DAIMLERBENZ Positioning for the future

We encounter products of the Daimler-Benz group every day. Their identity, however, is not always as apparent as that of the cars bearing the Mercedes star. Usually it would take a look behind the scenes to recognise AEG Daimler-Benz Industrie's microelectronics, rail systems, energy systems technology or automation technology; the same applies to the products and systems of Deutsche Aerospace and the services of debis. We often make use of them without realizing who is behind them. Daimler-Benz is an integrated technology group with extensive competence in the field of transportation and traffic systems. We are also active in fields interlinked by common Contents technologies and system structures. The common foundations of 2 The Corporate Principles of the corporate units, their structures and the forms of cooperation Daimler-Benz are part of the distinctive corporate identity of Daimler-Benz. 3 Daimler-Benz Highlights

Similar to some of our products, our corporate units do not always 4 Letter to the Stockholders draw attention to themselves. To give you more of an insight into and Friends of our Company "your" company than mere statistics and balance sheets can 6 Board of Management provide and, above all, to show you how we are positioning for 8 Report of the the future - we have given our annual report a new look. Board of Management 8 Business Review 14 Operating Activities of the Group 42 Central Corporate Functions

62 The Daimler-Benz Share

65 Discussion and Analysis of the Financial Situation

74 Financial Statements

95 Proposal for the Allocation of Unappropriated Profit

96 Supervisory Board

98 Report of the Supervisory Board

99 Directors and Daimler-Benz Group Representatives

100 Principal Subsidiaries and Affiliated Companies

102 Daimler-Benz in Figures The Corporate Principles of Daimler-Benz

Our work at Daimler-Benz serves We aim to learn better and faster Our core businesses include people and their environment. than our competitors. To achieve vehicles for passenger and freight We aim to offer the world's most this, we need not only flexible organ­ transportation, rail systems, aerospace, advanced products, systems and ser­ izational structures but also em­ propulsion systems, defense systems, vices. ployees who think entrepreneurially. automation, energy systems tech­ This requires a continual committ­ Key to our success are employees nology, and information-technology ment to technical, business, and social with a sense of responsibility, inde­ services. In these areas, Daimler-Benz innovation as well as a corporate cul­ pendence, creativity, drive, teamwork, strives to be a world leader. ture characterized not by compla­ and openness to new ideas. We there­ Furthermore, we are active in cer­ cency, but by creative unrest. fore promote every employee's per­ tain specialized areas, such as applied In a world increasingly complex, sonal development to the best of our microelectronics, selected financial with promising opportunities - but abilities. services, and countertrading, where also risks - even minor events can we aim to be highly competitive. To a take on consequences of major propor­ i Daimler-Benz does business in great extent, these activities interlink tions. Therefore, we must carefully all corners of the globe. We are our core business areas. weigh our every action. convinced of the advantages to every­ Each of our business areas falls We owe it to future generations to one of open trade borders throughout under the responsibility of one of our use our natural resources prudently the world. Therefore, we view competi­ four corporate units. Thus, Mercedes- and sparingly. This sense of respon­ tion as a welcome proving ground. The Benz, AEG Daimler-Benz Industrie, sibility must be reflected in all our measure of our success is the recogni­ DASA, and Daimler-Benz InterServices thoughts and activities throughout the tion our work receives, and economic (debis) work together under the um­ Group. success is an undeniable part of this brella of Daimler-Benz, the managing recognition. holding company of our group. Our customers are the focus of Inherent to our philosophy is re­ our efforts. We must strive not spect for other cultures. As an interna­ Our cooperation aims to: just to meet their expectations, but to tional company, we reject all forms of exceed them. Cooperation and the discrimination. This principle applies, Combine know-how and experi­ open exchange of know-how through­ moreover, to the filling of management ence to create new dimensions out all areas of our companies are cen­ positions, where we will extend equal - Responsibly promoting prog­ tral to meeting this goal. opportunities to every employee ress for everyone Just as we are accountable to our regardless of nationality. We are proud to continue a distin­ customers, we are equally responsible guished tradition guided by these prin­ to the companies' owners as well as to Daimler-Benz is an integrated ciples. the public. This means we must be technology group. This means willing to provide feedback to others that our various business areas are and to assess ourselves openly and linked by cross cutting technologies honestly. and system structures. We place a special emphasis on our know-how and experience in traffic management systems and transportation technolo­ gies.

2 The Corporate Principles of Daimler-Benz Daimler-Benz Highlights

Daimler-Benz Highlights 3 It is our intention to set new stand­ We do, however, expect the eco­ cially during the latter half of 1993, ards in the quality and content of our nomic recovery, which began taking have allready been reflected in sub­ company reports. As an international shape during the last quarter of 1993, stantial success. We are optimistic corporation, we wish to provide our to continue in 1994. During the last that this decidedly positive trend will investors, customers and suppliers the four years, we have built the right continue as we broaden and renew our world over, as well as our employees, foundations to benefit from this up­ product ranges; particulary at the car with the highest possible standard of turn. In view of the declines suffered and commercial vehicle divisions of information. Accordingly, we submit in nearly all our fields of business dur­ Mercedes-Benz, we are very convinced this annual report to all those who ing 1993, this may seem presump­ that we can, through internal growth, have links with our company and un­ tuous. However, my colleagues and reach our demanding goals using our derscore why those links will continue I are convinced that these difficult own resources. to be rewarding. times have confirmed just how This is consistent with the fact 1993 was an extremely difficult healthy the basic substance of that, like other industrial manufac­ year, not only for Daimler-Benz. Daimler-Benz really is. We possess the turers, we are reviewing possible Moreover, while the first signs of the vitality and potential to assure a areas of cooperation with both compet­ end of the deep economic recession healthy future for our company in itors and suppliers in sectors periph­ are beginning to appear, we cannot spite of the difficulties we have all eral to our core production activities. expect a significant upturn in most of endured. Indeed alliances, joint ventures and our main markets before the end of We have decided to propose the new forms of cooperation will remain this year at the earliest. The role payment of a dividend in the amount on the agenda not just in this year but which the unsatisfactory development of DM 8. Against the background of also in the years to come. of wages, and monetary policy have business trends, and in view of the Proud as we are of increasing pro­ played in this is largely undisputed. considerable burdens we have placed ductivity, we are not blind to the fact Conditions have not improved in on our employees, many people may that our competitors are also devoting other areas as well. This also applies consider it more appropriate not to enormous effort, to improving effi­ to government policy on purchasing as pay a dividend this year. However, we ciency and lowering costs. This means well as on the public sponsorship of believe our proposal to be appropriate that we must, and will, take further research and development, especially because we want our sharholders to measures. At times, these steps may in defense technology and the aero­ benefit from the long-term earnings seem unconventional, and will involve space industry. This is despite the fact potential of Daimler-Benz which con­ labor, and increasingly, capital. It also that these key technologies for the fu­ tinues to be very promising. means that we must continuously re­ ture are needed more than ever if we Productivity and efficiency in the view the locations of our operations to are to secure competitiveness - and entire group, with regard to both labor determine if they are compatible with therefore also jobs - both in Germany and capital, have increased signifi­ an internationally competitive produc­ and throughout Europe. cantly. The extensive and continuing tion structure. The first consequences improvements made in all areas, espe­ of this scrutiny, such as the closure and amalgamation of individual loca­ tions, have already been widely reported.

4 Letter to the Stockholders and Friends of our Company We will resolutely continue to We will continue to work reso­ Due to a high level of non­ globalize our activities to attain the lutely and rapidly to ensure an optimal recurrent expenditures again this best positions on the world markets of alignment of our areas of operation. year, 1994 will not be easy. Even so, tomorrow. We shall also continue to This can be accomplished with a high we are expecting a significant im­ focus the core capabilities of our inte­ degree of precision, now that we have provement. By 1995, we will once grated technology group on the mo­ improved and refined our internal again be able to speak of an overall bility of people and products. This ap­ planning and control mechanisms. satisfactory trend in our earnings. proach is exemplified by the strategic In the future, it will enable us to We are convinced that you, our restructuring of AEG Daimler-Benz In­ incorporate some important aspects stockholders, will not be disappointed. dustrie. The future main focus of this of the shareholder value concept. You can place your trust in this com­ company will go well beyond electrical This does not represent a break pany, because it is well prepared for and electronic engineering. Our corpo­ with our long-term philosophy of re­ the future. Through our work over the rate unit's traditional areas of busi­ sponsibility to our employees and to last few years, and thanks to the re­ ness will, in the future, be comple­ the worldwide community. Your com­ sources and motivation of the men and mented by a Diesel Engines field of ac­ pany is strong because of its resolute­ women working for your company, we tivity, uniting certain activities of MTU ness in pursuing its strategic goals have created the potential for world­ Friedrichshafen and of Mercedes-Benz while at the same being able to take wide growth, potential which others AG. AEG Daimler-Benz Industrie will quick and effective action wherever can only envy. This is true not only of also assume central responsibilities in necessary. our areas of individual activity, but the area of microelectronics, which is More changes will take place in also - and increasingly - of our capa­ of paramount importance for the inte­ the future. We have taken the initial bility to combine the knowledge at our gration of the group. In the other fields offensive not with isolated measures, disposal and to provide integrated of activity of this corporate unit, we but with a coherent, overall plan systems solutions. have built the platform to strengthen which we are putting into effect reso­ competitiveness through industrial lutely, step by step. Some important partnerships and divestitures. Addi­ successes have already been achieved, tional details are contained in this others will follow. This is a primary report. reason why we have decided to broaden your company's equity base which will give us the financial security for our further growth.

Letter to the Stockholders and Friends of our Company 5 The Board of Management of Daimler-Benz AG

DR. JUR. HANS-WOLFGANG HIRSCHBRUNN EDZARD REUTER Stuttgart Stuttgart Personnel Chairman

PROF. DR.-ING. HARTMUT WEULE Stuttgart Research and DR. RER. POL. Technology GERHARD LIENER Stuttgart Finance and Materials EDZARD REUTER DR. RER. POL. GERHARD LIENER Retired from the born 1928 in Berlin, born 1932 in Stuttgart, Board of Management: Member of the Board of Management Member of the Board of Management (on May 26, 1993) since 1973, since 1982, until 1979 responsible for Corporate until 1987 responsible for Subsidiaries PROF. DR.-ING. E.H. DR. H.C. Planning and Organization, and Affiliated Companies, Werner Niefer from 1980 to 1987 responsible since 1987 responsible for Finance Stuttgart, for Finance, and Materials, Deputy Chairman since 1987 Chairman, under contract until 1997. President and Chief Executive under contract until 1995. Officer of Mercedes-Benz AG, JÜRGEN E. SCHREMPP (Deceased September 12, 1993). DR. JUR. MANFRED GENTZ born 1944 in Freiburg, born 1942 in Riga, Member of the Board Member of the Board of Management of Management since 1987, since 1983, until 1988 responsible for the until 1990 responsible for Personnel, Commercial Vehicle Division, since 1990 responsible for the since 1989 responsible for the corporate unit Daimler-Benz corporate unit Deutsche InterServices (debis), Aerospace (DASA), under contract until 1995. under contract until 1999.

DR. JUR. HANS-WOLFGANG ERNST G. STOCKL HIRSCHBRUNN born 1944 in Sulzburg, born 1933in Offenburg, Member of the Board of Management Member of the Board of Management since 1991, since 1990, responsible for the corporate unit responsible for Personnel, AEG Daimler-Benz Industrie, under contract until 1996. under contract until 1996.

HELMUT WERNER born 1936 in Köln, Member of the Board of Management since 1987, until 1992 responsible for the Commercial Vehicle Division, since 1992 responsible for the corporate unit Mercedes-Benz, under contract until 1997.

PROF. DR.-ING. HARTMUT WEULE born 1940 in Bitterfeld, Member of the Board of Management since 1990, responsible for Research and Technology, under contract until 1996.

Board of Management 7 Report of the Board of Management

Business Review

Consolidated 1993 revenues of Daimler-Benz declined by 4% on a problems hindering production in Ger­ comparable basis to DM 97.7 billion. The decrease in business was many caused companies to reduce in­ caused by adverse world economic conditions. In all areas of the vestments. This also hurt economic re­ group, action has been taken to reduce costs and improve produc­ construction in the new Federal states, where both the speed and the quality tion processes on a long-term basis. We shall continue to take this of economic growth lagged far behind action to ensure that the group remains profitable. the high expectations.

Disappointing Economic Trends Daimler-Benz: Economic conditions were unfa­ Revenues of DM 98 Billion vorable to the Daimler-Benz group in The trend in business of the virtually all parts of the world in 1993. Daimler-Benz group reflects the diffi­ Although modest improvements in the cult economic climate. Consolidated USA and the United Kingdom contin­ 1993 revenues totaled only DM 97.7 ued, hopes of an upturn in the other billion, which was 4% below 1992 Western European industrial countries when comparably calculated. Reve­ and Japan were not met. Even the nues in the European Union were also strong growth in various newly indus­ reduced by 11 % to DM 58.4 billion, trializing countries of Asia and Latin while those in Germany also declined America failed to stimulate the global by 11% to DM 38.3 billion. However, economy to any significant extent. in the US market business volume in­ In Germany, the economic trend creased by 11 % to DM 16 billion and was particularly disappointing. The in other markets by 7% to DM 23.4 recession which began in the second billion. half of 1992, became worse during Consolidated shared revenues of 1993, sparked by the low level of do­ the business units of Mercedes-Benz, mestic demand and the decline in Ger­ AEG, DASA and debis were 63%, 11 %, man exports due to adverse conditions 19% and 7% respectively. in major markets. Also, the strength­ ening of the Deutschmark, against Mercedes-Benz Cars: most other European currencies, made Successful Start for New C-Class German export products more expen­ As a result of the recession pas­ sive. The reduced spending by German senger car sales declined in nearly all consumers is attributable to the grow­ Western European markets including ing burden of taxes and levies, cou­ Japan. The positive market trend in pled with rising unemployment. At the North America and various newly in­ same time, idle capacity and structural dustrializing countries overseas was not able to compensate for the reces­ sion, and accordingly worldwide de­ mand for cars was reduced by 4%.

Note: The Business Review is the combined audited Business Review of Daimler-Benz AG and the Daimler-Benz group.

8 Business Review Even under these conditions, New Corporate Structure for AEG wide-range, cost-cutting and perfor­ passenger car sales of the Mercedes- On December 8, 1993, the corpo­ mance improvement program to create Benz corporate unit remained stable. rate unit AEG completed its new cor­ a more efficient structure. The meas­ Mercedes-Benz worldwide sales of porate structure which will contribute ures include a reduction in personnel cars in 1993 declined by just 2% to track-bound products and systems to through 1996 and also include plant 508,100 units. The newly launched the core transportation business of the closures. C-class and the updated E-class, im­ Daimler-Benz group. It will also include Effective January 1, 1993, the Fok- proved Mercedes-Benz' market condi­ a microelectronics function, serving all ker group, in which a majority owner­ tions, although, as a result of the first sectors of the group, along with the ship was purchased on May 19, 1993, half of the year, annual registrations in traditional automation and power was merged into the Aircraft division. Germany declined by 12% to 209,900 transmission and distribution Incoming orders at Deutsche Aero­ vehicles. Foreign sales, totalling business. The new structure will dis­ space, amounting to DM 15.6 billion, 287,400 units, remained stable. solve activities which do not have a were 8% below those of 1992. In response to the generally unfa­ strategic role within the group. vorable 1993 market situation and in Due to the acquisition of Kiepe debis Continues order to reduce inventory, Mercedes- Elektrik a significant increase in cus­ to Increase Revenues Benz reduced passenger car produc­ tomer purchase orders was recorded The debis corporate unit increased tion by 9% to 480,600 vehicles. in the Rail Systems division. its total output in 1993 by 20% to The same development of cus­ DM 9.5 billion. The primary markets Mercedes-Benz tomer purchase orders applied to the were Germany and the USA. Commercial Vehicles: Microelectronics field of activity and to There was a sharp increase in Market Position Maintained Postal Automation, while in Industrial business with customers outside the Mercedes-Benz sold 253,900 com­ Automation and Electrotechnical Sys­ Daimler-Benz group, which increased mercial vehicles worldwide which was tems and Components orders fell short from 79% to 83% as a proportion of a reduction of 8% from 1992. The de­ of 1992 levels. Overall, customer pur­ total revenue. Although further acquisi­ cline is attributable to the recession in chase orders rose slightly by 2% to tions were made during 1993, the in­ Western Europe. Commercial vehicle DM 12.1 billion. crease in output of debis was attributa­ registrations in Germany declined by ble to growth in existing areas of the 25% to 82,200 units. Significant de­ Further Reduction in Capacity company. The Financial Services divi­ creases were also recorded in other at Deutsche Aerospace sion experienced a substantial expan­ Western European markets. However, The economic environment of the sion in business, resulting from an Mercedes-Benz continues to maintain Deutsche Aerospace corporate unit increase in international markets and its position as the leading manufac­ continued to decline. Business in the an expansion of the range of services turer of trucks over 6 tons, with a mar­ Aircraft division as well as the De­ provided. ket share in Western Europe of more fense and Civil Systems division dete­ than 30%. riorated significantly due to the struc­ Difficult Employment Situation Significant growth was experi­ tural crisis affecting the airlines and At year-end, the Daimler-Benz enced at Freightliner and most of the the drastic cuts in spending by the group employed 366,736 people (com­ other overseas subsidiaries, however, Federal Armed Forces. Incoming or­ parably calculated including Fokker; even with this growth in foreign sales, ders are insufficient to allow for full employees in 1992: 388,888). By Janu- total commercial vehicle production utilization of capacity. Accordingly, ary 1, 1994 the group workforce was was reduced by 13% to 241,600 Deutsche Aerospace has initiated a units.

Business Review 9 reduced further to total 362,190. From During 1993, numerous cost re­ In the Commercial Vehicle division, the end of 1993, 284,576 people duction projects were initiated by the European investment focused on the (1992: 302,464) were employed in Company which resulted in substan­ introduction of environment-friendly Germany. Mercedes-Benz employed a tial efficiency gains at both the manu­ engines and the light truck model up­ total of 209,933 people at the end facturing plants as well as our date. Over DM 1 billion was expended 1993, AEG employed 58,921, DASA suppliers. worldwide to maintain the compet­ employed 86,086, and debis employed Global sourcing activities in­ itiveness of the Mercedes-Benz com­ 8,812. Daimler-Benz AG employed creased during 1993. The "Purchasing mercial vehicle range and to take ac­ 2,984, including 540 in group manage­ Drive in the New Federal States" initi­ count of market-specific requirements. ment functions, 1,274 in group re­ ated by West German companies dur­ Investment in property, plant and search functions and 1,170 in service ing 1992 had excellent results. Impor­ equipment additions totalled DM 0.6 areas for the corporate units and the tant contributions were made by the billion for AEG , DM 1.0 billion for Mohringen location. companies of the Daimler-Benz group, DASA, DM 0.2 billion for debis, and In the corporate units of the who increased their purchases in the DM 0.1 billion for the holding com­ group, the employment situation was new Federal States to more than DM pany. occasionally strained. The unsatisfac­ 800 million (1992: DM 600 million). Additions to leased equipment to­ tory market situation required reduc­ talled DM 5.9 billion (1992: DM 5.2 tion in the size of the workforce, with Investment in Property, Plant billion). Borrowing for leasing and a view to safeguarding the competitive and Equipment at DM 5.4 Billion sales financing activities totalled strength of Daimler-Benz. Reductions Substantial funds continued to be DM 13.7 billion (1992: DM 11.0 in personnel were necessary at the deployed in 1993 to safeguard the fu­ billion). AEG and DASA corporate units in ture of Daimler-Benz. Investment in 1993, along with reduced work shifts property, plant and equipment totalled Research and Development Projects in response to inconsistent production DM 5.4 billion. During 1992, invest­ amount DM 9 Billion capacities. ments totalled DM 8 billion. Also in A total of DM 9 billion (1992: DM 1993 additions to intangible assets 9.6 billion) was expended on research Purchasing Volume totalled DM 0.2 billion, and deprecia­ and development of which develop­ at approximately DM 57 Billion tion and disposal of property, plant ment work for third parties, primarily Despite reduced production in and equipment and intangible assets at the Deutsche Aerospace corporate Germany and lower investments than totalled DM 6.3 billion. unit, accounted for DM 4.1 billion. in the previous year, the volume of The investment in property, plant On October 19, 1993, the Daimler- purchases due to the first time inclu­ and equipment was for new produc­ Benz Ulm Research Center was com­ sion of Fokker, increased from 1992. tion technologies, new products and pleted at a cost of DM 270 million, Worldwide purchases of goods and new strategies. The largest share of to­ which can accommodate 1,000 em­ services totalled DM 56.7 billion tal investment, DM 2.6 billion (1992: ployees. At the center various re­ (1992: DM 55.7 billion). Of these pur­ DM 4.2 billion), was deployed by search projects for the corporate units chases, Mercedes-Benz accounted for Mercedes-Benz. In the Passenger Car and development on key technologies 66%, 10% by AEG, 18% by Deutsche division, the preparations for produc­ is performed. The spectrum of activ­ Aerospace and 6% by Daimler-Benz tion of the new C-class and E-class, the ities includes but is not limited to mi­ InterServices. introduction of 4-valve gasoline and croelectronics, functional and struc­ diesel engines and the change-over to tural materials, production research water-based paints consumed DM 1.3 and the environment, energy research billion of the total investment. and information technology. The Mercedes-Benz corporate unit expended DM 3.2 billion (1992: DM 3.1 billion) on passenger car and com­ mercial vehicle development.

