Daimler-Benz Highlights Daimler-Benz AG Stuttgart

Annual Report 1985

Page Agenda for the Stockholders' Meeting 5 Members of the Supervisory Board and the Board of Management 8

Report of The Board of Management 11 Business Review 11 Outlook 29 100 Years of The Automobile 35 Research and Development 59 Materials Management 64 Production 67 Sales 71 Employment 77 Subsidiaries and Affiliated Companies 84

Report of the Supervisory Board 107

Financial Statements of Daimler-Benz AG 99 Notes to Financial Statements of Daimler-Benz AG 100 Proposal for the Allocation of Unappropriated Surplus 106 Balance Sheet as at December 31,1985 108 Statement of Income ForThe Year Ended December 31,1985 110

Consolidated Financial Statements 111 Notes to Consolidated Financial Statements 112 Consolidated Balance Sheet as of December 31,1985 122 Consolidated Statement of Income For The Year Ended December 31,1985 124

Tables and Graphs 125 Daimler-Benz Highlights 126 Sales and Production Data 129 Automobile Industry Trends in Leading Countries 130

3 for the 90th Stockholders' Meeting being held on Wednesday, July 2,1986 at 10:00 a.m. in the Hanns-Martin-Schleyer-Halle in Stuttgart-Bad Cannstatt, MercedesstraBe.

1. Presentation of the audited financial statements as of 3. Ratification of the Board of December 31,1985, the reports of the Board of Manage­ Management's Actions. ment and the Supervisory Board together with the con­ Board of Management and solidated financial statements and the consolidated annual Supervisory Board propose report for the year 1985. ratification.

2. Resolution for the Disposition of the Unappropriated 4. Ratification of the Supervi­ Surplus. sory Board's Actions. Board of Management and Super­ Board of Management and visory Board propose to distribute Supervisory Board propose ratification.

5. Election of Auditors for the Business Year 1986. The Supervisory Board pro­ poses to elect Deutsche Treuhand-Gesellschaft AG, Wirtschaftspruefungsgesell- schaft, Frankfurt am Main, as independent auditors for the business year 1986.

5 6. Resolution for the Redemp­ into account the approval of "(2) During the period from tion of Capital Stock. Paragraph 6 of the Agenda, now to June 30, 1991, the The Board of Management to read: Board of Management, with the Supervisory Board's ap­ and Supervisory Board pro­ "(1) The basic share capital of proval is authorized to in­ pose to purchase for re­ the company amounts to DM crease by DM 500,000,000, demption six common shares 1,941,364,800. It comprises: with a par value of DM 50 in in one amount or in partial amounts, the basic share a simplified proceeding al­ DM 1,939,168,800 common capital of the company lowed under Section 237, stock, viz. 1,877,000 shares through the issuance of new Sub-Section 3, Paragraph 1, of DM 1,000 each, 397,854 common stock against the of the Company Act, and to shares of DM 100 each, and receipt of cash payments. reduce the basic share capi­ 447,668 shares of DM 50 Coincident thereto, the stock­ tal by DM 300 in order to fa­ each, cilitate the capital increase holders are to be given a purchase right, excluding from company-generated DM 2,196,000 preferred stock, fractional amounts." funds in accordance with the viz. 2,193 shares of DM 1,000 allocation ratio outlined in each, 27 shares of DM 100 Apart from the resolution by Paragraph 7 of the Agenda. each, and 6 shares of DM 50 the shareholders at the an­ each." nual meeting, the common 7. Resolution for the Increase and preferred stockholders of Basic Share Capital from 8. Resolution for the Creation must additionally and sepa­ Company-Generated Funds of an Authorized Share rately vote on the resolutions. and for the Change in the Capital and Change of Bylaws. Bylaws. 9. Resolution for the Change The Board of Management The Board of Management of Section 2 of the Bylaws. and Supervisory Board pro­ and Supervisory Board pro­ The Board of Management pose to increase by pose that during the period and Supervisory Board pro­ DM 242,670,600 the basic from now to June 30, 1991, pose that Section 2 of the share capital on a one for the Board of Management, Bylaws be amended: seven basis, from with the Supervisory Board's DM 1,698,694,200 to "Section 2 - Business approval, be authorized to in­ Purpose DM 1,941,364,800 via the crease by DM 500,000,000, (1) The business purpose of conversion of unallocated re­ in one amount or in partial the company is the develop­ tained earnings into basic amounts, the basic share ment, manufacture and sale of: share capital based on the capital of the company December 31, 1985 balance through the issuance of new - land, water, air and space sheet through: common stock against the vehicles and of other techno­ distribution to common receipt of cash payments. logical products used for ve­ stockholders of Coincident thereto, the stock­ hicular, air, space and sea DM 242,396,100 of new holders are to be given a traffic; purchase right, excluding bearer stock certificates in - engines and other techno­ fractional amounts. The new denominations of DM 1,000 logical power trains; and DM 50, and shares are to be taken over by financial institutions which - plant, machinery and distribution to preferred are obliged to offer them to equipment for the manufac­ stockholders of DM 274,500 the stockholders. ture, transmission and usage of new, registered preferred of energy; shares in denominations of Section 3, Sub-Section 2, of DM 1,000 and DM 100 the Bylaws (basic capital), is - products related to the with dividend entitlement for newly amended to read as communication and informa­ both stock categories begin­ follows: tion technology; and ning with the 1986 business - other industrial products, year. Section 3, Sub-Section technical systems and pro­ 1, of the Bylaws (basic share cesses in the above-men­ tioned fields. 6 capital) is amended, taking The company may trade in 11 Election to Fill Supervisory Pursuant to Section 203 Sub- all kinds of raw materials, fac­ Board Vacancies. Section 2 Paragraph 2 in con­ tory supplies, semi-finished Dr. phil. Dr. rer. oec. h.c. Mar- nection with Section 186 Sub- and finished products and in kus Bierich, Stuttgart, Dr. rer. Section 4 Paragraph 2 of the goods which are related to pol. Friedrich Karl Flick, Düs- Company Act, we give, with re­ the business purpose of the seldorf and Dr. jur. Heribald spect to Paragraph 8 of the company's operations. The Naerger, Muenchen, have Agenda, the following company may render ser­ given notice that they wish vices within the framework of to resign their offices as Report to the Stockholders the above-mentioned activi­ members of the Supervisory at the Annual Meeting: ties. Board, effective July 2,1986. The remaining authorized share (2) The company may found The Supervisory Board pro­ capital, in the amount of and acquire other companies poses in their place DM 180,130,500 has not been whose business activities are used and is cancelled effective Dipl.-lng Hans-Georg Pohl, June 30,1986. related to those mentioned in Den Haag, Coordinator for Sub-Section 1; it may pur­ Europe of the Shell Interna­ The stockholders will also re­ chase an interest in such tional Petroleum Company, ceive a purchase right (Section companies and may fully or 186 Sub-Section 5 of the Com­ partially bring them under a Mr. Hermann Joseph pany Act) in connection with the unitary management." Strenger, Leverkusen, creation of the new authorized Chairman of the Board of share capital as proposed by 10. Resolution for the Change Management of Bayer AG, the Board of Management and of Section 13 of the Bylaws. and by the Supervisory Board. Ex­ The Board of Management Prof. Dr. Gerhard Tremer, cepted therefrom are fractional and Supervisory Board pro­ Graefelfing near Muenchen, shares which can no longer be pose to change Section 13 Deputy Chairman of the Su­ distributed to all shareholders. of the Bylaws as follows: pervisory Board of Merce- In the event that the authorized "Section 13. Supervisory des-Automobil-Holding AG, share capital is used, the Board Board Remuneration Member of the Board of of Management - with the Su­ Supervisory Board mem­ Management of Bayerische pervisory Board's approval - bers, in addition to the reim­ Landesbank Girozentrale, will stipulate the conditions for bursement of their expenses and elect them as members their issuance. It will take into - including a sales tax pay­ of the Supervisory Board re­ account the then prevailing able for the Board activities presenting stockholders, i.e. capital needs and market - receive a fixed fee paya­ for the remaining term of the conditions. ble after the end of the busi­ other Supervisory Board ness year amounting to DM members. 7,000 for each member. The Pursuant to Section 96 Sub- Chairman and Deputy Chair­ Section 1, Section 101 Sub- man receive respectively Section 1 of the Company four times and two times this Act, and Section 7 Sub-Sec­ amount. Furthermore, the tion 1 Paragraph 1 of the 3rd Supervisory Board receives Codetermination Act, the Su­ a remuneration in the pervisory Board consists of amount of .4% of that ten Board members elected amount by which the divi­ by the stockholders and ten dend paid to common stock­ Board members elected by holders exceeds 10% of the the employees. common share capital; the The stockholders' meeting is distribution of this remuner­ not bound by the election ation is decided upon by the proposals. Supervisory Board."

7 Hermann J. Abs, Frankfurt (Main) Honorary Chairman Honorary Chairman, Deutsche Bank AG

Dr. rer. pol. Alfred Herrhausen, Frankfurt (Main) Chairman Member of the Board of Management, Deutsche Bank AG (since July 3, 1985) Herbert Lucy, Mannheim *) Deputy Chairman Chairman of the Labor Council, Daimler-Benz AG Dr. phil. Dr. rer. oec. h. c. Marcus Bierich, Stuttgart Chairman of the Supervisory Board, Mercedes-Automobil-Holding AG Chairman of the Board of Management, Robert Bosch GmbH Willi Boehm, Kandel*) Member of the Labor Council, Woerth Plant Dr. rer. pol. Friedrich Karl Flick, Duesseldorf Helmut Funk, Stuttgart*) Chairman of the Labor Council, Untertuerkheim Plant and Main Office Richard Heiken, Achim-Bierden*) Chairman of the Labor Council, Bremen Plant Rudolf Kuda, Frankfurt (Main)*) Departmental Manager within the Board of Management, Metal Workers' Union Hugo Lotze, Reinhardshagen*) Chairman ofthe Labor Council, Kassel Plant Dr. rer. pol. Klaus Mertin, Frankfurt (Main) (since July 3,1985) Member of the Board of Management, Deutsche Bank AG Dr. jur. Heribald Naerger, Muenchen Member of the Board of Management, Siemens AG Dr. rer. pol. Wolfgang Roeller, Frankfurt (Main) Speaker for the Board of Management, Dresdner Bank AG Alfred Schaible, Renningen*) Chairman ofthe Labor Council, Sindelfingen Plant Dr. jur. Roland Schelling, Stuttgart Attorney at Law Dr. jur. Walter Seipp, Frankfurt (Main) Chairman of the Board of Management, Commerzbank AG Dr. jur. Johannes Semler, Oberursel (since Juiy 3, 1985) Member of the Board of Management, Mercedes-Automobil-Holding AG Franz Steinkuehler, Frankfurt (Main)*) Second Chairman, Metal Workers' Union Dipl.-Ing. Maria-Christine Fuerstin von Urach, Stuttgart*) Director Diplom-Kaufmann Guenter Vogelsang, Duesseldorf Bernhard Wurl, Mainz*) Deputy Departmental Manager within the Board of Management, Metal Workers' Union

Retired from the Supervisory Board on July 3,1985 Dr. rer. pol. Wilfried Guth, Frankfurt (Main), (Chairman) Chairman of the Supervisory Board, Deutsche Bank AG Prof. Dr. jur. Joachim Zahn, Muenchen

*) Elected by the employees. Prof. Dr.-lng. E. h. Werner Breitschwerdt, Stuttgart Chairman Dr. jur. Manfred Gentz, Stuttgart Employment Hans-Juergen Hinrichs, Stuttgart Sales Dr.-lng. Rudolf Hoernig, Stuttgart Research and Development Dr. rer. pol. Gerhard Liener, Stuttgart Subsidiaries and Affiliated Companies Dr.-lng. E. h. Werner Niefer, Stuttgart Production Edzard Reuter, Stuttgart Finance Walter Ulsamer, Stuttgart Materials Management Dr.-lng. Peter Sanner, Stuttgart (deputy member) (since May 2, 1985) Materials Management

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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. Report of The Board of Management

Continued Economic German Auto Industry: Through the purchase of all Growth in The Industrialized Growth in shares of Motoren- und Tur- Countries The Foreign Markets binen-Union (MTU) and of port­ World trade continued to For the German auto indus­ folio investments in Dornier and grow in 1985. A major factor try, car exports were the main­ AEG, the company has gained was the recovery of business stay of production and employ­ access to additional high-tech­ activity in most of the Western ment in 1985. The German nology fields of activity and thus European countries and in Ja­ motor vehicle manufacturers' to markets with great growth pan. Once again, strong stimuli trade surplus rose from DM 60 potential. came from the U.S.A., although billion to DM 70 billion. The the U.S. economy did not grow drastic increase in foreign de­ Sales of More Than as dynamically as in the two mand more than compensated DM 52 Billion preceding years. The dollar ex­ for the decline in the demand Consolidated sales rose 20 % change rate, which on average for cars in Germany. During the to DM 52.4 billion in 1985. The was still high during the year, first half of the year, domestic total includes, pro rata, DM 2 bil­ caused an additional import pull sales were adversely affected lion of MTU (since April) and in the North American market. by the discussion about new DM 1.2 billion from Dornier The developing and newly- pollutant emission regulations, (since July). The greatest rise industrializing countries, how­ and the possible introduction of was in domestic sales, up 27 % ever, did not benefit from this; a general speed limit on Ger­ to DM 18.7 billion, but foreign their share in world trade man motorways. It was only at sales also rose 17 % to DM 33.7 dropped once again. the end of June, when the ques­ billion. In the Federal Republic of tion of low-pollutant cars was In both the company's large Germany, the economic upturn clarified by the EC resolution, divisions, cars and commercial stabilized. During the first half that domestic demand picked vehicles, business volume con­ of the year, the chief promoter up gradually, yet without mak­ tinued to increase, though at of growth was foreign demand. ing up for the decline of the first varying rate of growth. Car sales This is reflected by the German few months. came to DM 27.5 billion, an in­ current account surplus of more Because of increased crement of 18 %, while com­ than DM 70 billion in 1985, the exports, employment in this mercial vehicle sales rose 7 % highest ever reached. During branch of industry rose by some to DM 19.6 billion. This meant a the second half of the year, it 24,000 to more than 800,000. further shift in emphasis towards was the home-market demand Investment, which increased car business. Its share in the for capital goods which increas­ once again, to DM 10 billion, increased business volume, ingly promoted business activ­ had important stimulating effects at 52 %, remained virtually un­ ity. The marked increase in em­ on other sectors of the eco­ changed, while the share of ployment for the first time in nomy. commercial vehicle sales de­ years brought the first positive clined to 37 % (42 % in 1984). signals in the labor market; yet Daimler-Benz - Successful MTU and Dornier, included for unemployment still remained Year 1985 the first time, accounted for 6 %. depressingly high. For Daimler-Benz, 1985 was a year of gratifying business performance and of important decisions for the future of the company. Because of the high demand for Mercedes cars in Germany and abroad, produc­ tion and sales were raised significantly. In commercial ve­ hicle sales we were able to im­ prove our position in the mar­ kets, even though some of these markets continued to decline.

11 Sales of Daimler-Benz AG al­ Our company's chief foreign lion. Demand for commercial one rose to DM 37.1 billion, up markets were once again the vehicles from Middle East and 16 % compared with the pre­ Western European countries; North African countries contin­ ceding year which had been the value of sales to these coun­ ued to stagnate. Our shipments adversely affected by the labor tries was boosted 24 % to DM 8 to these regions remained at the dispute. Contrary to the indus­ billion. It was above all our ex­ previous year's low level. try trend, the increase in our ports to neighboring European company's domestic sales was countries which accounted for greater (+18 %) than that of ex­ this gratifying development. The port sales (+14 %); the latter's USA remained the largest sin­ share correspondingly dropped gle foreign market. Deliveries to to below 54 %. the U.S. rose 20 % to DM 5.8 bil­

Sales

• Value added by foreign subsidiaries Exports by domestic companies

Domestic

12 Both our foreign commercial Sales by vehicle manufacturing compa­ Geographic nies and our distribution com­ Areas panies, through which we are presented in all major markets, recorded remarkable sales in­ creases. The value added by them, aided also by a continu­ ing strong dollar in 1985, rose to DM 12.1 billion (DM 11.4 bil­ lion in 1984).

High Level of Investments For The Future of The Company To secure the future of our company, we again invested substantial funds in 1985. Expenditures on Research and Development in the motor vehicle sector amounted to DM 1.7 billion (DM 1.5 billion in 1984). MTU and Dornier to­ gether invested DM 900 million in Research and Development. Investments in plant and equip­ ment, and in intercorporate in­ vestments for the group rose to a total of DM 5.6 billion (DM 3.6 billion in 1984). This, a marked increased over the previous year, is accounted for by the ac­ quisition of MTU and by the pur­ equipment worldwide; DM .8 Additions to plant and equip­ chase of a majority holding of billion of this total is attributable ment at Daimler-Benz AG to­ 65.6 % in Dornier and by the to the first-time inclusion of MTU taled DM 1.8 billion (DM 1.9 bil­ purchase of a 24.9 % holding in and Dornier in the consolidated lion in 1984) and involved the AEG. Following the approval of annual accounts. following areas: the Federal Cartels Office in February 1986, we have mean­ while increased our AEG hold­ ing to some 56 %. A total of DM 4.0 billion (DM 3.4 billion in 1984) was invested in plant and

13 Capital spending centered on In the interest of improving Our foreign subsidiaries the car division, i.e. extension of our competitiveness, and thus raised their investments in plant capacity, further improvements of safeguarding employment in and equipment to a total of DM to the S-Class, the start-up of the long term, our investments 1.6 billion in 1985 (DM 1.2 bil­ production of the new T-Series are also geared to further in­ lion in 1984). Of this total, as in Bremen, new gasoline and creasing the efficiency of pro­ much as DM 1.0 billion was diesel engines and catalytic duction. Wherever possible we spent by our strongly expanding converter technology. are, at the same time, aiming at vehicle leasing companies in Most of the investments in the an improvement of working the U.S.A. and in Western Eu­ commercial vehicle division conditions. We also take into ac­ rope where sales solicitation went to improve and extend our count the requirements of envi­ and sales promotion activities vehicle and component ranges. ronmental protection, not only are of growing importance. Our The most important projects on the product side but also commercial vehicle manufactur­ were the development of two through environmentally- ing companies invested DM .4 turbocharged V8 engines for compatible facilities. In the year billion, and the distribution com­ heavy-duty long-distance trucks, under review, we spent DM 86 panies in North America and the start-up of production of the million on environmental protec­ Western Europe DM .2 billion. new Duesseldorf van series, tion measures in Germany The DM 5.6 billion addition to and various new features in the alone. plant and equipment and inter­ bus range. corporate investments of the group, including the cost of in­ vestments in affiliated compa­ nies in excess of book value at acquisition, could be fully fi­ nanced with the cash flow gen­ Sales by erated in 1985, and amounting Segments to DM 5.9 billion.

More Than 230,000 Employees Worldwide At the end of 1985, employ­ ment at Daimler-Benz AG had increased to 161,518 - an in­ crease of more than 4,000 over the previous year. New hiring took place particularly in the Sindelfingen, Untertuerkheim and Bremen car factories. We further increased openings for trainees to approximately 9,400 (previous year 9,100). In the year under review, some 2,900 youngsters took up vocational (technical and commercial) training at Daimler-Benz A.G.

14 1981 1982 1983 1984 1985 Worldwide employment at the Investments and end of the year totaled 231,077 Depreciation (previous year 199,900). Of this Allowances total, some 25,000 are employ­ Daimler-Benz- ed at MTU and Dornier which Group are included for the first time. Our foreign subsidiaries main­ tained employment levels over­ all while the domestic subsidi­ aries were able to increase their labor force.

We Thank Our Employees We thank all employees and their representatives on the plant and general labor coun­ cils as well as the management staff and their spokesmen for their hard work and commit­ ment. Joint efforts and mutual understanding have gone a long way towards making 1985 a particularly successful year in the history of Daimler-Benz.

Gratifying Increase in Earnings The significant expansion of business volume and the extra­ In the non-operating area, continues to include compo­ ordinarily high capacity utiliza­ Daimler-Benz AG had net inter­ nents merely compensating for tion in the car division favorably est income (excess of interest the erosion in the purchasing influenced earnings in 1985. income over interest expense) power of monetary assets. An additional positive factor was of DM 662 million (1984: DM Consolidated net income in­ the high average rate of ex­ 607 million) before tax. Group creased by 52% to 1,682 mil­ change for the dollar together net interest income came to DM lion. Net income of Daimler- with increasing exports to the 1.0 billion (1984: DM 1.1 billion). Benz AG rose from DM 711 mil­ U.S.A. In the commercial vehi­ As in the previous year, we off­ lion to DM 1,252 million; it in­ cle division, earnings have set the inflationary profits reflec­ cludes dividend income of net again improved, even though ted in interest income against DM 100 million from our North we cannot yet be satisfied with the expense arising from the American Holding company. the results. In 1985, we had to translation of the self-financed The gratifying earnings results cope with additional burdens re­ liquidity of our subsidiaries in of the Daimler-Benz group al­ sulting, for instance, from the re­ countries with high inflation lowed a further strengthening of duction in working hours and rates. This figure nonetheless retained earnings. the production start-up of new models. All in all, however, pos­ itive influences prevailed. The subsidiaries in Germany and abroad also made a gratifying contribution to the improved group earnings.

15 The Mercedes Likewise, through the proposed Compact Class - dynamic, easy issuance of a stock dividend in handling cars, a ratio of one for seven, we wish in which trend- to convert DM 243 million of re­ setting driving qualities and pro­ tained earnings into basic share gressive engineer­ capital, increasing it to DM 1,942 ing are combined. million; the newly-issued shares shall be fully entitled to divi­ dends for the business year 1986. To be prepared financially and to maintain our entrepre­ neurial flexibility, we propose the creation of a newly authorized share capital in the amount of DM 500 million in place of the presently authorized share cap­ ital expiring June 30, 1986. As an expression of thanks and recognition, our employees and pensioners will receive a ju­ bilee payment totaling DM 230 million. On the occasion of the 100-year anniversary of the au­ tomobile, Board of Management and Supervisory Board wish to give special importance to the event through the creation of a "Gottlieb Daimler and Karl Benz Foundation". The function of the foundation, which has been en­ dowed with DM 50 million, shall be the furthering of science, particularly the research into the Jubilee In recognition of this jubilee, interrelationships between man, "100 Years Automobile" which is so important for environment and technology. In 1986 we are celebrating Daimler-Benz, the Board of We are convinced that in the 100th birthday of the auto­ Management and Supervisory shaping and securing a hu­ mobile - an event of oustand- Board have decided on a num­ mane future in a free society, it ing historical importance. The ber of measures in favor of is more than ever necessary to development of our modern shareholders, employees and research the interrelationships times was hardly influenced commonweal. between man, environment and more positively by another To our shareholders we pro­ technologies, and to design product than by the automobile. pose to increase the dividend them for the benefit of all. All this we owe to the brilliant from DM 10.50 to DM 12 for achievements of our founders each DM 50 share, and addi­ Gottlieb Daimler and Karl Benz. tionally to pay a bonus of DM 2.50; the total amount paid would thus be increased by DM 135 million to DM 491 mil­ lion. With the shareholders' ap­ proval at the annual meeting, DM 105 million are to be allo­ cated to retained earnings, to 16 further strengthen net equity. CARS from the continuing trend to­ Stagnation in German Car wards high-technology cars in Market More Than 32 Million Cars the U.S.A. New car registrations in Ger­ Worldwide In Japan, car sales stagnated many were down just under 1 % Worldwide car sales once at 3.1 million units in 1985. It to 2.38 million units. The share again increased in 1985; pro­ was only by a drastic increase of foreign makes, which had in­ duction rose 5 % to 32.6 million in exports that production could creased markedly the previous cars. This clearly exceeded the be stepped up 8 % to 7.6 mil­ year, went up once again. Im­ previous record of 1978. Sales lion cars. Japanese car produc­ ports, including German cars increased in all three important tion abroad rose slightly to .7 manufactured abroad, accoun­ areas, in the U.S.A., in Japan, million units. ted for about a third of new car and in Western Europe. In 1985, car sales in Western registrations. The largest car market in the Europe went up 5 % to 10.6 mil­ The growing trend towards world, the U.S.A., continued its lion units. In the Scandinavian low-pollutant cars benefited upward trend, now in the fourth countries in particular, but also especially the manufacturers of year, though at lower growth in Italy, the United Kingdom and diesel-powered cars whose rates. New car registrations went France, demand improved no­ market share rose abruptly to up 8 % to 10.9 million cars. ticeably. Western Europe expor­ more than 22 % (13 % in 1984). American manufacturers sold ted .3 million more cars to over­ But there is also growing ac­ more cars than in the preced­ seas countries than were im­ ceptance for low-pollutant ing year yet lost in their market ported from those countries, gasoline-engine cars in the do­ share to importers. Car imports although Japanese manufactur­ mestic market. The trend to from Japan rose 16 % to 2.2 ers were able to boost sales in higher-priced cars in Germany million cars, followed a long way Europe considerably over the continued. behind by the German auto in­ previous year. Western Euro­ dustry with 424,000 cars pean production rose 5 % to a (+23 %). The latter benefited total of 11.3 million cars; its share of world output, at 35 %, remained unchanged.

The new Mercedes mid-series Class 200D to 300E - offering generous, comfortable space for business and family use - continues to be the center piece of the Mercedes car program.

