63,877 +20 of which USA 78,651 78,104 65,300 56,615 +20 Other markets 13,032 12,942 14,111 15,246 -8 Employees (at Year-End) 466,938 441,502 425,649 +6 Research and Development Costs 7,628 7,575 6,693 6,501 +13 Investments in Property, Plant and Equipment 9,536 9,470 8,155 8,051 +16 Cash Provided by Operating Activities 18,149 18,023 16,681 12,337 +8 Operating Profit 11,089 11,012 8,593 6,230 +28 Operating Profit Adjusted2) 10,388 10,316 8,583 - +20 Net Operating Income 7,081 7,032 6,359 4,946 +11 Value Added 2,155 2,140 1,753 - +22 Net Income 5,785 5,746 4,820 4,0573) +19 Per Share (in €/US$) 5.77 5.73 5.03 4.283) +14 Net Income Adjusted2) 6,270 6,226 5,350 4,057 +16 Per Share (in €/US$)2) 6.25 6.21 5.58 4.28 +11 Total Dividend 2,375 2,358 2,356 - +0 Dividend per Share (in €) 2.37 2.35 2.35 - ±0 1) Rate of exchange: 1€ = US $1,0070 (based on the noon buying rate on Dec. 31, 1999). 2) Excluding one-time effects, see page 60. 3) Excluding one-time positive tax effects, especially special distribution of €10.23 per share. C H A I R M E N ’ S L E T T E R A Clear Direction: Strategies for Growth Dear Shareholders and Employees: ■ Revenues up 14% to €150 billion (US $151 billion) At the start of the 20th century, your company’s founders ■ Operating profit* up 20% to €10.3 billion (US $10.4 had just invented the automobile. We enter the 21st century billion) a world leader in the automotive industry and one of the ■ Net income* up 16% to €6.2 billion (US $6.3 billion) world’s five most respected companies.1) ■ Earnings per share* up 11% to €6.21 (US $6.25) CHAIRMEN’S LETTER This report covers our first full year since the creation of ■ We sold almost 4.9 million cars, light trucks and 2 DaimlerChrysler, and we are delighted to tell you that 1999 commercial vehicles – and once again increased market share in virtually every segment in which we operate – capped a hundred years of extraordinary progress. This was despite intense competition. a year of record sales across our brands, of expanded market ■ We added €2.1 (US $2.2) billion in value in 1999 shares, technological innovations, and major advances in the (operating profit less our cost of capital) way we design and build our vehicles, serve our customers *Excluding one-time effects. and manage our business portfolio. All of our major auto- motive brands – Mercedes-Benz, Chrysler, Jeep, Dodge, Freightliner, Sterling, Setra – as well as our services company debis and Dasa, our aerospace division, had a This year of record performance by DaimlerChrysler was not great year. evident in the DCX share price. This, in our view, is largely a reflection of transformations in the global economy. Tele- Profit growth once again outstripped revenue growth by communications and IT growth stocks grabbed the attention more than we had anticipated. Net income is 19% up on of investors, while value stocks such as those of the auto- 1998, and we have proposed a dividend of €2.35 per share5 motive industry, lagged behind. Investors were also concern- Adjusted net income also rose by 16% to €6.2 billion ed about a possible slowdown in the US market. So we know (US $6.3 billion). This made us one of the most profitable that our current share price does not properly reflect the of the major automotive groups in 1999. high potential of this great company. And we are working to therefore realize our true value. However, as you will see throughout this Annual Report, when it comes to assessing the value of this company, we do more than insist on its potential. We are constantly turning that potential into performance. And in 1999 we achieved a level of performance that demonstrates what we believe real value is all about. 1) Financial Times, November 1999 Robert J. Eaton, Jürgen E. Schrempp For that, we owe a great deal to our people all around the Today, integrated functional departments, and shared ideas world, who can be proud of a fine achievement in a difficult and technologies, are significantly improving everything we CHAIRMEN’S LETTER 3 year. Working together has been more demanding than we make, the way we do business, and the way we serve our anticipated. Integration projects made heavy calls on our customers – as this report shows. time and energies. But we got on with our day-to-day busi- ness, kept our eye on the ball, and simultaneously set in And as importantly, these integration benefits are helping motion a process of profound change. It is to everyone’s us to become more efficient. In 1999 we made €1.4 