10 Business Review In the Passenger Car division, the At Deutsche Aerospace, DM 4.8 190 compact series was replaced in billion (1992: DM 5.5 billion) was June 1993 by the new C-class. The spent on research and development; of C-class has been newly engineered which projects carried out for third throughout and offers significantly parties accounted for DM 3.9 billion. more leg room. In June 1993, the In the Aircraft division, development E-class was given a new look, incor­ work in the Airbus and Fokker pro­ porating styling features from the grams continued. Further areas of ac­ S-class and C-class. With a new genera­ tivity included the EF 2000 European tion of four-valve gasoline and diesel Fighter Aircraft and the Tiger helicop­ engines, we are giving our C-class and ter development program. In Space E-class customers noticeably more Systems, research and development power and comfort, coupled with low focused on the Cluster, ERS-2, Polar fuel consumption. At the Frankfurt In­ Platform and Ariane programs. In the ternational Motor Show, we presented Defense and Civil Systems division, our VISION A 93 study, with which we further development was carried out intend to enter a new market segment on anti-aircraft systems and the Milan with high growth potential. VISION A and Hot anti-tank systems. In the non- is the foundation for development military sector, digital transmitting work on the new Mercedes-Benz technology was the focus in the Eu­ A-class. reka program. In Propulsion Systems, The Mercedes-Benz Commercial a considerable investment was ex­ Vehicle division presented new, pended on improving the efficiency environment-friendly engines in 1993 and service life of the PW 2000 jet en­ which are being successively phased gine range. In the field of medical sys­ into production. A variety of product tems, a completely new lithotripter improvements have made the vehicle system was introduced to the market. range more attractive and even more closely tailored to customer require­ Consolidated Net Income ments. Falls to DM 0.6 billion In 1993, AEG spent DM 764 mil­ The net income of the Daimler- lion (1992: DM 726 million) on re­ Benz group in 1993 totalled DM 0.6 search and development. Central areas billion (1992: DM 1.45 billion). The de­ of research activity included systems cline of DM 0.8 billion was due to sig­ engineering, postal automation sys­ nificant declines in operating results tems, a new generation of rail cars, in all the corporate units; however, local public transport concepts and there were also some promising devel­ products, semiconductors and vehicle opments. Adapting certain valuation electronics. and accounting methods to tax regula­ tions and US accounting standards led to an extraordinary income of DM 2.6 billion. Extraordinary results of DM 7.4 budgets, and the recording of provi­ Allocation of Earnings billion (1992: DM 4.5 billion) included, sions for structural adjustments of Net income of Daimler-Benz AG among others, a book profit of DM 1.7 DM 1.1 billion. Further adverse influ­ totalled DM 390 million (1992: DM billion from the sale of securities. Re­ ences were the reduction in deliveries 703 million excluding extraordinary sults from ordinary business activities to international airlines and the income). This amount contains extra­ were a loss of DM 3.3 billion (1992: first-time inclusion of Fokker, where ordinary income of DM 1,722 million DM 2.0 billion) is the fundamental negative results were posted. (1992: DM 4,490 million) which re­ basis for the profit/loss contributions debis made a positive contribution sulted from adjustments to valuations of the operating units. Included in the to the Daimler-Benz consolidated re­ for tax regulations and U.S. accounting results from ordinary business activ­ sult of DM 0.4 billion (1992: DM 0.3 principles, particularly relating to pro­ ities are costs arising from structural billion). Included in the positive contri­ visions, inventories and receivables. measures amounting to DM 3.5 billion. bution was a negative contribution The profit transfer agreement was The automotive sector incurred a from Sogeti and additional restructur­ slightly negative for Mercedes-Benz loss of DM 1.3 billion (1992: a profit of ing expenditures in the Systemhaus including extraordinary income, and DM 2.3 billion). This was mainly due group. debis, however, AEG and Daimler- to decline in revenues in the first half The net interest expense of the Benz Luft- und Raumfahrt-Holding AG, of 1993 and substantial restructuring leasing and sales financing companies the parent company of the DASA expenditures of DM 1.7 billion. The totalled DM 0.3 billion (1992: DM 0.4 group, incurred considerable losses. foreign companies in the automotive billion). Consolidated net interest in­ At our Annual General Meeting on sector made a larger overall contribu­ come, excluding the above expenses, May 18, 1994, we shall propose that a tion than in the previous year. amounted to DM 0.8 billion (1992: 1.0 dividend of DM 8 be paid per share of The contribution of AEG in 1993 billion). The first-time inclusion of Fok­ DM 50 par value (1992: DM 13). The fell sharply from the small positive re­ ker and lower interest margins were total dividend payment will amount to sult achieved in the previous year to a the primary reasons for the decline in DM 373 million. loss of DM 0.9 billion, as a conse­ net interest income. quence of economic factors and struc­ Outlook tural expenditures of DM 0.6 billion. Sound Balance Sheet Structure The first signs of a recovery in the Particularly the fundamental restruc­ Due to the continued increase in global economy are visible at the turing in the Rail Systems field of ac­ leasing and financing business, the beginning of the 1994 financial year. tivity, structural measures in Automat­ balance sheet total increased by al­ Although the upward trend of the US ion and in electric motors made large most 6% to DM 90.9 billion . On the economy is continuing, for Europe demands on resources. asset side, both non-current and cur­ - with the exception of the United The negative result of Deutsche rent assets increased. Liabilities rose Kingdom - a slight recovery is the Aerospace increased further in 1993 due to the first-time inclusion of most that can be expected. The same to DM 1.0 billion and was considerably Fokker and the higher financing re­ also applies to Japan, although the gov­ worse than the 1992 loss of DM 0.5 quirements of the financial services ernment is mounting large-scale eco­ billion. The primary reasons for this business, while stockholders' equity nomic programs to stimulate the econ­ negative result were due to declining was reduced due to the inclusion of omy. In Germany, the recession has al­ revenues in Defense and in Space Sys­ Fokker, having been valued according ready bottomed out, but a significant tems, due to reductions in government to Daimler-Benz accounting policies. upturn in 1994 is unlikely. The first Excluding the financial services busi­ impetus should come from exports, ness, which is primarily financed by not the least due to the devaluation of debt, the equity ratio declined from the Deutschmark against major cur­ 28% to 26% and the proportion of non- rencies in the first months of the year, current assets in relation to stock­ while domestic demand will be slow to holders' equity was reduced from 81% gain momentum. to 78%. Long and medium-term capital amounted to 60% of the consolidated balance sheet total.

12 Business Review Sales of Mercedes-Benz passenger Deutsche Aerospace expects to cars in the first two months of 1994 hold its revenues at the low level of significantly exceeded the low level of 1993 in the current financial year. A 1992. Commercial vehicle business in considerable increase is expected in Europe was still unsatisfactory and in the Space Systems division and a view of economic conditions will be small increase in the Propulsion Sys­ very slow to rally. The growth of our tems division. In the Aircraft division, markets in North America seems positive results can be expected only likely to continue. We do not expect from deliveries of the Dornier 328, vehicle demand to recover to any sig­ which began at the end of 1993. In the nificant extent in Japan. Prospects in Defense and Civil Systems division, the newly industrializing countries in increase of production in the Stinger Asia and Latin America continue to be program to the target volume will promising. offset declines in other projects. In order to maintain the compet­ The comprehensive program to cut itiveness of our German-based opera­ costs and improve performance tions, the measures to increase pro­ launched by Deutsche Aerospace in ductivity will be accelerated. 1993 will continue through to 1996. Mercedes-Benz will also be expanding Daimler-Benz InterServices ex­ its global market presence and its pects favorable development prospects worldwide activities in the areas of in the services sector and anticipates purchasing, manufacturing, research an increase in its total output and the and development. share of business with customers out­ AEG Daimler-Benz Industrie side the group. In those areas adver­ expects its Rail Systems, Micro­ sely affected by the recession, debis electronics and Automation fields of will take measures aimed at stabiliz­ activity in particular to record in­ ing business. Cost-cutting and effi­ creased sales. However, the intended ciency improvement programs will sale of the Domestic Appliances field continue in 1994. of activity and the power meters and Our joint ventures will achieve lighting systems sectors will mean cost savings by concentrating on their that overall, incoming orders and sales core areas of activity. Increased tech­ of AEG will be lower than in 1993. In nology transfer with other companies, addition, the restructuring of the AEG new marketing strategies and develop­ group will involve further industrial ment of solutions to transport prob­ activities of the Daimler-Benz group lems through traffic management sys­ being transferred to AEG Daimler- tems are focal activities of these joint Benz Industrie. ventures. Despite the prevailing adverse economic conditions, we believe the Daimler-Benz group will achieve an in­ crease in business as well as signifi­ cantly improve the earnings trend.

Business Review 13

Even our youngest ''customers" can rely on us because the engineers of Mercedes-Benz have always worked hard for safety. Always one step ahead, the Mercedes-Benz safety engineers invented the crash test and such trend-setting safety features as the crumple zone and the safety passenger cell. New Mercedes passenger cars continue to set new standards in the field of active and passive safety.

Corporate Unit Mercedes-Benz The Western European automotive Consolidated sales of Mercedes-Benz for the 1993 financial year sector, faced with unfavorable sales totalled DM 64.7 billion (- 3%). We took the opportunity in the diffi­ trends at home, was forced to notice­ cult business environment which characterized this year to make ably cut production of both passenger cars and, to a greater extent, commer­ key decisions for the company. Bold measures were implemented cial vehicles. to make our organizational structures and processes more efficient Competition on prices and terms in order to safeguard the competitiveness of our German-based in the commercial vehicle sector inten­ operations. We expanded the global presence of our company and sified further, and price pressure in­ laid the foundation for future growth by carrying out a strategic creased sharply even in the luxury restructuring of our product policy. segment of world passenger car mar­ kets as a result of growing surplus ca­ pacity. Sales Crisis in The entire European automotive West European Automotive Sector sector was forced to implement far- The automotive sector was one of reaching measures to bring about last­ the areas hardest hit by the recession ing cost reductions. 1993 was marked in Western Europe. by plummeting profits, reduced work­ Passenger car sales suffered in ing hours and workforce reductions nearly all Western European markets throughout the industry. as prevailing economic uncertainty de­ pressed consumer spending. This was Mercedes-Benz: not offset by the more positive market Sales of DM 65 Billion trend in the USA and various newly With sales revenue of DM 64.7 bil­ industrializing countries. With a pro­ lion (1992: DM 66.5 billion), Mercedes- nounced weakening in the Japanese Benz held its own in an extremely market as well, the world wide de­ harsh business environment. While mand for passenger cars diminished our volume of business in Western by 4% and thus to its lowest level Europe fell by 12% to DM 38.3 billion since 1987. as a result of the recession, we were Low investment confidence and able to boost sales revenue by 22% to growing surplus capacity in the truck­ DM 10.0 billion in the United States, ing industry have slowed the replace­ thanks in part to a strengthening of ment process in European commercial the dollar against the Deutschmark. vehicle fleets. Replacement volume Growth was also achieved in South had been especially dynamic in pre­ America, Eastern Europe and, above vious years, due to European integra­ all, in the newly industrializing tion and German unification. During nations of Asia. In Japan, conversely, 1993, purchases were postponed due we could not avoid a drop in sales to the unfavorable overall economic revenue of 10% to DM 2.5 billion. outlook causing a sharp drop in sales In the Passenger Car division, rev­ in major European commercial vehicle enues totalled DM 38.4 billion, down markets. In contrast, the upturn in the 3% from the previous year. Revenues USA grew stronger, especially the of the Commercial Vehicles division heavy duty trucks. Strong market were reduced by 2% to DM 26.2 growth was also achieved in various billion. newly industrializing countries in South America and Asia.

16 Mercedes-Benz Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The Mercedes-Benz range extends from sleek SL convertibles for the sporty individualist to E-class station wagons catering to the family. For all their diversity, the different models have in common the typical Mercedes-Benz qualities which are prized by our customers the world over. Children, in particular, appreciate the advantages of the practical and versatile E-class station wagon.

Mercedes-Benz Passenger Cars: Following the excellent years of Market Position Strengthened 1991 and 1992, our new registrations by C and E-Classes in Germany fell by 25% to 82,200 The unit sales corresponding to commercial vehicles. the consolidated revenues fell during Double-digit declines were also 1993 to 508,100 (1992: 520,200) pas­ posted in other Western European senger cars. countries, with the result that unit With the introduction of the new sales in Western Europe outside Ger­ C-class and the updated E-class in many lagged 14% behind the previous mid-1993, we were able to increase year's level. Despite greatly intensifed our market position substantially in competition, we were able to maintain Germany. S-class sales were affected our position as the leading manufac­ by the recession in Germany, although turer of trucks over 6 tons, with a 30% less than the rest of the market, the market share in Western Europe. S-class therefore improving the mar­ We achieved strong results in ket share within its segment. Due to overseas markets. Our subsidiary, the weak first half of the year, new Freightliner, made a major contribu­ registrations of Mercedes-Benz cars, at tion to that success. With sales of 209,900, failed to reach the previous 36,800 (1992: 27,400) Class 8 trucks year's volume of 239,000 vehicles. (upwards of 15 tons), Freightliner was We sold 289,300 passenger cars able to improve the position of market abroad and were able to maintain leader which it attained the year be­ the strong volume of 287,400 unit fore, with a share of almost 24% in sales, we achieved the previous year. this fiercely contested market. While unit sales fell in Western Eu­ A total of 241,600 (1992: 277,300) rope and Japan as a consequence of commercial vehicles rolled off the as­ the recession, growth was seen in the sembly lines at the 46 production sites Asian newly industrializing countries, of the Mercedes-Benz group. Produc­ Eastern Europe and Latin America. tion volume in Germany had to be cut Since the new C-class could not be de­ by 26% to 121,200 vehicles due to the livered to American customers until market situation in Western Europe. year's end, sales in the US market also Our foreign plants set a new produc­ fell to 61,900 (1992: 63,300) pas­ tion record, of 120,400 vehicles, with senger cars. an increase of 7%. In response to the generally unfavorable demand situation in the Increased Competitiveness 1993 financial year and in order to Through New Structures reduce inventories, Mercedes-Benz Faced with the difficult market sit­ cut passenger car production by uation worldwide, we had to intensify 9% to 480,600 vehicles. our efforts to improve competitiveness in all areas of the company. Mercedes-Benz Commercial We have set up new performance Vehicles: Market Position centers throughout Mercedes-Benz AG Maintained which will help to achieve this goal. Our commercial vehicles also suf­ We have strengthened our internal fered from the difficult business condi­ management structures and organiza­ tions in Western Europe. Worldwide tion through extensive delegation of we sold 253,900 vehicles during 1993. decision-making and responsibility. This amounts to 21,200 fewer units than in the previous year, a drop of 8%. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. As part of the vigorous restructuring which we implemented during 1993, the number of hierarchical levels and the number of positions at each level were sharply reduced. Accordingly processes and decision-making chains are both faster and more flexible. We will increase the capacity utili­ zation efficiency at our plants, thereby improving the productivity of the capi­ tal deployed, by new methods of de­ coupling working times from oper­ ating times. With the introduction of teamwork and the optimization of work processes, productivity and the quality of labor have increased.

Reductions in the Workforce The weakness in important mar­ kets and growing pressure to reduce costs necessitated reductions in the workforce at Mercedes-Benz, as was the case throughout the industry. At year's end, the group had 209,933 (1992: 222,482) employees including 9,992 (1992: 10,752) trainees and apprentices. At Mercedes-Benz AG, the workforce fell by 9,982 to 159,098 employees. Re­ ductions affected the factories as well as the administrative headquarters and sales organization. Further reductions in the work­ force to protect the international com­ petitiveness of our German-based op­ erations are unavoidable. Given the continued high level of surplus capac­ ity in Western Europe, the Commercial Vehicle division will be most affected by future cutbacks.

20 Mercedes-Benz Customer satisfaction with Freightliner trucks is the foundation of our success in the newly emerging NAFTA region. Our Freightliner subsidiary widened its lead in the US market for Class 8 trucks (upwards of 15 tons) with an increase in its market share to 24%. During 1993 sales of Freightliner increased by approximately 40% to 45,800 trucks. (see following pages)

Signal for the Future DM 2.6 Billion Invested In order to maximize the sales At the end of 1993, the Board of in Property, Plant and Equipment potential for our passenger cars and Management and the labor council To protect our competitiveness in commercial vehicles in Eastern Eu­ concluded an internal agreement re­ the automotive field well into the rope, the Commonwealth of Indepen­ garding improved competitiveness and future, we pursued vigorously our dent States, China, South East Asia workforce reductions at Mercedes- planned investment projects despite and South America, we have increased Benz AG. This agreement opened the the strained profit situation of the our efforts to set up sales and service way both for economically viable pro­ company. organizations in those countries. duction of the new A-class at the In the Passenger Car division the Rastatt plant and for a socially accept­ focus of our investment budget of DM New Passenger Car Plant able implementation of further neces­ 1.3 billion was on preparations for pro­ in the USA sary reductions in personnel. This duction of the new C and E-classes, In September, 1993, the decision means that measures already initiated the gasoline and diesel engines with was made to build a new Mercedes- to boost productivity can be continued 4-valve technology and the conversion Benz plant in Tuscaloosa, Alabama, in in 1994. to water-based paints. the southern United States. The plant This agreement will strengthen In the Commercial Vehicle divi­ will manufacture a sports utility vehi­ our production operations in Germany sion, our European investments were cle with 4-wheel drive. This will give and the long-term profitability of the concentrated on converting our model us a foothold in a new market segment company. range to environmentally compatible with exceptional growth prospects. engines and the updating of the light This vehicle will represent a new se­ TANDEM - A New Concept duty trucks. Worldwide we spent over ries in the Mercedes-Benz range. The for Relations with Suppliers DM 1 billion to enhance our model favorable sales prospects in the United We focused on relations with the range with even greater precision to States, as well as the intensity of the supply industry using an innovative, the complex demands of the different competition in this segment led us to comprehensive plan developed during markets. choose this location. 1993. This new plan is called TANDEM to reflect the joint goal of increasing Expansion of Our Production of the A-class the competitiveness of all parties. Worldwide Sales Network in Rastatt Within the framework of TANDEM we We further strengthened our sales After long and difficult negotia­ involve our partners more deeply than organization with investments of DM tions with the labor council, the Board ever before in our company's internal 224 million (1992: DM 219 million). of Management decided to produce the processes. The experience and ideas of Approximately half of these funds new A-class in Rastatt beginning in our suppliers are utilized even more were used to expand and modernize 1997. intensively than in the past, for mu­ our sales and service organization in The decision in favor of the loca­ tual gain. Germany, with special emphasis on tion in Germany was made possible by Purchasing volume at DM 39 bil­ the new Federal states. the volume of cost reductions agreed lion, was 4% below the previous year's upon by the labor council and manage­ level. As a result of our increased ac­ ment. tivities in new purchasing markets, The A-class concept offers com­ more purchases were made from out­ pact outer dimensions with extremely side Germany. Since some TANDEM generous and variable use of interior projects led to significant cost savings space, as well as a level of safety un­ in the year under review, price trends matched in its class. With this vehicle, were slightly down. Mercedes-Benz has redefined the seg­ ment of sub-compact cars.