17 Record Car Exports Production rose 10 % to 4.17 Daimler-Benz: With exports of 2.6 million million cars and thus exceeded Market Success at Home cars (+15 %), the German auto the record of 1979 by more and Abroad industry reached an all-time re­ than 200,000 units. At the same For Daimler-Benz, 1985 was cord. High growth rates were re­ time, the export share of pro­ a particularly successful year in corded both in the U.S.A. and duction rose to 62 % (59 % in terms of car sales. Domestic the Western European coun­ 1984). These figures illustrate and foreign demand for all our tries; these two regions accoun­ the extent to which employment models exceeded our produc­ ted for almost 90 % of car in the German auto industry de­ tion capacity. exports. pends on unrestricted access to During the first half of 1985, foreign markets and, conse­ Mercedes-Benz cars expe­ quently, on the necessity of cre­ rienced their own special boom; ating a united European "home new car registrations rose 18 % market". to 265,578 units for the whole

Car Production

S-and Special Class

Mid-range Class

of which: T-Series

Compact Class

18 The S Class was adapted to the new­ est state of engin­ eering and interior appointments were again upgraded. The new 560 SEL is the top-of-the-line model in our car program.

year. Thus our market share im­ Our exports to the U.S.A. con­ Production in the Bremen fac­ proved markedly from 9.8 % to tinued to rise in 1985; in the in­ tory was stepped up briskly, by 11.6 %. This positive trend was terest of maintaining our high 8 % to 211,804 Compact mod­ most of all due to the success standard of back-up service, we els. In November 1985, after of our new mid-range Class; continued our policy, pursued nearly three years in production, sales in this Class increased for many years, of careful ex­ the 500,000th 190 model came 29 % to 113,739 units. The de­ pansion in this market. off the assembly line. Output of mand for the compact Class, In Japan we sold 9,170 cars, S-Class and SL and SEC mod­ S-Class, SL and SEC models an increase of 22 %. To be able els was raised 4 % to 108,896 also remained at a high level. to improve our services in this units. The trend in the diesel car mar­ particularly receptive market for ket was particularly gratifying; our high-quality cars, we will be New Car Models their share of domestic orders represented there as of 1986 by In the year under review, we increased to 53 % (43 % in our own distribution company, successfully launched the new 1984) of the Compact Class, Mercedes-Benz Japan. Mercedes Mid-Range 200D - and to 39% (36% in 1984) of Fully utilizing the extended 300E models in Germany and the mid-range Class. capacity in 1985, car output was abroad. Our exports went up 11 % to 541,039 units, 13 % more than In early summer 1985, the 278,157 cars; in all foreign mar­ in the previous year, although Compact Class was extended kets, however, demand would we had to change over to the by the addition of a more pow­ have permitted even higher new Mid-Range Class, intro­ erful diesel model, the 190D 2.5, sales. We delivered a total of duce a new engine generation with a 66 KW (90 hp) five- 129,442 cars to European mar­ and emission control concept. cylinder diesel engine and a kets in 1985, 21 % more than in The increase of almost 63,000 standard five-speed gearbox. At 1984. Especially high growth units, however, has to be seen the Frankfurt Motor Show, we in­ rates were recorded in Italy, the in the light of the production troduced two more new mod­ United Kingdom and France. losses caused by the labor dis­ els, the 190E 2.6 with a 122 KW pute in 1984. Of the new Mid- (166 hp) six-cylinder gasoline Range 200D - 300E models, a engine, and the 190E 2.3 with total of 161,000 cars were man­ a 100 KW (136 hp) four-cylinder ufactured in the first year. gasoline engine.

19 The new Coupe emission control systems can models 420 SEC to 560 SEC: the be subsequently installed. More most beautiful than 35 % of German custom­ form of Mercedes ers are already ordering their driving with every conceivable amenity. Mercedes cars with three-way It is the realization catalytic converters. Added to and embodiment of what Daimler-Benz this is a large number of "con­ is able to accomplish verted" cars prepared for the in building cars. ready installation of a catalytic converter at a later stage. Another possibility of effectiv­ ely reducing the pollutant emis­ sion of cars already in circula­ tion is the catalytic converter without oxygen sensor offered by Daimler-Benz for retrofitting, to cut pollutant emission by at least half. All current Mercedes-Benz diesel-engine cars are rated In Frankfurt, our new T-Series Mercedes-Benz Driving "low-pollutant" and thus tax- models (three diesel and three Dynamics Concept privileged under German law gasoline-engine models) also The Mercedes-Benz Driving provided they were first regis­ met with a gratifying response. Dynamics Concept introduced tered in January 1985 or later. This is now also reflected by a at the Frankfurt Motor Show The results of the large-scale high level of incoming orders. combines progressive mechan­ test concerning speed limits on This second generation of five- ical systems with "intelligent" elec­ German highways proved con­ door all-purpose sedans com­ tronics. The system minimizes vincingly that technical solutions bines the balanced integration the consequences of wrong re­ can be more beneficial for the and future-oriented engineering actions on the part of the driver, environment than attempts to of the new Mercedes Mid- and provides maximum active regiment individual road users. Range Class with the transport safety especially in critical and The decision of the Federal Ger­ and touring qualities of the pre­ dangerous situations, under ex­ man government to introduce vious T-Series. treme climatic or road condi­ no general speed limit was, The S-Class and SL and SEC tions. The concept comprises therefore, logical; it will also give models were adapted to the lat­ three graduated, electronically- a major stimulus to further tech­ est engineering standards and automatically controlled sys­ nical progress. interior appointments upgraded. tems: Automatic Locking Differ­ We take the rejection of the New six- and eight-cylinder en­ ential (ASD), Acceleration Skid speed limit as an invitation and gines enhance performance Control (ASR) and automatically an obligation to continue to ad­ and safety as well as economy engaged Four-Wheel Drive vocate energetically the non- and environmental acceptability. (4MATIC). pollutant car - by offering it on The 560 SEL sedan and the attractive terms and by provid­ 560 SEC coupe are the new Mercedes-Benz Emission ing our customers with all nec­ top-of-the-line models of our car Control Concept essary advice. range. All gasoline-engine models in our car range are now option­ ally available with second- generation catalytic converters. The four-cylinder engine mod­ els are equipped - either as standard equipment or optional equipment with the Multi-Func­ tional Mixture Formation and Ig­ nition System so that catalytic COMMERCIAL VEHICLES With above-average growth commercial vehicle market, new in the United Kingdom and in vehicle registrations were up Worldwide Upturn France, sales in Western Euro­ 15 %, yet sales of heavy-duty in Lower-Range Commercial pean countries were up 6 % trucks declined 3 %, following a Vehicle Sales and thus again reached the substantial rise in the previous The 1985 trends in the inter­ level of 1982. In contrast to this, year. The Japanese commercial national commercial vehicle there was a further decline in vehicle market grew by 3 %. business differed greatly both Middle East sales, affecting between regions and vehicle most of all heavy-duty trucks. categories. The 8 % increase in The additional volume which worldwide commercial vehicle had been built up in these areas output to 12.1 million units was up to and including 1982 is now exclusively accounted for by the being diminished from year to lower weight categories. year. In the U.S.A., the largest

Mercedes-Benz long-haul-vehicles distinguish them­ selves due to high transport perfor­ mance at low fuel consumption. An international service network with spe­ cially established T.I.R. anchor points, assures problem- free operation throughout Europe.

21 The Mercedes-Benz themselves felt particularly in the van T1 represents a vehicle of transpor­ sales of heavy-duty trucks of 16 tation which is tons GVW and above. economical, versatile After four successive years of and indispensable in many businesses. decline, exports went up again in 1985, by 14% to 177,817 commercial vehicles. This in­ crease was exclusively achiev­ ed in van sales. Exports of trucks of 6 tons GVW and above continued to decline. Western Europe, especially the United Kingdom, Belgium, the Netherlands, Luxembourg and Italy, took larger deliveries; yet, this did not compensate for the decline in the Near and Middle East countries. Total output of the German commercial vehicle industry in­ creased 9 % to 279,234 vehi­ cles, with the emphasis on the lower weight categories, while production of medium-heavy trucks (6 to 16 tons GVW) stag­ nated. Production of trucks of 16 tons and above rose by just un­ der 1 %, but this rise was from For Japan, still the largest German Commercial Vehicle a very low level. The export manufacturing country with 4.6 Industry: Domestic and For­ share went up to almost 64 % million commercial vehicles, eign Sales Continued Slack (61 % in 1984). 1985 was the fourth year in suc­ The economic recovery in the cession in which the industry Federal Republic of Germany suffered a decline in its share of benefited commercial vehicle world output, to 38 %. The sales in 1985 only to a limited American manufacturers, by extent. New vehicle registrations contrast, were able to raise their increased by just under 3 % to share from 17 % in 1980 to a total of 133,834 units, yet re­ 29 % in 1985. The Western Eu­ mained about 25 % below-the ropean commercial vehicle in­ record volume of 1980. The dustry increased its share of share of foreign makes, which worldwide production from 11 had increased from 20 to 23 % to 12 %. Western European in the previous year because of production of trucks of 6 tons the production losses in the GVW and above rose 2 % to German commercial vehicle 298,000 units, yet still remained factories caused by the labor 30 % below the record of 1975. dispute, continued to rise in the year under review, to 24 %. For­ eign manufacturers improved their position especially in the market of car-derived small vans. Low construction activity and the self-imposed invest­ ment restraint of carriers made 22 Daimler-Benz: trucks of 6 tons GVW and which is so important for us, Increase in Commercial above totaled 27,270 units, ex­ we have gained new customers. Vehicle Production ceeding the previous year's vol­ We were able to benefit fully Daimler-Benz has been able ume by 6 %. Our market share from the slight recovery of de­ to consolidate and further ex­ increased from 59.0 % to mand in the Western European pand its position in the Western 61.1 %. The increase in sales commercial vehicle markets, es­ European commercial vehicle was due to the success of the pecially with our vans and light markets. New registrations of new light- and medium-heavy trucks. In Belgium, the United Mercedes-Benz commercial ve­ trucks from Woerth. Domestic Kingdom, Italy, Austria, Switzer­ hicles in Germany were up 4 % sales of our heavy-duty trucks land, Norway and Sweden, we to a total of 58,114. Sales of (16 tons GVW and above), too, were able to improve our posi­ were boosted by 6 % to 11,977 tion, in some of these countries vehicles; in this market segment, substantially. Daimler-Benz's

Commercial Vehicle Production

• Foreign Cross-country vehicles • Domestic

Exports from domestic plants

23 1976 1977 1978 1979 1980 1981 *) Kits destined for production abroad, starting with 1983, no longer shown in total production figures. O 303 RHD - the es­ pecially comfortable high rise long dis­ tance coach, offers in 14 or 15 rows of seats room for 41 to 56 passengers.

share in the Western European In the year under review, export business remained also market for trucks of 6 tons GVW 143,387 commercial vehicles difficult for us; we were able to and above rose to 26 % (24 % were manufactured in our Ger­ increase bus and bus chassis in 1984). In the Near and Mid­ man factories, only slightly more output only 3 % to 5,345 units. dle East countries, on the other than in 1984. In contrast to the hand, we were adversely af­ increment in van, light and Unimog and MB-trac: fected by the continuing deteri­ medium-heavy truck output, that Increased Business Volume oration of the overall economic of heavy-duty trucks dropped The competition in the mar­ situation there. due to declining exports. In ket for four-wheel drive tractors, The decline in our exports by 1985, employees of the truck has become even keener with almost 3 % to 79,993 commer­ plants were again temporarily respect to price and sales cial vehicles is compensated for assigned to car factories which terms. In spite of this, Daimler- by an equal rise in the export were running at full capacity. Benz was able to sell 5,638 Uni­ of vehicle parts kits. This is due mog and MB-trac units (+1 %) to the fact that a fair number of Bus Business Continued deliveries of completely- Difficult knocked-down (CKD) commer­ 1985 was the first year of an cial vehicles has been replaced upturn in the demand for buses by so-called vehicle parts kits in Germany, following several supplied to foreign assembly years of decline. Total new ve­ plants with higher local content hicle registrations were up more requirements. Production of ve­ than 7%, while Daimler-Benz hicle parts kits rose 46 % to was able to sell 2,009 buses, an 26,400 units. increase of 18 %, and boost its market share to 49.7 % (45.0 % in 1984). Sales of new intra-city buses developed particularly fa­ vorably, thus more than com­ pensating for the poor trend in the intercity coach market. The 24 in Germany. Exports were up Further Rise in Mercedes-Benz Espana, 42 % to 4,924 vehicles, due pri­ Commercial Vehicle Output which had to operate under marily to various large-scale or­ at Our Foreign Plants particularly difficult market con­ ders. We were, therefore, able Our foreign commercial vehi­ ditions in Spain for years, was to step up production by 12 % cle companies were able to in­ able to step up van production, to 10,250 vehicles. crease production and sales in though from a low volume, by 1985. Mercedes-Benz do Brasil about a third to 10,910 vehicles. Growing Demand continued the upward trend Total production of our for­ For Mercedes which began in 1984. Output eign companies rose 13 % to Cross-Country Vehicles was raised 13 % to 33,012 com­ 70,523 commercial vehicles in There was a revival in cross­ mercial vehicles. By contrast, 1985. Worldwide output totaled country vehicle sales, with new Mercedes-Benz Argentina, un­ 220,213 vehicles, an increment registrations of Mercedes cross­ der the pressure of poor mar­ of 4 %. country vehicles in Germany in­ ket conditions, had to cut back creasing by almost 4 % to 1,858 production - which had been units, while exports rose almost raised the year before - by 6 % to 4,153 units. Production 22 % to 3,376 commercial ve­ was stepped up by 14 % to hicles. Our U.S. subsidiary 6,303 cross-country vehicles. Freightliner, having recorded substantial increases in the two preceding years, in 1985 sur­ passed even the previous year's high level with an output of 20,947 heavy-duty trucks al­ though the overall market was clearly declining during the sec­ ond half of the year.

The new series T 2 delivery van is bas­ ed on the engineer­ ing concept of light­ weight trucks from Woerth; the model range extends from 4.6 tons to 7.5 tons of permissible gross vehicle weight and also comprises variations allowing lesser loads.

25 The light truck mod­ As of early 1986, Acceleration els from Woerth: Skid Control (ASR) has been of­ a modern vehicle concept, state-of- fered in addition to the Anti-Lock the-art-engineering Braking System (ABS) for air- and ease of servi­ ceability are the basis braked trucks and buses. The for the great market­ ASR system ensures the vehi­ ing success of this cles' track-holding stability when series from Woerth. pulling away and accelerating, for instance on a slippery road.

Declining Sales of Industrial Engines and Vehicles Components Sales of industrial engines and vehicle components drop­ ped almost 12 % to DM 279 million. This was mostly due to poor export demand and keener competition. Generator sets and pump assemblies were particularly affected. By contrast, we were able to increase our sales to makers of special-purpose vehicles, e.g., mobile cranes. We responded to the trend towards more pow­ New Products in the In the year under review, the erful engines for agricultural Commercial Vehicle Range light Woerth truck range was ex­ machinery by supplying the 400 At the Frankfurt Motor Show, tended by the addition of the engine series. Daimler-Benz presented a large 817 model which is available as The industrial engine range, number of new commercial ve­ platform truck and tractor. with output ratings from 17 kW hicle models and features. Our Innovations in the city bus to 478 kW was extended in heavy-duty trucks were equip- range continued; there are now 1985 by the addition of two new ed with more powerful turbo- three versions, the 0 405 for 108 engine versions. In the output charged diesel engines. The passengers, the O 405 G artic­ category above 200 kW we performance and torque cha­ ulated pusher bus for 170 pas­ managed to consolidate our racteristics of the turbocharged sengers, and the standard market position. 260 KW OM 442 A engine and O 402 mini-bus for low-cost, the turbocharged 320 KW OM low-volume (up to 50 passen­ 442 LA with intercooler are an gers) service. For regular ser­ excellent basis for optimizing vice over longer distances, the drivetrain configuration. The Daimler-Benz developed the resulting integral drive system new O 407 urban bus which in permits considerable fuel sav­ 1987 will replace the O 307 that ings and, at the same time, has been in production since higher average road speeds. 1973. The new, attractive O 301 touring coach for up to 32 peo­ ple meets the demand for com­ pact, medium-sized coaches. ADDED GROUP ACTIVITIES mand for aero-engines, in par­ development and production of ticular, increased substantially. building components and elec­ New Subsidiaries Operate In 1985, Dornier was able to tronic equipment for aircrafts, Successfully in The Market increase sales significantly, by multi-purpose aircrafts, defence Our new subsidiaries outside 40% to DM 2.1 billion. The prod­ technology, space flight and re­ the auto industry developed uct and service offering of the lated electronics to medical favorably in 1985. Both MTU Dornier group ranges from the systems. and Dornier substantially expan­ ded their business volume as expected. During the reporting period, MTU achieved group sales of DM 2.7 billion (+14%). The MTU group is engaged in the development and production of aero-engines and high-perfor­ mance diesel engines as well as exhaust gas turbochargers and industrial blowers. The de­

The turbo fan power plant PW 2037 brought to fruition by MTU in coopera­ tion with Pratt & Whitney resulted in the assumption of responsibility by MTU for the devel­ opment and manu­ facture of a complete module, the low pressure turbine.

27 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. Favorable Conditions For German Economy: ital spending activities of manu­ World Economy Continued Business facturers and suppliers, have In the first months of 1986 the Improvement also boosted employment upward trend in most of the In the Federal Republic of levels. This positive picture testi­ Western industrialized countries Germany, the upward revalua­ fies to the German auto indus­ steepened. Low interest and in­ tion of the D-mark in relation to try's high degree of competitive­ flation rates stimulated invest­ the dollar reinforces the price ness. After all, an industry which ment and private spending. The decline in crude oil products. is confronted with an unrestric­ drastic reduction in crude oil Overall, the conditions for a con­ ted, keen competition from im­ prices has had contrary effects tinuation of growth have thus porters in its own home market, in individual economic regions. improved. and which achieves more than However, in the long run, the Domestic demand has mean­ half of its sales abroad, can only world economy is expected to while replaced exports as the create additional jobs if its prod­ derive additional benefits there­ mainstay of the economic up­ ucts can hold their own in inter­ from. turn. In addition to the continu­ national markets. Real income is rising in the ing capital spending activity dur­ oil-importing countries because ing the last couple of months, Competitiveness Through of the favorable effect on price household spending, too, be­ Qualitative Growth levels, current account balance came a supporting factor of do­ The competitive strength of and economic growth. The mestic economic activity. Con­ German automobiles is the re­ highly-indebted newly-indus­ trary to previous years, real sult of a strategy which has con­ trializing and developing coun­ purchasing power is not being centrated on technical progress tries, inasmuch as they are not diminished by rising prices. The and qualitative growth ever among the oil-producing coun­ favorable impact caused by the since the 70's. This is reflected tries, will be favorably impacted. oil price decline and the tax re­ by constant improvements in The weakening of the dollar and duction in force since January safety, fuel economy and envi­ lower interest rates have similar have increased disposable in­ ronmental compatibility. The effects worldwide. By contrast, come. Foreign demand is ex­ Anti-Lock Braking System the economic and financial sit­ pected to give additional stim­ (ABS), the Acceleration Skid uation of some of the oil-ex­ uli to the capital goods industry. Control (ASR), efficient catalytic porting countries is deteriorating For the first time in years, em­ converters and the growing use because of substantial revenue ployment in the German indus­ of microelectronics are exam­ losses. Demand is declining, try picked up slightly again. For ples from a large variety of new, and many of these countries are 1986, the fourth year of eco­ value-increasing developments. losing their ability to service their nomic recovery, a considerable Technically progressive and debts. increase, of more than 300,000 therefore more attractive vehi­ jobs, is expected, so that the av­ cles are in growing demand erage number of unemployed world-wide. This trend proves is likely to drop. Nevertheless, how new and technically so­ the difficult labor market situa­ phisticated solutions can create tion remains a pressing prob­ quantitative growth and in­ lem for the negotiating parties crease employment. and political decision makers.

Favorable Employment Situation in The Auto Industry In contrast to the overall economy, employment in the German auto industry has been developing positively since 1970. Some 90,000 additional jobs have been created. More­ over, the marketing of cars and the use of cars, just as the cap- 29 The new O 407: with Good Prospects For its environmentally- The Automobile compatible engine, the modern styling, Independent research insti­ and the comfortable tutes assume that worldwide de­ and functional inte­ rior appointments, mand for cars and commercial it is the ideal bus for vehicles will rise by more than intercity travel. a third by the year 2000. This quantitative growth will be con­ centrated above all in the newly- industrializing countries. It is there where the greatest growth for transport needs can be ex­ pected, and it can be provided at acceptable cost only via the road. In the least developed coun­ tries, with poor infrastructure, the emphasis of demand will, for the time being, be on public transport. In the industrialized nations replacement demand will prevail. Here growth will be more of a qualitative nature, i.e. it will come about through greater value creation. As a Through product innovation, Micro-electronics, in particu­ consequence, the yardstick for broadening of available optional lar, applied in communication future sales and employment equipment, and the trend to­ and information technology, will potential will no longer be vol­ wards more powerful vehicles, be used in the automobile to a ume alone but also, and above the real value of German cars growing extent. Like many bran­ all, the technological quality has been increased by an an­ ches of industry which have standard of cars. nual average of 3.5 % since the reached a high standard of de­ In spite of these favorable early 70's. This disproves the velopment, the future of the auto prognoses for the auto indus­ claims that the automobile no industry will depend on its abil­ try, warnings against creating longer had any innovative po­ ity to intelligently introduce new excess capacity are certainly not tential worth mentioning, and technologies in marketable unjustified. The situation of that its production had no future products. For the automobile, some of the European commer­ in a highly industrialized coun­ this means even greater safety, cial vehicle manufacturers in try. On the contrary, as far as the fuel economy and environmen­ particular shows that existing automobile is concerned, resig­ tal compatibility, even greater capacity clearly exceeds the nation with regard to engineer­ ease of handling and servicing, current market prospects in ing potential is as uncalled for and even greater comfort and spite of the substantial capacity as pessimism with regard to quality. reductions during the last few growth prospects. Although the years. It would nonetheless still basic technical concept of the be wrong to correct such a sit­ motor vehicle is fully developed, uation by state intervention and when considered as part of a regulation. comprehensive and increasing­ ly integrated transport system, it still has great potential, espe­ cially with respect to the appli­ cation of new technologies.

30 Where structural problems In Western Europe in particu­ German Auto Industry are perpetuated by subsidies, lar, there is not only excess ca­ Benefits From Trends this means as a rule that excess pacity in the commercial vehi­ Towards Greater Quality capacity is maintained and eco­ cle sector but also a bottleneck For the German auto indus­ nomic growth and innovative situation in the field of technol­ try, with its great innovative po­ forces are weakened - at the ogically highly sophisticated tential, the future lies above all expense of future employment. cars, for which there has been in technolocically and qualitat­ The reduction of trade barriers, above-average demand for sev­ ively sophisticated cars. The the safe-guarding of a function­ eral years. manufacturers have sufficient ing international competition Only ten years ago, some of scope and technical creativity to and not least the creation of a the forecasts for large, powerful maintain their leading position united European home market cars were rather gloomy since as competition grows tougher. will therefore go a long way to­ they were not expected to meet Thus we have good reason to wards preventing excess pro­ the more exacting demands for consider further technological duction in the long run. Since fuel economy. It was in this ve­ progress as a special opportu­ the structural changes are com­ hicle category, however, that by nity in the market. However, the mon and necessary in every far the most spectacular savings risks involved for the growth and market and every branch of in­ were achieved. A similar phe­ employment prospects in our dustry, it is important to accept nomenon can be observed now industry must not be ignored. them as entrepreneurial chal­ that the low-pollutant car is These result from the danger of lenges, and not to fall back on making headway. In Europe, growing protectionism in the state support. cars with more than two liters to­ world markets and, above all, tal displacement will comply from the cost trend in the Fed­ with the most stringent pollutant eral Republic of Germany. emission regulations and they Real employment costs in­ will not only be "low-pollutant" cluding fringe benefits rose con­ earlier than smaller-displace­ siderably in the 70's. German ment cars but will also have the motor manufacturers have to lowest pollutant emission in ab­ pay labor costs which, at the solute terms. current exchange rates, are

The 4MATIC of Mercedes-Benz: in­ dependently activat­ ed and terminated four wheel drive with two differential locks. It reacts quicker and more precise than any driver ever could, due to its electronic- automatic regulator.

31 about a third higher than in Ja­ For 1986, the German auto Development work will con­ pan, France and Italy. In spite of industry expects a new produc­ tinue to place the emphasis on all product innovation, they tion record. While the good re­ the qualities to which Mercedes would therefore hardly have sults of 1985 are largely attrib­ cars owe their reputation: bal­ been able to defend their posi­ utable to the growth in exports, anced integration in design, tion in the world markets had a surge of demand is now likely quality and fully-matured eng­ they not comprehensively mod­ to come from the domestic mar­ ineering, safety and comfort, as ernized production at the same ket. This expectation is based well as value retention and du­ time. not only on the drastic decline rability. It remains our aim to of­ The Federal Republic of Ger­ in fuel prices but also on the fa­ fer products with high utility many, being a country with high vorable economic climate cur­ value combined with maximum labor costs, can only remain a rently prevailing in the Federal performance, environmental place of domicile for motor ve­ Republic of Germany. compatibility and fuel economy. hicle production if manufactur­ The drastic fall in oil prices will ing methods are applied which Daimler-Benz: not diminish our efforts to re­ excel in both flexibility and pro­ Increase in Production duce energy consumption, nor ductivity. The German auto fac­ In 1986, Daimler-Benz once our research and testing in the tories are today among the again plans to substantially in­ field of alternative sources of en­ most modern in the world. crease production and sales to ergy. Another major task of ours an expected volume of more is to make available, at accept­ Favorable Employment than 580,000 cars. The gradual able cost, a large variety of Prospects extension of our car plant in models in all series catering to We are confident that it will Bremen, and more intensive customers' individual wishes. continue to be possible to offer use of the flexibility potential in German motor vehicles at com­ production at the Bremen and International Commercial petitive prices. Only then can Sindelfingen factories will make Vehicle Business Continues our industry remain a long-term it possible for us to increase ca­ Difficult stabilizing factor for employment pacity, particularly for the Mid- In 1986, the international in our economy. Range Class. commercial vehicle business is likely to remain difficult because of insufficient capacity utilization. Dornier's X-ray sa- telite Rosat, which In view of a further decline in was developed and sales to Near and Middle East constructed by countries, competition will con­ order of the Federal Ministry for Re­ centrate even more intensively search and Techno­ on the traditional European mar­ logy, is supposed to search the skies for kets. The economic upturn, no­ X-ray radiation sour­ ticeable in Western Europe, is ces and subsequent­ causing the transport volume to ly observe selected sources. grow, but given a further im­ provement in transport effici­ ency, this does not necessarily imply a corresponding increase in the demand for commercial vehicles.