credit that we accomplished so much – the best year ever (US $1.4) billion in synergies. in our combined history. Secondly, we restructured our organization by establishing PILLARS OF PROFITABILITY three brand-focused automotive divisions, backed by an Automotive Council for product design, engineering and In particular, we accomplished four points in your company production, and a Sales and Marketing Council for brand this year – each one will support our long-term profitable development and strengthening our sales organization, both growth. We completed our integration, set up two councils of which report directly to the Board of Management. The to fast-track our best ideas, unlocked new value for share- councils will preserve the most successful aspects of our holders in our non-automotive businesses, and put in place integration and sustain a process of continuous transfor- a strategy for our future growth. mation and reinvention at DaimlerChrysler – principally by fast-tracking good ideas. Let’s look at each of those accomplishments in a little more detail. Thirdly, we restructured our business portfolio as part of our on-going strategy to unlock value for our shareholders First, we completed our program for the integration of the from our non-automotive businesses. To this end, we created new company in just one year, instead of two as originally the world’s third largest aerospace group (after Boeing projected. The effect of the integration process: We are now and Lockheed) by negotiating the three-way merger of one company. DaimlerChrysler Aerospace, Aerospatiale-Matra and CASA, to form the European Aeronautic Defence and Space Com- pany, EADS. This deal leaves us with 30% of EADS – the largest single shareholding. C H A I R M E N ’ S L E T T E R CHAIRMEN’S LETTER 4 Top Team Talks: The joint chairmen address senior management. We also sold debitel, our mobile telephone subsidiary, and Fourthly, and most importantly, we put in place a number the gain from that amounted to €1.1 billion (US $1.1 billion) of core strategies that are already charting our course for – from an initial investment of a mere €9 million nine future growth. Simply stated, they come down to this: years ago. delivering value added for our shareholders through brand leadership in our markets. This restructuring of our non-automotive business has enabled us to free up capital for attractive new investments THE FUTURE OF OUR BUSINESS and this process will be continued. – AND THE BUSINESS OF OUR FUTURE And while Adtranz, our rail systems subsidiary, experienced The automotive business is no longer just about moving difficulties in 1999, it retained its global leadership in the metal. It’s about moving customers – in both senses of the rail systems market and we introduced a major program for word. Today’s customers assume quality and reliability as its recovery, which we expect will return it to profitability given. What they demand now are styling, power, status, in 2000. lifestyle and personalized service. They want their dream car, or truck. They want it tailored to their needs and tastes. Moreover, through alliances, there are excellent opportun- They expect us to deliver that, and they expect us to ities for us to grow our investments in both Temic and MTU. surprise them, and delight them. New consumer demands and dramatic advances in automotive technology (a field where DaimlerChrysler always leads the pack) mean that the way we design and make vehicles will change faster and more radically in the next ten years than it did in the past 50. At the same time, the way we sell our vehicles and serve And it’s not just the big, leading-edge developments that our customers will also be transformed. And the Internet count; there are also the many smaller ideas that together will play a huge part in these changes. make a big difference. Last year alone, we registered 2,000 patents and introduced 85 major new developments into our In this highly competitive market place, quality and speed- passenger and commercial vehicles. to-market have been reduced to entry-level requirements. We will be delivering profitable growth and value-added to What’s more, of the 500 projects currently under way in our our shareholders by exploiting the power and fascination Research & Technology division, more than half will in the that our brands represent in the market, and leveraging to near future find their way into two or more of our business the hilt our technological and design superiority.