Mercedes-Benz 21 Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

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Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. R&D Expenditure We will actively expand the global DM 3.2 Billion market presence of our company, as In order to react even faster to the well as the worldwide activities of evolving demands of our customers Mercedes-Benz in the areas of pur­ worldwide, we have implemented new chasing, manufacturing, research and forms of interdisciplinary project man­ development. agement in our research and develop­ All our efforts in the Passenger ment departments. The supply indus­ Car division are directed at strength­ try, through the TANDEM plan, was ening our position as manufacturers of also integrated in this process at a exclusive vehicles by expanding our very early stage. range to include products for new, The year's outstanding model in­ growing market segments. novation was the new C-class, which Our foremost goal in the Commer­ was presented to the public in June, cial Vehicle division is to offer individ­ 1993, in four different model versions. ualized solutions to the transportation We also refined the E-class consid­ needs of our extremely diverse world­ erably, with a model update in June. wide customer base. The Mercedes-Benz commercial vehi­ cle range was also upgraded during 1993 with new, environmentally com­ Corporate Unit AEG Daimler-Benz Industrie patible engines and various product Adverse economic conditions had a substantial impact on business improvements. at AEG. Although incoming orders rose due to an increase in for­ eign business, sales revenue fell below the previous year's level. Outlook We intend to align future business policy at AEG more closely to There is no significant improve­ ment in sight in the business condi­ the strategic position of the Daimler-Benz group and we have tions for our company in 1994. already launched wide-ranging structural programs. The goal of Although we expect continued these measures is to close loss-making activities and to strengthen growth in our United States markets, the strategic basis and earnings capability of the future fields the economic weakness in Europe will of activity. improve at best, only gradually. Nor can any significant recovery in Japa­ nese automotive demand be expected, Further Decline in Business although the newly industrializing na­ in the West German tions in Asia and Latin America show Electrical Engineering Industry good prospects. 1993 saw a fall of almost 7% in In order to keep our German based the output of the West German electri­ operations competitive, we must in­ cal engineering industry. The decline crease the measures already imple­ was caused by the adverse conditions mented to boost productivity. for foreign business, the fall in de­ mand in Germany and the economic problems facing customers in impor­ tant areas such as mechanical engi­ neering, road vehicle building and the chemical industry. Sales and incoming orders fell sharply from their levels of the previous year, by 5% and 6%, respectively. The fall in business was particularly marked in Germany, while

24 AEG Daimler-Benz Industrie AEG is playing its part in ensuring that Shanghai's school children are punctual. Constructed by the "German Shanghai Metro Group" consortium headed by AEG, the metro system will be extended in stages in the coming years. In May, 1993 operation commenced on the first seven- kilometer section of track. The metro project is a major milestone in the development of an efficient infrastructure for this fast-growing Southern Chinese metropolis. (see following pages)

foreign business declined by almost Sales Down on the Previous Year Restructuring the Group 1 %. Further falls in capacity utilization Sales revenue of the AEG group at The business goals of AEG will in made it necessary to cut back produc­ DM 11.0 billion were 3% less than the future be aligned more closely to the tion and drastically reduce workforce comparable figure for the previous strategic positioning of the Daimler- levels by almost 8%. year. In Germany revenues fell by 3% Benz group. AEG will in the future to DM 6.5 billion; revenues in comprise only those business High Level of Incoming foreign markets also fell by 3%, to activities Orders from Foreign Markets DM 4.5 billion. • which contribute track-bound Incoming orders in the AEG group The growth in sales in Rail products and systems to the core totalled DM 12.1 billion, 2% over the Systems resulted largely from the in­ transport business of the Daimler- comparable figure for the previous voicing of projects in Germany and Benz technology group, year. The increase was generated from the first-time consolidation of which offer strategically important solely by the foreign markets, Kiepe Elektrik GmbH. microelectronics technology to the where demand increased by 16% to The increase in sales in the Micro­ group and the external market, DM 5.3 billion. Orders from Germany electronics field of activity was based < which are responsible for indus­ were down by 7%. on the good performance by TEMIC trial tasks within the group which The largest increase in orders of TELEFUNKEN microelectronics in the do not strictly belong to the auto­ 25% was recorded in the Rail Sys­ area of semiconductors and vehicle motive or aerospace sectors, along tems field of activity. This was attribu­ equipment. with those which have evolved table especially to large orders from In Automation, revenues fell from AEG's traditional business abroad, for example for a city rail sys­ slightly short of the previous year's focus. tem for Kuala Lumpur, Malaysia, a level, since the recession led to a fall monorail system for Newark Airport in in business particularly in the indus­ The restructuring of the group will the USA, and a mass transit system trial systems division. also involve divesting activities which for the City of Toronto in Canada. The Electrotechnical Systems and lie outside the strategic core busi­ A positive trend was also recorded Components field of activity presented nesses of AEG and the Daimler-Benz in the Microelectronics field of activ­ a divided picture. While the Energy group, such as domestic appliances, ity, largely due to a marked increase Systems Technology division achieved lighting systems and power meters. in orders at TEMIC TELEFUNKEN a slight growth in sales, business in The joint venture formed with microelectronics. the Components division was below Electrolux in 1992 involving a joint The Automation field of activity the previous year's level due to the production structure - initially for wet experienced a substantial loss of mo­ strong impact of the recession. appliances - fulfilled the expectations mentum, particularly in the area of in­ In Domestic Appliances, falling of both partners. However, 1993 saw dustrial automation, due to weak do­ foreign business resulted in a slight changes in the operating environment mestic demand. However, postal auto­ decline in sales from the 1992 level. of AEG Hausgerate: the continuing mation showed a positive trend due to concentration in the retail trade a high level of incoming orders from throughout Europe, the joining to­ foreign markets. gether of competitors as well as the Orders in the Electrotechnical Sys­ appreciation of the DM relative to tems and Components field of activity other currencies. failed to match the levels of the pre­ vious year. The components division was particularly hurt by the recession.

AEG Daimler-Benz Industrie 25 Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

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Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. It was decided at the end of 1993 Investment in that AEG would withdraw from domes­ Modernization Programs tic appliances. A preferential offer was Investment by the AEG companies given to Electrolux to acquire all opera­ in 1993, including the assets taken tions in this field of activity. over from newly acquired companies, totalled DM 764 million (1992: DM 916 Structural Program million). for AEG Rail Systems Investment activity concentrated The reorganization of the Rail Sys­ on modernization at AEG Schienen- tems field of activity is a central ele­ fahrzeuge in Hennigsdorf, projects in ment in the overall AEG structural the Domestic Appliances field of activ­ program. Acquisitions made over re­ ity and projects at TEMIC in Nurem­ cent years have caused revenues to berg. Outside Germany, AEG invested increase. It is now necessary to com­ principally in the Pittsburgh Technogy plete the integration of these activ­ Centre for Systems Electronics, in the ities. Postponement of orders by the USA, the administration and service German Federal Railways, surplus ca­ premises in Greece and the TEMIC pacity in the German rail industry plants in South East Asia and Mexico. particularly in the mechanical sector, and increased access of Western Euro­ Systems-Oriented pean competitors to projects for the Research and Development German core market have significantly At DM 764 million (1992: DM 726 depressed the profitability of million), research and development revenues. expenditure increased from the pre­ Rationalization and cost-cutting vious year and as a proportion of sales programs have been started with a revenue increased to 7%. goal to strengthen competitiveness. Principal areas of research and Any remaining overlap between activ­ development activity included systems ities at different sites will be elimi­ engineering, postal automation sys­ nated and co-ordinating functions will tems, a new generation of rail cars, be centralized at the Hennigsdorf site. local public transport concepts and The level of vertical integration will be products, semiconductors and vehicle reduced in all areas. Highly labor- electronics. intensive activities will be transferred to low-cost locations. This will lead to More than 58,900 Employees the closure of AEG's Berlin Nonnen- Worldwide, AEG employed 58,921 damm site. All programs are sched­ people at the end of 1993, 44,591 of uled to be completed by the end of these in Germany. The reduction of ap­ 1995. proximately 3% in the total workforce from the prior year is largely attributa­ ble to capacity adjustments which were necessitated by the strained employment situation.

28 AEG Daimler-Benz Industrie Outlook improvement in the German electrical AEG expects to see a slight expan­ engineering industry, as stabilization sion in its business volume in 1994, means a continuation of extremely with a slightly stronger increase in depressed revenues as well as the foreign markets than in Germany. underutilization of capacities. Increased revenue is expected partic­ This is also the case for AEG. Fur­ ularly in the Rail Systems, Micro­ thermore, we have to continue our electronics and Automation fields of comprehensive restructuring program activity. However, the intended dives­ in 1994, which forms a necessary part titures from the Domestic Appliances of our new strategic direction. These field of activity and the power meters restructuring programs will have a one and lighting systems sectors will time charge which will result in last­ reduce consolidated revenues. The ing cost reductions in future years. restructuring of the AEG group will All of our measures to secure the involve additional industrial activities future should turn around earnings in of the Daimler-Benz group being trans­ 1995. ferred to AEG. It is planned that AEG will take over the industrial manage­ ment. It is also intended to integrate Corporate Unit Deutsche Aerospace (DASA) the diesel engine and decentralized The operating environment of Deutsche Aerospace deteriorated power supply activities of MTU further in 1993. The result was a decline in business in virtually all Friedrichshafen into AEG. areas. We are reacting to these dramatic changes with a rigorous The goal of these measures and of the restructuring program is to close program to improve structures, adjust capacity and reduce costs. loss-making activities and to Greater efficiency is essential if we are to continue to have an ac­ strengthen the strategic basis and tive role in global markets. We have also intensified our policy of earnings capability of the future fields partnerships with other companies to further strengthen our posi­ of activity in Automation, Diesel tion in the world markets. The comprehensive programs to improve Engines, Rail Systems, Energy Sys­ profitability will continue. tems Technology, Microelectronics and Industrial Holdings. The process of separating strate­ gic group management tasks from Crisis in the Aerospace Sector operative business responsibilities, Necessitates Structural Changes initiated in 1993, will continue. Staf­ Deutsche Aerospace was hurt si­ fing in the central group functions was multaneously by worldwide economic slashed in 1993 to approximately 25% weakness, the cancellation of long- of former levels. Effective January 1, term budgets and the structural crisis 1994, the required central service affecting the airlines. In addition, com­ functions are performed in indepen­ petition in the world market is becom­ dent units, with a view to improved ing fiercer. Many competitors receive efficiency and more transparent costs increasingly massive state support in and structures. Despite the first signs the USA and Japan, and new competi­ of a stabilizing economic environment tors are emerging from Eastern Europe in 1994, there have been no signs of and the Far East.

Deutsche Aerospace 29 The fastest and safest mode of transport of our times must be serviced and refuelled before every take-off The four-engine A340 has been in use on regular services since April, 1993. On its record-breaking 48-hour flight around the world in June, 1993, all previous records for long- haul flights were shattered and new standards were set in international air travel.

Deutsche Aerospace reacted to the The acquisition of a majority stake In South America we initiated dramatic changes in its economic envi­ in the Dutch aircraft manufacturer, a further project to expand our com­ ronment with a rigorous package of Fokker, significantly improved our mercial satellite business. As the programs to make structures more ef­ strategic position in the Aircraft leader of a consortium with Aero­ ficient, adjust capacity and reduce division. We now have a complete spatiale and Alenia, we entered into a costs. In addition, the international product range from small turboprop 24-year license contract with the competitiveness of DASA will be pro­ aircraft to large jets. We are also, to­ Argentinian Comision Nacional de tected and expanded through an ag­ gether with our Airbus partners Aero­ Telecomunicaciones (CNT) for the gressive and targeted presence in the spatiale, British Aerospace (BAe) and commercial satellite-based communi­ market. Construcciones Aeronauticas (CASA), cations system, Nahuel. The operating The Aircraft division needs to re­ working with Boeing on a feasibility company, Nahuelsat S.A., was formed organize production structures and study for a very large commercial air­ in December, 1993. We also entered eliminate excess capacity through con­ craft. negotiations for the formation of a solidation. In the Space Systems and One promising development for satellite-manufacturing joint venture. Propulsion Systems divisions, new the future came in the form of a structures were put into place during "memorandum of understanding" Sales Down in Almost Every Area 1993. Considerable resources are signed by four aero-engine manufac­ At DM 18.6 billion, sales of the being put into expanding non-military turers, MTU, Snecma, Pratt & Whitney Deutsche Aerospace group, including activities in the Defense and Civil and General Electric to develop a new the newly acquired Fokker group, Systems division. engine in the thrust range between were 10% below the comparable sales One key element of our ongoing 12,000 and 20,000 lbs. for the previous year. With only a few effort to secure the company's future We intensified our activities in exceptions, business in all areas was is our market offensive in China, Eastern Europe and the People's down. Especially affected were the De­ South East Asia and America. Republic of China by concluding a fense and Civil Systems and the Pro­ number of cooperation agreements pulsion Systems divisions. The Space International Partnerships in various aerospace fields. Systems division also experienced to Safeguard the Core Business Deutsche Aerospace (24.5% substantially lower revenues due to in­ Through increased cooperation share), together with Deutsche Bun- voicing factors. Business in Germany with international partners, a competi­ despost Telekom (51%) and ANT weakened by 16% to DM 5.8 billion tive critical mass will be attained in a Bosch Telekom (24.5%) founded Ro­ (1992: DM 6.9 billion). Foreign sales contracted market. Multilateral part­ mantis GmbH. Now the activities of fell by 7% to DM 12.8 billion (1992: nerships are inevitable, given the com­ the partners in satellite communica­ DM 13.8 billion) and accounted for plexity and growing financial costs of tions will be together. Supported by lo­ 69% of group sales. Military sales fell large aerospace projects, the globaliza­ cal companies, Romantis will offer lan­ to 29% of total business volume, tion of markets, the intensity of com­ guage (telephone), data and television largely as a result of the disproportion­ petition and the reductions in public services in Eastern Europe via the ate decline in Military purchases funds. Through numerous acquisi­ Intelsat VI satellite, and establish the and the first-time inclusion of Fokker. tions, joint ventures and partnerships link-up with Western telecommunica­ Incoming orders were also down, at the national and international level, tions networks. Accordingly, Romantis totalling DM 15.6 billion or 8% less we have achieved a strategic position is making an important contribution to than the orders for the previous year. that improves our situation in the infrastructural expansion in Eastern However increases in customer orders world market. Europe. were received by the Propulsion Sys­ tems division and by our joint venture with AEG, TEMIC Telefunken micro­ electronic GmbH.

30 Deutsche Aerospace Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Satellite aerials undergo intensive tests before going into orbit. In the compact range test facility, the conditions in which aerials will be operating in space are simulated. Satellite aerials play a key role in space missions, functioning as the communication link between the satellite and the ground control center. Deutsche Aerospace and its subsidiary, Dornier, are the world's leading suppliers of aerials for communications and remote sensing satellites.

Renewed Emphasis on Space Systems Influenced Workforce Reductions and Aircraft Activities By Large Projects Reduced Working Hours Inevitable With the integration of Fokker, the Sales revenue in the Space Deutsche Aerospace had 86,086 Aircraft division now contributes more Systems division are influenced to a (1992: 94,293) employees at the end than half of the total consolidated significant extent by large projects. In of 1993, including 3,560 trainees and sales. Revenues of DM 10.3 billion were contrast to the previous year, no indi­ apprentices. Deutsche Aerospace AG slightly lower than the comparable vidual major projects were invoiced in employed 17,363 (1992: 20,051) peo­ figure of the previous year. The 1993, which resulted in a considerably ple, including 843 trainees and ap­ Deutsche Aerospace Airbus business lower sales level of DM 1.4 billion prentices. The persistent worsening of unit was almost able to compensate (1992: DM 1.9 billion). Large contribu­ economic conditions led to extensive for lower sales in other units. The first tions, once again, came from ongoing underutilization of capacity in all deliveries of the Dornier 328 did not, invoicing in the Ariane and Columbus areas of the group. This made further from a sales perspective, have an projects. Customer orders of DM 1.5 reductions in the workforce unavoid­ impact during 1993. billion (1992: DM 1.7 billion) also able. In addition, reduced working Incoming customer orders fell failed to reach the high level of the hours had to be implemented for over again, to DM 7.6 billion (1992: DM 9.1 previous year. half of the workforce. billion). While new orders in the Deut­ 46,863 (comparably calculated for sche Aerospace Airbus business unit Defense: 1992: 51,781) people were employed remained at the very low level of the Sales Now Sharply Down in the Aircraft division, 4,463 (1992: year 1992, the Tornado contract from The downward trend in customer 4,864) in Space Systems, 12,387 Saudi Arabia led to a marked increase orders experienced by the Defense (1992: 14,369) in Defense and Civil in military aircraft orders. All other and Civil Systems divisions for a num­ Systems and 15,347 (1992: 16,338) in business units, however, experienced ber of years was for the first time Propulsion Systems. In other business drastic declines in customer orders. fully reflected in sales for 1993. activities, which largely comprise the At DM 2.8 billion (1992: DM 3.6 joint venture TEMIC, which is in­ billion), revenues were 21% lower cluded on a pro rata basis, and medi­ than in the previous year. The already cal systems, 7,026 (comparably calcu­ very low level of customer orders de­ lated for 1992: 6,941) were employed. clined further by 6% to DM 2.3 billion (1992: DM 2.4 billion).

Propulsion Systems: Decline in Sales in All Business Units Sales in the Propulsion Systems division dropped 13% from the pre­ vious year's level to DM 3.1 billion (1992: DM 3.6 billion). Especially hard hit was the Aircraft Propulsion Sys­ tems business unit. However, one major order for each of the business units Aircraft Propulsion Systems and Propulsion Systems Land/Marine Applications resulted in a considerable increase in customer orders to DM 3.2 billion (1992: DM 2.8 billion) after a low overall level the previous year.

32 Deutsche Aerospace Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Capital Expenditures Decreased Outlook Due to the difficult economic situa­ During 1994, we expect a modest tion, we have limited our capital ex­ increase in sales revenue. In the Space penditures to the minimum necessary Systems division, higher revenues can level. As a result and despite the first- be expected particularly due to deliv­ time consolidation of Fokker, capital ery of the ERS-2 satellite. We also an­ expenditures were lower than in the ticipate moderate growth in the Pro­ previous year. We invested DM 1.0 bil­ pulsion Systems division. In the Air­ lion (1992: DM 1.2 billion) in property, craft division positive results can be plant and equipment in the group and expected only from deliveries of the DM 100 million (1992: DM 200 mil­ Dornier 328, which began at the end lion) in Deutsche Aerospace AG. Pro­ of 1993. In the Defense and Civil Sys­ duction was reorganized to accommo­ tems division, increase of production date new technological and structural in the Stinger program to the target challenges and non-military products. volume should offset declines in other We also put considerable funds into projects. We will continue through to expanding the production of airbags. 1996 with the comprehensive program already initiated to cut costs and Commissioned Research improve performance. Even with and Development numerous programs to improve effi­ Expenditures on research and de­ ciency and structures, a further reduc­ velopment projects for third parties tion in capacity is essential. By the also fell as a result of overall weak end of 1996, we must eliminate business conditions to DM 3.9 billion approximately 10,000 more jobs and (1992: DM 4.5 billion), representing close several plants. This will reduce 21% of sales revenue. Our in-house overhead to be highly competitive and research and development funding to DASA's position in international com­ protect our future operations was at petition will be significantly enhanced. the previous year's level of approx­ We have initiated an internally funded imately DM 0.9 billion or 5% of sales product development program to in­ revenue. Total research and develop­ crease market penetration which will ment expenditures amounted to DM provide a strong basis for future 4.8 billion (1992: DM 5.5 billion). In growth. the Aircraft division, expenditures were concentrated on the Airbus A330/A340, Dornier 328 and Euro- fighter (EF 2000) programs. In Space Systems, the main emphasis was on the ERS-2 (European Remoted Sensing Satellite), Cluster, Columbus, Polar Platform and Ariane. In the Defense and Civil Systems division, we concen­ trated particularly on the Pars 3 pro­ gram and also expanded activities in non-military sectors. In the Propulsion Systems division we focused on the EJ 200 engine for the EF 2000, devel­ opment of non-military engines and two new diesel engine series. Corporate Unit There was a sharp increase in Daimler-Benz InterServices (debis) business with customers outside the debis increased its total 1993 revenue by 20% to DM 9.5 billion. In­ Daimler-Benz group, which increased tensified competition on prices and terms caused us to initiate a from 79% to 83% as a proportion of total revenue. In financial services vigorous campaign in 1993 to reduce costs and increase and bartering, almost all business was efficiency. The international emphasis of our activities was further with external customers; the share of increased in all divisions. external business in the other divi­ sions was in excess of 50%. Services sector also affected Although additional acquisitions by the recession were made during 1993, the increase The services sector was affected in revenues of debis was largely due to by the adverse world economic situa­ growth in existing areas of the com­ tion in differing degrees. Suppliers of pany. The Financial Services division information technology services for in­ had a substantial expansion in busi­ dustry suffered from the reduction of ness, which was due to increasing project orders. Investment in standard internationalization as well as an software also declined sharply. How­ expanded range of services offered. ever some service sectors were un­ affected by the recession. In Germany, Large Investment in vehicle leasing acquisition reached, to Leased Equipment a large extent, the high level of the Additions to leased equipment previous year, despite reduced vehicle grew by 5% to DM 6.2 billion. sales due to the low level of economic Our investment in property, plant activity. In the USA, leasing was popu­ and equipment increased in 1993 by 16% lar and led to an increase in demand to DM 200 million. As in the past, this for capital goods. Demand for mobile largely comprised data processing communication services greatly equipment. Modern computer operat­ increased. ing systems were installed in our for­ eign financial services companies. debis: Continued Growth debis increased its consolidated revenues during 1993 by 20% to DM 9.5 billion. 51 % of total revenue was generated in Germany, 10% in other European Union (EU) countries, 31 % in the USA and 8% in other mar­ kets. Total revenue include sales reve­ nue of DM 8.7 billion and interest in­ come from sales financing receivables of DM 0.8 billion. Consolidated net in­ come of debis declined in 1993 to DM 18 million (1992: DM 122 million).