32 Apart from this, we are real­ Space telescope of NASA with roll-out istic enough to recognize that it solar generator will be increasingly difficult in which has a power the future to supply high-growth rating of 4 kW. non-European markets from German commercial vehicle factories. Many of the develop­ ing and newly-industrializing countries are protecting their markets against imports in or­ der to promote their own industrialization. With the increase in invest­ ment activity continuing, new ve­ hicle registrations in Germany in 1986 are expected to exceed last year's level. Because of poor demand for construction site vehicles, growth will be achieved above all in the van and light truck segment, al­ though sales of trucks of 6 tons GVW and above are also ex­ pected to pick up slightly. Ex­ port demand is expected to go down slightly in 1986 so that The majority of our produc­ We will apply sophisticated production can be assumed to tion companies abroad are op­ technology to further improve remain at 1985's relatively low erating under more favorable the efficiency, the utility value level. market conditions now. Mer­ and the quality of our vehicles. cedes-Benz do Brasil is head­ As in cars, improvements in the Daimler-Benz 1986: Increase ing for a marked increase in trucks' and buses' environmen­ in Worldwide Commercial sales, and the Argentinian sub­ tal compatibility must not be at Vehicle Production sidiary, having suffered a de­ the expense of fuel economy. In our commercial vehicle cline last year, is endeavoring to All Mercedes-Benz commercial business we expect growth again reach the production vol­ vehicles already comply with the above all in the van market ume of 1984. Mercedes-Benz EC pollutant emission norms or where, in the spring of 1986, we Espana, too, reckons to achieve are even well below them. That launched the new T2 series (4.6 a greater business volume; environmental compatibility and tons to 7.5 tons). We are also Spain's entry into the European economy are not incapable of anticipating positive market re­ Community is likely to stimulate association is proven by our sponse to our new bus models. sales further. By contrast, our new commercial vehicle en­ In the oil-producing countries, U.S. subsidiary Freightliner is gines with "Integral Drive Sys­ however, truck sales are expec­ having to cut back production tems" matched to their perform­ ted to decline further. In spite of because of the general weak­ ance characteristics. In the fu­ the extension of the heavy-duty ness of the heavy-duty (Class 8) ture, this will be a major area of truck range, with the new, more truck market. The group's com­ emphasis in our development powerful engines which form mercial vehicle production will work. Microelectronics are gain­ part of an optimized drive con­ increase overall. ing growing importance here, cept, and which has met with a too, as shown by the introduc­ positive market response, we tion of ABS and ASR for com­ will, therefore, not be able to mercial vehicles. step up production in Woerth. Production of our commercial vehicle factories abroad is likely to remain at last year's level. 33 Daimler-Benz: New Growth Prospects objective of remaining in the Future Prospects Favorable Through Broadened Company lead in the demanding market In the car division, we will Base for high-quality cars and com­ continue to pursue our strategy For quite some time, Daimler- mercial vehicles. of qualitative growth. Quantita­ Benz has pursued a concept of The competence and com­ tive growth will be acceptable broadening the company's mitment of our staff and our only to the extent that the ex­ base by the addition of high- sound financial basis are the clusivity of the Mercedes-Benz technology activities. This "quali­ prerequisites which will allow us marque is maintained. As far as tative jump" into new areas of to accomplish the now substan­ commercial vehicles are con­ technology has the aim of op­ tially broadened range of tasks cerned, we want to remain sup­ ening up new, long-term per­ ahead of us. pliers for virtually all types of ap­ spectives for our company and plication. Our aim is to stan­ of safeguarding its future. It is in­ Daimler-Benz: Trends in The dardize components as much tended to exploit the resulting First Three Months of 1986 as possible over the entire synergetic effects to develop In the first quarter of 1986, range, and with the aid of the new products and processes Daimler-Benz raised car output building-block system, produce which, without this interaction, to more than 146,000 units. them flexibly and efficiently. would not come about or not Worldwide commercial vehicle This objective will be pursued come about at such a high production was again around increasingly throughout the quality, as cost-efficiently or as 56,000 units; in Germany, some group; we want to coordinate in­ quickly. 34,000 commercial vehicles ternational commercial vehicle The focus of our interest is on were manufactured. activities more intensively than air and space travel, drive tech­ The new subsidiaries, MTU before, based on a global mod­ nology and electronics, includ­ and Dornier, have been able to ular production concept. The ing communication and infor­ continue last year's gratifying optimization of our worldwide mation technology. These fields business trend. AEG is success­ integral production structure complement our previous busi­ fully continuing the consolida­ will also contribute towards ness activities and help in op­ tion course initiated some years safeguarding employment in the ening up new dimensions for ago. German factories. A strategy as the automobile, itself a "high- Group sales in the first three comprehensive as this, how­ tech product". months of 1986 amounted to ever, has to be seen as a long- To fully meet the demands more than DM 14 billion. Sales term project, not least because that will be made on the auto­ of Daimler-Benz AG itself rose of the numerous protectionist mobile in the future, it will be 7 % to DM 9.5 billion. barriers in international markets. necessary to an increasing ex­ The activities on the produc­ tent to make use of sophisti­ tion side are being supplemen­ cated technology in and around ted by an extension of the sales the car. organization. With the founda­ It has always been our phi­ tion of Mercedes-Benz Japan losophy and conviction that we early in 1986 we have taken an have to deal with new technol­ important step in this direction. ogies inside the group as well. Furthermore, we will be intensi­ This is and remains the prereq­ fying our efforts in the fast- uisite for our ability to manufac­ growing South Chinese market. ture top-class products which To this end, Daimler-Benz will, are well balanced in every before long, establish a repre­ respect. sentative office in Hong Kong. In the long term, we consider With our new commitment in the creative integration of differ­ Mexico we are closing an im­ ent technologies as an oppor­ portant gap between the North tunity to further improve our tra­ and South American markets. ditional lead in the world markets. Yet there should be not doubt that Daimler-Benz will 34 continue to concentrate on the Hans K. Herdt Deputy Editor-in-Chief Boersen-Zeitung The history of Daimler-Benz AG and its two immediate fore-runners the Daimler- Motoren-Gesellschaft and Benz & Cie - is a representative piece of German, and also European, economic history. The family tree can be traced back directly to the two founding fathers of the automobile indus­ try, Karl Benz and Gottlieb Daimler, who independently of each other were res­ ponsible for steering the automobile onto the stage of world history one hundred years ago. From it a strong and vigorous industry has grown which is thriving to­ day throughout the world and is still con­ tinuing to put forth new shoots. A Vision becomes Commercial Reality Success gave the incentive to expand and this called for capital. The institution of the magination, hard work and competi­ share certificate, inseparably linked with I tion, an extremely effective combina­ the great inventions of the 19th century tion, have been associated with the auto­ and those of the even more dynamic 20th mobile from its very beginnings. Karl Benz century, came to the assistance of Karl Benz and Gottlieb Daimler, who met briefly, and Gottlieb Daimler too. The Daimler- were, like Wilhelm Maybach, men of hum­ Motoren-Gesellschaft AG was founded at ble background, which made them all the the end of 1890 with a capital of 600,000 more conscientious in exploiting the op­ marks, consisting of 6,000 shares. The ob­ portunity of a sound technical training. ject of this move according to Gottlieb They both went on to become enterpren- Daimler was not to "acquire partners who eurs who were able to test out their versa­ would bale me out but partners who would tile talents on the market, and after many back me up. I also wanted to avoid bearing

setbacks, their perseverance was eventu­ such a promising project solely on my ally rewarded. The automobile had been a own shoulders." Benz & Cie, Rheinische vision in the minds of many other contem­ Automobil- und Motorenfabrik of Mann­ poraries as well, but very few of them had heim, became a joint stock company in the unrelenting tenacity with which Karl 1899, with a starting capital of 3 million Benz and Gottlieb Daimler pursued their marks. In this year it was the world's lead­ goal, which for them was both a technical ing automobile factory, producing a total and a commercial one. Entrepreneurial in­ of 572 vehicles. Gottlieb Daimler, who had stinct has always been separate from pure temporarily taken leave of the business in inventiveness. 1894, died at the turn of the century, while Thus, there are probably sound reasons Karl Benz withdrew from active participa­ why the names of Karl Benz and Gottlieb tion in his own company in 1903. Daimler have lived on in the shape of a world company which looks on the pri­ vate enterprise traditions of its founders as a valuable inheritance and still upholds the virtues associated with them. This combi­ nation of pioneering enterprise, industry, reliability and quality-consciousness may also have been something of a regional product - the southwest German origins of the company, the combination of Swabia and Baden, have always been a valuable asset.

The Dawn of the Mercedes Era In 1899, Emil Jellinek was the first to enter he name Mercedes has a family back­ a Daimler ground too. It was introduced by a race car under T the name of Daimler customer as a lasting memorial to his daughter, his daughter. The businessman Emil Jel- Mercedes, for the linek, who had bought his first vehicle in "Week of Nice"; this was the 1893 in Cannstatt, was a tireless source of hour of birth ideas and advice to Gottlieb Daimler and of a world- Wilhelm Maybach, whose products he zeal­ renowned ously advertised on the Cote d'Azur. For marque. the "Nice Week", Jellinek had ordered a batch of Daimler racing cars which ran un­ der the name of his ten year-old daughter Mercedes and were overwhelmingly suc­ cessful. The name quickly caught on and the Mercedes era began at Daimler. The three-pointed star, which too became world-famous, appeared on the scene in Both Benz and Daimler had to adapt their 1911 when Daimler registered it as a trade­ automobile production to rising demand. mark. Its arms represent the three elements The Daimler-Motoren-Gesellschaft moved land, water and air in which the Mercedes from Cannstatt to Untertuerkheim, Benz & engines are used. Cie from Waldhofstrasse in Mannheim to Mannheim-Waldhof where a new factory was built, no less imposing than that of its Wuerttemberg competitor.

The Daimler-Benz AG is Born

After the First World War a critical J\. period began. In order to "safe­ guard against the risk of infiltration", the Daimler-Motoren-Gesellschaft had in 1919 issued preferred shares with multiple vot­ ing rights. Although, as in the case of Benz & Cie, which too had issued preferred shares and held unissued shares, this meas­ ure had not entirely prevented the com­ pany from falling prey to speculative man- euvres, it was nevertheless a deterrent to unwanted intruders; these shares were pre­ served, initially with a total value of 360,000 Reichsmark, after the merger in 1926. The preferred shares of today with a nominal value of DM 1,921,500 and held by the Deutsche Bank, which on certain kinds of resolution have a thirtyfold voting right, date back to this time. Additional financial problems at this time caused the Wuerttembergische Vereins- bank of Stuttgart and the Rheinische Cre- ditbank of Mannheim, both of which had come under the control of the Deutsche Bank, to recommend that the two firms join forces. The decision that Daimler and Benz should be merged on equal terms was taken at two general meetings, in Mann­ heim and in Stuttgart, on the 28th and 29th of June 1926. It had been preceded by the founding of an association of common interest in 1924. The share ownership situ­ ation now became more stable and the new, larger company was thus more independent.

Assembly carts were simple fore­ runners of the conveyor belt, which, for the first time in U.S.A. permitted highly efficient production, put­ ting the German automobile industry under competitive pres­ sure. At the general meeting of 1927, the The founding of Daimler-Benz AG was spokesman of the Deutsche Bank manage­ thus the response to a crisis of serious ment board justified the bank's involve­ proportions. ment on the grounds that it was one of the In 1925, both firms together had built first principles of a bank that it should be only 3,666 cars, this was less than the num­ prepared to risk losses when the survival ber of cars built in 1911. In 1926, car pro­ of a company of vital importance to the duction had abruptly slumped a further national economy was at stake. The bank 40% to 2,169 - the market had collapsed. felt satisfaction, he said, to have been able The situation was of the utmost gravity to do customers and the economy this ser­ when Daimler-Benz AG was formed. In the vice. The foundation stone was now laid "life and death struggle" against powerful for an intensive and continuing relation­ ship between Daimler-Benz and the Deut During the mid- sche Bank. 1920s, the eco­ The Daimler-Motoren-Gesellschaft, nomic survival could only be which acted as the absorbing company. assured by the brought into the new company the Daim- merger of Daimler ler factories in Untertuerkheim, Berlin- and Benz. Marienfelde and Sindelfingen, while the Benz & Cie assets comprised the plants in Mannheim and Gaggenau. All these facto- ries are still used by Daimler Benz AG to- day. The registered office of the new com­ pany was in Berlin, but the administrative: headquarters remained in Untertuerkheim, which in 1905 had become part of Stuttgart. The freshly merged Daimler-Benz AG was initially vulnerable and in need of protec- tion. In the U.S.A. four and a half million cars were produced in 1926, as compared with half a million in the whole of Europe, Germany accounting for a tenth of this fig- ure. From 1924 to 1927 the number of German car manufacturers had fallen from 86 to 19. Productivity in the United States, where the first assembly lines were in trial operation, was twice that of German facto- ries. And the ominous trade imbalance be­ tween car imports (11,400) and exports (2,700) posed grave problems. manufacturing experience, joint purchas­ ing of raw materials and a large field organi­ zation - to offer their customers all over the world passenger cars and commercial vehicles of insurpassable quality at a rea­ sonable price". Thus the concept of quality was invoked right at the founding of Daimler-Benz AG.

Commercial Vehicles - In at the Start

ight from the start, the Daimler-Benz R. range included commercial vehi­ cles. As early as 1895, Karl Benz had devel­ oped the first selfpropelled omnibus on the basis of his "eight-seater Landauer", thus giving the incentive for the first motorised omnibus service in Germany. On March 18, 1895, two of these Benz motor buses An advertise­ ment, in form of replaced the post office horse and carriage a stock certificate, service between the town of Siegen and announced the the outlying villages of Netphen and Deuz. merger in the year 1926 And in 1896, twenty years after the first four-stroke engine had been developed and ten years after the first roadworthy four- foreign competition the company was for wheeler car with fast-running petrol en­ some time on the very brink of extinction. gine had been brought out, Daimler and In 1926, an advertisement in the form of Maybach had designed the first truck in the an official certificate appeared with the fol­ world. However, it was almost ten years lowing message to car buyers: "The two before the haulage industry took notice of eldest and largest car manufacturers in Ger­ this advance, whereupon the commercial many have merged in order to be able - on vehicles started to revolutionize the trans­ the basis of more than 40 years of car- port of goods.

The first bus was developed in 1895, based on the eight-seat "Landauer". It operated the route Siegen- Netphen-Deuz. The first annual Benz & Cie had been even more involved report of Daimler- with commercial vehicles than the Daimler- Benz AG is also Motoren-Gesellschaft. In 1925, Daimler the document of a produced 881 commercial vehicles, Benz crisis. It reported limited purchasing 1,364. In 1926, the amalgamated company power at home, In 1923, the first produced only 1,545 - the economic crisis duty barriers for diesel truck was was affecting the commercial vehicle mar­ exports, and supe­ put on the rior manufactur­ road by Daimler. ket too. ing methods in the Its engine had U.S.A. been developed at the Marienfelde plant.

Triple victory for the Mercedes SS in 1928, at the uGrossen Preis of Germany" on the Nuerburgring.

From the First Annual Report sources, America was able to build up over of Daimler-Benz A G a weakened Europe during the war and for many years thereafter." espite numerous racing successes However, after the Berlin Motor Show in D (Daimler-Benz had just won the November 1926, at which the company German Grand Prix), sales had suffered presented new models, the long-awaited from reduced domestic purchasing powef recovery in sales took place and the board as reported in the first annual report of of management was able to note with satis­ 1926. High tariff barriers abroad had pre­ faction "that the export markets, too, have vented exports from compensating for this, displayed strong interest in our new cars Competition from countries with non- by a not inconsiderable volume of orders". stabilized currencies had also played its The proportion of car production expor­ part. "In particular a major concerted effort ted rose to 10 %. Now the wind began to was needed to narrow somewhat the mas­ gather behind the sails of Daimler-Benz AG, sive lead which, thanks to unlimited re- particularly since the merger had led to a Early connec­ Brief Upturn Followed by World Slump tions to the North American Market existed pronounced upturn took place in also in the com­ the years 1927, 1928 and 1929, mercial vehicle sector: and in 1929 Daimler-Benz commenced pro­ A Mercedes-Benz duction of trucks at its Gaggenau factory. L 5000 in New This was a standard model with a five-ton York (1929). payload and a six-cylinder prechamber die- sel engine. Annual sales, starting at 2,100, had doubled four years later and in 1936 reached 9,200 units. In between came the world slump. Daimler-Benz turnover, which had climbed from RM 68 million in 1926 to RM 121 million in 1927, and to more than RM 130 millionin 1928 and 1929, slid back in 1932 to RM 65 million. The workforce was cut back from 18,124 in 1927 to 8,850 in 1932. By the end of 1932 a loss of RM 13.4 mil­ lion had accumulated, equivalent to almost a third of the capital stock. This was a large amount, although not life-threatening be­ cause there were only RM 5 million of bank The standard liabilities requiring debt service. model L5, a The long-term viability of the new com­ truck which had been manufact­ standardized administration and to a book pany Daimler-Benz AG was by no means ured since 1929 profit which was used for "internal write­ certain at the beginning. Major efforts and a in Gaggenau, offs and the accrual of provisions". Inven­ purposeful reorganization were required was equipped first. In 1931, the share capital was reduced with the newly tories had been reduced. "Non-moving developed models are no longer held". To consolidate to RM 433 million by a share redemption, 70 horse power bank debts, 6 % debentures were issued and and in 1933, by a capital reduction to just OM 5 engine. an increase in capital stock of RM 14 mil­ lion to RM 50 million was proposed to the The year 1928, shareholders at the annual meeting for th e in which this Daimler-Benz acquisition of new plant and equipment; stock certificate the new shares were issued at a premium was issued, was of 10 %. Only RM 9 million of this - nomi­ marked by a temporary eco­ nal value - was issued to existing nomic upturn. shareholders.

under RM 26 million. This was the bottom of the trough. Daimler-Benz, then Ger­ many's third largest automobile manu­ facturer with a market share of 11 %, sub­ sequently participated in the general up­ swing in the motor industry which followed the abolition of the motor vehi­ cle tax on new cars effective April 1,1933. 1936 - First Dividend Naturally enough, political developments in Germany had already thrown their en years after the merger, in spring shadow on Daimler-Benz AG. In the sec­ 1936, the shareholders in Daimler- ond half of the 1930's results were impaired Benz AG received their first dividend of by the government's order to export at all 5 % for the fiscal year 1935. Turnover had costs. In 1938, Daimler-Benz had to accept risen from RM 147 million to RM 226 mil­ an RM 6 million loss on its export sales. lion and production from 11,255 to 15,199 This was not the only adverse factor visibly cars. Commercial vehicle production rose: affecting the results for that year. Daimler- from 5,617 to 8,459 units. The pre-war Benz had to take part in the four-year plan peak in car production was attained in 1937 which prepared the German industry for a with 27,955 vehicles, while commercial changeover to arms production. For the vehicles production continued to rise to first time since 1935 it had not been possi­ 15,694 units in 1939. In 1939, turnover ble to finance all investments from depre­ amounted to RM 438 million and the work­ ciation provisions; bank loans had to fill force had dropped to 31,095 from 35,123 the gap. Meanwhile, the state was taking an in the previous year. In September, the Sec­ ever greater slice in taxes, two-thirds of ond World War had broken out which had these via property taxes. The tax bill in an immediate impact on the number of 1938 amounted to RM 23 million, twice employees. that of 1936.

An impressive three-axle bus of the thirties, was equipped with a 150 horsepower 6-cylinder motor.

An aircraft engine factory, chiefly dedicated to armament preparation, op­ ened in Genshagen near Berlin in 1936. Earnings thus remained again modest in At the Hannover International Export Fair 1938, likewise the dividend of 7.5 %. All in May 1948 three new vehicles were pre­ the same, the shareholders were asked, for miered. On the commercial vehicle side the first time since 1927, to contribute more these were the three-and-a-half ton truck, capital. The basic share capital was on the car side the 170 S with a more pow­ increased on the basis of 1 for 2 at an issue erful engine and more comfort than the price of 12 % above par. Following this, in 170 V of 1946, and the 170 D diesel ver­ 1939, Daimler-Benz had a net equity of RM sion. All these models proved popular. On 46.5 million. Subsequent capital stock in­ September 28, 1949 , eleven days after a creases raised the basic share capital to RM 30.5 % devaluation in the pound was an­ 120 million by the end of the war. nounced, the D-mark was devalued by

After the ficti- tious prosperity came destruc­ tion: the Unter- tuerkheim plant after an air raid in 1944.

Fresh Start After The Second World War 20.6 %, and the dollar now stood at DM 4.20. Thus more favorable conditions were n June 18, 1948, the last day of created for West German exports. stock exchange trading before the The final balance sheet measures were Currency Reform, the Daimler-Benz stock taken at the stockholders' meeting on May was quoted at 156. On July 14, the first day 25,1951, putting an end to the war and its of trading in the new "era", it was quoted, aftermath. In the DM opening balance sheet, still with a nominal value of 100 Reichs­ which was approved on that date by the mark, at 18. When official trading was shareholders, basic share capital was re­ resumed at the beginning of March 1950 it duced in the ratio of 5 to 3 from had risen to 50. In the same year car pro­ 120,259,200 Reichsmark to 72,155,520 duction had risen to 33,906 and commer­ D-marks, of which DM 155,520 pertained cial vehicle production to 8,399 units. to preferred shares. The board reminded Turnover amounted to DM 502 million of shareholders that by the spring of 1945 the which 133 % from exports. company had almost ceased to exist. The In May 1945, immediately following the production facilities were a sea of rubble end of the war, Daimler-Benz had 2,860 and communication between the plants employees. The year-end figure for all five was impossible at the beginning. But now, plants in the western zones and West Ber­ in May 1951, the company already had a lin was given as 12,850. One year later, it workforce of 32,000, almost as many as the end of 1946, it had risen to 17,850. before the outbreak of war. 4,000 cars, be­ This was the year in which the America ti tween 700 and 800 three-and-a-half-ton foreign minister James F. Byrnes in his fa­ trucks and more than 200 six-ton trucks mous speech in Stuttgart had expressly per­ were assembled monthly. Full order books mitted the defeated Germans to "rebuild led to waiting times of many months. their industry for peaceful purposes". Daimler-Benz Establishes Itself More and More on the World Markets

n 1950, production and marketing of the Daimler-Benz-designated Uni- mog was taken over from the firms Gebr. Boehringer and Erhard & Soehne and trans­ ferred from Goeppingen to Gaggenau. Much later, in 1972, this family of prod­ ucts, which has its own separate sales and service organisation, was enlarged with a new vehicle, the MB-trac. By 1985, some 300,000 Unimogs and MB-tracs had been sold, in almost every country in the world. After the Currency Reform, a concen­ trated effort was made to reenter the world market. Daimler-Benz led the way in West Germany's vehicle exports. By the begin­ ning of the 1950's, passenger cars and high- Loading of mod­ Reconstruction would not have beei performance engines were being shipped el 170s in 1951, possible just from internally generated at the Bremen via Rotterdam as far as Japan. By 1950, overseas harbor. funds. Medium- and long-term loans had to Daimler-Benz was established in 44 coun­ This model series be taken out. Plant and equipment, and tries with 51 general distributors and 338 was also a suc­ inventories abroad and in East Germany, outlets. In 1951, 6,540 passenger cars and cess abroad after the war. with a book value totaling RM 10.1 million, 1,586 commercial vehicles were exported. had been lost. The RM 40 million holding By 1952, Daimler-Benz was represented in in Daimler-Benz Motoren GmbH in Gens- 79 countries. In February 1954, at the New hagen was valueless too. This factory to York Sports Car Show, the new version of the south of Berlin, which had been set up within the framework of the national- socialist armament policy, and which had commenced operation at the end of 1936, was dismantled and confiscated. In addi­ tion, Daimler-Benz AG had lost its foreign subsidiaries, as well as the sales offices in Vienna, Zurich, Paris, London and Budapest. They had a much higher real value than the token amount at which they were car­ ried on the balance sheet. In total, assets with a value of RM 194.3 million were lost, and that was the book value which was lower than the real value. Furthermore, this figure took no account of dismantling dam­ ages which occured after 1945. The cash resources of RM 210 million shown in the 1945 balance sheet had dwindled to RM 108 million, and after conversion i:o the Mercedes 300 SL was enthusiastically The UNIMOG (Universal- D-marks amounted to DM 8 million. received and in the same year turnover for Motor-Geraet), For 1951 and 1952 dividends of 6 % we re the first time topped one billion marks. workhorse paid. This rose to 8 % for 1953- The board Remarkable progress was also made in and trans­ portation all in of management reported the frictionless the commercial vehicle division; by set­ one - soon be­ introduction of the new car models which ting up its own assembly plants abroad, the came known and had been favorably received at the Frank­ company was able to gain a footing in pre­ appreciated all furt Motor Show of spring 1953. viously inaccessible overseas markets. In over the world. Buenos Aires, Mercedes-Benz Argentina was launched, in Sao Bernardo do Campo, Mercedes-Benz do Brasil was founded and in India, in conjunction with the Tata group, a truck plant was built in Jamshed- pur. Due to this, India became an impor­ tant customer during the 1950's. Exports of "completely knocked down" (CKD) trucks which were then assembled at a for­ eign location became an important part of the company's business. Daimler-Benz has A Distinctive Identity Develops contributed significantly to the economic and industrial development of India and his was the decade when the charac- the two South American countries. teristic company identity of Daim- No less important was the early redis­ ler-Benz began to take on stronger shape. It covery of Mercedes-Benz cars by the Amer­ was different between the two main prod­ ican market. In 1956, 3,700 cars were sold uct lines. For the cars it consisted in exclu­ to North America, in 1967 the figure was sivity, singularity and individuality, for the Examples for an almost 23,000 and in 1985 some 89,000. early commit­ commercial vehicles in a broad, full-line ment abroad: In 1955, Daimler-Benz of North America product range. opening of a was founded, as an importing company. With its cars, the company concentrates factory in Sao Marketing was initially carried out by the Bernardo do on high-class, technically advanced vehi­ Campo, Brazil, in American vehicle manufacturers, Stude- cles. The commercial vehicle range on the 1956 (above), baker, later by the Mercedes-Benz of North other hand, extending from light vans and frontal view America distribution company. In terms of of th e Mercedes through to heavy-duty trucks, from Un- Benz Argentine sales, the U.S.A. had moved into first place imogs to buses; it thus meets the full range S. A. facilities in among the export markets by 1959- of transport requirements. For the cars, a Buenos Aires. A convoy of the legendary 300 SL on the autobahn, after their pick-up at the Sindelfingen factory by mem­ bers of the Merce­ des-Benz Club of America.

Between 1954 and 1958, 100,000 passenger cars model 180D were manufactured. This car - a first for Mercedes-Benz - had a pontoon type chassis. State visit by U.S. President Dwight D. Eisenhower in Bonn, in 1959. He is accompanied by Federal Chancellor Konrad Adenauer in a MB 300.

cautious capacity policy oriented to long- The factory in Woerth, planned term market chances now dominated, on the "green while the concept of the commercial vehi­ meadow", com­ cle range followed the precepts of large- menced produc­ tion in 1965. It is scale production and the building-block known world-wide system. as one of the most At the stockholders' meeting of July 18, modern manufac­ turing facilities for 1955, the Flick group came forward as a trucks. major shareholder, in possession of a 25 % holding in the company. The ownership pattern, which was to prevail into the 1970's, was taking shape: the Flick group, Quandt, and as a kind of regulating factor, the Deutsche Bank which had been pres­ ent from the start. At the stockholders' meeting in July 1957, the Flick and Quandt groups together held exactly one half of the share capital. In 1974, Quandt with­ drew while the Flick group, which had started buying Daimler-Benz shares in 1952, withdrew in two stages, firstly at the turn of 1975/76 and secondly at the turn of 1985/86. Production Capacity is Expanded gart-Zuffenhausen, the Werkzeugmaschi- nenfabrik Koengen GmbH & Co. KG and n 1958, Daimler-Benz took over the the Maschinenfabrik Esslingen AG. The (new) Auto Union GmbH in Ingol- Hedelfingen-Bruehl-Esslingen complex stadt from Friedrich Flick and the Swiss alone gave another 550,000 square metres industrialist Ernst Goehner, and seven years of industrial space in the immediate vicin­ later sold it to Volkswagen, building the ity of the Stuttgart-Untertuerkheim plant Woerth factory with the proceeds. This (which itself extended over an area of some transaction did not result in any tax liabili­ 560,000 square metres). The space prob­ ties since it was considered a direct swap. lems at the latter site could for the time The rurally situated plant in Woerth, com­ being be regarded as solved. pleted by 1967, centralized truck produc­ Besides the supply industry, the region tion, which had previously centered in as a whole profited from this expansion at Mannheim and Gaggenau. The concomi­ Daimler-Benz. The company had not only tant standardization of parts, components done itself a good turn but at the same time and models facilitated the necessary quan­ had implemented a piece of active struc­ tities which are necessary for efficient, large- tural policy. The Wuerttembergische scale production of vehicles and com­ Baumwoll-Spinnerei und -Weberei, a spin­ ponents. ning and weaving factory, had been hard- The move brought an expansion in ca­ pressed by the textile crisis; Horex in Bad pacity, from 36,000 to initially 48,000 Homburg - since 1960 a flourishing branch trucks and later, by the end of the 1970's to of Daimler-Benz - had been suffering from around 100,000. Woerth is now the larg­ the flood of imports from the Far East which est truck assembly plant in Europe, em­ caused problems for the German bicycle ploying a workforce of more than 10,600. industry. Another new Daimler-Benz ac­ Car capacity too has been steadily expan­ quisition was the Duesseldorf plant, which ded. In the ten years from 1958 to 1967, had originally been rented by Auto Union the monthly capacity of the Untertuerk- GmbH. The Maschinenfabrik Esslingen, heim and Sindelfingen factories doubled, part of the Gutehofifnungshuette group, had rising to 18,000 vehicles. For 1968/69 a fallen behind the times with its traditional production target of 20,000 cars per month product range and would in any case have was set. required restructuring. To overcome the severe space shortage in Untertuerkheim, Daimler-Benz AG bought or leased a number of firms around this time, including Schaudt Maschinenbau GmbH in Stuttgart-Hedelfingen, Wuerttem­ bergische Baumwoll-Spinnerei und -Weberei in Esslingen-Bruehl, Horex KG in Bad Homburg, Ernst Heinkel AG in Stutt-

Plant 2 of MTU is situated in Man- zell, a part of Friedrichshafen. The Mid-1960's and the Birth of MTU was renamed Mercedes-Benz of South Af­ rica in 1984 when Daimler-Benz took a s a result of the good understanding majority holding. which had come about between In 1985, a total of 121 general distribu­ Daimler-Benz and GHH through the Ma- tors were working for Daimler-Benz, im­ schinenfabrik Esslingen, the two compa­ porting passenger cars and commercial ve­ nies came to an agreement on a reorganiza­ hicles from Germany; the latter either as tion of large engine and turbine produc­ built-up or knocked-down units. These dis­ tion. The two components of the later joint tributors assemble the parts, sell the vehi­ enterprise MTU Motoren- und Turbinen-Un- cles either themselves or (with the help of ion GmbH were Maybach Mercedes-Benz special wholesalers) through local retailers Motorenbau GmbH - which had emerged and ensure an extensive network of work­ out of the Maybach Motorenbau GmbH in shops to maintain and repair the vehicles. Friedrichshafen in 1964 - and M.A.N. In the most important export markets, Turbo GmbH in Munich (formerly BMW Daimler-Benz is also represented by 23 Triebwerkbau GmbH), which had been in­ company-owned sales companies. tegrated into the GHH group in two stages, In 24 countries, many of them in the in 1955 and 1960. Third World, there are Mercedes-Benz as­ These two companies merged on an sembly plants; in eight of these the com­ equal basis at the end of 1969. At the same time, a cooperation agreement was reach­ ed between Daimler-Benz and M.A.N, re­ garding mutual supply of assemblies and components for commercial vehicles. This was on the basis of a joint venture agree­ ment terminable in 1981; this agreement was not renewed. Thus the complete take­ over of MTU in 1985 by Daimler-Benz AG was a logical move. It extended the exist­ ing fields of activity, vehicle and engine building, and was a step in the desired di­ rection of widening the company's base to include new, advanced technologies. It thus marked a return to the situation in the early days of Daimler-Benz, when a com­ plete range of propulsion systems for trans­ port on land, water and in the air were offered. pany has an equity holding. Finally, there Know-how transfer as development New Commercial Vehicle Plants are 25 independent manufacturing plants contribution: at Home and Abroad abroad, either with or without a Daimler- conveyance of Benz holding, three of them licencees. They practical and theoretical hen recession led to a crisis in the import parts and components from Ger­ knowledge through German commercial vehicle in- many in varying quantities which are de­ schooling and train­ pendent upon the relevant industriali­ ing of youths from dustry in the second half of the 1960's, many countries. Daimler-Benz AG was involved in the re­ zation regulations. Of these the largest at structuring of a special kind. The company the present time is Mercedes-Benz do Brasil acquired the truck marketing organization in Sao Bernardo do Campo; it now has a of the Krupp group when the latter ceased subplant in Campinas, which in 1979 be­ truck production, and also took over the gan producing buses and which has op­ commercial vehicle business of Rheinstahl ened a central parts depot. AG which had been conducting business As in the south, the North American sub­ under the name Hanomag-Henschel. It thus continent too has four factories, one in Can­ took possession of factories in Kassel, ada (near Vancouver) and three in the Hamburg-Harburg and Bremen. The Bre­ U.S.A., in Portland on the Pacific Coast, in men factory was later to become purely a Mount Holly, North Carolina and in Hamp­ car plant. ton, Virginia. These production plants are This strengthening on the domestic mar­ run by the American heavy-truck producer ket went hand in hand with an expansion Freightliner, whose capital stock was ac­ of international activities. In 1966, the com­ quired in 1981 by Daimler-Benz. Mercedes- pany had already acquired a holding in the Benz Truck of Hampton, which was South African United Car & Diesel Distribu­ merged with the Freightliner organization, tors (UCDD) in Pretoria. This company, is responsible for the assembly and distri­ which assembles both commercial vehi­ bution of medium-heavy-duty trucks pro­ cles and passenger cars in East London, duced by our Brazilian subsidiary. Daimler-Benz Today

n terms of turnover and with a world- wide workforce of more than 230,000 at the end of 1985, Daimler-Benz is one of the largest industrial companies in West Germany and one of the leading vehi­ cle manufacturers in Europe. But at the same time, size and growth have never been regarded at Untertuerkheim as ends in themselves. What has remained since the very first days of the automobile under Daimler and Benz one hundred years ago, is the constant striving to achieve the best. Value retention, quality and love for tech­ nical detail come before quantity. No less A truck of the The 11 Daimler-Benz plants; in Germany important for an integrated development American heavy- in all areas is a sound company policy. The duty truck manu­ operate in a closely interlinked production facturer Freight- system. The traditional car-making plants, model line policy of Daimler-Benz is based liner, a subsidiary Stuttgart-Untertuerkheim and Sindelfingen, on balanced design, modern and matured of Daimler-Benz technology and an optimal combination of AG since 1981. were joined in 1984 by the new Bremen plant. safety, quality, durability and economy, On the commercial vehicle side, the cen­ while diversity and breadth of the product tral truck assembly plant in Woerth on the ranges are further characteristics. Rhine is supplied by the component- producing factories of Mannheim and Gag- genau, Berlin-Marienfelde, Hamburg-Har- burg and Kassel. The Duesseldorf plant pro­ duces steering assemblies for both cars and commercial vehicles and is also the central assembly plant for all Mercedes-Benz vans. The Bad Homburg plant produces engine valves. The objective is maximum produc­ tion quality combined with high produc­ tivity. Additionally, the market requires flexibility in both quantities produced and models offered. In recent years, every ef­ fort has been made to optimize the flexibil­ ity of domestic production within the framework of the long-term production concept. A Mercedes-Benz 190 and a 1961 Borgward Isabella symbolize the tradition of car manufacturing in Bremen.

Mercedes-Benz do Brasil today is by far the largest foreign subsi­ diary with its own commercial vehicles produc­ tion facilities. Industrial robots assure consistent­ ly high precision standards in body shell con­ struction and free man from heavy manual labor.

Experience of Work stations The two major spheres of activity on co-workers and and duties are which the success of the company is based love for technical adaptable to the - passenger cars and commercial vehicles details are essen­ individual: tial pre-requisites Ergonomic work - must be kept strong and stable. The prod­ for the ful­ arrangement is a uct range combines the latest technology fillment of the matter of high with contemporary economy and individ­ highest quality priority at demands. Daimler-Benz. ualistic diversity. It is backed up by a very extensive service network and customer aftercare - from the express delivery ser­ vice for parts to transport consultation. The broad dispersion of sales markets has played an important part in the steady and balanced upward trend of the com­ pany. International-mindedness has char­ acterized the policy of the company since the days of its founders Gottlieb Daimler and Karl Benz. Vehicles with the Mercedes star are a familiar sight on roads all over the world. Half the passenger can. and an even greater proportion of the domestically pro­ duced commercial vehicles are exported to 170 countries around the world.

Widening The Company Base

fter the complete take-over of MTU, With three long­ Daimler-Benz went on in the mid- distance records, dle of 1985 to acquire a majority holding in the 190E 2.3-16 Dornier GmbH, a company working in the demonstrated its fields of aviation, space, transport, medi­ roadworthiness at extreme cine, the environment, energy and infor­ speeds. mation technology. Since February 1986, AEG too has been part of the Daimler-Benz group. AEG is one of the most important companies in the German electro- engineering industry; high technology ac­ Optimal trans- portperform- counts for more than 50% of its turnover. ance, at still Given the continuing rise in research and greater efficiency, development costs, Daimler-Benz has thus characterize the ensured itself the opportunity to partici­ "lightweight" truck class from pate in ever more costly long-term devel­ Woerth, intro­ opments in fields like information and com­ duced in 1984. munication technology not just in the automobile but in other products as well. The longest, most Creative integration of different technol­ modern and saf­ est track-guided ogies is seen as offering the chance in the bus-road in the longer term of further expanding the com­ world was inau­ pany's traditional leading position in the gurated in Ade­ laide, Australia, world markets. using Mercedes- Benz buses. Changes in Share Capital

t the end of 1985, Daimler-Benz was In Oman, MB valued at more than DM 40 billion trucks 2632 are on the stock exchange, as against not quite being employed under extremely DM 10 billion four years ago. This shows difficult condi­ the high esteem in which the shares of tions. Daimler-Benz AG are currently held by do­ mestic and foreign investors. Here too there are interesting historical parallels. In May 1958, the Daimler-Benz share was the second listed security to break through the 5 00 barrier after the war. Soon the 1000 barrier too had been broken and in early August 1960 the highest rating of 7,800 was recorded. The basic share capital, at DM 72.16 mil­ lion, had remained unchanged since the conversion to D-marks. The entire recov­ ery - turnover had meanwhile risen to just under DM 3 billion by 1960 - had been achieved under the company's own steam. As a logical consequence, basic share capi­ tal was now increased through the issu­ ance of bonus shares (i.e. retained earnings generated by the company were conver­ ted into dividend-carrying share capital) on a 1.5 for 1 basis to DM 180.39 million, and thus accommodating the increased vol­ ume of business. After this first capital ad­ justment, the Daimler-Benz share was quoted at "just" 4,080. In relation to the In the category of old capital, this was really 10,200, clearly luxury cars, indicating that the anti-spasmodic effect in­ Mercedes-Benz tended had not been achieved. passenger cars are the undisputed "The fact that an automobile factory after leaders in the years of continued plant expansion still has U.S.A. a waiting period of 21 months naturally serves to encourage the investor", the eco­ nomic press commented in 1960. The rise of the Mercedes-Benz cars on the American market seemed to have made a deep im­ pression everywhere. The mood was optimistic. In 1960, a 12 % dividend was paid on the increased share capital. In the following year, the 75 th anniversary of the Daimler and Benz automobiles, it was again 12 %, following a further increase in the capital stock, this time on a 1 for 2 basis to DM 270.58 million. Another five adjustments followed between then and 1974. By this time, the Daimler-Benz basic share capital had been increased seven times from com­ pany resources and twice by shareholders' capital contributions. It rose in the process fromDM72.l6millionin 1951 to DM 1.19 billion in 1974, even though the sharehold- Assembly of air­ ers injected only DM 118.4 million over craft jet engines this period. Quite naturally, this helped to at the MTU plant ensure a buoyant market value, aided by in Allach near the fact that between 1950 and today the Munich. dividend has remained constant only four times, and in all other years has steadily increased even in the critical period of the 1973 oil crisis and its aftermath. Of the total share capital of DM 1,699 AEG solar plant on the Northsea million, as shown in the balance sheet as at island of Pell- December 31, 1985, DM 628 million has worm delivers a been contributed by shareholders subsequ­ maximum of 300 kilowatt of ently to the currency reform; 510 million energy. of this amount alone since December 1977.

Change in Shareholder Structure

n the 1970's, the shareholder structure at Daimler-Benz changed radically. In 1974 and 1975 particularly, a lot of move­ ment took place. The Quandt group sold its holding of approximately 14 % to the oil sheikdom of Kuwait. Flick sold 29 % of the Daimler share capital to the Deutsche Bank, which in turn contributed 25.23 % of it (nominal value DM 300 million) to the newly-formed Mercedes-Automobil-Hold- ing AG (MAH). To finance this, MAH is­ sued its own shares in the same amount. Half of these shares were taken over by The "Instrument institutional investors. The other half was Pointing System" broadly distributed to the general public at (IPS) is a precise a price of DM 305 for each share with a par alignment sy­ stem, used in the value of DM 50. Since then, the Daimler- Space Shuttle Benz share is being traded on the stock Program. It was exchange with its twin sister, the Mercedes- designed and produced by Automobil-Holding share. The latter star­ Dornier by order ted trading on October 7, 1976. Today of the European Daimler-Benz is a much more broadly-based Space Agency (ESA). public company than in the past. Just as in the twenties, the Deutsche Bank, in 1975, once again helped to shield Daimler-Benz from the danger of foreign control. Again, on January 1,1986, the Deutsche Bank did not hesitate to take over the Flick group's residual 10 % holding for distribu­ tion. Almost overnight, this parcel was bro­ ken down into small lots with the result that just under one-third of the Daimler- Benz share capital (except the Mercedes- Automobil-Holding portion) is now widely scattered. The 29 % Daimler-Benz holding, which Flick had sold to the Deutsche Bank at the turn of 1975/76, had a value of about DM 2 billion. The second 10% parcel had a 1986, the company was valued at more than DM 50 billion by the market. Naturally, the Daimler-Benz share has been exposed to all the ups and downs affecting the stock exchange due to major and minor political convulsions, from the Korean crisis at the beginning of the 1950's, the powderkeg East-West conflicts during the "Cold War" era, the Middle East trou­ bles and to the oil price shocks. It had to react to fears of inflation and to the restric­ tive counter-measures of the Bundesbank, to revaluations and devaluations of the D-mark, to the oscillations of the currency markets (turbulent at the best of times) to international recessions, to rising and fall­ ing interest rates and to crises in world The officially market value of more than twice that trade. traded stocks of Mercedes-A uto- amount. Flick is no longer a Daimler-Benz The seven capital adjustments and the mobil-Holding AG, shareholder. An era had come to a close. five "classic" capital increases each time which have made the Daimler-Benz share "lighter" for been on the mar­ a while. The larger number of shares out­ ket since 1976, were distributed Daimler-Benz Shares - standing led to temporary reductions in by the Deutsche A Blue Chip on the Stock Exchange the value of the individual shares. Bank. One half The Daimler-Benz share has always main­ was placed with institutional in­ part from the usual fluctuations and tained its momentum. Its fluctuations were vestors, the other vacillations, the market trend of sometimes considerable, for example be­ half was widely the Daimler-Benz stock has always been tween DM 663 and DM 342 in 1983 and dispersed. upwards. In 1983, Daimler-Benz had a to­ between DM 1,257 and DM 594 in 1985. tal market value of DM 18.1 billion, in mid- But every time, as befits a blue chip, the May 1985 DM 24.6 billion. With the stock healthy situation of the company carried it selling at DM 1,500 at the end of April through. The soundness, worldwide pres­ tige, technical reputation and steady mar­ ket penetration of the Mercedes star have always prevailed against the vicissitudes of the stock market. This is a favorable omen for the second century of the automobile.

Daimler-Benz stock is held by about 260,000 shareholders. More than 100,000 emplo­ yees own stock in their company. 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. The hundred-year-old his­ Uniform Exhaust Gas Efficient Emission Technology tory of the automobile is a re­ Regulations in The Relieves The Strain on minder of technical progress European Countries The Environment Better Than and engineering achievements In the year under review, ex­ Administrative Measures geared to the future. One of tensive negotiations within the The large number of investi­ the chief factors responsible European Community regarding gations which have now been for the automobile's great suc­ future exhaust emission limits conducted prove convincingly cess, as well as its economic for cars were conducted. that state interference, for exam­ and social impact, was the It was not until the Luxem­ ple, general speed limits on way it adapted flexibly to vari­ bourg Compromise of June motorways, does not have any ous, often changing technical 1985 that regulations for the lasting effect in terms of reliev­ and economic demands. One whole of the EEC could be ing the strain on our environ­ example of this is the way the agreed upon, and these are not ment. Following the evaluation automotive industry has come yet legally binding. A timetable of the large-scale test conduc­ up with some convincing so­ for the mandatory introduction ted in the Federal Republic of lutions to problems of environ­ of stricter limits was, however, Germany, there now exist em­ mental protection and accept­ passed. For an interim period, pirical data acquired under real ability within such a short time. the Federal Republic of Ger­ traffic conditions. These data It will continue to do so in the many introduced tax incentives show that an effective reduction future, too - as technology favoring low-pollutant cars. in pollutants can only be advances. These measures are designed achieved by means of techni­ The future development of to considerably reduce the en­ cal innovations and their quick the automobile will be increas­ vironmental pollution as quickly introduction in the marketplace. ingly marked by the use of "in­ as possible. In other areas of telligent" systems. These will automotive engineering, varying Environmental Protection - considerably change all areas legislation is still hindering de­ A Matter-of-Course of automotive engineering, velopment work and making it at Daimler-Benz and electronics will become more expensive, e.g. the lack At Daimler-Benz, improving more and more important. The of coordinated regulations within the environmental compatibility new systems must be inte­ the ECC regarding commercial of motor vehicles was an impor­ grated into the automobile in vehicle dimensions and weights. tant development goal long be­ such a way that with the help Differing norms and regulations fore protecting the environment of technology, they assist the in many countries outside the became a focal point for public driver to avoid mistakes when­ EEC add to this problem. For discussion. For this reason, we ever possible. Within the this reason, special versions were able to offer our custom­ framework of the Eureka Pro­ must still be developed for indi­ ers an efficient emission control ject, we intend to take part, to­ vidual markets, in order to com­ system at an early stage. gether with a number of other ply with the relevant regulations For gasoline-engined vehi­ European automobile manu­ regarding threshold limits, cles, we have developed se­ facturers, in a research pro­ measuring cycles and measur­ cond-generation catalytic con­ ject (Prometheus) which fo­ ing specifications. With this in verter systems which are optim­ cuses on the development and mind, the compromise achieved ally adapted to European traffic testing of complex electronic in the EEC on exhaust emis­ conditions and which ensure control systems so as to make sions should be welcomed. compliance with the new EEC traffic largely free of accidents, limits - comparable with U.S. smooth-flowing, environmen­ limits - for our cars. At the cur­ tally compatible and econo­ rent stage of development, the mical. closed-loop three-way catalytic converter currently used repre­ sents the most efficient emission control engineering. With our higher-compression engines, this system achieves the best results in terms of fuel con­ sumption, performance and pol- 59 The computer aided DM 1.7 Bill. For Research design system and Development in assists the design engineer in his work, The Automotive Field and speeds up the For our extensive research search for alterna­ tives. Picture and development projects, we shows installation spent DM 1.7 billion, 12 % more conditions of a cat­ than in the previous year. Over alyst in the exhaust system. 10,000 employees in research, development and testing jobs are engaged in broadening and improving our vehicle ranges. For the expansion and mod­ ernization of test and experi­ mental facilities, including the modernization of office build­ ings, DM 74 million was inves­ ted. The main emphasis was placed on the new buildings for lutant emission. A convenient commercial vehicles with clos­ the car testing departments and switch-over facility in the multi­ ed-loop three-way catalytic con­ the research division; the test functional mixture formation and verters, too. For some of these stands could be put into service ignition system also allows vans we have also planned cat­ during the course of this year. regular-grade unleaded fuel to alytic converters for retrofitting. In the areas of both design be used. Due to the fact that a For the heavy-duty trucks and and testing, increased use is network of filling stations with buses, the world's strictest par­ being made of efficient data- unleaded gasoline is still lack­ ticulate emission regulations al­ processing systems, in order to ing in some countries, we also ready exist in Europe (ECE-R improve the results of the re­ offer "retrofitting" (RUF) versions, 24). The gaseous emissions are search work and to shorten the i.e, without the catalyst and ox­ limited by the Geneva regula­ time needed for many projects. ygen sensor, which are sensi­ tion ECE-R 49, although this is We have plans for systems tive to lead. They can be still not legally binding in any which can be used by more installed subsequently at any country. All our commercial ve­ than one division within the time in one of our workshops. hicle engines comply with these company. All gasoline-engined cars with limits already; the newly and fur­ three-way catalytic converters ther developed standard en­ Construction of The Boxberg and all Mercedes-Benz diesel gines have emission values Test and Measurement Track cars are considered low-pollu­ which are at least 20 % below Preparatory construction work tant within the meaning of the the limits above. This brings at the site for the Boxberg Test tax-incentive regulations. nitrous-oxide levels into line with and Measurement Track was For all cars, beginning with the limits in force in the U.S.A., begun in January 1986. We are model year 1980, we offer retro­ while at the same time fuel con­ confident that the appeals to the fit catalytic converters which re­ sumption is considerably lower Constitutional Court lodged by duce pollutant emission by at and particulate emissions less. opponents of the project will be least 50 %. This is the most effi­ rejected, and that all the land cient alternative to the closed- needed for construction will loop three-way catalytic con­ then become available. verter. With respect to commercial vehicles, we are following, in terms of environmental protec­ tion, the same aims as for cars. All our vehicles comply with stipulations imposed by law. This means that we can offer 60 our light, gasoline-engined The new test area is urgently being encountered. Should the Integral Drive System For needed so that we can comply electronic systems fail which is Heavy-Duty Trucks with the various design and ve­ also indicated to the driver - the We presented another exam­ hicle registration regulations in basic systems remain fully op­ ple of the logical use of elec­ different countries - regulations erational. The ABS system is tronics in 1985: the "integral which are becoming more and given priority: whenever the drive system" for heavy-duty more extensive. Our present test brakes have to be applied, ASD, trucks. This involved the optim­ facilities are no longer adequate ASR and 4MATIC are deacti­ ization of the engine/transmis­ for the increased demands and vated and the efficiency of ABS sion/drive train combination, in the broad product range of our is fully retained. order to make higher perform­ company. For commercial vehicles, too, ance with lower fuel consump­ we have complemented the tion possible. Following engin­ Mercedes-Benz-Driving- anti-lock brake system (ABS), eering modifications, we can Dynamics-Concept which was introduced some also offer this system for the Our new "Mercedes-Benz- time ago, by adding accelera­ Unimog and the MB-trac. Two Driving-Dynamics-Concept" for tion skid control (ASR) at the be­ turbocharged V-8 engines were cars and commercial vehicles, ginning of 1986. This has newly developed; due to their which was introduced to the greatly improved active driving output characteristics, they can press in February 1986, repre­ safety. be operated, in everyday use, sents a major advance in ac­ primarily in the range where op­ tive safety. At the same time, it timum fuel consumption is is an example of how we use achieved. In long-distance vehi­ electronics in vehicles when this cles, the gearboxes for these achieves better results than engines are equipped with other systems. A drive-slip-regula­ In the case of cars, this con­ tor (ASR) improves cept comprises the automatic the road stability of locking differential (ASD) for the commercial vehic­ les. In difficult road compact and mid-series Mer­ conditions, at cedes cars, and those S-Class slalom-type driving, models with six-cylinder en­ it becomes apparent: the right vehicle, gines. Acceleration skid control without ASR veers (ASR) is available for S-Class off course and spins, while the left cars with eight-cylinder engines, one with ASR while automatically engaging passes through the four-wheel drive (4MATIC) is an slalom course option for all the mid- and without difficulty. T-series models with six-cylinder engines. These "intelligent" sys­ tems are activated, without the driver having to make a deci­ sion, fully automatically and only when the vehicle approaches critical road-holding limits as a result of external influences or driving errors. The systems are activated by signals transmitted by sensors. This means that the consequences of human reac­ tion errors can be reduced to a minimum. A special indicator in­ forms the driver that the systems have been activated, allowing him to adjust his driving style to the particular road conditions 61 electro-pneumatic shifting (EPS), Complete Bus Range For O-Bahn System in Adelaide making gear-changing a much Local Public Transport Now Operational easier task for the driver. The broad bus offering for lo­ On the routes for track- In April of this year, we intro­ cal public transport is charac­ guided buses in Essen and in duced the new T2 van series. terized by its own unmistakable Adelaide, Australia, a total of These vehicles are based on appearance; it offers the right over seven million kilometers the same engineering concept vehicle size for every require­ has been driven. In Essen - as the light trucks from Woerth. ment. We supplemented the where 32 track-guided buses Their shape emphasizes the fact model range in 1985 with the are in service - the existing that they form part of a broad addition of the 0 405 urban bus track is being extended. Duo- commercial vehicle range. As and the 0 405 G articulated drive buses will be using the compared with the previous se­ bus. track at a later date. Extension ries, we have extended the As a third member of our bus work to provide two-lane oper­ choice of models available. It family, for urban and short- ation with electric drive will be now goes up to a permissible distance use, we introduced the finished by the summer of 1986. gross vehicle weight of 7.5 tons. O 407 regular-service country In Adelaide a six-kilometer sec­ bus at the Frankfurt Motor tion was completed and inau­ Show. The new O 402, which is gurated in March 1986. We based on the light Woerth trucks have begun demonstrations with respect to a number of ma­ with an electronically track- jor components, rounds off the guided bus in Fuerth. bottom of the range. A new addition to our touring Development Work For bus range is the O 301, which Foreign Subsidiaries has exactly the same chassis Following the introduction of and engine as the O 402. This the newly developed O 370 bus vehicle closes the gap between series by Mercedes-Benz do the van-based buses and the O Brasil in 1984, the new 360 se­ 303. Electropneumatic gear- ries engines have gone into shifting is available for this se­ production locally. Initially, these ries as an optional extra. are to be installed in vehicles destined for the U.S. market. With model FLC 112, Freight- The most common cause of accidents liner, for the first time, is offer­ is the human error ing a Class-8 medium-length factor. The analysis conventional with a cab derived of people's reaction to different traffic from that of the LN 2 series situations in the made in Woerth. After its suc­ driving simulator is an important contri­ cessful introduction as a road bution to traffic version, this vehicle has now safety. also been introduced as a dump truck in the market seg­ ment for construction-site vehi­ cles, a segment which is new for Freightliner. Following our acquisition of an interest in the Mexican company FAMSA, we have started designing com­ mercial vehicles for the Mexican market. Together with our Japanese partner, and based on the Mitsubishi L 300, we are developing a light van which is to be produced by our Spanish 62 subsidiary. Cooperation With New Airbag and automa­ tic seat belt retrac­ Subsidiaries tor decrease or pre­ We have now started an in­ vent injuries of vehi­ cle occupants in the tensive exchange of ideas with event of accidents. the relevant department of the The simulation model German subsidiaries acquired makes it possible to analyze body during the year under review. movements at vary­ Our aim is the rapid conversion ing speeds. of the results of research and development into systems which can be used in series production. With the specific know-how of these companies, we are expecting a new inno­ vative thrust, especially in the field of electronics.