Daimler-Benz InterServices (debis) 35 To be able to receive calls anywhere at any time is now an essential requirement in business. In the private sector too, while still considered a luxury, mobile communication is becoming increasingly popular and, in 1993, was one of the few growing markets in Germany, debitel further improved its position in this promising industry and with 100,000 customers strengthened its role as the leading supplier of mobile communication services in Germany.

8,812 Employees Financial Services: in the debis group Further Internationalization The consolidated companies of the The Financial Services division in­ debis group employed 8,812 people at creased its total revenue - excluding the end of 1993, an increase of 7% the 50% owned subsidiary Solovam, from the previous year. 7,527 people which was not consolidated - by 18% were employed in Germany and 1,285 to DM 6.7 billion. abroad. Of the total, 6,196 were em­ In Germany, the favorable trend ployed in the Systemhaus division, was assisted by passenger car leasing 1,570 in Financial Services, 351 in In­ programs in cooperation with surance Brokerage, 84 in Trading, 319 Mercedes-Benz AG. in Marketing Services, 173 in debitel In the USA, an increase in com­ and 23 in dIM (debis Real Estate Man­ mercial vehicle contracts compensated agement). 223 interns were receiving for declines in passenger car con­ training at debis at year end. tracts. The newly founded Mexican subsidiary made a positive contribu­ debis Systemhaus: tion to sales and income on an operat­ debis Systemhaus increased its ing basis. total revenue by 7% to DM 1.7 billion. In the early part of 1993 we estab­ This growth was contributed primarily lished another leasing and sales financ­ by the CCS group. However, the Cap ing company in Denmark. Now debis debis group suffered because of the offers financial services in 13 coun­ difficult economic conditions which tries. negatively affected the software prod­ New business worldwide in­ ucts market. The results of this divi­ creased by 22% to 195,000 acquisi­ sion were further depressed by neces­ tions, for a volume of DM 12.9 billion. sary provisions for future restructur­ At year-end, the total number of con­ ing programs. tracts outstanding totalled 435,000, Diebold, the third subdivision of corresponding to a total value of DM debis Systemhaus, further increased 22.8 billion, debis Aviation Leasing its total revenue and profit in the mar­ supported the financing of four aircraft ket for high technology and manage­ during 1993. Two operating type ment consulting services. leases were completed, for an Airbus A 340 and another for an Airbus A 300. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Creativity is the name of the game: modern bartering methods offer many different possibilities for promoting trading relations between contrasting markets and opening up new sales channels. During 1993, debis Trading facilitated exports worth DM 500 million to countries weak in foreign currency. Particularly in the Asian region, substantial bartering transactions were concluded.

Insurance Brokerage In May, 1993, 2 MTel, the French In a market characterized by large joint venture with Metro, commenced insurance claims, debis Assekuranz operation. GmbH steadily expanded its volume of business; commission totalled Outlook DM 68 million on a premium volume debis is ready for the diverse of DM 0.6 billion. demand trends and the intense com­ petition in the individual services Trading: markets. With our superior range of Successful Partnerships individual services and complete The services of the Trading divi­ systems, we have excellent prospects sion facilitated exports totalling DM to increase earnings and total 500 million in 1993 to countries weak revenues. Additionally, our business in foreign exchange. Total revenue dealings with external customers will amounted to DM 371 million (1992: continue to increase. DM 436 million). The decrease in 1993 is attributable largely to invoic­ ing factors. In December, 1993 debis AG pur­ Joint Venture Companies chased the remainder of debis Interna­ In its first full financial year, TEMIC focused on expanding its inter­ tional Trading GmbH from the Treu- national structures in the fields of development, manufacturing and handanstalt. sales. Mercedes-Benz CharterWay swiftly became established in its markets; demand for long-term Mercedes-Benz commercial vehicle Marketing Services: Further Acquisitions rental, which this company provides, is high. In spite of the difficult economic environment, the Marketing Services TEMIC Telefunken division increased its 1993 revenues microelectronic GmbH - to DM 561 million (1992: 205 million). Reorganization and Expansion This is primarily due to the first time of Global Structures consolidation of GFMO, Gesellschaft In TEMIC's first full financial year, fur Media Optimierung mbH, a com­ the focus was on a reorganization of pany acquired in 1992. the various business activities and an expansion of the global development, Mobile Communication Services: production and distribution structures. Dynamic Market Growth The volume of business increased As a provider of mobile communi­ to DM 1.5 billion, although depres­ cation services, debitel profited from sed markets handicapped sales to the dynamic market growth in Ger­ the consumer goods and automotive many which followed the entry into industries. service of the 'D-networks'. Our joint The semiconductors sector now venture with Metro is now the market unites five of the world's leading spe­ leader among the carrier-independent cialists in the field of application- service providers. Total customers specific, customer-oriented semicon­ served were 106,000 with a total ductor products: TELEFUNKEN in revenue of DM 152 million. Heilbronn, Siliconix in Santa Clara, California, MATRA MHS in Nantes, France and Dialog Semiconductor in

Joint Venture Companies 39 Long-term rental of Mercedes-Benz commercial vehicles under the trade name Mercedes-Benz CharterWay enjoys growing popularity with our customers. It is not difficult to see why: Mercedes-Benz CharterWay takes care of vehicle administrative duties, residual value risks, repair, maintenance, taxes and tolls and guarantees transport capacity at all times. CharterWay provides immediate assistance if a vehicle is out of commission.

Munich and Swindon, United King­ Micro-switch and foil switch systems Mercedes-Benz CharterWay dom, as well as EUROSIL in Hong provide the control interface between Since the start of business in early Kong. This group is supported by the man and machine in a great many in­ summer, 1992, long-term rental of TEMIC Integrated Circuits Develop­ dustrial products and systems. In this Mercedes-Benz commercial vehicles ment Center (EZIS) in Ulm, Germany. field, we recorded a growth in sales of under the tradename Mercedes-Benz TEMIC's semiconductors and design vehicle electronics systems. CharterWay has become a vital tool of ideas are sold around the world in the In the vehicle equipment field we sales promotion. This is illustrated, following target markets: computers, are developing innovative systems among other things, by the numerous telecommunication, motor vehicles, with a high electronics content and requests for information which have entertainment electronics and indus­ high quality standards. Our market po­ been received from markets where trial applications. In order to remain sition was significantly strengthened CharterWay is not yet offered. To date, abreast of technological development, by the latest generation of control CharterWay's activities are located in we concluded a license agreement units for anti-lock braking systems Belgium, Germany, France, the United concerning development and manufac­ (ABS) and the sensor systems and gas Kingdom and the Netherlands. In ture of a new 8-bit micro controller ar­ generators for airbags and belt- these markets, rental contracts for ap­ chitecture with the American semicon­ tensioners. Business in the field of proximately 3,000 vehicles had been ductor manufacturer INTEL. In the fractional horsepower motors for in­ initiated by the end of 1993, most of framework of long-term cooperation, stallation in the exterior mirror and which in the second half of the year. we concluded an agreement with Ja­ seat adjustment, window control and Following the successful launch phase, pan's Mitsubishi Electric Corporation, heating and ventilation systems of we are confident that our CharterWay so that we will continue to be assured motor vehicles was static due to de­ concept will become even more firmly access to leading CMOS technology. pressed conditions in the automotive established in the market. The striking We took our first step into the growing industry. However, sales of anti-theft benefits for the customer, who incurs Chinese market with the formation of systems are increasing. no risk relating to the sale of the used Simconix in Shanghai - a joint venture We are now suppliers to more vehicle, repair and maintenance and between Siliconix Inc., Santa Clara, than half of the world's largest auto­ downtime provides a promising basis. and the Shanghai Institute of Metal­ motive manufacturers. These suc­ The relief from administrative vehicle lurgy - which will produce and test cesses prompted us to construct a new management tasks is also a great semiconductor components. production facility at the TEMIC plant benefit. In the microsystems field we in Nabern and, at considerable invest­ develop, produce and market custom- ment cost, to expand capacity at the made solutions consisting, for example, Aschau plant. We also opened a new of sensors, hybrids and application- production plant for microelectronics specific integrated circuits (ASICs). and vehicle equipment in Nuremberg and commenced construction of a plant in Mexico for the manufacture of electronic components and systems for the NAFTA markets. The cable harness activities of TEMIC Telefunken Kabelsatz GmbH (TKG) in Muhlheim, which specializes in development and manufacture of cable harnesses for wide-ranging ap­ plications in the automotive industry, were taken over on December 31, 1993, by the American company Electro-Wire Inc., of Dearborn, Michigan.

40 Joint Venture Companies Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Central Corporate Functions within the Group

Research and Technology The increasing significance for the Daimler-Benz has concentrated its research activities, which are group of information technology was acquiring increasingly international orientation, at its new Ulm emphasized in 1993 with the estab­ Research Center. The research sectors carry out projects in close lishment of a separate research sector. The information technology re­ collaboration with the various corporate units and with diverse searchers in Ulm develop new com­ institutions within and outside Germany. An example of success­ puter applications, technologies and fully implemented synergy is the interdisciplinary TRAFFONIC concepts. project for vehicle and transport research. The Enterprising Researcher Daimler-Benz Research Center In a communication process en­ in Ulm Completed compassing the entire research divi­ The Daimler-Benz Research Cen­ sion, a new model of the "enterprising ter on Oberer Eselsberg, to the north­ researcher" has been developed and west of Ulm's city center, commenced incorporated into the Daimler-Benz operations with an opening ceremony research program. This model of on October 19, 1993. Building costs "strategy-oriented entrepreneurial amounted to DM 270 million. The Re­ management" is based on the re­ search Center, which can accommo­ searcher's displaying an "enterprising date 1,000 employees, makes a signifi­ spirit within the enterprise". The en­ cant contribution to the scientific city terprising researcher makes full use of of Ulm. Alongside the universities, the the opportunities provided to him re­ affiliated institutes run jointly by in­ garding visions, goals and resources dustry and the state and a "Science within the overall strategy of his field Park" geared to the needs of small and of research. medium-sized companies. The existing In order to deepen the knowledge and continually improving close con­ required for this purpose in the fields tact between the individual institutes of strategic competence and orienta­ is intended to promote exchange be­ tion towards the market and the cus­ tween academic and industrial re­ tomer, the research and technology search both within and beyond the division, together with the training sec­ frontiers of the growing technological tor of Daimler-Benz AG, has developed region of Ulm. a management skills program encom­ At the new Daimler-Benz Re­ passing the topics of innovation man­ search Center, research projects are agement, strategy and marketing. carried out for our corporate units and fields of activity. Additionally as a Globalization of Research "hub of knowledge" for the group it Activities in the field of research also develops key technologies which and technology are becoming increas­ provide an important basis for secur­ ingly internationalized. The trends are ing competitive advantages on the towards co-operation with research in­ growing markets of tomorrow. The stitutes throughout the world, student spectrum of activities includes: Microelectronics, Functional and structural materials, Production research and the environment, • Energy research and Information technology.

42 Research and Technology and employee exchange programs Advances in Vehicular with internationally renowned re­ and Transport Research search institutes and the involvement The TRAFFONIC synergy program of scientists in the research and devel­ has been brought to a successful con­ opment activities of group companies clusion after a period of more than outside Germany. Examples of this are: four years. Mercedes-Benz, Deutsche Aerospace and various Daimler-Benz Industrial cooperation with Aero­ research departments have jointly de­ spatiale (France), United Technol­ veloped new vehicular functions. In­ ogies (USA) and Mitsubishi terdisciplinary expertise across the (Japan), group was indispensable for the note­ EU-subsidized European research worthy successes achieved, especially and wordwide joint research in the fields of radar sensor technol­ projects and ogy and speech processing in road Research cooperation with compe­ transport. With the support of the cor­ tent research institutes in the CIS porate unit Deutsche Aerospace and countries and in the USA. the TEMIC joint venture, many of the Such cooperation serves to incor­ TRAFFONIC projects are now being porate international expertise and new further developed to production impulses and experience into research standard. work. Tangible results have already been achieved in the fields of mate­ Traffic Management rials and material technologies, both of by Intertraffic which are crucial competitive factors In 1993, Daimler-Benz AG ac­ in the design of future products. quired all the shares in ITF Intertraffic Gesellschaft fur Integrierte The AIT Program: Verkehrsmanagement-Systeme, which Pan-European User Initiative previously all corporate units of the A further example of interna­ Daimler-Benz group held shares. The tionalization is the pan-European in­ company brings together the know- dustrial user initiative "Advanced In­ how of the Daimler-Benz group in the formation Technology in Design and fields of traffic management systems, Manufacturing" (AIT) launched by the transport systems and information Daimler-Benz research division. technology. The current situation in European ITF is playing a leading role in im­ industry shows that the suppliers of plementation of the traffic manage­ information technology (IT) do not ade­ ment system STORM. This project re­ quately cater to the needs of users. quires the Daimler-Benz research divi­ Headed by Daimler-Benz, 17 large Eu­ sion, the Transport Ministry of Baden- ropean IT users from the automotive Wurttemberg, the City of Stuttgart and and aviation industries have, accord­ various other major companies to ingly, devised a project which is be­ jointly conduct trials of advanced traf­ ing sponsored by the European Union fic information and advice systems in (EU). The objective of which is to de­ the Stuttgart region. Data linkage be­ termine future IT requirements in de­ tween public and private transport velopment and production, so that IT suppliers can develop appropriate so­ lutions. In the sound lab: in 26 thousandths of a second, the airbag inflates into a balloon-like safety cushion. Scientists in Ottobrunn measure the blast from the gas explosion in their efforts to make the inflation process still more efficient. The Daimler-Benz research department carries out continuous development work on the airbag with a goal to provide even greater safety for the customer.

provides the basis for the following six things, the mistakes made by the Contact-free charging devices for pilot projects: driver. With the help of psycholo­ electric road vehicles, gical fault analysis, Daimler-Benz Contact-free vehicular drive mech­ traffic information system researchers have compiled error anisms, individual guidance system profiles for various vehicle categories High-voltage power supply for constantly updated park and ride and driver groups. The influences of locomotives and information stress, experience and age on error On-board power supply for all connections information frequency have been evaluated. types of vehicles. fleet management and an It has been shown, for instance, aid call system. Daimler-Benz researchers from that high stresses placed on the driver the automation field in Frankfurt are The STORM project infrastructure in traffic can lead to mistakes; currently preparing the necessary will be completed by the end of 1994 however, there was no evidence that technology and systems for the pro­ and will undergo trials through the driving errors result in higher duction and operation of such end of 1995. stress levels. The hypothesis that medium-frequency power transmis­ Also, ITF will participate in a com­ increased experience levels reduce sion units. pany which builds, operates and ar­ the frequency of errors was con­ ranges financing for individualized firmed. Mobile Computing and the traffic management systems. Another experiment disproved the Automatic Reading of Handwriting commonly held belief that the fre­ Information is only of value when The Channel Tunnel Vehicle STTS quency of driving errors increases it is available at the right time, at the in Operation with age. Here, too, experience plays right place and in the right language. Following the completion of the the decisive role: older drivers with Accordingly "Mobile computing" is tunnel under the English Channel, the a greater level of experience made one of the most important require­ innovative inductive track guidance the least errors of all groups in­ ments placed on modern information system, which we developed for the vestigated. technology. Service Tunnel Transport System In the field of "Mobile subscribers (STTS), will commence operations. The Non-Contact Battery Charging in the to networked systems", a basic infor­ track-guided special vehicles, devel­ Electrically Powered Vehicle mation and communication technology oped by Mercedes-Benz AG in collab­ The transmission and conversion system is currently being created at oration with the Daimler-Benz re­ of electrical energy is also showing the Daimler-Benz Research Center in search division and AEG, travel along technical advances. Ulm. Mercedes-Benz branches are cur­ the tunnel's 4.8 meter (approximately When power is transmitted at rently testing mobile computing for 16 feet) wide central shaft, which frequencies in excess of 20 kHz, the mobile recording of repair and inspec­ serves as a maintenance facility and space and weight requirements of tion orders. an escape route. Tests by the tunnel electromagnetic components along In a different field of information operator confirmed the system's effi­ with losses occurring in them, are con­ technology, Daimler-Benz researchers ciency and its robustness in the event siderably reduced. More importantly, have been achieving international ac­ of a malfunction. electrical power can be transmitted at claim and successfully applying their these high frequencies over an air gap, findings in automatic letter sorting Psychological Analysis without direct contact. New, rapidly systems of AEG Electrocom: on the of Driver Errors switching, economically operating basis of image and handwriting anal­ Motor vehicles move in traffic semiconductor components are now ysis and of speech and graphic recog­ more safely when they meet the needs making this frequency range viable. nition, they have developed concepts and cater to the individual characteris­ This opens up a broad spectrum of and methods for the automatic reading tics of the driver. To make progress in highly interesting product oppor­ of handwriting. With a recognition rate this area, vehicle developers must be­ tunities, such as: of over 80%, they have rapidly at­ come familiar with, among other tained a leading international position.