Research For The Transpor- tion of The Future Our research goals continue to include the development of alternative energy and drive systems, new materials and combinations of materials, in­ cluding their use in series pro­ duction, and the analysis of the Testing New Materials and grams with fermentation gas. interaction between man, envi­ Alternative Drive Systems About ten M 201 series engines ronment and traffic. One example of the progress are currently being used for this. In the driving simulator, which already made in the use of new The large-scale experiment with we installed at the Berlin- materials and combinations of hydrogen as an energy me­ Marienfelde plant for an invest­ materials within our series pro­ dium, which has been running ment of DM 25 million, we are duction is an extremely heat- in Berlin since 1984, will be ex­ investigating the stresses to resistant metallic material which tended to 1986. which a driver is subjected to was developed during work on In a competition for vehicles due to new technical innova­ the gas turbine. This material is with solar drive systems, the so- tions in the automobile. More­ now also used in the pre-cham- larmobile - developed in coop­ over, mathematically defined ve­ bers of diesel car engines in a eration with the companies of hicle models are also tested in number of our U.S. models. Alpha Real and AEG, and the driving simulator, so that de­ In the field of alternative drive driven by a trainee from our Sin- signing a vehicle can be faster, systems, at the Bremen plant, delfingen plant - won all the in­ safer and more precise. At the we were able to put into ser­ dividual stages in the "Tour de beginning of this year, the driv­ vice the first prototype of a Sol" in Switzerland. ing simulator was awarded the modular-energy-supply system Innovation Price of German for heat and electricity Industry. (MOEWE). This ultra-modern heat pump is powered by an in­ ternal combustion engine and delivers 650 KW. In the pre- treatment and painting sections of the Bremen factory, this sys­ tem achieved savings of 57 % in terms of primary energy input. In our testing of alternative energy sources, we have con­ tinued our experimental pro­ 63 Group purchasing volume Close Cooperation With In keeping with our logistics of raw materials, factory sup­ Suppliers policy, we are using long-term plies, capital goods and ser­ In order to improve our com­ requirement trends as a yard­ vices amounted to more than petitiveness even further, we are stick in structuring our stores DM 31 billion (DM 25 billion in working more and more closely where production materials are 1984). Daimler-Benz AG ac­ with our suppliers. One impor­ stocked. counted for DM 21.2 billion tant factor in a system of this The large number of new (DM 18.5 billion in 1984). The kind is the optimization of logis­ products and projects both in strong increase for the Daim­ tics, which is aimed at reducing the car and commercial vehicle ler-Benz group reflects not the total amount of goods kept sectors has demanded much of only the market success of in stock. The centerpiece is an our suppliers. All the supply, our vehicles but also the first- integrated system of an efficient transport and service compa­ time inclusion of MTU and materials and information flow. nies have retained their high Dornier. Materials costs were It offers us and our suppliers the level of quality and have dis­ up in 1985. This was primarily opportunity for a comprehensive played exceptional willingness the result of price increases in exchange of data. Thus in 1985, to cooperate and flexibility; it is plastic products - caused by we made use of long-distance here that we would like again price changes from chemical data transmission systems for the express our thanks to them raw materials - and in the communicating, ordering, deliv­ for their efforts. steel sector. ery, invoicing and payment data. We are convinced that success­ Contribution to ful, lasting efficiency can only be The Stabilization And achieved by means of a joint Consolidation of The Economy approach and coordinated op­ As in previous years, one of timization measures. the goals in our decision­ making and planning process in awarding contracts has been our endeavor to help stabilize and strengthen economic activ­ Purchasing ity. In view of the difficult situa­ Volume tion in the German construction in Excess of industry, we therefore advanced DM 31 billion into 1985 our medium-term Worldwide capital spending projects which in 1985 were provided for in the capital budget. Our commitment to the

64 The most modern transportation and storage techniques are also found at our subsidiaries; shown here Mercedes-Benz do Brasil.

support of structurally weak re­ Materials Management of Our gions and institutions worthy of Foreign Subsidiaries assistance was also continued. In the materials management In order to improve our links of our foreign subsidiary com­ with Berlin, where some of our panies the close cooperation suppliers are located, we held, with suppliers has proved its for the second time, a Daimler- value also. Overall, through Benz purchasing conference comprehensive efforts in the re­ there in 1985. spective national procurement markets and through the use of modern information systems, we were able to make progress both in engineering and in efficiency.

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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. State-of-the-art engineering, Car Plants: ment. At the Mannheim plant, high quality and a vehicle Noticeable Rise in Output output of completely-built-up range which meets the individ­ Our activities in the car plants buses was raised in keeping ual demands of the custom­ in 1985 were marked by the with market demand; here, too, ers are prerequisites for the highest output to date. At the production of a large number of lasting success of a company. same time, production start-up new models was started up. In In the production sector, this of a large number of new prod­ February 1986, the 25,000th requires the use of modern, ucts had to be coped with, par­ 0 303-series touring bus left innovative production techni­ ticularly in the Sindelfingen and the assembly line. ques and flexible systems. Untertuerkheim factories. In the These relieve the strain on Bremen plant, preparations for High Capital Investments employees, benefiting the the production start-up of the in Our Factories quality of their work. Systems new T-models were successfully In our factories, we invested flexibility also ensures that we completed, despite a consider­ considerable amounts for the can adapt quickly to changes able rise in output of the com­ optimization of the materials in demand. When planning pact models. So far, over 13,000 flow, for the replacement of ma­ and designing the facilities for units of the 190 E 2.3-16 sports chinery and in the ergonomic the compact and mid-series version alone have been pro­ design of workplaces. With cars, we therefore decided in duced. In the Sindelfingen plant, these measures we achieved a favor of production systems the last of the former mid-series further improvement in product which can handle varying cars, the W 123-series, rolled off quality and a higher degree of models and quantities. During the assembly line. In December, reliability in supplying our as­ the year under review, produc­ at the Untertuerkheim plant, we sembly plants. Cost-intensive, tion of the compact models made the ten-millionth car en­ intermediate stages of storage has concentrated to a greater gine since series production be­ could thus be reduced. extent in the Bremen plant. gan in 1946. The machinery and equip­ This meant that we could ment installed in the Untertuerk- reserve urgently needed Production Start-Up For Many heim plant for the production of capacity for the mid-series New Products in The the new 6- and 8-cylinder en­ Mercedes in Sindelfingen. Commercial Vehicle Plants gines offer a high degree of In our commercial vehicle productivity and model flexibil­ plants, too, we had to cope with ity. At the Gaggenau plant, facil­ the production start-up of a ities for the manufacture of as­ large number of new products semblies have been installed, as well as the broadening of our and measures introduced deal­ model line. ing with energy conservation Our product program for the and environmental protection - light trucks from Woerth was en­ such as, for example, the hanced by adding new engines changeover of the varnish re­ and more optional equipment. moval operation to the environ­ The new models 1644 S and mentally-compatible high pres­ 1635 S round off our range of sure technique. At the ancillary heavy-duty long-distance trucks. plant in Hamburg, the reorgani­ The production in Woerth of zation of production and of the plastic parts for the car sector materials flow was concluded in was greatly increased with the 1985 with the completion of a production start-up of the new central parts store and the ex­ Mercedes mid-series. After thor­ tension of the premises. ough testing, we have adopted a new painting process in van production; this clearly improves corrosion protection and the quality of the finish. At the same time, emissions have been re­ duced, benefiting the environ­ 67 With the aid of so At the Kassel plant, flexible called "power transfer lines for the production manipulators", the driver seats in trucks of steering knuckles and wheel are effortlessly hubs were taken into service. installed in truck With these systems, which use assembly at Woerth - applying scientific highly modern CNC technology, studies in actual machine-integrated measure­ practice. ment and monitoring systems and automatic transfer links, we are able to make more efficient use of the machinery, and at the same time reduce intermediate stages of storage. In Berlin, a measuring robot with a wide va­ riety of applications was in­ stalled; it monitors and safe­ guards the production quality of the transfer lines where the oil and water pumps for our new car engines are made. At the Bad Homburg factory, the new facilities for the manufacture of rocker arms used in the M 103 engine series and for valve tap­ pets used in the OM 601 to OM 603 diesel engines were put into service in 1985. Due to the installation of the new waste water treatment system for the galvanizing section and the har­ dening shop, we were able to substantially reduce environ­ mentally damaging effects. Production Plants Working Conditions For in Germany Employees Further Improved In designing workplaces, we apply the latest knowledge in in­ dustrial science. In order to avoid physical strain at the workplace as much as possible, we are making increased use of technical aids. In the press- ing-and body-shell sections, with the aid of handling devices, large sheet-metal body parts

68 are put into the stations with Electronic Data Processing planning changes quickly and specified cycle times. During Raises Quality and Flexibility reliably. truck assembly at the Woerth in Production In the engine testing section factory, power manipulators en­ Electronic data processing is of the Untertuerkheim plant, a sure easy installation of the becoming more and more im­ computer-aided so-called "ex­ seats. Our new assembly sys­ portant in a large number of pert system" was tested for the tems have a large number of planning and production areas. first time under real production group workplaces which are not With the use of computer-aided conditions. When functional de­ tied to a specific cycle; they al­ design for our products and fects occur in the engines, rapid low the employees more initia­ production equipment, we are and clear-cut diagnoses can be tive and variety in their work. aiming for an unbroken flow of made from a large variety of An essential prerequisite for data from design to production. possible causes. the rapid introduction and suc­ This also helps to monitor qual­ With the use of innovative cessful application of new pro­ ity. Many times, computer-gen­ production processes, espe­ duction methods is early and erated data, derived from au­ cially laser and sensor technol­ comprehensive training of em­ tomatic measuring systems, ogy, we can make the produc­ ployees. At the Sindelfingen serve as standards in function tion of the numerous parts and plant, for instance, the employ­ and quality control. For invest­ major components even more ees in the individual production ments with long-lasting effects, flexible. Freely programmable areas are familiarized with their computer-aided simulation of future jobs and with the equip­ work processes for complex ment at training centers spe­ production equipment and se­ cially built for the purpose long quences is proving a valuable before the start-up of series instrument in optimizing capac­ production. ity and flexibility, and allowing

Accurate measure­ ments are a sign of quality in the manu­ facture of Mercedes- Benz buses. The picture: a trim station for bus under carriages at the Mannheim plant.

69 The Mannheim Plans For Our Foreign plant: precision and Production Companies accuracy are a must when mounting and For our foreign production installing casting companies, we aim to create a cores. This no long­ er takes place in an more closely integrated produc­ assembly line tion system. The planning for fashion, but rather the necessary production facili­ depends on the wor­ ker's own speed. ties is done in close coopera­ tion with our central planning and production division; this en­ sures that the available know- how is used equally for both do­ mestic and foreign plants. In South Africa, Thailand, In­ donesia and Malaysia, the new mid-series Mercedes models are being assembled since the beginning of 1986. Production of the V-engined luxury touring bus O 302 S was set up at our affiliate OTOMARSAN in Turkey; in Aksarey, new facilities were built for truck and engine as­ sembly. During the second half of 1986, also in new facilities, production of the T1 vans is to start up near Bajaj-Tempo in In- dore, India. From our Woerth and Mannheim plants, we are supplying our American subsid­ iary Freightliner to an increas­ laser cutting presses make it Environmental Protection ing extent with parts kits for steel possible to manufacture various and Energy Conservation cabs and special engines. stamped parts without the time in Production and costly process of making During the year under review, special tools. Especially for parts we continued with our environ­ made in small job lots and with mental protection and energy complicated outlines, laser cut­ conservation measures in all ting represents an economically our factories. At the Mannheim efficient alternative to conven­ plant, we were able to shut tional stamping. down our own power station and switch over to a distant public heating plant, thus con­ siderably reducing pollutant emissions. The use of special monitoring and control systems in the plants reduces energy consumption peaks and auto­ matically switches off energy consumers during pauses in production. When renovating and building new facilities, we place particular emphasis on comprehensive thermal insula­ 70 tion. In 1985 we continued to Presentations intensive training courses, our consolidate our market posi­ of New Products at The sales personnel were carefully tion at home and abroad in Frankfurt Auto Show 1985 prepared for the topic "the au­ both the car and commercial In the year under review, the tomobile and the environment". vehicle sectors. Our improved Sales Organization successfully We were, therefore, able to help share of the highly competi­ launched the new mid-series greatly to boost demand for tive Western European truck Mercedes on all foreign mar­ these cars. market was particularly en­ kets. The presentation of our couraging. Despite keener extended vehicle ranges at the Mercedes-Benz Commercial competition from the Japan­ Frankfurt International Auto Vehicles with Progressive ese, we were able to increase Show met with a positive re­ Information Systems van sales. We have further ex­ sponse. The choice of Mer­ In the commercial vehicle tended our comprehensive cedes-Benz cars and commer­ sector, it is the total package of­ range of services in consul­ cial vehicles has never before fered which is of increasing im­ tancy, maintenance and repair, been as comprehensive and portance. Profitability studies and thus created the basis compact. show clearly that, of the costs in­ for an even faster, smoother curred at acquisition and the spare parts supply. A Comprehensive Range of subsequent operation of a com­ Low-Pollutant Mercedes-Benz mercial vehicle, only about 15 % Cars are due to the purchase price, With our clear approach to and 85 % to subsequent costs. emission control for cars, and a This fact, and our years of ex­ no less comprehensive detailed perience in advising and look­ advisory service covering our ing after our customers, formed broad range of low-pollutant the basis for the development Mercedes cars, we were able, of special information systems. in good time, to give our cus­ tomers the assurance they needed before buying a car. In

The number of visi­ tors at the 1985 IAA reflects the contin­ ued fascination with the automobile. Always in everyone's field of vision - the Mercedes display with its attractive vehicle offerings.

71 Using computer programs, we Service and Training Program Financing as an Instrument of perform profitability studies and Greatly Enlarged Sales Promotion route planning for our custom­ The continual expansion of In autumn 1985, we expan­ ers, and propose optimum ser­ the service network was system­ ded the sales financing busi­ vice and spare parts strategies atically carried on in 1985. With ness in Switzerland by founding for vehicle fleets. The Transport a fine-meshed network of ser­ Mercedes-Benz Credit AG, Zur­ Consultancy system "Mercedes- vice points and a broadened ich. The encouraging growth in Benz-Assistant", which we pre­ range of services - e.g. Satur­ business of Mercedes-Benz sented at the Frankfurt Auto day service, round-the-clock Credit Corporation in the U.S.A., Show, is for the comprehensive emergency services - we aim of Merfina S.p.A. in Italy, of planning, control and evaluation to meet customer requirements Mercedes-Benz Finance Bel­ of all transport activity. It offers even more. In addition, the gium S.A. and of Mercedes- customers the most economical amount of service work neces­ Benz Finance in France has strategy for their own, specific sary with our cars and commer­ been continuing. requirements. cial vehicles has in some cases In 1984, Mercedes-Leasing been considerably reduced and GmbH, Stuttgart, was once A Complete Range of defect diagnosis further simpli­ more able to increase its leas­ Services in The Used Vehicle fied. ing and vehicle sales revenue Sector, Too Our worldwide sales and ser­ by 13 % to DM 406 million. A to­ Throughout our whole sales vice organization can only work tal of 9,392 leases were written organization, the used vehicle successfully with properly qual­ (7,944 in 1984) for an invest­ business was further expanded ified personnel who undergo ment of DM 371 million (DM in conjunction with new vehicle continuous training. For this rea­ 280 million in 1984). The pro­ sales. If the cars are to be sold son, we supported our subsidi­ portion of new leasing business in due course, they must not aries and general distributors in accounted for by cars was 72 % only be technically and visually selecting instructors and in de­ (73% in 1984). in excellent condition, but must veloping and founding training also be presented appealingly centers in Thailand, Pakistan New Sales Activities in Asia and be supported by a corres­ and India. In Germany and In order to meet country- ponding advisory service. With abroad, we now have a total of specific customer requirements our campaign "Used Vehicles - 48 training centers, in which in­ even more fully, we founded Guaranteed Value", which in­ structions were given to over Mercedes-Benz Japan in Janu­ cludes expert advice, mainte­ 48,000 employees in 1985. ary 1986. In the course of the nance and repairs and compre­ year, this company will be tak­ hensive after-sales service, we ing over a number of major aim to promote sales more in­ functions from Western Automo­ tensively. In the Koblenz branch, bile, our general distributor we opened the "Mittelrhein hitherto. Commercial Vehicle Center", The opening in Singapore of thereby creating a regional fo­ new sales premises with a cal point for used commercial workshop attached, and the vehicles. successful introduction of new commercial vehicles in Indon­ esia are also noteworthy. In the year under review, we were able to sell 830 cars and 580 commercial vehicles in the Peo­ ple's Republic of China. In or­ der to improve our position in this increasing market, and to achieve our long-term aims, we have extended our base in Peking. Spare Parts Service Further be taking over some of the Worldwide Customer Care - Improved wholesale functions of the retail Services For The Future In order to provide a com­ branches. The pilot project in We have adapted our sales plete and successful service for Hanover, which has been oper­ and service organization to mar­ MercedesBenz customers, a ating now for over three years ket conditions which change smooth, fast parts supply sys­ and which supplies 21 branch rapidly and vary greatly from tem is essential. Due to the workshops and over 200 au­ country to country. Today, planned expansion and impro­ thorized workshops, proved in Daimler-Benz is represented in vement of our product range, 1985 to be more efficient and over 170 countries. Throughout the current total of 270,000 providing higher-quality service. the world, a total of 5,900 sales spare parts items will have risen In mid-1986, the second re­ and service points are available to about 450,000 by 1990. For gional supply depot is to be for the care of Mercedes-Benz this reason, the central spare taken into service in Pulheim- cars and commercial vehicles. parts depots in Sindelfingen for Brauweiler, near Cologne. It has To serve our customers all over cars, and for commercial vehi­ a storage area of about 26,000 the world, we have over cles in Woerth, are to be com­ square meters and a capacity 125,000 people - a team with plemented by five regional sup­ for over 70,000 spare parts great experience, commitment ply depots in Germany; they will items. From here, 16 branches and flexibility. In our sales or­ with 180 authorized workshops ganization, more than 50 million will be kept supplied with origi­ customer contacts are made nal Mercedes-Benz spare parts. every year, over a quarter-of-a- On the U.S. market, the supply million a day. of spare parts for all Mercedes- Benz cars has been further im­ proved due to a new parts de­ pot in Baltimore, Maryland.

The concept of a new appearance for the Mercedes-Benz distribution organi­ zation could be real­ ized at a paragon in­ stallation which was completed in 1985. In the years to come, we are going to introduce this largely uniform pro­ gram in the entire distribution organi­ zation, in the admin­ istration and in the plants.

73

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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. One of the focal points of Agreement were made with the general la­ our personnel work in 1985 on Early Retirement bor council concerning "pilot was the implementation of the Made Use of by Many projects to intensify further train­ industry-wide agreements re­ The internal agreement on ing of wage earners" and lating to shorter working hours early retirement which was con­ "workshop circles". The con­ and the conclusion of the cor­ cluded at the end of 1984 and structive cooperation was char­ responding local agreements. which came into force in Janu­ acterized by an atmosphere of On the basis of the working ary 1985 was taken advantage trust and, above all, by the de­ hours agreed with our labor of by many of our employees. sire to achieve agreements councils on April 1, 1985, the A total of 2,316 employees had which will serve the interests of working hours for the majority opted for early retirement by the the employees and the com­ of employees at Daimler-Benz end of 1985, and a number of pany alike in the years to come. AG will be 38.5 hours per further early retirement contracts week. All managerial staff and were concluded for 1986. This Qualifying The Employees a number of other employees meant that the agreement had For New Technologies are continuing to work 40 a decided effect on the labor The question of how to main­ hours. A corresponding num­ market, since about 78 % of the tain and improve the level of ber of employees - above all jobs vacated due to early retire­ employee qualification in the those who want an even shor­ ment could be given to unem­ long term, in view of the intro­ ter workweek - work 37 hours ployed workers or to trainees duction of new technologies, is per week. Machine-related who had qualified but still had of growing importance both for working hours remain un­ not found work. companies and for society as a changed at 8 hours per shift. whole. Especially in the blue- A constant capacity utilization Wages and Salaries Up 2 % collar sector, new technology of the capital-intensive ma­ In addition to the agreement requires additional knowledge chinery and equipment has on working hours, a 2 % rise in which often goes beyond the thus been made possible. Due wages and salaries, agreed in qualifications originally acquired to the separation of machine- 1984, became effective on Ap­ during vocational training. For related working hours from in­ ril 1, 1985. In 1985, there were this reason, we wish to prepare dividual working hours, the no new contracts between em­ our employees in good time for basis for flexible compensa­ ployers and unions in the metal new developments and chang­ tion of the time differential, industry. In the vehicle retail es. One aspect closely linked geared to the interests of the trade, however, there were ne­ with this is the increased partici­ employees, was improved. For gotiations for shorter working pation of employees in opera­ employees working in produc­ hours, which in some cases tional matters. Organized dis­ tion, this compensation of time have now been concluded. cussion groups on selected is in the form of free shifts. topics for the employees con­ Where special agreements ex­ Constructive and cerned - so-called workshop ist, employees can decide for Close Cooperation With circles - can greatly help to im­ themselves when to take time The Labor Councils prove quality, work sequence, off, within the framework pro­ work design and work safety. vided by the extended system The chief area of cooperation of flexible working hours. With with the general labor council at the planning of free shifts in the corporate level and with the the plants, Daimler-Benz AG individual labor councils at lo­ has entered into new territory cal levels lay in implementing in terms of personnel policy. the contractual agreements re­ All in all, this system has lating to working hours within proved itself. the plants. To this end, a num­ ber of internal agreements were concluded; within the frame­ work provided by the main con­ tracts, these allow the local plant requirements to be taken into account. In addition thereto, a number of internal agreements 77 More Employees taken over completely in 1985, taken on went into the car sec­ in Subsidiaries and of Dornier, in which tor, development and central and at Daimler-Benz AG Daimler-Benz acquired a major­ administration. This was due to The number of people em­ ity interest last year, have been the growth in car output, addi­ ployed by the group rose in included in the figures for the tional tasks, and the effects of 1985 from 199,872 to 231,077. group for the first time. the reduction in working hours. This noticeable increase is due At Daimler-Benz AG, the particularly to the fact that the number of employees rose by work forces of MTU, which was 4,269 to 161,518. Most of those Due to the continuing difficult Involving employees more strongly in situation in the commercial ve­ management prob­ hicle sector, there were also lems and questions: employment problems last year this is one of the goals set by work­ in the plants directly affected. By shop discussion means of temporary reassign­ groups. ment of employees to other plants, a job-safeguarding measure which has proved its value over the last few years, we were able to compensate for this situation once again in 1985. An average of 327 em­ ployees from the commercial vehicle plants were thus tempo­ rarily reassigned to the car sector.

More Trainee Positions Last year, nearly 2,900 young people took up job training at The proportion of women to to­ Personnel Expenditures and Daimler-Benz AG. This figure is tal number of employees was Company Benefits Up in 1985 well above those in our 11.8 %. In the year under re­ The structure of personnel ex­ medium-term planning and re­ view, the average age dropped penditure for Daimler-Benz AG flects our aim of helping to im­ from 39.0 to 38.6 years, and the is shown in the table below. Per­ prove the continuing difficult average length of service with sonnel expenses exclusive of situation for entry-level job the company from 12.5 to 12.3 old-age pensions amounted to seekers. years. This tendency can be at­ 25.8 % of total sales (previous tributed to the fact that, in the year 26.6 %); wages, salaries Domestic Employee last few years, a large number and social security levies rose Structure Little Changed of younger people were taken by 13.2 % to DM 9.7 billion. Of the 161,518 people em­ on, while a particularly high The social security contribu­ ployed by Daimler-Benz at the number of older employees left tions for pension, unemploy­ end of 1985, 112,125 were the company as a result of the ment and health insurance were wage earners, 40,022 were sal­ early retirement agreement. once again higher than in the aried employees and 9,371 18,455 employees have been previous year due to an in­ were trainees and apprentices. with Daimler-Benz for more than crease in the taxable wage The number of foreign workers, 25 years. In the year under re­ base and the raising of some at 27,193, has hardly changed. view, 2,324 employees were contribution rates. As in previ­ honored for 25 years of service, ous years, many Daimler-Benz 171 for 40 years and 2 for 50 AG employees were active in years with the company. the self-administration bodies of At the end of 1985, 7,359 se­ the social insurance institutions. verely handicapped people The average Christmas bo­ were employed by the com­ nus and special remuneration pany. In addition to this, orders for each eligible employee (ex­ valued at about DM 12.7 million cluding trainees) rose to DM were awarded to workshops for 3,232 in 1985. Total payments the handicapped. amounted to DM 494 million.

79 For capital-forming invest­ by the Fourth Capital Formation Loans totaling about DM 43 ment purposes, employees re­ Law. A total of 83,588 Daimler- million were given to employees ceived DM 624 in keeping with Benz shares and 2,773 to help them build or purchase the labor agreement. Employ­ Mercedes-Automobil-Holding 1,816 apartments or homes. ees could make use of personal shares were thus bought by The significance of this social funds to take advantage of an employees. Since 1973, more benefit is also reflected by the additional investment of DM 312 than 578,000 Daimler-Benz total amount of about DM 306 as provided for by the Fourth shares have passed into the million which has been lent over Capital Formation Law. As in hands of employees, together the past ten years. previous years, we voluntarily with over 13,000 shares from The company pension sys­ contributed another DM 156 per Mercedes-Automobil-Holding tem is the centerpiece of the so­ employee. Employees were also AG. Each employee was al­ cial benefits provided by offered a Daimler-Benz share or lowed to put DM 312 into com­ Daimler-Benz. In the year under a Mercedes-Automobil-Holding pany debt certificates, and in the review, 37,707 pensioners, wid­ AG share at preferential rates as year under review 13,114 em­ ows and children received DM a form of investment permitted ployees availed themselves of 187 million in current benefits. this opportunity. In accordance with the Com­ pany Pensions Law, 5,300 of these current benefits were raised. The increase for the year amounting to DM 2.6 million. Over 3,400 employees, who left the company, had vested pen­ sion rights at the end of 1985; over 58 % of these are foreign­ ers. We helped some 5,500 em­ ployees with one-time assis­ tance payments. In order to cover future pension benefits, we transferred DM 677 million to pension reserves or to the Daimler-Benz Provident Fund. In January 1986, after nego­ tiations with the labor council, the Board of Management de­ cided to pay employees a spe­ cial bonus to commemorate the centennial of the automobile. Our employees will be receiv­ ing a basic sum of DM 1,000 plus DM 175 for every 5 full years of service with the com­ pany. Personnel Policy Regarding The care of employ­ ees by the company Work Arrangement doctor also includes Work arrangement policy at medically-work- related prophylactic Daimler-Benz aims to take into examinations. account all the main personnel- related and ergonomic aspects, already starting at the initial stage when capital investment projects are planned. This all- encompassing approach helps to improve not only working conditions, but also overall effi­ ciency. The work study group "Man and Technology", which was newly set up in 1985 with representatives from production, personnel and the labor coun­ cil, has been investigating these questions closely and dis­ cussing ways of putting ideas into practice. Steps have al­ ready been taken towards real­ izing these aims in a number of new and redesigned projects.

Preventive Measures of Increasing Importance The number of accidents per million productive man-hours rose in 1985 to 68.2 (66.4 in 1984). This rise, which is partic­ Added Value ularly linked with the start-up of Statement new production, re-tooling and Daimler-Benz AG output increases in individual plants, shows that a high prior­ ity will continue to be given to matters of safety at the work place and to ways of prevent­ ing behavioral-related acci­ dents. The average absentee rate due to illness - based on nom­ inal man-hours - was 7.4 %. The rate for wage earners was 8.9 % (previous year 8.5 %) and for salaried employees 3.8 % (previous year 4.1 %). During the year under review, medical care at Daimler-Benz was provided by 32 plant doc­ tors and 139 qualified medical

1976 1985 81 workers. Work centered on Catering Services Further More Suggestions physical examinations for pre­ Improved Submitted ventive purposes which are re­ The cafeterias in the factories In the year under review, quired by the employee trade and in central administration 19,287 suggestions for improve­ association and which are also provided over 11 million meals ments were submitted. A total of performed voluntarily by the for employees last year. This DM 4.1 million was paid out in company. high figure shows that efforts to bonuses and awards. The keen Effective July 1, 1985, preven­ further improve the hot and cold interest of the employees in im­ tive health cures were offered food offered have been ac­ proving work processes, tools for foremen and group foremen cepted by the work force. In ad­ and products helps boost the for the first time. These, like the dition, the food we offer meets efficiency of the company; preventive health cures intro­ requirements for a healthier diet, above all, though, it encourages duced in 1981 for shift workers, which more and more of our individuals to identify them­ are intended to serve the aims employees wish for. In a num­ selves with their work. of preventive medical care and ber of factories, late-shift wor­ to raise the level of health kers now have the opportunity Training For consciousness. to have a hot evening meal. 60,000 Employees In 1985, Daimler-Benz AG With over 9,300 apprentices employed 14 qualified social and trainees, reprenting 6 % of workers in the company's social the total work force, Daimler- advisory service. This service Benz has reached its highest helps employees if they have training level so far. About 7,000 any particular personal prob­ young people were preparing lems, such as addiction, psy­ themselves for their future jobs chological problems, difficulties in one of the 33 technical trade due to serious illness or if they vocations and about 1,500 were are in some other personal cri­ apprenticed in the 10 business sis situation. occupations. In view of new technologies, continuous modification of the The educational training center in course contents is becoming in­ Lautenbach (Black creasingly important. Consider­ Forest) which was able financial investments have remodeled and expanded in 1985, been made for it: in the techni­ offers the proper cal area, in machinery and frame for further education and devel­ equipment for the expansion of opment and for training on computer-controlled socio-educational systems, and in the commercial courses of trainees. area for data processing.

82 New technologies are already em­ ployed during train­ ing: data process­ ing employees work on personal computers at the vocational training academy.

In our company training work, In February 1985, "Haus Laut- In order to ensure a pool of continuing training for our em­ enbach", the training center in well-qualified employees, our ployees and advanced training the Black Forest, was reopened foreign subsidiaries and affili­ for our managerial staff are ac­ after extensive modification and ated companies and distributor­ corded a high priority. In 1985, extension work. This means that ships are training over 2,400 over 60,000 employees atten­ "Haus Laemmerbuckel" has young people for appropriate ded internal and external cour­ now been complemented by a jobs. Especially in those coun­ ses; of these, more than 7,000 second training center - also of tries in which an institutionalized attended advanced courses for highly modern design for con­ education system is only now managerial staff. One of the tinuing advanced training, and being developed, we regard this chief areas of emphasis for con­ for courses relating to socio- as a particularly important task. tinuing training is in helping de­ pedagogic topics. partments when new technol­ ogies are introduced. Focal points here include questions related to CAD/CAM, electron­ ics, control systems and new of­ fice and communications equipment. New requirements and tasks for training work have emerged within the depart­ ments themselves with increas­ ed help being given to discus­ sion and problem solving groups. 83 In 1985 we complemented CONSOLIDATED COMPANIES AUTOMOTIVE SECTOR our traditional areas of activ­ ity in the automotive sector by Sales by companies included Consolidated Companies With acquiring MTU, Dornier and in consolidation amounted to Their Own Manufacturing AEG, three companies which DM 28.4 billion in 1985. In the Facilities are primarily active in the commercial vehicle sector, our high-technology sphere. In the manufacturing companies Further Rise in Turnover by car and commercial vehicle achieved a 9.2 % increase in Mercedes-Benz do Brasil sectors, we consistently pur­ sales to DM 8.3 billion, mainly In Brazil, the economic upturn sued a strategy of safeguard­ in Brazil and Spain. Sales by gained further momentum. Due ing, on a long-term basis, the our distribution companies rose to the continuing high level of growth of our company 9.5% to DM 16.1 billion, prima­ exports and the growth in de­ abroad through our own pro­ rily in the Western European mand on the domestic market, duction and distribution com­ countries and in the U.S.A. In the the economy grew by more panies. During the period non-automotive sector of the than 8 % in real terms. under review, a distribution group, our new subsidiaries Despite the labor dispute in company of our own was MTU and Dornier contributed the Brazilian metal industry in founded in Japan; through an DM 3.2 billion to consolidated the first half of 1985, Mercedes- equity investment in the Mex­ sales. Benz do Brasil SA, Sao Ber- ican commercial vehicle man­ The results of operations nado do Campo, was once ufacturing company FAMSA, within the individual companies more able to boost sales by we aim to create greater mar­ varied widely. The contribution 6 %, to 33,191 commercial ve­ ket potential for Mercedes- by our domestic companies to hicles. Since our company was Benz products. consolidated net income was harder hit by the labor dispute In the countries in which our DM 59 million. The contribution than our competitors, we had to affiliated companies produce by our companies abroad, con­ accept temporary losses in our commercial vehicles them­ verted into D-marks and unifor­ market share in Brazil. A total of selves, we were able to con­ mly adjusted to German valua­ 27,744 commercial vehicles solidate our market position tion criteria, increased to DM were sold on the domestic mar­ and in some cases even 573 million (DM 402 million in ket. However, with market considerably improve it. Our 1984). shares of 40% for trucks (previ­ production and distribution Again in 1985, our policies at ous year 44 %) and 81 % for companies are well equipped home and abroad were in ac­ buses (previous year 84 %), our to exploit every market cord with the "OECD Rules for company was able to retain its opportunity on account of their Multinational Companies". leading position. competitive strength. Exports, at 5,447 vehicles, failed to reach the previous year's level (7,802). It should be noted, however, that in 1984 a larger number of vehicles were delivered early. Most of the ve­ hicles exported went to our sub­ sidiaries and affiliated compa­ nies in the U.SA and Indonesia. We were once more able to increase the number of employ­ ees in 1985, by 2,429 to 15,827 people.

84 Sales - converted to Mercedes-Benz Argentina Mercedes-Benz Argentina D-marks - rose by 28 % to DM Maintains Its Position S.A., Buenos Aires, sold 3,492 2.4 billion. As a result of the Due to a far-reaching reform, commercial vehicles (previous higher capacity utilization and a the economic situation in Argen­ year 4,369) - almost exclusive­ financing and liquidity policy tina has stabilized. Above all, the ly on the domestic market. Due geared to the long-term, com­ inflation rate, which was running to a particularly hard price war, pany earnings have further im­ at over 1,000 % at the begin­ in which our company did not proved. Investment has been ning of the year, was dramati­ take part for profit reasons, the concentrated mainly on mod­ cally reduced. The minor eco­ market share dropped to 38 % ernizing and extending the nomic upturn in the closing (previous year 54 %). Despite product range, and on improv­ months of the year also bene­ this, the company retained its ing manufacturing efficiency. fited the automotive industry. leading position on the truck The favorable economic trend Compared with the previous and bus market. and the high demand for ex­ year, however, a drop in sales Despite this unfavorable situ­ ports should result in further had to be accepted. ation, the number of employees growth for the company in remained at a high level. Em­ 1986. At present, it is too early ployment stood at 1,948 people to tell what effects the latest gov­ (previous year 2,076). However, ernment intervention in the shorter working hours had to be Brazilian economic and mone­ introduced in certain areas. tary system will have. Company sales - converted to DM dropped by 12% to DM SOFUNGE / Brazil 479 million. Even so, the results Boosts Casting Output of operations were, on balance, by 23 % an improvement. SOFUNGE S.A., Sao Paulo, a subsidiary of Mercedes-Benz do Brasil S.A., supplies castings The new bus series to the parent company and to O 370 is manufac­ other companies in the Brazil­ tured with the aid of ian automotive industry. As a re­ the most modern production equip­ sult of increased demand, the ment at the Cam­ company raised its output of pinas plant of castings by 23 % to 51,597 tons. Mercedes Benz do The number of employees was Brasil. increased by one-third to 2,487. Sales - converted to DM - went up 22 % to DM 118 mil­ lion. Government price controls impacted a generally positive result. Capital investments, es­ pecially for new products of the parent company, were contin­ ued according to plan.

85 The foreign manufacturing and assembly companies with Freightliner / USA: Daimler-Benz ownership manufactured commercial vehicles and Output Up Again engines: The weak economic growth in the U.S.A. led to a decline in the sales of heavy-duty trucks to 134,000 units (previous year 138,000). In the case of me­ dium-heavy trucks, on the other hand, sales amounted to 145,000 units which exceeded the previous year's high level. Despite difficult market con­ ditions, Freightliner, after its strong growth in the previous year, was able to sell 20,809 heavy-duty trucks in North Ame­ rica (previous year 20,516). It increased its market share to 13.5 % (previous year 12.8 %). The market share in Canada fell to 12.3 % (previous year 13.2 %). The product range was extended by the new conven­ tional introduced in May 1985, and for which cabs are supplied by our Woerth plant.

The newly-deve­ loped heavy-duty truck (type FLC 112) with medium length bonnet comple­ ments, the traditional product program of Freightliner. After its successful intro­ duction as a road vehicle, a tilting version was also introduced.

86 Of our medium-heavy Mer­ Mercedes-Benz Espana keen price competition accom­ cedes-Benz trucks, 4,516 were Improves Market Position panied by a sharp reduction in sold (previous year 4,453). This The mildly positive develop­ registrations of cars and com­ raises our market share in this ment of the Spanish market led, mercial vehicles. category to 2.9 % (previous year in 1985, to a reversal of the Our subsidiary was not 2.6 %). The range of conven­ trend in the commercial vehicle spared the effects of this devel­ tional trucks was extended with market, which had been declin­ opment either. Sales of Mer­ the addition of cab-over-engine ing for four years. Van sales cedes cars fell to 10,913 units models, for which a number of rose, albeit from a very low level, (previous year 15,944), due es­ major components are also by 13 %; the market share of pecially to new government reg­ supplied from factories in Ger­ imported vehicles grew to 24 % ulations which put higher-priced many. (previous year 21 %). vehicles at a tax disadvantage. In response to the lower U.S. Mercedes-Benz Espana in­ Sales of Honda cars, on the demand for heavy-duty trucks creased sales of vans made in other hand, which are manufac­ in the second half of the year, Spain by 19 % to 10,432 units, tured under licence and are not Freightliner reduced the number and further improved its market subject to the tax increase, rose of employees to 5,439 (previous share. Sales of imported Mer­ by 4.4% to 11,015 units. year 6,059). cedes-Benz vehicles also Sales of our commercial ve­ Group sales rose 2 % on a showed a positive trend; in hicles declined in 1985 to 3,647 dollar basis; converted to DM, 1985, 1,182 commercial vehi­ units (previous year 4,362), al­ sales were up 5 % to DM 3.8 cles were delivered (previous though our market share in the billion. Due to keener price year 651) and 3,545 cars (pre­ truck class over 7.5 tons gross competition, the results of oper­ vious year 2,791). vehicle weight climbed from ations of the previous year Converted to DM, MBE-group .24 % to 31 %. could not be matched in 1985, sales came to DM 719 million The drop in the volume of but can be considered satis­ (previous year DM 529 million). business and the negative ef­ factory. Despite higher capacity utiliza­ fects of the currency problems We expect the truck market tion, it was still not enough to resulted in a decline in turnover in North America to decline in provide satisfactory results. A - converted to DM - of 32 % to 1986 and especially to be further improvement is expec­ DM 1.1 billion. The results of op­ marked by keener competition ted for 1986. The measures for erations were not satisfactory. from Japanese manufacturers. modernizing and extending the Due to the continuing difficult We intend to meet this chal­ van range, which were intro­ political and economic condi­ lenge by expanding and further duced at the beginning of 1985, tions in South Africa, we expect improving our product range. are being continued according company sales to stagnate in to plan. 1986.

Difficult Environment For Mercedes-Benz of South Africa With the continuation of polit­ ical disturbances, the economic situation in South Africa has worsened considerably. Ex­ change rates for the country's currency dropped dramatically. This development particularly affected the South African auto­ motive industry, which is highly dependent on the import of parts. Compared with the pre­ vious year, the industry suffered

87 Distribution Companies cedes diesel cars declined to Further Growth For 29 % (previous year 49 %) of Mercedes-Benz Credit Corp. Mercedes-Benz sales. We are expecting further U.S.A. of North America and opportunities for growth from The Mercedes-Benz Credit Mercedes-Benz Canada our new mid-sized models. Corporation Norwalk/Connecti- Profit From Brisk Demand When converted to DM, sales cut, which offers sales financing For Cars in the U.S.A. rose by 8 % and in for our entire vehicle range in On the expanding car mar­ Canada by 23 %. Due to the North America, considerably ex­ ket in the U.S.A., the trend high volume of business and a panded its loan and leasing towards gasoline cars gained in still favorable average annual business in 1985 - following momentum in 1985, while de­ dollar exchange rate, results of major increases in the previous mand for diesel cars dropped operations were once again years - by 46 % to U.S. $ 863 a further 39 %. Our North Amer­ satisfactory. million (DM 2.1 billion). The car ican distribution companies leasing side was an important Mercedes-Benz of North Amer­ factor in this. The results of op­ ica, Inc., Montvale, and Mer­ erations were once more satis­ cedes-Benz Canada, Inc., Tor­ factory. onto, whose shares have been The finance subsidiary foun­ directly held by Daimler-Benz of ded in 1984 in Canada has now North America Holding since extended its financing business mid-1985, were able to raise to include Mercedes-Benz cars. their sales to the dealer organi­ zation by 2.9 % to 88,453 cars. A major share of this develop­ ment is due to the continuing brisk demand for the S-class and SL models, and the com­ pact series. The share of Mer­

A computerized net­ work was establish­ ed to link DBAG with Mercedes-Benz of North America and their regional offices, parts depots, vehicle preparation centers and participating dealers. This net­ work helps to opti­ mize the supply flow of passenger cars and of spare parts, thus taking advan­ tage of market potential.

88 Higher Profits Among comparable vehicles, Company sales - converted For Mercedes-Benz France the company improved its mar­ to DM - rose by 10 % to DM 2.1 With 1.8 million new registra­ ket position to 15.7 % (previous billion. Overall, the results of op­ tions in 1985, the French car year 15.2 %). The French truck erations remained unsatisfactory market only just exceeded the market (2 tons GVW and over) in 1985, although they showed volume of the previous year. declined in 1985. New vehicle improvement for the first time in With continuing brisk demand, registrations dropped by 3.5 % three years. Mercedes-Benz France sold to 136,000 units. With sales of 22,578 cars (previous year 15,370 units, our distribution 20,658). The compact models company was able to match the are highly popular in France as previous year's performance, elsewhere, and accounted for thereby slightly raising its mar­ 60 % of our total car sales. ket share to 11.2 %.

Principal Subsidiary and Affiliated Companies - Summary

Net sales for our foreign subsidiaries were converted at average annual exchange rates; changes in currency relations resulted in significant variances, sometimes preventing comparability. Sales for business years 1984/85 and 1983/84 respectively. These companies manufacture commercial vehicles under their own trademark; they do have, however, licenses for some Daimler-Benz components. New personnel added by TELCO. 89 Mercedes-Benz United King­ Mercedes-Benz Netherland: Large Increase in Commercial dom: Increases in Car and Positive Development Vehicle Sales Commercial Vehicle Sales Continued For Mercedes-Benz Belgium In 1985, the United Kingdom With 496,000 new vehicle In a stagnating Belgian car car market reached a new peak registrations, the Dutch car mar­ market, Mercedes-Benz Bel­ level at 1.8 million new vehicle ket showed the first significant gium SA/N.V. was able to im­ registrations. Mercedes-Benz growth in years. Mercedes-Benz prove its position. Car sales rose (United Kingdom) was able to Netherland was able to continue 6 % to 11,898 units. On the sup­ boost car sales by a further its positive trend and increase ply side, however, demand, es­ 15 % to 18,413 units. The 190- sales by 18 % to 11,746 cars. pecially for the mid-series, could model strengthened its market Demand for our new mid-series not be satisfied completely. position among the higher-qual­ models exceeded our supply Following a slight revival of ity compact cars. Positive im­ capability. the Belgian economy, the situ­ pulses are expected from the The rate of growth in the truck ation on the commercial vehi­ new mid-series, which was in­ market (2 tons GVW and over) cle market improved for the first troduced in the fall of 1985. slowed down in 1985; with time since 1979. Sales by our The trend on the British com­ 31,000 newly registered trucks, distribution company rose shar­ mercial vehicle market was en­ the previous year's level was ex­ ply by 29 % to 3,929 units, couraging. With 177,000 newly ceeded by 12 % nevertheless. mainly due to the success of the registered trucks (2 tons GVW Our subsidiary was once again new light- and medium-heavy and over), the previous year's able to improve its position by truck series. The market share level was exceeded by 5 %. The expanding its market share to for trucks of 2 tons GVW and importers' market share was 24.5 % (previous year 22.5 %). over rose from 14.3 % to a re­ 41 % as in 1984. Our distribu­ In doing this, we achieved cord 16.8%. tion company sold 15,156 com­ above-average growth rates in Sales - converted to DM - in­ mercial vehicles (previous year all truck classes. A total of 7,372 creased by 22 % to DM 774 mil­ 11,082) enjoying an above- commercial vehicles were sold, lion as a result of higher unit average participation in the 17 % more than in the previous sales and the trend towards market's growth, and an in­ year. higher-priced cars. The results crease in market share from Sales - converted to DM - of operations were satisfactory. 6.2 % to 7 %. went up 26 % to DM 966 mil­ Sales - converted to DM - lion. The results of operations in rose 32 % to DM 1.6 billion. The 1985 improved once again. results of operations were satisfactory.

In 1985, the first Mercedes-Benz "B-Train" was licensed for milk transport in southeast Australia. Its performance, strength and dependability under the most difficult climatic and geogra­ phic conditions in Australia are espe­ cially appreciated.

90 Mercedes-Benz heavy-duty truck of our Swiss partner NAW. The particularly robust components, such as large-volume suction engines and planetary hub reduction axles, withstand the test in off-the-road opera­ tion.

Encouraging Growth in Sales Our subsidiary was also able Turnover - converted to For Mercedes-Benz Italia to share in the upward trend on DM - rose to DM 746 million The economic upswing in the Swiss commercial vehicle (previous year DM 720 million). Italy continued in 1985. The car market, particularly in the truck Due to a drop in the exchange market grew by just under 7 %. sector of 6 tons GVW and over; rate for the Australian Dollar, the Sales by Mercedes-Benz Italia here, our market share grew to satisfactory results of operations rose by 33 % to 19,441 cars. In about 40 % (previous year of the previous year could not addition to the compact mod­ 38 %). A total of 2,940 commer­ quite be matched. els, our new mid-series also met cial vehicles (previous year with a positive response. 2,839) was sold. Decline in Sales The commercial vehicle mar­ Company sales - converted For Mercedes-Benz Hellas ket also displayed an upward to DM - increased 29 % to DM The overall economic situa­ trend, although keen price com­ 616 million. The results of oper­ tion in Greece deteriorated fur­ petition continued. Our subsidi­ ations show a continuation of ther. As a result, Mercedes-Benz ary sold 5,138 commercial ve­ the positive trend of the last few Hellas S.A., Athens, again suf­ hicles, 14 % more than in 1984. years. fered a drop in sales to 177 A major factor in this was the cars (previous year 214) and success of our new light- and Mercedes-Benz Australia 223 commercial vehicles (pre­ medium-heavy truck series. Profits From Domestic Upturn vious year 501). Turnover - Sales - converted to DM - grew The economic upturn in Aus­ converted to DM - fell by 23 % by 34% to DM 1.1 billion. De­ tralia continued in 1985. The au­ to DM 56.5 million. The results spite the difficult profit situation tomobile market also profited of operations remain unsatis­ in the commercial vehicle sec­ from this; car sales rose by factory. tor, earnings were satisfactory. 11 %, commercial vehicle sales by 4 %. Mercedes-Benz (Aus­ Mercedes-Benz Japan Mercedes-Benz Switzerland - tralia), Mulgrave/Melbourne, Founded in Early 1986 Satisfactory Car Sales sold 3,769 cars (previous year At the beginning of 1986 we In Switzerland, new car reg­ 3,198), maintaining its leading founded a distribution company istrations were slightly below the position on the market for of our own, Mercedes-Benz 1984 level at 267,000 units. higher-priced cars. Sales of Japan. This is in response to However, our distribution com­ commercial vehicles increased the growing importance of the pany succeeded in boosting car to 1,736 trucks and buses (pre­ Japanese market for Mercedes sales even further, by over one- vious year 1,522). cars. third to 7,224 units. For Merce­ des-Benz (Schweiz) AG, Zurich, the introduction of the new mid- series had a highly positive effect. 91 The Dornier 228 small passenger plane with up to 19 seats is a multi­ purpose plane and, among other appli­ cations, is being used for research purposes at the South Pole, for coastal and environ­ mental surveillance, and as a business aircraft.