44 Research and Technology Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Microelectronics and New Materials - New Opportunities investigating a closed process chain Microsystems Technology for Energy and the Environment from the CAD model via prototype pro­ Microelectronics research exper­ The characteristics of new mate­ duction, with such methods as stereo- tise is not only of benefit to products rials are opening up a variety of attrac­ lithography, with subsequent return of of the future. The Ulm Research Cen­ tive applications to Daimler-Benz in the measured prototype to CAD data. ter incorporates a newly established the field of energy and the environ­ "foundry" - a manufacturing center for ment. Future-Oriented Research - gallium/ arsenide semiconductor com­ A major focus of continuing devel­ and the Searching Internal Review ponents - where transistors, circuits opment for materials scientists at the The Berlin "Research, Technology and other products for the Daimler- Ulm Research Center is functional ma­ and Society" group processes non- Benz group are produced. External terials, for example for electrodes and technological future-oriented knowl­ customers are now supplied with membranes in batteries for electrically edge in order to support the corporate tailor-made components; as a rule, powered vehicles. For future genera­ units in operative and strategic pro­ these are small series of a few hun­ tions of the "ZEBRA" sodium/nickel- cesses. On the basis of research re­ dred chips, the production of which chloride high-energy battery, jointly sults, investigations held to determine would not be cost effective in a com­ developed by the Anglo-American whether existing and planned prod­ mercial semiconductor production corporation, South Africa, and AEG, ucts, services or organizational princi­ facility. Daimler-Benz researchers are cur­ ples have a realistic future. In a wide range of corporate prod­ rently developing new materials with The researchers have identified ucts such as passenger cars or rail ve­ a goal to reduce operating tempera­ for example, the future trends that will hicles, in aviation and aeronautics or tures, costs and enhancing func­ be of relevance for the company and in drive systems and automation tech­ tionality. its products in the years to come. The nology, intelligent sensor and actuator Environmental compatibility is the interdisciplinary trend analyses are components known as smart-power supreme goal in the "solid oxide fuel grouped according to the following circuits are incorporated (addressable, cell" research objective. This cell pro­ observation fields: diagnosable and self-monitoring sys­ duces electricity from any combustible Economic framework data tem solutions), which are being devel­ gas, for example natural gas or hydro­ Socio-demography oped by the research division in close gen without a flame, steam or rotating The environment contact with technological develop­ turbine blades, to an efficiency factor Energy ments. Using this technology, a con­ of 60%. The development of appropri­ City planning and area develop­ trol circuit for reluctance motors used ate electro-ceramics, combinable flat ment for positioning exterior mirrors on pas­ cells and of integrating and connecting Transport senger cars is being developed to­ technology the Daimler-Benz re­ Society, values and behavior gether with TEMIC TELEFUNKEN mi­ searchers are making the required The working world and leisure croelectronic GmbH, Heilbronn. know-how available for practical appli­ time behavior Wheel and suspension accelera­ cation. Companies. tion on road vehicles will, in the future, be measured by micro- Production Research for the This is complemented by a re­ mechanical sensors integrated on a Industrial Society of Tomorrow search audit; carried out by internal single chip the size of a pinhead, 1993 saw the initiation of the In­ and external experts of world renown. which convey this data to control telligent Manufacturing System (IMS) This procedure tests our own research units. These new acceleration sensors, research program, designed on a activities for efficiency, effectiveness developed by researchers at the global scale as a three-way alliance be­ and quality. The customers of the Munich-Ottobrunn site, are about to tween the USA, Japan and Europe. IMS Daimler-Benz research sector expect go into series production. has the objective of standardizing in­ products which not only equal or, in dustrial production and to carry out most cases, exceed any comparison comprehensive data integration - from with the world's best in terms of tech­ placement of orders, development and nology, but also ensure competitive manufacture to ultimate distribution. pricing. As part of the "Rapid Product Develop­ ment" pilot project, Daimler-Benz is

Research and Technology Environmental Protection subsequently launched at the begin­ As a result of amendments to waste legislation in Germany, more ning of 1994. The purpose of this in­ emphasis will be placed on residual materials from the manufacture formation system is to coordinate the monitoring of facilities, processes and of a product in the future. Together with newly implemented test hazardous substances at the various audits at the production plants and product-based ecological plants and to ensure efficient docu­ records, the documentation of environmental protection has been mentation of environmental protection further optimized by means of an environmental information within the company. The information system. The segregation and recycling of residual plastics as well from the plants' data banks is cen­ as the use of natural materials have shown encouraging trally coordinated to allow environ­ test results. mental protection to be monitored on a group-wide basis. New Waste Legislation An important focus of environ­ Environmental Audit mental discussion in 1993 concerned for Company Operations the amendments to waste legislation, Prior to the EC directive on the which focuses on the prevention of voluntary environmental auditing of waste, through recycling. The new leg­ production plants, test audits were islation covers all residual materials previously performed at two of the arising from a product from the manu­ group's plants, so that experience facturing stage up to disposal. The could be gained with this instrument. manufacturer's responsibility has These tests revealed that the legisla­ been extended to include designing tion, which has come into effect, is products which can be recycled sev­ lacking detailed analysis criteria. eral times, produce minimal residual Moreover, the directives reinforce na­ material and have a long service life. tional differences which put German Additional significant changes in plants, with their high environmental the field of waste policy are imminent standards, at a disadvantage over in the form of the electronic waste and foreign plants. junked vehicle ordinances and the obligation on manufacturers to take The Product-Related back scrapped products; this will also Ecological Balance Sheet affect the manufacturing and product With the further development of development sectors. The recycling environmental legislation, attention is legislation and the two above ordi­ focusing on the overall "balance sheet" nances have not yet been passed into of the burden a product places on the law at the present time. environment in manufacture, opera­ tion and disposal. The Daimler-Benz Environmental Information System Acquires Increasing Significance The central working group "Envi­ ronmental Protection", comprising all chief environmental officers within the Daimler-Benz group, decided in May, 1993 that the corporate unit, debis, should develop a group-wide environ­ mental information system, which was

Environmental Protection 47 One recycling problem is solved: test facility at the Ulm Research Centre for categorized recycling of composite plastic materials on a purely mechanical basis. Synthetic waste is in this way turned into a new source of raw materials.

Research Center in Ulm is placing Cooperation with Mitsubishi more emphasis on this issue scien­ In November, 1993, Daimler-Benz tifically sound criteria for measuring and Mitsubishi agreed to commence with the environmental burden of a product two environmental protection projects. must be recognized at an early stage Within the framework of a joint re­ and immediately incorporated into the search and development project, the manufacturing process. On the basis of recycling of mixed synthetic waste material and energy balance sheets, and electronics waste is being re­ ecological weak-point analyses have searched. In the second environmental already been completed for various cooperation project, it was agreed to products of the company. work closer together in the recycling of metals from scrap vehicles. In addi­ Investments in tion, both corporations displayed a Environmental Protection renown cross section of their environ­ Investments in environmental pro­ mental know how at the 'New Earth tection declined to approximately DM Environmental Show' in Osaka in 200 million which was less than that December, 1993. invested in the previous year. The pri­ mary reason for this is the high level Conservation of of investments capitalized in 1992, re­ Natural Resources lating to the conversion to water based In a joint venture involving var­ paints in car production. Additionally ious corporate units, UNICEF and the this also reflects the overall declining University of Para in Belem, Brazil, a level of investments in property, plant variety of materials and methods are and equipment. being tested for the industrial utiliza­ tion of natural fibers and other renew­ Recycling Synthetic able raw materials. During 1993 Material Waste approximately 6,000 tons of natural A further objective in corporate materials such as coconut fiber and research is the development of pro­ caoutchouc were processed into parts cesses for the recycling of complex at small-scale Brazilian production synthetic waste materials created in plants and installed in buses and production. The Daimler-Benz Re­ trucks by Mercedes-Benz do Brasil. In search Center has succeeded for the addition to various technological ad­ first time in mechanically sorting com­ vantages, such as a contribution to im­ posite synthetic waste created in the proved interior climate and greater air manufacture of dashboards into the permeability, natural fibers are also of original materials and reusing these in considerable ecological advantage, a high-quality recycling process. As because they dispense with the use of soon as the sorting unit, currently un­ exhaustible resources and no prob­ dergoing endurance testing, is put into lems are encountered in recycling or operation at the Worth plant, 1,500 disposal. tons of waste can be prevented annu­ This project is also significant in ally and the pure plastic constituents terms of development policy. Farmers reused in the manufacture of automo­ are able to replace roving cultivation tive components. with an environmentally compatible basis of existence as suppliers of fiber to the automotive Industry. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The five core topics of internationalization, concentration to the markets, innovative talent, entrepreneurship as the key to competitiveness and social responsibility were the focus of discussions at the Daimler-Benz Congress '93. The discussion of these issues by more than 2,000 senior managers of the company generated a mood of enthusiasm which is making a valuable contribution to the integration of the group.

Personnel we have in the past. To keep these Difficult economic conditions in 1993 created adjustments to the redundancies to a minimum, however, workforce not only at the operating units but also at the Daimler- new methods of adjusting capacity will Benz holding. Reduced working hours in response to fluctuations in also be considered. Emphasis will be placed on the flexible structuring of activity was also necessary. The workforce of the Daimler-Benz working time. group was reduced by 6% to 366,736; affected by the decline, in A further focus of our personnel particular, were Mercedes-Benz, AEG and DASA. We continue to work, especially in this difficult year, improve the skills of our employees through basic and advanced was the maintenance and further training, which is a critical factor in maintaining our international development of our human resource competitiveness. potential. Training in efforts to raise skills continued in the Daimler-Benz Strengthening Competitiveness group during 1993. Basic vocational in a Difficult Environment and advanced training are considered The difficult economic conditions permanent tasks designed to protect of 1993 made it necessary for the the future of the company and its Daimler-Benz group to reduce its employees. workforce and personnel costs. Releas­ ing personnel, especially on the scale Employment Situation that is necessary, is always a painful At year-end the Daimler-Benz step. The company not only loses group employed a workforce of knowledge and experience; the reduc­ 366,736 (1992: comparably calculated tions also impair the age structure of 388,888), on January 1, 1994 employ­ the remaining workforce. ment in the group declined a further In 1993, we tried to make the 4,546 to 362,190. 284,576 people adjustments in a socially acceptable (1992: 302,464) were employed at the manner, particularly through normal end of 1993 in Germany. In the corpo­ attrition, early retirement and individ­ rate units of the group the employ­ ual severance agreements. In addition, ment situation was extremely reduced working hours were used to a strained. considerable extent to accommodate fluctuations in activity. In the corpo­ rate units of AEG and DASA, however, redundancies were unavoidable in 1993. It is our intention that future re­ ductions in personnel, which are nec­ essary if we are to secure our interna­ tional competitiveness, will be carried out in as socially compatible a manner as possible, though the room for flex­ ibility is more limited. The possi­ bilities for taking advantage of attri­ tion and early retirement have now been largely exhausted. Thus, we will not be able to avoid redundancies as

50 Personnel Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The five core topics of internationalization, concentration to the markets, innovative talent, entrepreneurship as the key to competitiveness and social responsibility were the focus of discussions at the Daimler-Benz Congress '93. The discussion of these issues by more than 2,000 senior managers of the company generated a mood of enthusiasm which is making a valuable contribution to the integration of the group.

Personnel we have in the past. To keep these Difficult economic conditions in 1993 created adjustments to the redundancies to a minimum, however, workforce not only at the operating units but also at the Daimler- new methods of adjusting capacity will Benz holding. Reduced working hours in response to fluctuations in also be considered. Emphasis will be placed on the flexible structuring of activity was also necessary. The workforce of the Daimler-Benz working time. group was reduced by 6% to 366,736; affected by the decline, in A further focus of our personnel particular, were Mercedes-Benz, AEG and DASA. We continue to work, especially in this difficult year, improve the skills of our employees through basic and advanced was the maintenance and further training, which is a critical factor in maintaining our international development of our human resource competitiveness. potential. Training in efforts to raise skills continued in the Daimler-Benz Strengthening Competitiveness group during 1993. Basic vocational in a Difficult Environment and advanced training are considered The difficult economic conditions permanent tasks designed to protect of 1993 made it necessary for the the future of the company and its Daimler-Benz group to reduce its employees. workforce and personnel costs. Releas­ ing personnel, especially on the scale Employment Situation that is necessary, is always a painful At year-end the Daimler-Benz step. The company not only loses group employed a workforce of knowledge and experience; the reduc­ 366,736 (1992: comparably calculated tions also impair the age structure of 388,888), on January 1, 1994 employ­ the remaining workforce. ment in the group declined a further In 1993, we tried to make the 4,546 to 362,190. 284,576 people adjustments in a socially acceptable (1992: 302,464) were employed at the manner, particularly through normal end of 1993 in Germany. In the corpo­ attrition, early retirement and individ­ rate units of the group the employ­ ual severance agreements. In addition, ment situation was extremely reduced working hours were used to a strained. considerable extent to accommodate fluctuations in activity. In the corpo­ rate units of AEG and DASA, however, redundancies were unavoidable in 1993. It is our intention that future re­ ductions in personnel, which are nec­ essary if we are to secure our interna­ tional competitiveness, will be carried out in as socially compatible a manner as possible, though the room for flex­ ibility is more limited. The possi­ bilities for taking advantage of attri­ tion and early retirement have now been largely exhausted. Thus, we will not be able to avoid redundancies as Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Mercedes-Benz employed a total Daimler-Benz InterServices of 209,933 people at the end of 1993, (debis) had a total workforce of 8,812 including 160,175 in Germany. The at the end of 1993, including 7,527 workforce declined in Germany by people in Germany. Primarily through 9,982 from the previous year to acquisitions, the workforce increased 159,098. Reduced working hours were by 600 from the previous year. agreed upon in both divisions, partic­ Included in this net increase is a ularly the commercial vehicle sector. reduction of approximately 150 em­ Generally, workforce reductions con­ ployees at debis Systemhaus due to formed to socially compatible meas­ the difficult business situation. ures such as extensive offerings of At Daimler-Benz AG, the execu­ early retirement and severance agree­ tive holding company, a total of 2,984 ments. people were employed at December AEG had a total of 58,921 em­ 31, 1993, of which 540 were in group ployees at the end of 1993, including management functions, 1,274 in group 44,591 in Germany. The workforce de­ research functions and 1,170 in ser­ clined by 4%. The reductions affected vice areas for the corporate units and particularly the Automation, Electro- the Mohringen location. The workforce technical Systems and Components, declined by 156 employees from the and Microelectronics fields of activity. previous year. At Deutsche Aerospace (DASA) 86,086 people were employed at year- Collective Agreements for 1993 end, including 69,373 in Germany. In In the old Federal states of Ger­ comparison with the previous year, many, wages and salaries rose by 3% the workforce in Germany declined by effective April 1, 1993, as a result of 8%. Additionally approximately 50% of the pay agreements concluded for the employees were affected by reduced metal-working and electrical indus­ working hours. The continued dra­ tries in 1992. Additionally, the con­ matic sales decline in the Aircraft, tractually guaranteed special remu­ Space Systems and Defense Systems neration rose to 60% of a month's pay. divisions led to the announcement in The reduction in working hours to 36 October, 1993 of significant changes hours per week without loss of pay, in structure and employment at the previously agreed to in 1990, also DASA group. went into effect on this date. In the new Federal states, the 1991 agree­ ments on gradual adjustment of wage and salary contracts to the level in West Germany were changed only af­ ter a labor dispute. The decisive mate­ rial change consists in an extension of the phases of the time frame. As of De­ Private Capital Formation Company Training Activities cember 1, 1993, pay rates were gradu­ Assistance in employee stock Particularly in difficult economic ally raised to 80% of the West level. As ownership programs was provided times, the Daimler-Benz group con­ of July 1, 1994 the ratio will be 87%. again in 1993 to the domestic group. siders the training of junior personnel After a further increment to 94% on Daimler-Benz AG, Mercedes-Benz AG, an important strategic task to protect July 1, 1995, the level in the old Ger­ and a few companies belonging to the future of the company. man states will be the same for all debis participated in these programs. At year-end 1993, approximately German states by July 1, 1996. Every entitled employee had the 12,800 young people were undergoing opportunity to purchase a share of vocational training in Germany, of Personnel and Social Daimler-Benz AG at a discounted which 3,200 young men and women Welfare Expenditure price. Approximately 73,000 em­ commenced training in 1993. Over Group personnel expenditures ployees, or 41 % of those entitled, 100 of the jobs created by the Daimler- increased by 6% to DM 33.8 billion. took advantage of this offer. Benz group, in the new Federal states In connection with the vigorous cost- in 1993, exceeded the actual needs cutting measures, social benefits were Managerial Development and is evidence of the company's curtailed in all corporate units and in and Planning strong sense of social responsibility. the holding company. Managerial development and plan­ Training is offered in almost 60 techni­ The company pensions, a central ning is characterized by increasingly cal trades and 10 different business element of social benefits in the difficult economic conditions. Execu­ professions. This training is supple­ Daimler-Benz group, remained un­ tives are also affected by the neces­ mented by 15 special programs for affected. Daimler-Benz AG and sary adjustments in staffing levels. high school graduates at professional Mercedes-Benz AG paid DM 353 mil­ The 1993 executive staff review academies. lion to approximately 53,200 retirees, reflected a sufficiently large number of All corporate units offer advanced widows and children in 1993. A total qualified junior personnel to meet the training in comprehensive programs of DM 551 million was allocated to expected future need of managerial consistent with the different fields of pension provisions at Daimler-Benz staff. We are assisting our managerial activity. The focus of training for se­ AG and Mercedes-Benz AG. AEG dis­ staff through specially developed nior managerial staff in 1993 was the bursed DM 107 million in 1993 and training programs to improve their in­ structural change in the group and its DASA paid DM 113 million. A total novative skills and acquiring greater markets. of DM 1.4 billion were provided for general management competence with Expenditures for basic vocational company pensions in the group. a more international profile. and advanced training was approx­ The expansion of networks for imately DM 800 million in 1993. knowledge transfer, integration and communication within the group was assisted by the '93 Daimler-Benz Con­ gress in Berlin: in numerous working groups, approximately 2,000 senior managers from domestic and foreign companies of the group discussed issues of internationalization, market orientation, innovative strength, com­ petitiveness and responsibility toward society. The 1993IAAF World Championships in Athletics in Stuttgart drew nearly half a million spectators to the Gottlieb-Daimler Stadium. More than four billion people around the world followed the competitions on television. Daimler-Benz and Mercedes-Benz were active sponsors of this extremely successful event.

Preventive Health Care Our sponsoring policy has two pri­ and Occupational Safety mary goals. First, it should yield tan­ Medical care for our employees is gible benefits for society by concentrat­ traditionally an essential part of our ing on projects which would not have personnel and social policy. In the been possible, or not at the same high German group companies, approx­ level, without the support of Daimler- imately 230 employees are in the Benz. Second, by coordinating spon­ medical care service to provide health sorship goals with company goals, care to their peers. positive effects should result for the Approximately 200 full-time company in the market, as well as safety experts ensured on-the-job specific benefits for our employees. safety. The success of their work is The primary focus of sponsorship reflected in the further reduction in policy within Daimler-Benz AG is our accidents in all corporate units. international drive to promote the ad­ vancement of young people. In addi­ Thanks to Our Workforce tion to contributing to better inter­ We would like to express our grat­ national understanding by bringing itude to all our employees for their together young people from different commitment and hard work in a year nations and cultures as well as to im­ which was characterized by a very dif­ prove the image of Germany abroad, ficult economic situation and painful we are also securing the development steps to optimize costs. We also ex­ of highly qualified, internationally ori­ tend our appreciation to the represen­ ented management personnel for the tatives of the labor councils and man­ future. The program "Award of Excel­ agerial committees at all levels of our lence" in cooperation with the Goethe group. Institute provides an opportunity for selected students from the United States and Canada to live for several The Company's Role in Society - weeks with German host families - Public Relations' Promoted Activities employees of our company - allowing Daimler-Benz sponsors a wide range of projects in social, cultural them to become acquainted with our country and our company. The re­ and ecological areas as well as sports. In addition to the positive sponse to this program within the benefits to society, our activities also achieve positive effects for company and the participants has the company. Particularly important are the international programs been so positive we have designed to promote the advancement of young people.