OTHER Despite the continued unsat­ At the end of 1985, the MTU GROUP ACTIVITIES isfactory situation on the inter­ group employed 15,987 people national market, MTU Friedrichs- worldwide. The orders on hand, Continued Success for MTU hafen was able to register a whose fulfillment will extend Companies slight rise in the demand for over several years, safeguard The MTU group was extend­ heavy-duty diesel engines. The the present jobs beyond the ed in 1985 by the acquisition of company is making every effort current financial year. In 1985, L'Organe GmbH, Stuttgart, to create new sales opportuni­ the MTU group had net earn­ which manufactures injection ties through constant product ings of DM 31.8 million. systems for heavy-duty diesel improvements and new, lower- engines. Group turnover am­ cost designs. To this end, fur­ Dornier Business on ounted to DM 2.7 billion (previ­ ther license and joint venture Successful Course ous year DM 2.4 billion). agreements have been con­ The main areas of activity of MTU Muenchen benefited cluded with leading engine the Dornier companies are as from the growth in demand manufacturers. follows: Dornier GmbH, Fried- from the airlines. The company MTU Maintenance, which richshafen, develops and manu­ participates in a number of in­ deals with the maintenance and factures above all aircrafts, while ternational joint ventures involv­ repair of heavy-duty aircraft- the repair and maintenance of ing the development and pro­ engines, succeeded in winning these is the concern of Dornier duction of engines for civilian over an American airline as a Reparaturwerft GmbH, Ober- aircrafts in a wide variety of customer. Despite this, the re­ pfaffenhofen. Dornier System sizes. Due to a new joint ven­ sults of operations in this sector GmbH, Friedrichshafen, is active ture in development and pro­ remained unsatisfactory. in the fields of space flight, elec­ duction with Pratt & Whitney, Kuehnle, Kopp & Kausch tronics (mainly information sys­ Canada, the civilian engine sec­ AG was able to increase its tems) and the so-called New tor has grown in importance. business, due especially to con­ Technologies - energy, environ­ The development and produc­ tinued positive trends in the tur- ment, waste disposal, and ma­ tion capacities of the company bocharger sector. In the me­ terials technology. Dornier Medi- were fully utilized. chanical engineering area, the zintechnik GmbH, whose field higher requirements for heavy- of activity was separated from duty fans for smoke desulphur- that of Dornier System GmbH at ization in coal-fired power sta­ the beginning of 1985, manu­ 92 tions has stimulated demand. factures and sells the lithotripter. In the year under review, Dor- OTHER invoicing of major orders in nier GmbH delivered 29 Dornier AFFILIATED COMPANIES 1984. Sales increases were model 228 aircrafts as sched­ achieved by the components, uled. Throughout the world, a AEG Continues on Successful communications technology, total of over 100 aircrafts have Course of Consolidation volume-produced products and been sold to date. Development Since the approval by the information technology sectors. and production capacities were Federal Anti-Trust Office in Feb­ By year-end, the number of fully utilized. ruary 1986, and the raising of employees had risen by 560 to Dornier Reparaturwerft GmbH our equity holding from 24.9 % 73,760 people, chiefly in the further consolidated its position to about 56 %, AEG Aktienge- volume-produced products, in aircraft maintenance. It has sellschaft has become a subsid­ components and railroad tech­ long-term contracts with the iary of Daimler-Benz AG and nology sectors. Investment in Federal Republic of Germany, will be included in consolidation property, plant and equipment NATO and Canadian aircraft beginning in 1986. amounted to DM 370 million. manufacturers. In 1985, the company was DM 850 million was spent on With the "Instrument Pointing able to continue on the suc­ research and development, am­ System" (IPS) which it devel­ cessful course of consolidation ounting to about 8 % of sales. oped itself, Dornier System introduced over the last few GmbH participated successfully years. Incoming orders valued Deutsche Automobil- in the U.S. Spacelab program, at DM 11.3 billion were on gesellschaft Develops and with a number of experi­ about the same level as last According to Plan mental devices in the first Ger­ year. Business in the various The Deutsche Automobilge- man Spacelab mission D1 in sectors varied. The high-fre­ sellschaft mbH, Hanover, is ow­ 1985. The company was also quency technology, component, ned 50 % by Daimler-Benz AG heavily involved, within a con­ and volume-produced product and 50 % by Volkswagen AG. sortium of European firms, in the sectors achieved above-aver­ The research and development development of the space age growth rates, whereas the projects in the fields of electro- probe "Giotto", for the investiga­ AEG KANIS sectors, energy dis­ technology and electrochemical tion of Halley's comet. tribution and industrial technol­ storage systems were continued Dornier Medizintechnik ogy, were below the 1984 level. by the company according to GmbH achieved a substantial With a slight increase in total plan. growth in sales in 1985. Produc­ revenue, AEG sales amounted Earnings were divided equal­ tion planned for 1986 is already to DM 10.8 billion (previous year ly among the proprietors in ac­ booked out. DM 11.0 million). The drop in cordance with the profit and At year-end, the Dornier sales is mainly the result of the loss transfer agreement. group had 8,755 employees. The orders on hand worth DM The calibration of a 2.0 billion will, in some cases, high-performance take several years to complete. traveling wave-tube Consolidated sales totaled DM for television and radio satelites is an 2.1 billion. The financial state­ indispensable ments submitted to the annual requirement for the integration into meeting show net earnings of the satelite. DM 33.1 million for the year.

93 HWT-Gesellschaft fuer Hydrid- Portfolio Investment in June of 1986, now that an in­ und Wasserstofftechnik FAMSA / Mexico itial import licence for required Commenced Operations In mid-1985, we acquired parts has been granted. The HWT-Gesellschaft fuer 49 % of the capital stock of Fab- The company consolidated its Hydrid- und Wasserstofftechnik rica de Automtransportes Mex- leading position in the market mbH, Muelheim/Ruhr, was foun­ icana S.A. (FAMSA). Since No­ for trucks of over 5 tons GVW, ded in the spring of 1985. vember, FAMSA has been the selling 2,173 units (previous Daimler-Benz AG and Mannes- only firm in Mexico, apart from year 1,940) and raising its mar­ mann-Roehrenwerke AG each one state-run company, to fulfill ket share to 49 % (48 % in hold 50 % of the capital stock. the legal requirements giving it 1984). In 1985, the company started the right to manufacture diesel- In addition, ANAMMCO won up operations in the fields of engined commercial vehicles in a major order for the supply of rare-gas and hydrogen stor­ the 9 to 15-ton GVW range. buses, involving our Brazilian age/purification and insulation FAMSA produces and sells subsidiary. This agreement now technology. The first products medium-heavy commercial ve­ gives ANAMMCO the right to have already been sold. hicles and bus chassis under assemble buses under licence. licence. In the year under re­ Due to the increased volume Encouraging Order Situation view, a total of 1,552 vehicles of business, sales - converted For NAW in Switzerland was sold. The market share am­ to DM - rose 35 % to DM 374 NAW-Nutzfahrzeuggesell- ounted to 8 %. million. The results of operations schaft Arbon & Wetzikon AG fur­ Sales totaled the equivalent of were once again satisfactory. ther broadened its model offer­ DM 204 million. The results of ing in 1985. For the account of operations were unsatisfactory. NAI / Saudi Arabia Again Cuts Daimler-Benz AG, NAW conver­ In the next three years, pro­ Back Commercial Vehicle ted and equipped 1,307 special duction of commercial vehicles, Assembly vehicles (previous year 765) on which are obtained from the The economy of Saudi Arabia the basis of Mercedes-Benz Daimler-Benz group, will be was affected also in 1985 by heavy-duty trucks; it assembled started up. With the consolida­ dwindling oil-export revenues. 44 Mercedes-Benz model 3850 tion of the economic situation in The commercial vehicle market heavy-duty semi-trailer tractor Mexico expected for the me­ declined further. The National units. In addition, NAW made dium term, we are counting on Automobile Industry Company, 480 Saurer heavy-duty trucks a significant growth in sales by Ltd. (NAI) was forced to cut with off-road capability. our new affiliated company. back assembly of Mercedes In the bus sector, chassis pro­ commercial vehicles by 43 % to duction was expanded accord­ Growth in Sales For 1,777 units. Despite increasing ing to plan. One focal point of ANAMMCO / Nigeria Despite pressure from competitors and acitivity is made up by chassis Difficult Economic Situation the drop in sales of imported, which are made from Daimler- Nigeria's foreign exchange completely built-up vehicles, the Benz components and from earnings, which are mainly ear­ company consolidated its posi­ NAW's own products, so as to ned by oil exports, declined fur­ tion in 1985. Company sales - meet the particular require­ ther in 1985. This resulted in se­ converted to DM - fell 44 % to ments of the Swiss bus market. rious supply problems for DM 203 million. The results of On a larger scale, chassis for import-dependent industries operations were not satisfactory. the new O 301 and O 402 small and resulted in work stoppages For 1986, too, we expect the bus series are manufactured for in a number of cases. commercial vehicle market to the account of Daimler-Benz In spite of this difficult situa­ stagnate at a low level. AG. The number of employees tion, the Anambra Motor Manu­ was increased to 452 (previous facturing Company Ltd. year 436). Sales rose to the (ANAMMCO) succeeded in equivalent of DM 103 million continuing assembly of com­ (previous year DM 84 million). mercial vehicles of over 5 tons As in 1984, the results of oper­ GVW without shutting down the ation were positive. plant until the end of Novem­ ber 1985. The company hopes 94 to re-start production in May/ OTOMARSAN/Turkey IDEM / Iran: In the spring of 1985, the as­ Raises Capital Stock Sales Increase in DM sembly of commercial vehicle In 1985, the Turkish govern­ The continuing Gulf War and engines was commenced ac­ ment continued its course of re­ dwindling oil revenues are af­ cording to plan by P.T. Star form. On the commercial vehi­ fecting the Iranian economy Engines Indonesia. cle market, high interest rates more and more. Sales - converted to DM - and cuts in government spend­ Our two licensees for Mer­ rose to DM 223 million (previ­ ing, as part of the policy of con­ cedes-Benz commercial vehi­ ous year DM 212 million). The solidation, have resulted in a cles suffered declines in sales, results of operations were not noticeable resitancy on the part but were able to limit this due satisfactory. of buyers. to their good market position. In 1985, our affiliated com­ Diesel engine sales by our affil­ Considerable Output Growth pany Otobus ve Motorlu Arag- iate Iranian Diesel Engine Man­ of FAP FAMOS / Yugoslavia lar Sanayii A.S. (OTOMARSAN), ufacturing Company, Tabriz, In 1985, as in previous years, Istanbul, produced 1,242 buses dropped by 17 % to 20,502 the Yugoslavian economy suf­ (previous year 1,488), and thus units. Converted to DM, sales fered from import and foreign failed to match the full capacity revenue rose by 12 % to DM exchange restrictions. The com­ utilization of the last few yars. 331 million. Results of opera­ mercial vehicle industry, how­ Domestic sales dropped 31%; tions were lower. ever, registered a slight upturn. exports, on account of growing Our Belgrade-based partner import restrictions and the short­ Difficult Market FAP FAMOS boosted its output age of foreign currencies in the For German Motor, by 18 % to 5,565 commercial traditional sales markets of the Star Motors and vehicles. The market position region, were 15 % below the Star Engines / Indonesia was also improved. Sales in lo­ high level achieved in 1984. The Indonesian economy cal currency rose by 108 % to Sales - converted to DM - was hit even more than last year the equivalent of DM 697 mil­ declined by 9 % to DM 243 mil­ by the world-wide drop in de­ lion (previous year DM 572 mil­ lion. Even so, the results of op­ mand for crude oil. In the case lion). The results of operations erations were satisfactory. of light- and medium-heavy were once again positive. In mid-1986, OTOMARSAN is trucks and buses, especially, to start up production of me­ the market shrank considerably, Daimler-Benz Austria: dium-heavy and heavy-duty reaching its lowest volume in six Expansion of Car Business trucks and the assembly of die- years. Daimler-Benz Oesterreich sel engines at the newly built Our Indonesian affiliates P.T. Vertriebsgesellschaft mbH, of plant in Aksaray. German Motor Manufacturing, which we own 50 %, has been In support of these activities, Wanaherang (assembly and coordinating the sales activities the capital stock was raised production), and P.T. Star of the Austrian provincial distrib­ from TL 9 billion to TL 12 billion Motors Indonesia, Jakarta (im­ utors for our vehicles since (approximately DM 51 million). port and marketing), succeeded 1980. With the successful The DaimlerBenz AG holding in expanding their market launch of the new Mercedes remains unchanged at 36 %. shares for commercial vehicles mid-series, our share of the car and cars. In the year under re­ market rose to 3.8 % (previous view, 1,866 commercial vehicles year 3.3 %). Deliveries to Austria (previous year 1,830) were sold, went up 20 % to 8,598 cars. and 805 cars (previous year On the market for commer­ 758). Capacity utilization was cial vehicles of 2 tons GVW and unsatisfactory however. over, we were able to defend our market share of 15 %. Deliv­ eries came to 3,135 vehicles, matching 1984 levels.

95

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BALANCE SHEET Fixed Asset Coverage in connection with Section 7d of The high level of intercorpo­ the Income Tax Act and Sec­ Asset and Capital Structure rate investments has naturally tion 82d of the Income Tax Reg­ Property, plant and equip­ effected the ratio of stockhol­ ulation (environmental protec­ ment and intercorporate invest­ ders' equity to "property, plant tion and research and develop­ ments increased DM 1.4 billion and equipment, and intercor­ ment investments), Section 14 to DM 7.2 billion, after adding porate investments"; it amoun­ of the Berlin Development Law capital expenditures and de­ ted to 86 % as compared to and Section 3 of the Zonal Bor­ ducting depreciation allowances 96 % the previous year. The re­ der Area Development Law. of DM 3.7 billion and DM 2.3 maining fixed assets and sub­ Scheduled depreciation billion, respectively. This in­ stantial portions of current as­ allowances were calculated gen­ crease was mainly due to our sets are financed by long- and erally using the following use­ acquisitions of new companies. medium-term borrowed capital. ful lives: 17 to 25 years for build­ The ratio of "property, plant and ings, 10 to 17 years for site im­ equipment, and intercorporate provements, 3 to 10 years for investments" to total assets thus Assets machinery and plant, 2 to 10 rose to 33 % (last year 30 %). years for factory and office The increase in current assets Property, Plant and equipment. Machinery used for by DM 1.1 billion to DM 14.8 bil­ Equipment multishift operations was depre­ lion pertained mostly to such Property, plant and equip­ ciated using correspondingly balance sheet items as "inven­ ment decreased DM .4 billion to lower useful lives. tories", "marketable securities" DM 4.2 billion, after additions Movable property with a use­ and "other assets". Receivables and allowance for depreciation ful life of 4 years or more is de­ remained virtually unchanged. and disposals totaling DM 1.8 preciated using the declining- Stockholders' equity - consis­ billion and DM 2.2 billion, re­ balance method. We change ting of capital stock, retained spectively. As in the previous from the declining-balance earnings and 40 % of special year, property, plant and equip­ method to the straight-line equity reserves - rose DM .6 bil­ ment was valued at acquisition method of calculating depreci­ lion to DM 6.3 billion. This in­ or manufacturing costs, reduc­ ation when the equal distribu­ crease was due to the transfer ed by accumulated deprecia­ tion of the remaining net book to retained earnings of half of tion. The manufacturing costs value over the remaining useful the net income for the year. The of in-house produced property, life leads to higher depreciation ratio of stockholders' equity to plant and equipment comprise amounts. Assets of small value total capitalization amounted to the costs for direct materials are expensed in the year of 28 % (last year 29 %). Included and labor and applicable acquisition. in borrowed capital are other li­ manufacturing overhead. Ac­ Depreciation on 1985 addi­ abilities which increased DM 1.1 quisition or manufacturing costs, tions, including transfers from billion. Provisions increased DM respectively, are reduced by the construction in progress and .5 billion to DM 10.0 billion. This investment tax credits earned. advance payments relating to increase pertained exclusively to The opportunities for special tax property, plant and equipment, pension provisions while the deductible depreciation allow­ and capitalized in prior years, amount of "other provisions" re­ ances were fully utilized, mostly was as follows: mained nearly unchanged. The ratio of provisions to total capi­ talization was reduced to 45 % (last year 49 %). Daimler-Benz has recorded Inventories Treasury Stock leasehold rights in favor of third The materials and finished For the purpose of issuing parties who have built factory goods inventories have increas­ shares under the employee and office buildings for our ed DM 314 million to DM 3,248 stock purchase plan, a total of manufacturing plants and retail million as a result of higher pro­ 108,985 shares (with a par branches on land owned by the duction levels. value of DM 5.4 million = .32 % company. As of December 31, The methods of inventory val­ of total common stock) was pur­ 1985, there were 16 (last year uation remained unchanged. chased during the year at an 15) leasing agreements for Raw materials and manufactur­ average price of DM 837 a buildings and improvements; ing supplies were valued at the share, i.e. 3,500 shares in Jan­ payments for such leases lower of cost or market. The val­ uary, 23,650 in February, 21,585 amounted to DM 20 million (last uation of finished goods includ­ in March, 1,000 in April, 5,000 year DM 17 million). ed direct materials, direct labor in August, 25,300 in September and applicable manufacturing and 28,950 in October. Intercorporate overhead. Reasonable deduc­ In July of 1985, 83,588 shares Investments tions were made especially for (with a par value of DM 4.2 mil­ The balance sheet amount of obsolescence due to design lion = .25 % of total common intercorporate investments rose changes or after longer storage stock) were sold to our employ­ DM 1,815 million to DM 2,868 periods. ees at a preferential purchase million, and in Germany was price of DM 367.50 a share. As due to the purchase of shares Receivables of December 31, 1985, we held in AEG Aktiengesellschaft, Receivables at DM 4,217 mil­ 55,662 shares (with a par value Berlin and Frankfurt am Main, lion remained nearly unchang­ of DM 2.8 million = .16 % of to­ in MTU Motoren- und Turbinen- ed. An increase in notes receiv­ tal common stock) which had Union Muenchen GmbH, Muen­ able is offset by a decline in re­ been purchased in 1985. The chen, and in Dornier GmbH, ceivables from subsidiaries and shares were valued at DM 35 Friedrichshafen. Abroad, we affiliated companies in about the million. have increased our investment same amount. We have reduc­ in Mercedes-Benz Espana S.A., ed the amount of non-interest Other Assets Madrid, and have participated bearing receivables by dis­ The increase of DM 258 mil­ in a capital stock increase at counting them to maturity. lion to DM 3,492 million was Mercedes-Benz of South Africa In valuing our receivables, we mainly due to investments of (Pty.) Ltd., Pretoria; we acquired have again made allowance liquid funds in short and me­ a capital ownership of 49 % in for all known risks. dium-term time deposits and Fabrica de Autotransportes Me- similar debt instruments. More­ xicana S.A. de C.V., Mexico. Cash and Temporary over, this balance sheet caption As in the previous year, inter­ Investments in Marketable includes interest receivable, re­ corporate investments were val­ Securities fund claims for added value tax ued according to the lower-of- Cash and temporary invest­ and receivables from leasing cost-or-market principle. Invest­ ments amounted to DM 3,736 customers. ment write-downs of DM 110 million as compared to DM million (of which DM 50 million 3,251 million the previous year. on acquisitions made in 1985) Additional liquid funds of DM pertained mainly to our compa­ 3,079 million (last year nies in Spain and South Africa DM 2,797 million) were inves­ which still are in a difficult eco­ ted in short- and medium-term nomic situation. debt instruments, which repre­ sent by far the single largest item in the balance sheet cap­ tion "Other Assets".

101 STOCKHOLDERS' EQUITY According to the information because last year's inventory of AND LIABILITIES received by us under Section treasury stock was completely 20, Sub-Section 1, of the Com­ sold to the employees. In con­ Capital Stock and Retained pany Act, "Deutsche Bank Ak- nection with the treasury stock Earnings tiengesellschaft", Frankfurt am on hand at December 31, 1985, Capital stock, at DM 1,699 mil­ Main, and "Mercedes-Automo- and as a result of purchases lion, is unchanged from last bil-Holding Aktiengesellschaft", during 1985, DM 35 million was year. From the hitherto existing Frankfurt am Main, each own transferred from unallocated "authorized share capital", there more than 25 % of our capital retained earnings to retained still remains available a balance stock. earnings allocated for treasury of DM 180 million which may be Retained earnings allocated stock. used through June 30, 1986; under statute of DM 171 million An amount of DM 626 million we are proposing to the Annual remained unchanged from 1984. was allocated from net income Meeting of Stockholders on July An amount of DM 9 million to unallocated retained ear­ 2, 1986 to ratify in its place a was transferred from retained nings. new "authorized share capital" earnings allocated for treasury of DM 500 million. stock to unappropriated surplus Special Equity Reserve Provisions For Deferred Contingent Liabilities Of the special equity reserve Maintenance Discounted notes receivable totaling DM 392 million, DM 266 For maintenance planned totaled DM 18 million. Pledges million pertain to reserves al­ in the reporting year but not given for domestic and foreign lowed under Section 3, Sub- carried out, we have made a affiliated companies amounted Section 1, of the Foreign Invest­ provision of DM 151 million. to DM 380 million. ment Act (losses from foreign Existing payment guarantees subsidiaries), DM 95 million to Other Provisions of DM 12 million were given in reserves allowed under Section At DM 4,089 million, these favor of creditors in connection 1, Sub-Section 1, of the Income provisions are about the same with the 1982 Ifr-bond issue Tax Act for Developing Coun­ as last year. Primarily, they take of Daimler-Benz Finanz-Holding tries, DM 15 million to reserves into account our worldwide war­ S.A., Luxemburg. for price increases allowed un­ ranty obligations, legal and liti­ The obligation arising from der Section 74 of the Income gation risks and our obligations stock subscriptions and guaran­ Tax Regulations and DM 14 mil­ in the social benefit area (in­ tees given by cooperatives ow­ lion to the reserve allowed un­ cluding liabilities for company ned by subsidiaries amounted der Section 6b of the Income pre-retirement arrangements). to DM 16 million. Tax Act. Additionally, they encompass We are jointly and severally obligations from outstanding liable for two non-incorporated Lump-Sum Allowance For tax assessments and possible companies which have profit Doubtful Accounts losses inherent in pending busi­ and loss pooling agreements The general credit risk at ness transactions. with controlling companies. home and abroad has been A minimum dividend guaran­ considered on a country-spe­ Long-Term Liabilities tee was given to co-owners of cific scale of 4 % to 10 %. With Long-term liabilities, with a a subsidiary, the amount of risk structure nearly unchanged, maturity of at least four years, which is not ascertainable. the lump-sum allowance of rose to DM 166 million, with doubtful accounts was reduced new borrowings and repay­ * by DM 2 million to DM 148 ments amounting to DM 34 mil­ million. lion and DM 25 million, respec­ Under the assumption that tively. The new borrowings per­ the proposed dividend is ratified Provisions For Old-Age tained mostly to low interest by the shareholders at the an­ Pensions loans which are available under nual meeting, the remunerations The obligation for old-age the Berlin Tax Incentive Laws. of the members of the Board of pension benefits are actuarily Scheduled repayments of prin­ Management amounted to DM determined on the basis of an cipal will amount to DM 27 mil­ 9,507,923. Disbursements to for­ actuarial interest rate of 3.5 % lion in 1986. mer members of the Board of using the Entry Age Actuarial Management or their survivors Cost Method. Provisions for old- Other Liabilities totaled DM 4,216,787. Disburse­ age pensions increased DM The DM 1,090 million in­ ments to members of the 515 million to DM 5,734 million, crease to DM 4,578 million is in Supervisory Board totaled DM after allowance for additions connection with the considera­ 1,418,000. and pension payments. ble increase in business volume Together with the assets of which has resulted in higher the Daimler-Benz Provident payables for goods and ser­ Fund GmbH of about DM 2.9 vices and in higher other billion, the accumulated capital liabilities. available for pension benefits to our employees amounted to DM 8.6 billion.

103 STATEMENT OF INCOME Net Interest Income Other Income Interest income of DM 709 This summary item com­ Total Revenue million (last year DM 659 mil­ prises above all - apart from The increase of total revenue lion) less interest expense of extraordinary income items - by DM 5.4 billion to DM 37.5 bil­ DM 47 million (last year DM 52 profits from the sale of securities, lion was due to a rise in sales million) resulted in net interest allocations of administrative by DM 5.1 billion and to an in­ income of DM 662 million (last expenses and rental income; crease in inventories by DM .3 year DM 607 million). In this it decreased DM 31 million to billion. item is expressed the favorable DM 127 million. liquidity situation. Cost of Materials, etc. Personnel Expense Including Cost of raw materials, manu­ Income from Dissolution Old-Age Pension facturing supplies and of goods of Reserves With the increase in employ­ purchased for resale rose DM This income item decreased ment by 4,300 employees, 2.8 billion to DM 18.7 billion. by DM 45 million to DM 394 mil­ wages, salaries and social se­ This was largely due to the in­ lion. A portion of the guarantee curity levies rose DM 1.1 billion creased car production along and litigation risks had to be val­ to DM 9.7 billion. Higher union- with higher-value options. ued at a lower amount; further­ negotiated wages and salaries more, the risks for possible also contributed to this trend, as Excess Income Over Losses losses in intercorporate invest­ did the increase in the taxable From Affiliated Companies ments and for losses inherent in wage base for medical and so­ Because of a dividend pay­ pending business transactions cial security contributions. ment by our North American were valued at a reduced Expenses for old-age pension Holding Company, net income amount. and support payments were re­ from affiliated companies was duced to DM .7 billion (last year noticeably higher: DM 1.0 billion). Last year, addi­ tional provisions were made be­ cause of the introduction of Heubeck's updated actuarial ta­ bles and the reduction to 3.5 % of the actuarial interest rate used in calculating pension benefits.

Taxes on Income and on Net Assets Taxes on income and on net assets rose DM 834 million to DM 2,957 million. This increase was partly due to the fact that the 1984 tax expense was in­ fluenced by the tax deductible provision for preretirement benefits.

104 Other Expenses Net Income and DM 626 million are derived from This summary expense item Unappropriated Surplus net income and a further DM 18 - which increased DM 386 mil­ Net income for the year, million from last year's profit- lion to DM 3,209 million - com­ amounting to DM 1,252 million carryforward and from retained prises above all, as heretofore, (last year DM 711 million), in­ earnings allocated for treasury administrative and selling ex­ cludes no "inflationary profits" stock, is to be distributed to the penses including sales commis­ according to our computations. shareholders in the amount of sions, freight out, packaging, Out of net income for the DM 491 million. Furthermore, at rental and lease expenses, and year, an amount of DM 626 mil­ the annual meeting, the share­ additions to provisions which, by lion was transferred to unallo­ holders will pass a resolution for law, must be classified here. cated retained earnings. The the transfer of the remaining unappropriated surplus of DM 153 million to unallocated DM644 million, of which retained earnings.