The same strong sense of respon­ sibility which we feel toward our customers also extends to our share­ holders and to the general public. This sense of responsibility includes our permanent readiness to engage in critical exchanges of ideas with people outside, and inside the company. This dialogue and cooperation with various groups is assisted by a wide range of sponsoring projects in social, cultural and ecological areas as well as in sports. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. that we plan to expand it in the com­ In the sponsoring of cultural pro­ ing years. In the future, we will also grams and sports, promoting a new invite young people from other coun­ generation plays an important role. tries and regions in which we have This is also true of our support for growing business interests to visit young artists in which we offer spon­ Germany for several months as guests soring through various methods. of the Daimler-Benz group. The Daimler-Benz Junior Cup, an Planned activities during 1994 for international youth soccer tourna­ young Russian economists have been ment, held annually in Sindelfingen, in set at several locations within the which employees of the Daimler-Benz group. These activities will give them group are among the participants, not a comprehensive insight into the busi­ only contributes to communication ness practices of German industrial among young people across Europe, corporations as well as to build a net­ but also provides the SOS-Kinderdorf work of links with the future decision­ in Sarajevo with desperately needed makers in Russia. financial support. Complementing this program are a number of specific activities at for­ eign locations, such as in the NAFTA region. There, we are offering unem­ ployed young people in Mexico positions as trainees at local group subsidiaries. The youth projects, which the Group is undertaking, in the new Ger­ man states are especially timely. Dur­ ing 1993 Daimler-Benz AG held a con­ ference in Hoyerswerda on the subject "Youth and Violence". The conference included the financing of work promo­ tion programs to benefit unemployed youth in cooperation with the Freuden- berg Foundation and the German Foundation for Children and Youth. Similar goals are being pursued by the Youth Projects in Mannheim, which has a long tradition of assisting young people. Finance and Materials national and international markets and We have merged group-wide functions of the Finance and Materials pass these funds to the operating com­ division at the headquarters in Stuttgart-Mohringen. Important panies. This method enables the financ­ ing costs to be lower than through events in 1993, among other things, were the obtaining of a long- direct refinancing by the operating term rating by Standard & Poor's and Moody's Investors Service, companies in the local markets the preparation and implementation of the New York Stock Due to the continuing growth of Exchange listing of the Daimler-Benz shares and the activities in the financial services business, connection with the Purchasing Drive in the New Federal States. we again used the various interna­ tional capital markets in connection Group Treasury with the central procurement of funds During 1993 we continued to for financing. We focused on borrow­ develop the concept and technical ing under our Euro medium-term note aspects of our central cash manage­ program, and were able to support ment and included the European the needs of our leasing and sales group companies in the cash concen­ financing companies very flexibly. tration process. Due to the scope of this borrowing we In the area of cash management, limited ourselves to a few activities flexibility and efficiency were further involving the standard Eurocurrency improved through increased use of loans. We performed a securitization commercial paper programs, espe­ of sales financing receivables in the cially in Germany and the USA. USA for the first time, with the goal of Through active portfolio management, extending our investor base and diver­ we invested long-term funds primarily sifying our financial instruments. in fixed interest rate instruments of As part of our Treasury activities first-class issuers and, to a smaller we also make use of derivative money extent, in investments in shares of and capital market instruments to other companies. limit the group's financial risk and As in the past, the task of foreign improve financial results. exchange management consisted of ascertaining and limiting, by foreign exchange hedging methods, the cur­ rency risks of the operative sectors, particularly with regard to USD and JPY and also for selected European currencies. We will continue in the future to be guided in our strategy by continually updating currency rate ex­ pectations and will employ the finan­ cial instruments individually depend­ ing on the currency and business field. The financing needs of the group are essentially handled by Daimler- Benz AG and its network of regional holding and finance companies. The networks, in their function as financial hubs, procure external funds on the The handling of financial transac­ We view the maintenance and im­ Sales and Project Financing tions and the use of the financial trad­ provement of the financial flexibility of Supporting worldwide sales of ing instruments in connection with the group as an important goal. Our group products increasingly requires central cash and foreign exchange mobility shows itself, for example, ap­ specific product and customer related management and the central refinanc­ propriate to the business needs, in the financing solutions in addition to the ing tasks is governed by financial trad­ fact that gross liquid funds are avail­ offering of standardized financing pro­ ing guidelines and thus subject to able within the group (at year-end grams. We need innovative financing strict regulation. Accordingly, we 1993 over DM 10 billion). Addi­ and hedging facilities for projects of employ electronic systems with tionally, we finance less than two units operating in the infrastructure defined financial control parameters thirds of our financial services exter­ sector. which take functional distinctions into nally and the rest from group funds. In traditional export financing we account. An external refinancing level as high made use of the opportunities pro­ A hierarchically structured report­ as 90% is customary in the industry. vided by the existing financing and ing system, which is steadily improved With a view to financial security, hedging instruments. We also have fi­ upon, shows us risk areas and poten­ we always supply our foreign subsid­ nancings in which these methods are tials very early on and provides us iaries with enough equity so that they not utilized. For construction and as­ with up-to-date information on which can refinance themselves on a stand­ sembly projects in Eastern Europe and to base decisions. Since we make alone basis regardless of the oppor­ the Far East, tailored financing solu­ extensive use of electronic data pro­ tunities for fund procurement through tions were developed. cessing systems in our cooperation our centrally controlled regional hold­ The further recovery of the econ­ with external associates, we give great ing and finance companies. omies of the countries of Latin Amer­ importance to data security. During 1993, there were larger re­ ica, Central Europe and in part, the quirements for funds, above all in the Far East, contrasted with a partial de­ Financial Planning and Control domestic areas of the group. These terioration of political stability and the To minimize the cost of capital in were covered notably by freeing DM 3 economic climate in several countries financing group activities, we optimize billion in funds from inventories and of Africa, Eastern Europe and the CIS. the allocation of the existing funds in by generally raising the efficiency of Restrictive policies continued for the the group, along with the distribution working capital management. approval of credit risk insurance, and channels through which the necessary In the 1993 financial year, resistance by international banks were capital from outside and inside the Moody's Investors Service and the met within these regions. This group, is provided to the users within Standard & Poor's ratings group for required greater effort to structure the group. the first time issued long-term ratings financing solutions. to bonds and issues under the Euro medium-term note program guaran­ teed by Daimler-Benz. Both agencies rated the good credit standing of Daimler-Benz with Aa3 and AA, and particularly stressed the group's favor­ able financial profile. These strong rat­ ings improve possibilities for borrow­ ing on the international debt markets.

Programs of public institutions to For private shareholders, we organ­ Investments in Related Companies aid the financing of delivery and in­ ized an Investor Relations Forum in Mergers & Acquisitions vestment projects are important not the Stuttgart Liederhalle auditorium in It was again our policy in 1993 to only for the newly industrializing and June, 1993, together with DG Capital adjust or round out the core business developing nations of Africa, Asia and Management. We introduced our com­ segments of the group through the for­ Latin America, but increasingly also pany to over 1,000 interested guests, mation of joint ventures, divestitures, for the countries of Eastern Europe giving them a survey of the activities and selective acquisitions, and in this and the CIS. There are also oppor­ of the Daimler-Benz group. In view of way to secure our competitive posi­ tunities in connection with technical the exceedingly favorable response, tion. As specific examples, a transac­ assistance and rehabilitation programs we will stage further events in the fu­ tion structure was developed; busi­ which are used for the financing of ture specifically addressed to private nesses were appraised and analyses of products of our group. investors. companies performed (due diligence) It will continue to be a central In addition, we take the informa­ in connection with purchases; and task of trade and project financing to tion requirements of institutional in­ concepts for investments in related minimize financing risks in order to vestors and financial analysts into ac­ companies and management concepts support product sales and, at the same count through round-table discussions were elaborated. time, to maintain the group's latitude and company presentations. The in­ Beyond the consulting-related du­ for financing. creasing demand for round-table dis­ ties we exercised the asset protection cussions, which we hold at our head­ function for the group by evaluating Investor Relations Activities quarters in Stuttgart-Mohringen, indi­ the group's subsidiaries and affiliates As part of our investor relations cates that this form of communication as to performance and, where re­ activities we provide comprehensive with the capital market has become quired, developing methods for im­ information on our enterprise and its indispensable. provement together with the corporate development, to financial analysts and We hold company presentations in units. These ranged from optimization institutional investors, as well as to Germany and in major foreign finance of capital employment to consideration our private shareholders and potential centers, in close cooperation with of joint ventures and divestitures. investors, both domestic and foreign. renowned commercial and investment In the framework of subsidiary We address all our shareholders and banks. The high point of these activ­ and affiliate administration, we as­ the general public through our annual ities was an extended roadshow in the sisted with and exercised Supervisory and interim reports. USA, where we conducted presenta­ Board duties for the group companies, tions and individual talks with inves­ followed and assessed ongoing pro­ tors in Los Angeles, San Francisco, jects, and drafted decisions for the Portland, Chicago, Boston and New internal bodies. York in preparation for our New York stock listing. To give US investors and financial analysts direct and timely access to company information, we es­ tablished an Investor Relations Office in New York parallel to introducing the stock there. Purchasing Drive in the Information concerning potential New Federal States Supports suppliers, such as the range of Upswing in the East products offered, financial data and The "Purchasing Drive in the New previous talks with group companies Federal States" initiated in 1992 by are collected by the Materials sector of West German enterprises can look Daimler-Benz AG in an information back on encouraging results in the data base to which all corporate units first full year in which it was in effect. have access. Important contributions were also To assist the purchasing sectors, a made by the companies of the coordination office was opened in Ber­ Daimler-Benz group. Purchases from lin on July 1, 1993. It serves the corpo­ the new Federal states were increased rate units as an information and con­ to over DM 800 million (1992: DM 600 tact point, and is the contact for poten­ million). Despite the continued diffi­ tial suppliers and associations. The cult economic situation we expect that various parties are already making the purchasing goal of DM 1 billion in very active use of this liaison office. the new Federal states expected for the year 1995 can be achieved, if not Global Sourcing Activities exceeded. Our purchases from abroad have We want to assure as efficient a increased due to additional global procedure as possible for making con­ sourcing activities. To further improve tact with and selecting potential sup­ our cost structures, we are striving to pliers from Eastern Germany. For this raise the foreign share of purchasing purpose we have created a special pro­ in Germany to 25% in the medium ject organization "Purchasing Drive in term. the New Federal States in the Daimler- Eight corporate offices have been Benz Group": with the Daimler-Benz established in the important and holding company exercising overall productive markets in Europe, North coordination. Project officers have America, Asia and Australia to coordi­ been appointed in every corporate unit nate purchasing. They support our do­ who steer the activities of their partic­ mestic purchasing departments with ular company. information on potential new suppliers To achieve optimum communica­ and about market trends and poten­ tion between potential suppliers and tials in the respective countries and the companies of the Daimler-Benz make purchases locally for the individ­ group and to effectively support the ual group companies. existing links, "sponsorships" were in­ Additionally, up-to-date informa­ troduced in the fall of 1993. Ten expe­ tion on the international markets is rienced managers from the group are available to purchasers through a each responsible for ten companies. foreign supplier information system installed worldwide. On October 5, 1993, Daimler-Benz AG was the first German company to be listed on the New York Stock Exchange. The successful negotiations with the US Securities and Exchange Commission (SEC), have opened up a new epoch for us in capital procurement and financial disclosure.

The Daimler-Benz Share The price of the Daimler-Benz share rose by 57% in 1 993, to DM 844, primarily due to the good atmosphere on the German stock markets as well as the very favorable reception regarding the introduction of our shares on the New York Stock Exchange. To increase the number of our shareholders in the USA, Deutsche Bank reduced its stake in Daimler-Benz AG to slightly more than 24% and placed just under 4% of our capital stock on the American market. Following the merger of Mercedes Aktiengesellschaft Holding with Daimler-Benz AG, we will have more flexibility in using the international capital markets.

During the beginning of the sec­ ond half of the year, the German stock index DAX increased at an accelerated pace, climbing to a new record high of 2,267 points by the end of the year. At DM 844, the Daimler-Benz share attained a year-end price which it had last reached in early August, 1990. The 57% increase in 1993 was higher than the average increase for the 30 enterprises included in the DAX (47%). In the first months of 1994, the German stock market entered a phase of consolidation which coincided with the revision of the optimistic expecta­ tions in regard to the economy and profits, not least because of fears that interest rates would rise again. The Daimler-Benz share price fell, through the end of February, by 4% to DM 808.3, while the DAX average declined Stock Exchange Trend by 7%. In 1993 almost all major stock Once again in 1993, our shares exchanges reached new highs. The were among the most heavily traded boom in the German stock market was securities on German stock exchanges. nourished by declining interest rates A total of 309 million shares, a third and repeated rumors of additional in­ more than the previous year, were terest rate cuts. Other factors were the traded. This volume, with a market anticipation of medium-term profits value of DM 204 billion, represented now that numerous enterprises have 11 % of the total trade in domestic instituted cost-cutting measures and stocks. On the German Futures Ex­ that the new law to safeguard loca- change, Daimler-Benz options also tional advantages had been passed. ranked among the most actively traded securities, with 1.6 million contracts traded. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Daimler-Benz on MAH shares will be exchanged for 470,000 shareholders, Daimler-Benz is Foreign Stock Exchanges Daimler-Benz stock at a ratio of 1 for one of Germany's largest public corpo­ In October, 1993, we listed our 1, now that this has been noted in the rations. shares on the New York Stock register of corporations in Frankfurt/ Exchange. Daimler-Benz is the first Main and Stuttgart. MAH held a Dividend Reduced German company to have gained blocking minority of 25% of the For the financial year 1993, a divi­ direct access to the largest and most Daimler-Benz capital stock. Following dend of DM 8 (1992: DM 13) for each important capital market in the world. the merger, Daimler-Benz will be able eligible share of DM 50 par value will The American Depositary Shares to make more flexible use of the inter­ be proposed at the Annual General (ADS) traded there are denominated at national capital markets. In the future Meeting taking place on May 18, a tenth of the par value of a Daimler- it will be possible to increase capital 1994. For shareholders subject to Benz share. The opening quotation stock depending on the market situa­ income taxes in Germany, the gross was 47 1/8 dollars; the quotation on tion and to issue convertible bonds or dividend amounts to DM 11.43. December 30, 1993, was 48 5/8 options. In addition, our shares will be­ dollars. come accessible to a broader range of The Daimler-Benz share is now investors. listed on eight foreign stock exchanges:

The trading volume of our shares on foreign stock exchanges in 1993 increased by 44% to 24 million shares. Trading in London was partic­ At the beginning of February, Good Yield Opportunities ularly active. 1994, Deutsche Bank placed part of its A long-term investment in To further internationalize our holding, about 4% of our capital stock, Daimler-Benz shares offers good yield financing activities and to strengthen on the American market. Deutsche opportunities, although a share price our global presence, we intend to be Bank's interest in our company decline may produce a negative re­ the first German company to introduce thereby declined to 24.4%. Our share­ turn. Investments made in currencies our stock in Singapore in May, 1994. holder base in the USA has thus been other than the D-Mark entail further As soon as the necessary conditions substantially broadened. opportunities and risks due to fluctua­ are met, we also plan to go to the The Government of Kuwait, with tions in currency exchange rates. Shanghai stock exchange, where no approximately 14%, is the second A twelve-year investment in Daimler- foreign companies are presently listed. largest shareholder in Daimler-Benz Benz stock reflects an average return We want to underscore the growing after Deutsche Bank. Stella Automobil- of 13.8% per annum; an investment of significance of East Asia for our Beteiligungsgesellschaft mbH will only three years reflects a return of product range. retain a share of 12.6%. When the 16.1%. In this calculation we have merger of Mercedes Aktiengesell­ assumed that the proceeds from rights Shares more widely held schaft Holding with Daimler-Benz AG issues and cash dividends (excluding At the end of December, 1993, takes effect, almost half of our capital tax credits) were reinvested in the Extraordinary General Meeting of stock will be widely held. With a mar­ Daimler-Benz stocks and that the Daimler-Benz AG and the Annual ket value of DM 37.7 billion (at the investor has not purchased any General Meeting of Mercedes end of February, 1994) and over additional amounts. Aktiengesellschaft Holding (MAH) resolved to merge the two companies. Discussion and Analysis of the Financial Situation

The 1 993 consolidated group net income is DM 0.6 billion vious year because of the first-time (1992: DM 1.5 billion); it was supported by changes in valuation in consolidation of Fokker; accordingly, which we adjusted certain accounting principles to the U.S. ac­ the latter's share in the total revenue counting principles. Using U.S. accounting principles, results for increased from 48.7% to 51.3%. 1993 amounted to a loss of DM 1.8 billion (1992: a profit of Despite the reduction in employment, personnel expenses continued to rise, DM 1.4 billion). Due to the sharp decline in business operations, as a result of the inclusion of Fokker and extensive restructuring costs incurred of DM 3.5 billion, and of the high costs of structural per­ the net operating result was a loss of DM 3.3 billion DM sonnel strategies, so that this compo­ (1992: a profit of DM 2.0 billion). nent now represents 34.0% (1992: 31.7%) of total revenue. Since the pre­ ceding years' high level of investment in property, plant and equipment and Valuation in Consolidated ance sheet, have generated a one-time leased equipment continued during Financial Statements Adjusted to income before tax of DM 2.6 billion in 1993, the depreciation increased by U.S. Accounting Principles the German consolidated financial 13.7%, to DM 8.1 billion. We began to conform our balance statements. This amount is classified sheet accounting and valuation as extraordinary income. The balance methods to international conventions of the differences are from rules and with the 1989 consolidated financial regulations regarding obligatory ac­ statements, in order to simplify com­ counting and valuation procedures. parison with other companies as well Our annual report includes a as to improve our method of reporting. reconciliation of the net income We were the first German company to and stockholders' equity determined list its stock on the New York Stock according to the principles of the Ger­ Exchange, and therefore reconciled man "Handelsgesetzbuch" (Commer­ net income and stockholders' equity to cial Code) to those amounts reported generally accepted accounting princi­ under U.S. GAAP. The interest expense for our leas­ ples in the U.S. (U.S. GAAP). It became ing and sales financing companies, at apparent that there were still substan­ Consolidated Net Income of DM 342 million, was significantly tial differences between our account­ DM 615 Million Reported lower than that of the preceding year. ing principles and the U.S. accounting In addition to the changes in ac­ Interest income of the leasing busi­ principles, which have a decisive counting principles and valuation ness is included in the lease payments influence on financial reporting. methods, the 1993 consolidated finan­ and therefore included in revenues. In the 1993 consolidated financial cial statements include special factors When the interest expense for financ­ statements, we have therefore adapted and the first-time inclusion of the Fok­ ing leasing and sales are excluded, the our methods of accounting and valua­ ker group. As a result of the recession­ net interest income for the group is tion as closely as possible to U.S. ary weakness in the most important DM 0.8 billion (1992: DM 1.0 billion). GAAP. These measures, which at the markets, sales revenue declined by 0.8% As in previous years we have reduced same time achieve substantial align­ to DM 97.7 billion. On a comparable interest income by the inflationary ment between the German commercial basis, i.e. taking Fokker's 1992 sales effects, from highly inflationary balance sheet and the German tax bal­ into account, the decrease was 3.8%. countries. As a result of the reduction in inven­ tory at Mercedes-Benz (offset, how­ ever, by inventory increases at DASA and AEG), total revenue declined more sharply than sales revenue, down DM 1.4 billion to DM 99.3 billion. Costs of materials exceeded those of the pre­ The results from ordinary busi­ The disappointing trend of busi­ Balance Sheet Influenced ness activities declined significantly, ness in the year 1993 is more clearly by Financial Service Business from DM 2.5 billion in 1992 to a loss evident in the operating results than Even greater than the effect on the of DM 1.1 billion in 1993. The 1993 in the reported net income. income statement, is the effect of the net income of DM 615 million (1992: Following a profit of DM 2.0 continued strong growth of leasing DM 1,451 million) was achieved only billion in 1992, this (for an internal and sales financing on the consoli­ because of lower taxes on earnings calculation) important figure took a dated balance sheet. Our leasing con­ and other taxes and certain accounting significant turn to a loss of DM 3.3 bil­ tracts are primarily operating type changes which had a considerable ef­ lion in 1993. (see page 69) leases. Leased equipment is valued at fect on the 1993 consolidated net in­ its acquisition or manufacturing cost come. These changes in accounting Results of Operations less accumulated depreciation. It is principles influenced almost all areas Allocation among the divisions: listed separately as part of the of operations and the net income of non-current assets. Daimler-Benz AG. The financing of sales is a install­ In addition to the one-time profit ment receivable, which increases the of DM 2.6 billion due to the change in balance sheet due to the recording of certain accounting principles which such receivables and liabilities due to we posted as extraordinary income, the financing of such receivables. Ad­ we had a gain of DM 1.7 billion from ditionally, prepaid customer operating sales of securities. There were also lease payments are reported as a lia­ income of DM 1.0 billion from tax While the decline of business in bility included in deferred income. rebates and DM 237 million from the the automobile and commercial vehi­ We utilize the financial services recapture of over-funded assets of the cle industry had a negative effect on business, within the Daimler-Benz Daimler-Benz external pension funds the operating profit of Mercedes-Benz, group, as a flexible instrument of our to the provider companies Daimler- the restructuring expenses, amounting world-wide sales strategy. The effects Benz AG and Mercedes-Benz AG, to approximately DM 1.7 billion, also of this business on the consolidated which thus was a tax free transaction. played a decisive role in reducing balance sheet are shown in the follow­ In contrast to these revenues were income. ing table. It is assumed that the funds expenses of approximately DM 3.5 bil­ The operating loss at AEG which are utilized by the financial lion connected to the restructuring of includes restructuring expenses of service business are available for the technical capacities and the extensive DM 607 million. payment of liabilities. reduction in personnel. There were The results of DASA were im­ also additional provisions resulting paired by the decline in demand in the from write-downs of the portfolio of areas of defense technology and space investments in affiliated and related systems and by the first-time inclusion companies and from the first-time of Fokker. In addition there were pro­ inclusion of the Fokker group in the visions for future restructuring ex­ Daimler-Benz consolidated financial penses amounting to DM 1.1 billion. statements. The higher operating profit of debis is a result of lower net interest costs for the financing of leasing and sales, as well as improvements in the earnings of certain foreign leasing companies. The rent expense on operating leases for 1993 was DM 935 million. Future minimum rental payments under these operating leases as of December 31, 1993 are (in millions of DM) as follows:

Future rental income, from con­ tractual agreements totalling DM 10,307 million, are distributed over the future years as follows (in millions of DM):

Balance Sheet Total Increase for the Group The consolidated balance sheet to­ tal increased again in 1993 as a result of the first-time inclusion of Fokker Inventories, which increased only 1993 net income, the amortization and the further expansion of the leas­ slightly in comparison to the previous of good-will relating from the acqui­ ing and sales financing business by year, were financed by approximately sition of Fokker and the reduction in 5.5% to DM 90.9 billion. Including the 33% through customer down pay­ minority interest of shareholdings leased equipment, non-current assets ments. Despite the inclusion of Fok­ were the primary reason for this de­ increased by 5.1 % to DM 35.4 billion. ker, "net inventories", after customer crease. The percentage of stock­ If the leased equipment is excluded, down payments, were reduced from holders' equity to total liabilities de­ the non-current assets declined by DM 17.6 billion to DM 16.9 billion. clined from 22.2% to 19.5%. If we ex­ DM 0.4 billion, to DM 23.5 billion. The The release of funds from inventories, clude the financial service business, net increase of DM 4.7 billion in prop­ together with more effective manage­ which is dependent on business vol­ erty, plant and equipment, including ment of working capital, helped meet ume and is largely financed from out­ the acquisition of DM 0.8 billion of the the need for additional financial as­ side sources, the percentage of stock­ Fokker group which is consolidated sets, especially in Germany. Liquid holders' equity to total liabilities is for the first time, is reduced by DM 5.2 funds had a net increase from DM 9.8 26.0% (1992: 27.9%), the coverage of billion in depreciation. The leased billion to DM 10.5 billion. The percent­ non-current assets (excluding leased equipment continues to have above- age of liquid funds to the total assets equipment) by stockholders' equity average growth, increasing by 21.5% is 11.5%, which is consistent with that decreased from 81.1% to 77.5%. to DM 11.9 billion. Excluding the in­ of the prior year. Liabilities from the financing of ventory of lease vehicles, property, On the liabilities side, stock­ leasing and sales increased by 24.5%, plant and equipment would be re­ holders' equity, excluding the amount to DM 13.7 billion while allowances duced from 27.7% to 25.8% of total intended for dividend distribution, was for losses increased by only 3.4%, to assets. Receivables from the financing reduced by DM 1.3 billion to DM 17.8 DM 35.9 billion. The income from the of sales increased by 42.2%, to billion. With only a small amount changes in accounting principles was DM 8.8 billion. - DM 0.2 billion - retained from reduced by the first-time inclusion of the Fokker group and the established Stockholders' equity and long and Below we have reproduced the provisions for the reduction in work­ medium-term provisions fully cover segment reporting, based on German force and the restructuring of capacity. both the non-current assets (excluding accounting principles, as it appears in Provisions amounted to 39.5% (1992: leased equipment) and net inventories. the Form 20-F report, which we file 40.3%) of the balance-sheet total. with the U.S. Securities and Exchange Commission.

Statement of Financial Accounting and its large amount of cash (DM 2.0 Information on Derivative Financing Standards No. 95 billion) at the time of its initial consol­ Instruments in Accordance with "Statements of Cash Flows" idation. Since the surplus in financial US Standards (SFAS 95) assets from the industrial sector was Daimler-Benz uses derivative fi­ The cash flow statement of the not sufficient to fully cover the finan­ nancing instruments in order to hedge Daimler-Benz group included in the cial needs of the rapidly expanding currency and interest rate exposure 1992 annual report, has been revised leasing and sales financing business, for normal business operations. to completely conform to the U.S. Ac­ we required additional debt of DM 1.3 We work only with banks which counting Standard, SFAS No. 95. Ac­ billion in 1993 (1992: DM 3.7 billion). have strong long-term ratings. cordingly, the effects of foreign curren­ We are also anticipating a high The financial instruments are cies are eliminated, the additions to level of capital expenditures in the written almost exclusively in the cur­ non-current assets are adjusted for Daimler-Benz group in the next few rencies of the large industrial coun­ significant changes in the consolida­ years. We are exploring the utilization tries. At December 31, 1993, the vol­ tion group, changes in stockholders' of a variety of financing models for the ume of positions in foreign currencies equity allocated, and the declaration of leasing and sales financing business, was DM 30.9 billion (1992: cash is based only on instruments of which continues to expand. Addi­ DM 19.1 billion), and that of interest payment, rather than on total liquid tionally, we would like to support the rate contracts was DM 13.1 billion assets. A reconciliation to the liquid anticipated growth of the companies (1992: DM 8.6 billion). These gross assets is included in this report. by adding equity in the future. amounts represent the base values of In comparison to the previous all buying and selling contracts, as year, the cash flow from operating ac­ Additional Information in they are required to be disclosed in ac­ tivities increased by 86% to DM 9.9 Accordance with the "U.S. Generally cordance with Statement of Financial billion. This increase is primarily due Accepted Accounting Principles" Accounting Standard No. 105. to the significant reduction in inven­ (U.S. GAAP) tory assets, after adjustment for With the introduction of Daimler- Differences in Accruals as a Result changes in the consolidation group. Benz stock on the New York Stock Ex­ of the Change in the Treatment of Cash flow from investing activities, of change, we are filing an annual report Provisions, and Valuation Methods. DM 10.5 billion, was also substantially as a "Form 20-F" with the Securities U.S. accounting principles do not higher than in 1992 (DM 7.5 billion). and Exchange Commission (SEC). allow the formation of the extensive The primary reason for this increase Much of the content of this filing is loss provisions as permitted by Ger­ was the first-time consolidation of information taken from our annual man law. The excess German loss pro­ Deutsche-Aerospace Airbus GmbH, report; however, additional data and visions have to be dissolved, which financial information is provided deter­ has an effect on the net income as well mined on the basis of U.S. accounting as stockholders' equity. According to principles. In the following sections U.S. GAAP, the stockholders' equity we have set forth what we consider to be the most important information from the "Form 20-F." Since there are substantial differences, especially in the annual net income and stock­ holders' equity, the reconciliations are required to convert certain financial data from the German consolidated fi­ nancial statement to the values calcu­ lated by using U.S. generally accepted accounting principles (see page 73). increased by DM 5.8 billion during Goodwill and Acquisition Currency Translation and Financial 1993 as a result of the dissolution of of Investments in Businesses Instruments certain loss provisions which also Under German accounting regula­ Unrealized exchange profits and changed the inventory and receivables tions, goodwill can be allocated to losses on financial instruments are value. We use the term "Appropriated stockholders' equity, or capitalized treated differently in the two account­ Retained Earnings" to disclose to the and amortized generally over the ex­ ing systems. Under German law, ac­ American investors that such retained pected useful life, which in Germany cording to the imparity principle, only earnings are not available for distribu­ ranges between 5 to 15 years. Under unrealized losses are to be recorded, tion as dividends. This term also U.S. GAAP, the difference between ac­ whereas under U.S. GAAP unrealized establishes a bridge between the two quisition costs and market value must profits as well as losses must be different accounting cultures. be capitalized and amortized over a recorded. period not exceeding 40 years. Long-Term Manufacturing Other Differences in Valuation Customer deposits and manufac­ Disposal of Investments Additional differences between turing costs are reported under Ger­ in Businesses German and American accounting man law in accordance with the com­ Under German accounting princi­ methods may occur with respect to pleted contract method, whereas U.S. ples, sales of subsidiaries and share­ inventories, minority interests and principles generally require that the holdings in businesses must be leasing activities. percentage of completion method be allocated to the period in which the used. The majority of contracts within contract is signed. According to Deferred Taxes the group require partial prepayment U.S. GAAP, the gain or loss on invest­ Under German accounting regula­ as well as partial recognition of profits ment cannot be recognized until after tions, deferred tax assets are estab­ based upon payments received. Con­ the actual monetary exchange of the lished only for the elimination pro­ tracts of this nature are also custom­ investment. cesses in consolidation. Under U.S. ac­ ary in the USA, and are recognized counting principles deferred tax assets under its accounting regulations. The Pension Provisions can also be recorded for valuation resulting differences therefore are According to U.S. accounting prin­ adjustments and existing tax loss not material. ciples, the determination of provisions carry-forwards. for old-age pensions requires, among other things, a determination for antic­ ipated increases in wages and salaries. The calculation is not based on the dis­ count rate of 6% for unaccrued inter­ est, which is applicable under German tax law but incorporates the respective actual interest rates. Another differ­ ence is a result of the requirement that health care costs for retirees be actuarily calculated and accrued for in the USA.

Notes to the Consolidated Financial Statements Summary of Significant Accounting Policies

The consolidated financial state­ Provisions for Employee Benefits Accounting and Valuation ments have been prepared in accord­ and Social Costs Intangible assets are valued at ac­ ance with German generally accepted The obligations for anniversary quisition cost and are amortized on a accounting principles ("German bonuses, previously calculated straight-line basis over the respective GAAP"). All amounts shown herein, ratably without discounts, are now useful lives. Goodwill resulting from unless separately stated, are in mil­ determined actuarially on the capital consolidation is amortized over lions of German marks ("DM"). basis of an assumed interest rate a period of five years, providing it re­ During 1993, Daimler-Benz made of 5.5%, the entry age actuarial lates to the expansion of the Group. several changes in accounting policies cost method and the consideration Where it relates to the 1989 restruc­ in order to avoid or abandon taxed pro­ of employee turnover. turing of the Group, it is charged to re­ visions and to approach the account­ Expense Provisions Pursuant to tained earnings. Goodwill resulting ing policies generally accepted in the § 249 Par. 2 of the German from strategic alliances is split; the United States. The change of account­ Commercial Code amount relating to the expansion of ing and valuation principles has in­ The elective right for the valuation the Group is charged to earnings and creased income by DM 2.6 billion as of of expense provisions has not the amount relating to restructuring is January 1, 1993. For comparibility been exercised. For comparibility charged to retained earnings. purposes, this amount has been re­ purposes, the extraordinary in­ Property, plant and equipment is corded as extraordinary income in the come also includes the effects valued at acquisition or manufacturing statements of income (see Note 32). from reducing accruals that were cost. Self-constructed assets include The significant changes in not necessary upon adoption of direct costs, materials, handling and accounting policies affecting income the new method. production overhead which includes are as follows: Provisions for Deferred Repairs and depreciation. Maintenance Acquisition and capitalized manu­ Inventories This provision, which was previ­ facturing costs are depreciated. Where The accounts of subsidiaries ously estimated, is now calculated applicable, accelerated depreciation operating in highly inflationary based upon future plans for re­ methods are used in Germany, pur­ economies have been translated pairs and maintenance. suant to certain sections of the Ger­ using historical exchange rates man Tax Guidelines. instead of year end rates as used With the exception of the above, in previous years. these changes in accounting and Receivables valuation principles have not resulted Only long-term non-interest or in any significant changes to income. low-interest bearing receivables At the beginning of 1993, are present valued. The allowance Daimler-Benz changed the currency for losses remains unchanged ex­ translation applied to the non-current cept for the allowance for general assets of foreign subsidiaries, from risks which was previously re­ historical exchange rates to year end corded on a country-specific basis exchange rates. Subsidiaries in highly and is now recorded based upon inflationary countries (presently Brazil company-specific considerations. and Turkey) are excluded from the foregoing. The adjustment resulting from this accounting change is recorded in stockholders' equity. Property, plant and equipment is Raw materials, supplies and goods Consolidated Group depreciated over the useful lives as purchased for resale are valued at the In addition to Daimler-Benz AG, follows: 17 to 50 years for buildings, lower of cost or market; finished goods the consolidated Group consists of 305 8 to 20 years for site improvements, are valued at manufacturing cost. domestic and foreign subsidiaries 3 to 20 years for technical equipment Manufacturing costs include direct (1992: 271) and 12 joint ventures. The and machinery and 2 to 10 years for material, labor and applicable manu­ joint ventures are accounted for using factory, office and other equipment. If facturing overhead including deprecia­ the pro rata consolidation method. equipment is used in multiple-shift op­ tion. During 1993, 53 subsidiaries and erations, the useful life is reduced ac­ Loss provisions are recorded for 5 joint ventures were added to the cordingly. Buildings are depreciated inventories that have long periods of consolidation and 19 subsidiaries were using the greater of the straight-line or storage or changes in construction. deleted. the accelerated method of deprecia­ Non-interest or low-interest bear­ In May 1993, Deutsche Aerospace tion. Moveable property having a use­ ing receivables and other assets matu­ AG acquired a 78% majority share in ful life of four or more years is ring after more than one year are pre­ Fokker-Holding B.V., which owns 51% depreciated using the greater of the sent valued after taking into account of Fokker N.V. The effects of including declining balance or the straight-line all known risks. An allowance for this company in the consolidated fi­ method. Depreciation on additions dur­ doubtful accounts is deducted from the nancial statements for the first time ing the first and second half of the receivables. are explained in the notes to the finan­ year is calculated using full or half- Other securities are valued at the cial statements. The loss for the short year rates, respectively. Additional de­ lower of cost or market. period arising prior to the acquisition, preciation is recorded wherever Provisions for pensions and similar has been deducted from other operat­ deemed necessary. Items having an obligations, including postretirement ing expenses. immaterial value are expensed when medical benefits for retirees of U.S. At December 31, 1993, 271 sub­ purchased. subsidiaries, are actuarially deter­ sidiaries were not consolidated as Investments and other financial as­ mined on the basis of an assumed in­ their effect on the financial position sets are valued at the lower of cost or terest rate of 6% using the entry age and results of operations was not ma­ market; long-term non-interest or low- actuarial cost method. terial (their total revenues were less interest bearing loans are recorded at Provisions for taxes and other provi­ than 1 % of consolidated revenues). Ad­ present value. Investments in associ­ sions have been recorded using the ditionally, 11 other companies admin­ ated companies are generally recorded principles of reasonable accounting istering external pension funds, whose on the equity method. valuation. The obligations in employee assets are subject to restrictions, were Leased equipment is valued at benefits and social costs have been not included in the consolidation. The acquisition or manufactured cost and recorded at the lower of the present entire consolidated Group of Daimler- depreciated using the greater of the value of future payments or at the pro Benz AG is contained in the list of in­ declining balance method or straight- rata amount, depending upon the vestment holdings filed in the Stut­ line method. Where applicable, tax respective benefits acquired. tgart Commercial Register as entry deductible depreciation methods Liabilities are recorded at their No. HRB 15 350. provided in Section 35 of the Income repayment amounts. Tax Guidelines are utilized. Consolidation Principles acquisition of Fokker, is valued in con­ on the entry date or at the year end Capital consolidation is accom­ junction with the restructuring of the selling rate. plished using the book value method Company and, accordingly, has been The year end exchange rate by netting the acquisition cost and the charged directly to retained earnings is generally used to translate bal­ pro rata share of stockholders' equity without affecting net income. ance sheet items of foreign companies of the subsidiary at the time of its ac­ A deferred difference arising from from the respective local currency to quisition or when it is first included in capital consolidation is shown sep­ German marks. Excluded from this the consolidation. Joint ventures are arately under "Other provisions" as treatment are the non-current assets also accounted for under this method. "Difference from capital consolidation and inventories of companies in highly Significant investments in which with accrual character." inflationary countries, where historical Daimler-Benz has an ownership inter­ Appropriated retained earnings of exchange rates are used. est in the range of 20% to 50% are acquired subsidiaries are included in The difference resulting from the generally accounted for using the eq­ the Company's retained earnings. The currency translation of the balance uity method. Investments in which 1993 unappropriated profit reported in sheet items is charged or credited to Daimler-Benz has an ownership inter­ the consolidated financial statements stockholders' equity; for companies est of less than 20% are accounted for represents the unappropriated profit of operating in highly inflationary coun­ at cost. Daimler-Benz AG. Accordingly, the tries translation gains or losses are ap­ These financial statements include proceeds from consolidation measures plied to income. references to affiliated, associated and affecting operating income and the un­ The currency translation of non- related companies. Affiliated com­ appropriated profits of the subsidiaries current assets at year end exchange panies include entities in which have been offset against the retained rates reflect translation gains or losses Daimler-Benz has majority ownership earnings of the Company. in the property, plant and equipment or an interest of 20% to 50% and Investments in 142 associated analysis, and have been shown sep­ which are not consolidated or ac­ companies are recorded in the consoli­ arately in the schedule. Such transla­ counted for on the equity method, re­ dated financial statements. tion gains and losses were charged or spectively, as their effect would not be For the year ended December 31, credited to appropriated retained earn­ material. Associated companies repre­ 1993, 21 associated companies have ings without affecting income. The sent entities in which Daimler-Benz been included in the consolidated fi­ readjustment of the values in the 1992 owns between 20% and 50% and are nancial statements at equity using the consolidated balance sheet to year end accounted for using the equity book value method. exchange rates results in a negative method. Related companies include The remaining associated com­ difference of DM 106 million, which entities which have a significant own­ panies are reported as investments at was charged to appropriated retained ership interest in Daimler-Benz or an acquisition cost net of applicable de­ earnings without effecting 1992 earn­ entity in which a member of Daimler- preciation because the ownership is ings. Benz management is a board member. insignificant to the financial position Expense and income items are Wherever possible, the accrued of the Company. generally translated at the annual differences arising from capital consol­ All material intercompany trans­ average exchange rate. Where such idation are shown under the respec­ actions have been eliminated in con­ items concern non-current assets and tive consolidated balance sheet item solidation. inventories of companies in highly and are amortized to income over the The deferred taxes shown in the inflationary countries, the historical expected useful life. Goodwill is amor­ consolidated balance sheet include the exchange rates are used. Net income, tized in accordance with the method elimination procedures affecting net appropriated retained earnings and discussed in "Accounting and Valua­ income. unappropriated profit are translated at tion" above. The accrued difference of the year end exchange rate. The differ­ DM 841 million, remaining after the Currency Translation ence between the annual average and Foreign currency assets are trans­ year end exchange rates is included in lated at the lower of the entry date ex­ "Other operating expenses" (included change rate or year end exchange rate; in other operating income in 1992). foreign currency liabilities are trans­ lated at the higher of the selling rate Notes to Consolidated Balance Sheet

At December 31, 1993, included in intangible assets are DM 523 million of goodwill (1992: DM 611 million) from capital consolidation and from individual accounts, acquired computer software, patents and, to a lesser extent, advance payments. During 1993, additional amortization of goodwill amounted to DM 88 million.

The decrease in property, plant and equipment by DM 333 million to DM 18,921 mil­ lion is a result of DM 5,432 million in additions, DM 210 million in currency translation gains, and their reclassifications of minus DM 15 million, DM 751 million in disposals and depreciation expense amounting to DM 5,209 million. Included in depreciation expense is accelerated depreciation of DM 76 million (1992: DM 163 million) which is allowed by German tax law and additional accelerated depreciation of DM 287 million (1992: DM 21 million) relating to certain revaluations of property, plant and equipment. As a result of subsidiaries consolidated for the first time, capital expenditures in­ creased by DM 1,854 million and depreciation by DM 909 million; of which capital expen­ ditures of DM 1,638 million and related depreciation of DM 833 million resulted from the acquisition of Fokker.

Financial assets primarily represent investments in associated companies, other loans and investments. Loss provisions, amounting to DM 298 million (1992: DM 83 million) were recorded on investments with non-consolidated subsidiaries. As a result of the first-time consolidation of Fokker, acquisition costs were increased by DM 147 million and amortization increased by DM 70 million.

The increase of DM 2,102 million of leased equipment - almost exclusively vehicles - to DM 11,879 million primarily is the result of lease acquisitions from Mercedes-Benz Credit Corporation, Norwalk, USA, and MBL Mercedes-Benz Leasing GmbH & Co OHG, Stuttgart and, for the first time consolidation of Fokker which amounted to DM 458 mil­ lion. In accordance with the provisions of tax law, additional depreciation has been re­ corded on leased equipment in the amount of DM 5 million (1992: DM 3 million). The majority of consolidated inventories is from Mercedes-Benz and Deutsche Aero­ space. The increase over 1992 amounting to DM 2,560 million, is primarily from the corpo­ rate unit DASA, of which DM 2,066 million is from the first-time consolidation of Fokker. Inventory decreases were recorded in the Mercedes-Benz division.

Advance payments received in the amount of DM 7,317 million (1992: DM 5,549 mil­ lion) primarily represent projects and long-term contracts with AEG, DASA AG, Fokker, Dornier, Eurocopter and MTU. Such payments have been deducted from inventories.

This item represents receivables from customers in the amount of DM 8,771 million (1992: DM 6,166 million), of which DM 5,569 million (1992: DM 2,804 million) are long- term receivables. An allowance for losses of DM 174 million has been recorded on these receivables.

Approximately DM 0.4 billion (1992: DM 0.4 billion) of the receivables from related companies represent fixed interest rate debt instruments and securities. Tax refund claims and interest receivable are included in "Other assets." This item also includes liquid assets in non-marketable debt instruments amounting to DM 186 mil­ lion (1992: DM 437 million). An allowance for loss of DM 1,670 million has been provided for on receivables and other assets. In November, 1993, Daimler-Benz AG and the corporate units sold 72,945 shares (par value of DM 3.6 million, or 0.16% of equity) to employees at a discounted price of DM 337 per share. The remaining 49,357 shares of treasury stock were sold in the public market. Other securities primarily consist of fixed interest rate instruments. Certain current assets could have been increased by DM 27 million to their original values in accordance with German GAAP, however, the revaluation was not recorded due to a negative effect on currently payable income taxes.

The balance of DM 2,954 million (1992: DM 2,968 million) includes cash in banks, cash on hand, cash in the German Bundesbank and Postbank, as well as deposits in tran­ sit. The liquid assets included in various balance sheet positions total DM 10.5 billion (1992: DM 9.8 billion).

Deferred taxes generated from elimination procedures affecting income total DM 323 million (1992: DM 1,329 million). Among other things, the decrease is the result of minor inter-company profits from inventory reduction in the automotive sector. Additionally, a discount totalling DM 16 million has been included in this balance sheet position. The capital stock and additional paid-in capital pertain to Daimler-Benz AG. Daimler-Benz shareholders have approved, on June 26, 1991, through June 30, 1996, the issuance of up to DM 600 million (par value) of additional share capital.

Retained earnings contain the German statutory provision of DM 160 million and other retained earnings of Daimler-Benz AG totalling DM 13,091 million. Retained earnings also include the group's share of the consolidated subsidiaries retained earnings and balance sheet results, provided the earnings were generated by such subsidiaries since joining the Company. Additionally, retained earnings include the cumulative effect resulting from the elimination of inter-company profits from the consolidation and foreign currency transla­ tion gains and losses.

The interest held by third-parties in the stockholders' equity of the consolidated sub­ sidiaries primarily consists of Daimler-Benz Luft- und Raumfahrt Holding AG, AEG, Mercedes-Benz Mexico, Dornier, MTU and Eurocopter. In addition to the above a negative minority interest amounting to DM 758 million relates to Fokker.

Pension accruals have increased by DM 542 million to DM 12,759 million (1992: DM 12,217 million) as a result of the annual increase in pension provisions.The pension accruals and the plan assets of the external pension plan, fully fund the Company's pen­ sion obligations.

Accrued taxes amounting to DM 833 million (1992: DM 764 million), represent currently payable income taxes for Daimler-Benz, the balance of the accrued taxes is currently payable for all other consolidated companies. The difference from capital consolidation with accrual character represents the pur­ chase of two subsidiaries consolidated for the first time and an accrual for related start-up expenses.

In addition, the company is liable for compensatory payments guaranteed by Deutsche Aerospace AG which cannot be reasonably estimated for 1994 and future years. For outside shareholders of AEG Aktiengesellschaft and Daimler-Benz Luft- und Raumfahrt Holding AG claims also exist for compensatory payments which cannot be reasonably estimated. Additionally, outstanding contractual performance guarantees exist for which future liability cannot be reasonably estimated.

The other financial obligations are for future services from rental, leasehold and leasing agreements and amount to an average annual amount of DM 677 million over an average contractual period of 8 years. Other financial obligations due to non-consolidated subsidiaries, represent annual pay­ ments due of approximately DM 34 million over an average contractual period of 13 years. In connection with the fiduciary settlement by Deutsche Aerospace Airbus GmbH of the federally guaranteed serial credits, the effective amount cannot be determined until the beginning of 1995 when the federal government's last tranche of DM 1 billion is due; this also applies to the reorganization profit received in 1989. Within the scope of the government-supported Airbus-Development-Program, Deut­ sche Aerospace Airbus GmbH has agreed to assume performance portions itself. DM 199 million thereof relate to the time after the balance sheet date, to the extent that they are not already reflected in the annual accounts. All assets acquired by Deutsche Aerospace Airbus GmbH with subsidy funds have been conveyed to the Federal Republic of Germany as security. With reference to the development work for the Airbus program, Airbus Industrie G.I.E. has given a performance guarantee to Agence Executive (government office in charge of Airbus); this guarantee was taken over by Deutsche Aerospace Airbus GmbH - to the extent of its share interest - without restriction. Deutsche Aerospace Airbus GmbH considers the obligation fully covered by the relevant agreements for the financing and execution of the development work. Beginning in 2002, the profit sharing agreement provides that the federal government will share 40% in the profits of Deutsche Aerospace Airbus GmbH. This requirement, in its economic effect, stipulates the sequence of the government's repayment demands. The remaining financial obligations, particularly purchase order commitments for capi­ tal investments, are within the scope of normal business activities. The obligation arising from stock and capital subscriptions pursuant to Section 24 of the GmbH Act, amounts to DM 9 million. The company is jointly and severally liable for certain non-incorporated companies, partnerships and joint ventures. In addition, there exist performance and miscellaneous guarantees in connection with normal business transactions. Income from dissolved provisions is DM 2,348 million (1992: DM 1,519 million). Gains totalling DM 1,659 million were realized from the sale of securities. Additionally, the recapture of over-funded assets of Daimler-Benz Unterstützungskasse GmbH to Daimler- Benz AG resulted in income totalling DM 237 million. The source of such re-capture is the 1992 Tax Amendment Law, which limits the over-funding of such assets. Additional income resulted from the currency translation gains from countries outside of Germany relating to open payments and deliveries. Losses from open payments and deliveries are included in "Other operating expenses". Additionally, income was generated from subrental agreements. Other operating income in the amount of DM 3,581 million (1992: DM 2,226 million) is primarily related to reductions in estimated loss provisions. The cost of materials compared to the total output of DM 99,494 million (1992: DM 100,879 million) is 51% (1992: 49%), respectively.

The wages and salaries also include personnel expenses of DM 3.1 billion for restruc­ turing in conjunction with workforce reductions; of this amount, DM 2.7 billion represent accruals for provisions. The number of employees also includes 11,575 people employed by Fokker. Addi­ tionally, 10,740 people are employed in joint ventures.

The majority of the property, plant and equipment is owned by Mercedes-Benz. The increase of depreciation of leased equipment over the prior year results from the expanded leasing activities of the domestic and foreign financial service companies. Other operating expenses include increases to provisions, maintenance costs, adminis­ trative and sales costs including commissions for sales representatives, rental and leasing costs, currency exchange translation losses from open payments and deliveries, freight and packaging, and the losses from currency exchange translation of companies in highly inflationary countries. An accrual has been provided for future restructuring costs. Fok- ker's DM 94 million loss arising from the acquisition during the period from January 1 through May 18, 1993 has been deducted from other operating expenses. Additionally, included in other operating expenses are DM 224 million (1992: DM 161 million) which primarily relate to changes in estimated loss provisions.

1993 1992 DM in millions DM in millions

Interest paid to third parties from the leasing and sales financing business amounts to DM 342 million (1992: DM 421 million). The extraordinary income, amounting to DM 2,603 million, include non-recurrent in­ come from the new valuation methods and changes in accounting principles as explained in the "Summary of Accounting Policies". At January 1, 1993, provisions were reduced by DM 1,935 million; of this amount, DM 1,119 million were allocated to expenditure provisions, DM 548 million to provisions for employee benefits and social costs, and DM 268 million to provisions for maintenance costs. An additional reduction of DM 445 million resulted from a change in receivable valuation methods. Additional income of DM 223 million was realized from translating inventories of companies in highly inflationary countries using historical exchange rates for the first time.

In addition to the economic slowdown of important markets, 1993 net income of DM 615 million was reduced by a one time charge of DM 3.5 billion, before income taxes, for the restructuring of capacities and reduction in workforce. Offsetting this one time charge was income from securities sold, from the new accounting and valuation methods utilized and reduced tax expenses. Statutory depreciation of financial and current assets had an insignificant effect on consolidated net income.

Under the presumption that the proposed dividend is ratified by the shareholders at the Annual Meeting on May 18, 1994, the remuneration paid by the group companies to the members of the Board of Management and the Supervisory Board of Daimler-Benz AG amounts to DM 14,348,204 and DM 1,289,595 respectively. Disbursements to former members of the Board of Management of Daimler-Benz AG and their survivors amount to DM 9,790,261. An amount of DM 79,727,443 has been accrued in the financial statements of Daimler-Benz AG and Mercedes-Benz AG for pension obligations to former members of the Board of Management and their survivors. As of December 31, 1993, advances and loans to members of the Board of Management of Daimler-Benz AG amounted to DM 169,863. Home mortgages included herein are not subject to interest; other loans and advances bear interest averaging 5.5%. During 1993, DM 65,104 of outstanding loans was repaid. The terms for home mortgages are ten years and less than one year for loans and advance payments. Auditor's Report

We rendered an unqualified opinion on the consolidated financial state­ ments and the business review report in accordance with § 322 HGB (German Commercial Code). The translation of our opinion reads as follows:

"The consolidated financial statements, which we have audited in accordance with professional standards, comply with the legal provisions. With due regard to the generally accepted accounting principles, the consolidated financial state­ ments give a true and fair view of the assets, liabilities, financial position and results of operations of the Daimler-Benz group. The business review report, which summarizes the state of affairs of Daimler-Benz Aktiengesellschaft and that of the group, is consistent with the financial statements of Daimler-Benz Aktiengesellschaft and the consolidated financial statements."

Frankfurt/Main, March 23, 1994

KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft

Zielke Dr. Koschinsky "Certified Public Accountant" "Certified Public Accountant"

Proposal for the Allocation of Unappropriated Profit

The annual financial statements of Daimler-Benz AG as of December 31, 1993, show an unappropriated profit of DM 390,387,317.00. It will be proposed at the Annual General Meeting that this amount be applied as follows:

Stuttgart-Möhringen, March 8, 1994

The Board of Management Supervisory Board

HlLMAR KOPPER WOLFGANG GABELE*) HELMUT LENSE*) Frankfurt/Main Bremen Stuttgart Member of the Board of Management, Deputy Chairman of the Member of the Labor Council, Deutsche Bank AG Corporate Labor Council, Untertürkheim Plant, Daimler-Benz Group Chairman of the Mercedes-Benz AG Chairman Corporate Labor Council and the Joint Labor Council, AEG WALTER RIESTER**) KARL FEUERSTEIN*) Frankfurt/Main Mannheim MANFRED GÖBELS*) Vice-Chairman, Chairman of the Corporate Labor Leonberg Metal-Workers' Union Council, Daimler-Benz Group Senior Manager, Mercedes-Benz AG (as of 10/26/1993) Chairman of the Joint Labor Chairman of the Senior Managers' Council, Mercedes-Benz AG Committee, Daimler-Benz Group JÜRGEN SARRAZIN Deputy Chairman Chairman of the Frankfurt/Main Senior Joint Managers' Committee, Speaker for the Board of Management, PROF. DR. RER. NAT. GERD BINNIG Mercedes-Benz AG Dresdner Bank AG Munich Head of IBM Physics Group ERICH KLEMM*) DR. JUR. ROLAND SCHELLING Calw Stuttgart WILLI BÖHM*) Chairman of the Labor Council, Attorney at Law Kandel Sindelfingen Plant, Member of the Labor Council, Mercedes-Benz AG DR. MANFRED SCHNEIDER Worth Plant, Mercedes-Benz AG Leverkusen MARTIN KOHLHAUSSEN Chairman of the Board BIRGIT BREUEL Frankfurt/Main of Management, Bayer AG Berlin Speaker for the Board of Management, (as of 12/20/1993) President of the Treuhandanstalt Commerzbank AG (Government Agency for Privatization) PETER SCHÖNFELDER*) RUDOLF KUDA*) Augsburg PROF. HUBERT CURIEN Frankfurt/Main Member of the Labor Council, Paris Departmental Manager within the Deutsche Aerospace AG Former Minister for Research and Board of Management, Technology of the Republic of France Metal-Workers' Union PROF. DR. JUR. JOHANNES SEMLER Kronberg/Taunus DR. JUR. MICHAEL ENDRES Lawyer Frankfurt/Main Member of the Board of Management, BERNHARD WURL*) Deutsche Bank AG Mainz Departmental Manager within the Board of Management, Metal-Workers' Union

*) Elected by the employees. **) Judicially appointed as employee representative. Outgoing Members of the Supervisory Board:

HERMANN I. ABS PROF. DR.-ING. E.H. DR. H.C. Frankfurt/Main WERNER NIEFER Honorary Chairman, Stuttgart Deutsche Bank AG (deceased 09/12/1993) Honorary Chairman DlPL.-lNG. HANS-GEORG POHL (deceased 02/06/1994) Hamburg Deutsche Shell AG RICHARD BOLLMANN*) (on 05/26/1993) Mannheim Senior Manager, Deputy Chairman of DR. RER. POL. WOLFGANG RÖLLER the Senior Managers' Committee, Frankfurt/Main Mercedes-Benz AG Chairman of the Supervisory Board, (on 05/26/1993) Dresdner Bank AG (on 05/26/1993) PROF. DR.-ING. E.H. WERNER BREITSCHWERDT SIEGFRIED SAUTER*) Stuttgart Frankfurt/Main (on 05/26/1993) Deputy Chairman of the Corporate Labor Council, Daimler-Benz AG DR. RER. POL. HORST J. BURGARD Chairman of the Joint Labor Council, Frankfurt/Main AEG Aktiengesellschaft Member of the Supervisory Board, (on 05/26/1993) Deutsche Bank AG (on 05/26/1993) FRANZ STEINKÜHLER*) Frankfurt/Main HELMUT FUNK*) First Chairman, Stuttgart Metal-Workers' Union Chairman of the Labor Council, (on 06/21/1993) Untertiirkheim Plant and Main Office, Mercedes-Benz AG HERMANN-JOSEF STRENGER (on 05/26/1993) Leverkusen Chairman of the Supervisory Board, HUGO LOTZE*) Bayer AG Reinhardshagen (on 05/26/1993) Chairman of the Labor Council, Kassel Plant, Mercedes-Benz AG (on 05/26/1993) *) Elected by the employees. Report of the Supervisory Board

In connection with the audit en­ Hermann Josef Abs, Frankfurt/ gagement, the Supervisory Board and Main, died on February 6, 1994. He KPMG had no disagreement with the served as Chairman of the Supervisory companys' records. We approved the Board from 1955 to 1970 and subse­ 1993 consolidated financial statements quently as Honorary Chairman. During of Daimler-Benz AG as prepared by the his service Mr. Abs greatly influenced Board of Management; and such finan­ the development of Daimler-Benz and cial statements are hereby ratified. We we will always remember his achieve­ concur with the proposal of the Board ments and exceptional personality of Management regarding the alloca­ with great admiration and respect. tion of unappropriated profit. The con­ Professor Werner Niefer, a former During 1993, the Supervisory solidated financial statements, the busi­ member of the Board of Management Board held four formal meetings in ness review and the external auditors' from 1975 through May 26, 1993, died which we were informed in detail con­ report were submitted to us. on September 12, 1993. On May 26, cerning the state of the company and As s result of the regularly sched­ 1993, Mr. Niefer was elected to the Su­ essential matters of corporate policy. uled elections to the Supervisory pervisory Board. He was able to partici­ The Supervisory Board also discussed Board, at the Annual General Meeting pate in the Board only for a very short these issues with the Board of Man­ on May 26, 1993, a number of period. We would have liked to draw on agement. Our discussions focused on changes were made in the Supervisory his energy and wealth of experience for medium-term corporate planning, in­ Board. Departing the supervisory a long time to come. As a replacement cluding but not limited to capital ex­ board were Prof. Dr.-Ing. Werner for Mr. Niefer, Dr. Manfred Schneider, penditures, trends in employment and Breitschwerdt, Stuttgart, Dr. Horst Leverkusen, was elected to the Super­ earnings and further developments in Burgard, Frankfurt/Main, Hans-Georg visory Board on December 20, 1993. the structuring of the group. Addi­ Pohl, Hamburg, Dr. Wolfgang Röller, Mr. Herbert Lucy, Mannheim, died tionally, we discussed major business Frankfurt/Main and Hermann-Josef on January 15, 1994. From the year transactions and made decisions Strenger, Leverkusen. Elected to the 1965 until leaving the company in No­ concerning individual transactions supervisory board were Mrs. Birgit vember, 1989, he had been a member which, by either law or company Breuel, Berlin, as well as Prof. Hubert of the Supervisory Board as employee by-laws, required submission to the Curien, Paris, Dr. jur. Michael Endres, representative, and as of 1978 as dep­ Supervisory Board for review and Frankfurt/Main, Prof. Werner Niefer, uty chairman. His committed efforts approval. Stuttgart and Jürgen Sarrazin, on behalf of the employees, his consci­ The Supervisory Board examined Frankfurt/Main. entious cooperation and willingness to the consolidated financial statements Also departing the Supervisory work together with trust and respect, and the business review of Daimler- Board, at the close of the Annual Gen­ earned him widespread appreciation Benz AG and the group, as well as the eral Meeting on May 26, 1993, were and recognition - both within and out­ proposal for the allocation of unap­ the following employee representa­ side the company. We will remember propriated profit. KPMG Deutsche tives: Richard Bollmann, Mannheim, Mr. Lucy with great admiration. Treuhand-Gesellschaft AG, Wirt- Helmut Funk, Stuttgart, Hugo Lotze, We would like to take this oppor­ schaftsprufungsgesellschaft, Reinhardshagen, and Siegfried Sauter, tunity to express our sincere gratitude Frankfurt/Main, audited the financial Frankfurt/Main. Elected to the Super­ to the outgoing members of the Super­ statements of Daimler-Benz AG and visory Board were the following em­ visory Board, some of whom belonged the consolidated financial statements ployee representatives: Willi Böhm, to this Board for many years, for their of the group as of December 31, 1993, Kandel, Wolfgang Gabele, Bremen, active participation and their highly as well as the business review. The Manfred Göbels, Leonberg, and Hel­ technical knowledge. consolidated financial statements were mut Lense, Stuttgart. Franz Stein- in accordance with generally accepted kiihler, Frankfurt/Main who resigned accounting principles. The Supervisory from the Supervisory Board on June Board approved the audit results of 21, 1993 was replaced by Walter Ries- KPMG in a joint meeting with the ter, Frankfurt/Main, on October 26, Board of Management on April 7, 1994. 1993, by the appropriate legal body. Executive Management and Daimler-Benz Group Representatives

Executive Management Daimler-Benz Group Representa­ tives DR. JUR. BOY-JÜRGEN ANDRESEN Personnel Policy Berlin JERUSALEM/TEL AVIV

PETER-HANS KEILBACH BENJAMIN NAVON HANSJÖRG BAUMGART Englerallee 40 Ramban Street 11 Daimler-Benz Art Possessions 14195 Berlin Jerusalem Israel MARTIN BERGER Bonn Annual Accounts and Moscow Accounts Planning ALFONS PAWELCZYK Friedrich-Ebert-Allee 26 LOTHAR GLEITZE DR. RER. POL. ROLF A. HANSSEN*) 53113 Bonn Prosp. Vernadskogo 9/10, App. 602 Corporate Planning and Controlling Moscow 117311 Brussels Russia MATTHIAS KLEINERT*) DR. HANNS R. GLATZ Public Affairs and Political - Tokyo 133, RUE FOISSART - BTE. 29 Economic Policy B-l040 BRUSSELS RAINER JAHN BELGIUM Roppongi First Bldg. DR.-ING. MICHAEL KRÄMER 9-9, Roppongi 1-chome Research 1 Minato-ku, Tokyo 106 Japan DR. RER. NAT. VOLKER LEHMANN Research 2 Washington D.C.

WERNER POLLMANN RICHARD H. IMUS Technology, Environmental Officer Suite 800, 1350 I Street, N. W Daimler-Benz Washington D. C. 20005-3305 U.S.A. PROF. DR. RER. NAT. ROLF SCHARWÄCHTER*)**) Directorate for Group Business in Emerging Markets

JÖRG SEIZER Subsidiaries and Affiliated Companies

KONRAD STRAUB Corporate Auditing

DR. OEC. PUBL. PAUL WICK*) Finance and Taxes

DR. IUR. SOLMS WITTIG*) Staff Lawyer

GERD WORIESCHECK Personnel Development for Senior Group Executives

*) With general power of procurement. **) Also deputy member of the Mercedes-Benz Board of Management without an own department.

Executive Management and Daimler-Benz Group Representatives 99

Balance Sheet Press Conference:

April 12, 1994 10.00 a.m. Haus der Wirtschaft Stuttgart

Annual General Meeting:

May 18, 1994 10.00 a.m. International Congress Center (ICC) Berlin

Daimler-Benz reports on the first quarter of 1994 during the Balance Sheet Press Conference on April 12, 1994, on the first six months with an audited semi-annual report at the end of August, 1994 and during early November on the first nine months of 1994.

Daimler-Benz AG IR 70546 Stuttgart Telephone: 49-711-1 79 22 87 Telefax: 49-711-1 79 41 09

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