Expense Structure Total Revenue Daimler-Benz AG

Materials 50.0% (last year 49.6%)

Net income 3.3% (last year 2.2%)

Taxes from income and property 7.9% (last year 6.6%)

Depreciation 6.0% (last year 6.8%)

Other expenses less other income 5.2% (last year 5.1%) Expenses for old-age pension 1.8% (last year 3.1%) Wages, salaries and social security levies 25.8% (last year 26.6%)

105 The annual financial statements, as of December 31,1985, show an unappropriated surplus of DM 643,947,905.—. It is proposed to the annual meeting of shareholders that the unappropriated surplus be applied as follows:

Stuttgart-Untertuerkheim, March 27,1986

The Board of Management

106 Report of the Supervisory Board

In the Supervisory Board We have examined the finan­ meeting on July 3,1985, Dr. Wil- meetings of the past year, in cial statements, the annual re­ fried Guth and Prof. Dr. Joa­ numerous individual meetings, port, and the recommendations chim Zahn resigned from the and by means of written and for the payment of dividends. Supervisory Board. In their verbal reports, we have been in­ The financial statements as of place, Dr. Klaus Mertin, Frankfurt formed in detail and have con­ December 31, 1985, the annual am Main, member of the Board sulted with the Board of Man­ report and the accounting prin­ of Management of the Deutsche agement on the state of the ciples used were verified by the Bank, and Dr. Johannes Sem- corporation and on principal Deutsche Treuhand-Gesellschaft ler, Frankfurt am Main, member matters of corporate policy. In AG, Wirtschaftspruefungsgesell- of the Board of Management of particular, these discussions schaft, Frankfurt am Main, and the Mercedes-Automobile-Hold­ centered on employment have been found to be in ac­ ing AG, were newly elected to trends, results of operations and cordance with the books and the Supervisory Board. on medium- and long-range with the pertinent legal require­ Dr. Guth had been a mem­ corporate plans including capi­ ments. The Supervisory Board ber of the Supervisory Board as tal spending policy. Further­ has noted the result of the audit its Chairman since 1976. He de­ more, we discussed important with approval. serves great credit for his per­ business transactions and The result of the examinations sonal commitment to the com­ made business decisions which made by the Supervisory Board pany and his managerial far­ by law or bylaws had to be sub­ and the auditors has shown no sightedness. We wish to thank mitted to us for approval. cause for question. The Super­ Dr. Guth for his valuable contri­ visory Board has reviewed the butions with which he has given consolidated financial state­ substantial stimulations to the ments, the consolidated annual continued development of report and the report of the Daimler-Benz. auditors. The financial state­ During his five year tenure on ments of the corporation, as the Supervisory Board, Profes­ submitted by the Board of Man­ sor Zahn has made available to agement, are hereby ratified the company his profound and approved, and we concur knowledge and his abundant with the recommendations of experience which he had gain­ the Board of Management re­ ed as Chairman of the Board of garding the application of the Management of Daimler-Benz unappropriated surplus, the in­ AG. We all owe him our deep crease of the capital stock from gratitude. internally generated funds, the In the Board meeting of April renewed establishment of an 30, 1986, Dipl.-lng. Rudolf Hoer- "authorized share capital" and nig, heretofore deputy member the changes in the bylaws. of the Board of Management, Concurrent with the conclu­ was made a full member as of sion of the annual stockholder's that date.

Stuttgart-Untertuerkheim, May 1986

The Supervisory Board

Chairman 107 108 109 In 1985, pension payments to retirees and payments to the Daimler-Benz Provident Fund GmbH The accounting, the annual financial statements and the for current obligations amounted to DM 166,793,703. In the following five years, payments - management report, which we have examined with due care, not considering adjustment obligations pursuant to Section 16 of the Corporation Pension Law- comply with the law and the Company's bylaws. will in all likelihood be made amounting to 106%, 106%, 115%, 116%, 124% of this amount. Stuttgart-Untertuerkheim, March 27,1986 Frankfurt (Main), April 16,1986 Daimler-Benz Aktiengesellschaft Deutsche Treuhand-Gesellschaft Board of Management Aktiengesellschaft Breitschwerdt Gentz Hinrichs Wirtschaftspruefungsgesellschaft Liener Niefer Reuter Ulsamer Dr. Mueller Dr. Koschinsky Wirtschaftspruefer Wirtschaftspruefer Hoernig Sanner (independent auditors)

110 Consolidated Financial Statements COMPANIES INCLUDED Deletions from consolidation: As in previous years, we did IN CONSOLIDATION Autohaus Braun GmbH, Nuern­ not consolidate certain foreign berg, which had been in liqui­ companies that had no or only The consolidated financial dation, has ceased to exist. negligible business activities. statements basically include all Freightliner Canada Industries These companies had no trans­ domestic and foreign subsid­ Ltd., Vancouver, and Freightliner actions which would have had iaries in which Daimler-Benz AG Financial Services, Ltd., Vancou­ a material effect on the corpo­ (hereinafter referred to as ver, were merged with Freight­ ration's consolidated financial DBAG) has a direct or indirect liner of Canada, Ltd., Vancouver. statements. The following com­ stock ownership of more than Daimler-Benz Property Ad­ panies (Provident Funds), which 50 %. The consolidated financial ministration, Inc., Cleveland are providing old-age pension statements, as submitted, and (DBPA) transferred its assets to benefits to our employees, were including DBAG, comprise 34 Daimler-Benz Holding Com­ not included in consolidation (last year 18) domestic compa­ pany, Inc., New York. Concur­ because they are not consid­ nies and 102 (last year 95) rently, a subsidiary of DBPA was ered subsidiaries under the law foreign companies (see page dissolved, and two more com­ (Section 18, Sub-Section 1, 119f.). panies, which still only exist as Clause 1, of the Company Act), Additions during the year: a shell, were no longer consoli­ or, due to the insignificant After purchasing the remaining dated. Mercedes-Benz France amounts involved, would not 50 % ownership interest in MTU gave up one dealership. have any material effect on the Muenchen, the MTU Group consolidated financial state­ (hereinafter referred to as MTU), ments. with ten domestic and eight for­ eign companies, was included Daimler-Benz Unterstuet- in consolidation. Through the zungskasse GmbH, Stuttgart acquisition of a majority interest Holzindustrie Bruchsal in the Dornier Group (hereinaf­ Unterstuetzungskasse GmbH, ter referred to as Dornier), the Bruchsal number of companies included Bruehler Unterstuetzungs- in consolidation was enlarged gesellschaft mbH der Wuerttem- by seven domestic/foreign com­ bergischen Baumwoll-Spinnerei panies. The results of operations und -Weberei bei Esslingen of both groups are included in a.N., Esslingen a.N. consolidated financial state­ MTU Muenchen Unterstuet­ ments from the date of acquisi­ zungskasse GmbH, Muenchen tion. For the first time, moreover, Karl Maybach-Hilfe GmbH, a leasing/finance company Friedrichshafen in Switzerland, a retail operation L'Orange Unterstuetzungs­ in Spain, a finance company in kasse GmbH, Glatten Venezuela and two subsidiaries Dornier-Hilfe GmbH, Fried­ of Mercedes-Benz do Brasil richshafen. were included in consolidation. PRINCIPLES of the North and South Ameri­ Capital Consolidation OF CONSOLIDATION can currencies, vis-a-vis the Capital consolidation was af­ D-mark, we had negative trans­ fected according to the princi­ Classification and Valuation lation differences at these com­ ple of "First Consolidation": the The individual domestic finan­ panies where portions of current parent's acquisition costs are cial statements included in the assets are also financed eliminated against the relevant consolidation were classified in through equity capital. Positive share capital and retained earn­ compliance with the statutory re­ translation differences result ings at acquisition. The differ­ quirements of the Company Act from balance sheets in which ences resulting from the elimi­ and were certified by our out­ portions of fixed assets and nation are shown in the balance side auditors. As in prior years, intercompany investments are sheet as "Cost of Investments in the individual foreign financial financed through outside bor­ Consolidated Subsidiaries in statements - which were pre­ rowings. The net balance was Excess of or Below Book Value pared and certified in accord­ a negative translation difference at Acquisition". ance with the laws of the re­ which was, as in prior years, Profits earned by foreign sub­ spective countries - have, for charged to profit and loss; it sidiaries after date of acquisition consolidation purposes, been thus neutralizes the inflationary plus the unappropriated surplus reclassified to conform to the profits, notably those of our for 1985 - excluding minority in­ presentation requirements of the South American companies. terests - are added to retained Company Act and have been Revenues and expenses are earnings. valued according to methods basically translated at average The result is that the unap­ uniformly applied to all consoli­ annual exchange rates (excep­ propriated surplus of DM 644 dated companies. This resulted tion: historical rates for fixed as­ million (last year DM 365 mil­ in changes when compared to set depreciation charges, gains lion) in the consolidated finan­ the national results. and losses from fixed asset dis­ cial statements is identical to the posals). Net income, additions unappropriated surplus of Currency Translation to retained earnings and appro­ DBAG. The accounts of our foreign priated surplus, on the other subsidiaries are translated into hand, are converted and shown Other Eliminations D-marks on the basis of histori­ at the year-end rates. The Intercompany receivables cal exchange rates for fixed as­ resulting translation difference and payables of consolidated sets at the time of acquisition, was also reflected in the income companies were eliminated; and at year-end exchange rates statement. intercompany profits in fixed as­ for current assets, borrowed sets - 1985 for the first time also capital and unappropriated sur­ for leasing vehicles - and in in­ plus. Stockholders' equity in ventories were likewise elimi­ D-marks is the remaining differ­ nated. Write-downs for the de­ ence between translated assets cline in asset values of subsidi­ less translated liabilities and ap­ aries and intercompany valua­ propriated surplus. tion adjustments and provisions Because of foreign exchange were eliminated in consolida­ fluctuations of individual local tion. These income effecting currencies vis-a-vis the D-mark elimination measures decreas­ between balance sheet dates, ed "group retained earnings" changes in the D-mark net in 1985. equity occur when its amount The consolidated income differs from the amount of fixed statements are presented on a assets translated at historical ex­ fully consolidated, detailed ba­ change rates. Particularly as a sis pursuant to Section 332 of result of the exchange rate drop the Company Act; i.e. intercom­ pany sales and intercompany earnings were eliminated against the relevant cost of sales and expenses, respec­ tively. CONSOLIDATED Assets The debit amounts represen­ BALANCE SHEET ted acquisition costs in excess Property, Plant and of book value. These resulted Asset and Capital Structure Equipment from the purchase of goodwill The Group's balance sheet Property, plant and equip­ and the differences between the total rose 25 % to DM 35.8 bil­ ment rose DM 558 million to DM depreciated replacement costs lion. The increase was largely 8,095 million; additions of DM and the book value of assets at caused by MTU's and Dornier's 4,014 million were contrasted the time of acquisition. The inclusion in consolidation. De­ with depreciation write-offs and credit amounts arose largely spite the expansion of the com­ disposals totaling DM 3,456 mil­ with the purchase of our South pany's basic business opera­ lion. As in the previous year, American subsidiaries in the tions, 62 % (last year 68 %) of capital investments in Germany 1950's when portions of the the Group's assets is accounted accounted for two-thirds of the contractual capital stock in­ for by DBAG. total, mainly accounted for by crease were paid for with tangi­ Fixed assets, including "cost DBAG and the first-time inclu­ ble fixed assets (particularly of investments in excess of sion of property, plant and machinery and equipment). book value at acquisition", rose equipment of MTU and Dornier. The net debit balance thus 24% to DM 10.2 billion; they With respect to depreciation arrived in 1985 was due to the amounted to 29 % of total as­ write-offs, domestic companies first time inclusion in consolida­ sets, unchanged from last year. accounted for more than 75 %. tion of MTU and Dornier. Stockholders' equity (capital stock, retained earnings, minor­ Investments in Affiliated Inventories ity interests and 40 % of special Companies The increase in the Group's equity reserves) increased to The balance sheet caption in­ inventories by DM 1,867 million DM 9.8 billion (last year DM 8.5 vestments in affiliated compa­ to DM 7,177 million was due to billion) while its share of total nies comprises stock ownership the enlargement of the number capitalization amounted to 27 % in companies not included in of companies included in con­ (last year 30 %). The ratio of consolidation, notably owner­ solidation. MTU and Dornier fixed assets to equity now ship in AEG Aktiengesellschaft, accounted for DM 1,730 million amounts to 96 % (last year Berlin und Frankfurt am Main of this increase. 104%). (inclusion in consolidation start­ Borrowed capital amounted ing in 1986), ownership in All- Receivables to DM 25.8 billion (last year DM gemeine Verwaltungsgesell- Trade and notes receivables 19.9 billion). As in the previous schaft fuer Industriebeteiligun- rose DM 703 million to DM year, about half pertained to gen GmbH, Muenchen, and 5,101 million. This increase was provisions. ownership in Fabrica de Auto- also due to the Group's enlarge­ transportes Mexicana S.A. de ment by the new domestic C.V., Mexico. companies.

Cost of Investments Cash and Temporary in Excess of Book Value Investments at Acquisition Cash and temporary invest­ This amount represents the ments rose DM 1,123 to DM difference between the cost of 7,430 million, particularly at investments in subsidiaries and DBAG and because of the in­ their book value at the time of clusion of MTU and Dornier. The acquisition. Netting DM 777 mil­ companies abroad, however, lion (last year DM 75 million) of showed less of a liquidity. Fur­ excess purchase price over net ther liquid funds, in the amount assets and DM 115 million (last of DM 4,183 million, were inves­ year DM 96 million) of purchase ted in short- and medium-term price below net assets resulted debt instruments which, as in in a net debit of DM 662 mil­ prior years, are shown under lion; last year there was a net "other assets". credit of DM 21 million. Stockholders' Equity Consolidated retained earn­ Minority Interest and Liabilities ings of DM 7,529 million (last in Subsidiaries year DM 6,494 million) of DBAG This balance sheet caption Capital Stock and Retained comprise the retained earnings comprises outside third-party Earnings of DBAG and proportionate re­ ownership in the net equity and The capital stock in the tained earnings, unappropriated unappropriated surplus/deficit of consolidated balance sheet, surplus or deficits earned or consolidated companies. The amounting to DM 1,699 million, incurred by subsidiaries from increase in minority interest, by is identical to the capital stock the dates of their acquisition. DM 188 million to DM 330 mil­ of DBAG. Moreover, elimination amounts lion, was mainly due to MTU Paid-in-surplus at DM 10 mil­ affecting income are debited or with its subsidiaries and to lion is unchanged from last credited here. Dornier; furthermore, to capital year. stock increases at Mercedes- Benz Espana and Mercedes- Benz of South Africa, respec­ tively. Special Equity Reserves Long-Term Liabilities Contingent Liabilities Special equity reserves total­ Long-term liabilities rose DM The obligations from the en­ ing DM 502 million (last year 45 million to DM 939 million. dorsement and assignment of DM 407 million) were set up They are attributable mostly to notes and trade receivables pursuant to applicable national our North American, European amounts to DM 124 million. tax regulations. Of this amount, and South African companies. Guarantees for the repayment DM 392 million (last year DM of loans totaled DM 513 million, 338 million) was accounted for Other Liabilities of which DM 414 million and by DBAG, the largest share, and The sum total of other liabili­ DM 99 million pertained to the DM 57 million by Mercedes- ties rose DM 3,123 million to DIV balance sheets of domestic Benz France. 10,128 million. A significant fac­ companies and foreign compa­ tor in this rise was due to the in­ nies, respectively. Guarantees Lump-Sum Allowance crease in advance payment of which are similar to surety-type for Doubtful Accounts DM 2,071 million. It was largely obligations have been given by At DM 208 million, the lump­ caused by the inclusion of MTL one domestic subsidiary to for­ sum allowance for doubtful ac­ and Dornier where customers eign banks. counts remained unchanged make advance payments for In addition to the obligations from last year. orders being completed over reported at DBAG, there existed It covers the general credit a longer period of time. The in­ liabilities in the amount of DM risk at home and abroad and is crease in other liabilities, by DM 18 million arising from stock computed at 3 % to 10 % of 799 million to DM 3,368 million, subscriptions, from capital sub­ total receivables. The percenta­ occurred mostly at DBAG. scriptions in "Close Corpora­ ges are different from country tions" (Section 24 of the GmbH to country. Act) and from guarantees of co­ operatives owned by consoli­ Provisions dated companies. Pledges total­ Provisions rose DM 2,323 mil­ ing DM 63 million were made lion to DM 13,672 million. The for liabilities of consolidated increase ensued at DBAG, and companies. One foreign subsid­ as a result of the inclusion of iary has given customary pay­ MTU and Dornier. The pension ment guarantees within the provisions accounted for nearly scope of its sales financing ac­ half; 98 % of this pertained to tivities. At one domestic subsid­ domestic companies. Of the iary, there existed a possible other provisions amounting to liability, the amount for which is DM 7,160 million, DBAG set up not determinable, for the com­ 57 % and MTU and Dornier pletion of contractual obligations 22 %. At these manufacturing in connection with a joint pro­ companies in Germany, provi­ duction program entered into sions were set up for worldwide with foreign business partners. warranty obligations, for liability and litigation risks, and for pos­ sible losses inherent in pending business transactions. More­ over, this caption includes obli­ gations in the social benefit area and obligations arising from outstanding tax assessments. CONSOLIDATED STATEMENT Other Income Taxes on Income OF INCOME This summary caption rose to and on Net Assets DM 868 million (last year DM Taxes on income and on net Net Sales 681 million); it includes, inter assets rose DM 1,314 million Consolidated net sales rose alia, profits from sales of secu­ to DM 4,341 million. Of this 20.5 % to DM 52.4 billion. In­ rities, income from leases and, increase, DM 1,005 million cluded herein, for the first time, above all, exchange profits on applied to domestic companies, are the sales, totaling DM 3.2 day-to-day business and pay­ largely to DBAG. Taxes for for­ billion, of MTU and Dornier from ment transactions originating eign subsidiaries are computed the time of acquisition; see abroad. in accordance with national tax details on page 11 ff. laws. Personnel (Expenses Cost of Materials, etc. Including Other Expenses The cost of materials, factory Old-Age Pension This summary caption rose supplies and of goods purchas­ Wages, salaries and social DM 900 million, to DM 5,703 ed for resale rose to DM 27.2 security levies rose 22 % to DM million. It encompasses mainly billion (last year DM 22.7 billion), 12.8 billion. Above all, the inclu­ administrative and selling ex­ roughly in the same proportion sion of MTU and Dornier with penses including sales commis­ as sales. 24,742 employees takes effect sions, additions to provisions, here. The expenses for old-age freight out, packaging, rental Net Interest Income pension declined DM 262 mil­ and lease expenses and the re­ Interest income for the Group lion to DM 863 million, largely maining charges for currency of DM 1,522 million (last year at DBAG, as reported previously translations other than the infla­ DM 1,534 million) is contrasted tionary portion of interest which against interest expense of DM was netted in interest income. 505 million (last year DM 406 million); this resulted in lower Consolidated Net Income net income, by DM 111 million Consolidated net income is to DM 1,017 million (last year made up as follows: DM 1,128 million). The decrease was due, above all, to increased interest expenses, notably at for­ eign manufacturing companies. As in the previous year, we off­ set the inflationary profits inher­ ent in the interest income earn­ ed in the high inflation coun­ tries of Argentina and Brazil with the charges resulting from the currency translation of equity financed liquidity of our subsid­ iaries there. The largest portion of inflationary profits was thus eliminated from interest income. CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION

The changes in the financial position of the Daimler-Benz Group was characterized in 1985 by a continuing increase of net liquidity, despite the use of considerable cash resources in purchasing all the shares of MTU and portfolio investments in Dornier and AEG. The in­ crease, by DM 2.2 billion to DM 10.6 billion, was the direct re­ sult of sources of funds being in excess funds applied. The cash flow, which has been adjusted in each case for the December 31,1984 balance sheet amounts of MTU and Dor­ nier, exceeded additions to fixed assets and portfolio investments by DM 200 million. Excluding the portion of fixed assets, which were on hand at the new sub­ sidiaries at the end of 1984 and which had been financed there already, the excess cash flow amounted to DM 800 million. Within the financing and in­ vestment activities, "advance payments received" showed a particularly strong increase; it was derived from advance pay­ ments on longer-term orders at MTU and Dornier. Also, the in­ crease in inventories was largely due to the first-time inclusion in consolidation of these two companies. Companies Included in MTU Motoren-und Turbinen- Rotor Holding GmbH, Consolidation1) Union Muenchen GmbH, Zuerich/Switzerland 2) Muenchen2) Daimler-Benz Werkzeugbau Ges. m. b. H., Aktiengesellschaft, Stuttgart MTU Motoren-und Turbinen- Krems-Stein/Austria2) Union Friedrichshafen GmbH, 2 Maschinenfabrik Esslingen AG, 2 Dornier GmbH, Friedrichshafen ) Friedrichshafen ) Esslingen a N. Dornier System GmbH, MTU of North America, Inc., Motoren-und Aggregate- Friedrichshafen2) Sugar Land, Houston/USA.2) wartung GmbH, Stuttgart Dornier Reparaturwerft MTU Singapore Pte. Ltd., Porcher&Meffert GmbH, GmbH, Oberpfaffenhofen2) Singapore2)3) Stuttgart Dornier International GmbH, MTU Australia Pty. Ltd., Daimler-Benz-Wohnungsbau Muenchen/Oberpfaffen- Blacktown, Sydney/ 2 GmbH, Stuttgart 2 hofen ) Australia ) Mercedes-Leasing-GmbH, Dornier Medizintechnik MTU Motores Diesel Ltda., 2 Stuttgart 2 GmbH, Muenchen ) Sao Paulo/Brazil ) Daimler-Benz Project Consult Dornier Medical Systems, MTU Argentina S. A, Buenos 2 GmbH, Stuttgart 2 Inc., Atlanta/USA. ) Aires/Argentina ) Holzindustrie Bruchsal GmbH, Art & Media Werbeagentur Aktiengesellschaft Kuehnle, Bruchsal GmbH, Friedrichshafen2) Kopp & Kausch, Frankenthal2) Industrie-und Handels- DIV Dornier Industrie FVG Frankenthaler beteiligungen GmbH, Stuttgart Versicherungsvermittlung Versicherungsvermittlungs- GmbH, Friedrichshafen2) Mercedes-EDV-Beratung Gesellschaft mbH, GmbH,Weinheim Frankenthal2) Mercedes-Benz do Brasil S. A., Sao Bernardo do Campo/Brazil Industriehandel Handels-und Frankenthaler Industrieausruestungs- Wohnungsbau-Gesellschaft Sociedade Técnica de gesellschaft mbH, Stuttgart mbH, Frankenthal2) Fundicoes Gerais S.A., Sao Paulo/Brazil Hanomag-Henschel GmbH, KKK Limited, Welling­ Hannover borough/United Kingdom2) Starexport Trading S.A., Sao Paulo/Brazil2) Daimler-Benz Grundstuecks- MTU Maintenance GmbH, gesellschaft Hamburg mbH, Langenhagen bei Hannover2) LOBEM-Empreendimentos Sitz Stuttgart Comerciais Ltda., Sao Paulo/ UOrange GmbH, Stuttgart2) Brazil2) Daimler-Benz Grundstuecks- MTU Informationssysteme gesellschaft Bremen mbH, Mercedes-Benz Argentina S.A., GmbH Beratung-Software- Sitz Stuttgart Buenos Aires/Argentina Computerservice-Anlagen- Hans Braun GmbH, Nuernberg vermietung, Muenchen2) as well as one finance company and one realty Daimler-Benz Services GmbH, Entwicklungsgesellschaft fur company Stuttgart Turbomotoren mbH, Muenchen2) Mercedes-Versicherungsdienst GmbH, Stuttgart MTUVersicherungs- vermittlungs- und Wirtschafts- dienst-Gesellschaft mbH, Muenchen2) Mercedes-Benz Espana S.A., Mercedes-Benz of South Africa Daimler-Benz (Australia) Pty. Madrid/Spain (Pty.) Ltd., Pretoria/Republic of Ltd., Mulgrave/Australia South Africa Comercial Mercedes-Benz Mercedes-Benz (Australia) S. A., Madrid/Spain Car Distributors Assembly Pty. Ltd., Mulgrave/Australia (Pty.) Ltd., East London/ Automoviles Barcelona S.A., as well as one realty Republic of South Africa Barcelona/Spain2) company and two retail Mercedes-Benz Exchange companies as well as one retail company Unit Services (Pty.) Ltd., Mercedes-Benz Hellas S.A., Daimler-Benz of North America Johannesburg/Republic of Athens/Greece Holding Company, Inc., South Africa5) New York/U.SA Daimler-Benz Holding AG, as well as eleven realty Zuerich/Switzerland Freightliner Corporation, companies Portland/U.SA Mercedes-Benz Nederland P.T. Star Engines Indonesia, B.V, Utrecht/Netherlands Mercedes-Benz Truck Jakarta/Indonesia Company Inc., Portland/ as well as one retail SOFI DELS. A., Rocquencourt/ U.S.A. company and one realty France company Consolidated Metco, Inc., Mercedes-Benz France S. A., Portland/U.SA. Mercedes-Benz (Schweiz) Rocquencourt/France AG, Zuerich/Switzerland Freightliner of Canada, Ltd., as well as eight retail Burnaby/Canada Mercedes-Benz (Schweiz) companies and seven realty AG, Zuerich/Switzerland2) as well as one finance companies company as well as one realty Mercedes-Benz (United company and four finance Mercedes-Benz of North Kingdom) Ltd., Milton Keynes/ companies America, Inc., Montvale/U.S.A. United Kingdom AGAM Financiering B.V, as well as one service as well as one realty Utrecht/Netherlands company, one realty company and four retail company and two retail companies as well as one finance companies company and two service Daimler-Benz Holding Belgium companies Mercedes-Benz Credit S. A./N.V, Brussels/Belgium Corporation, Norwalk/U.S.A. Automercantil Venezolana S.A., Mercedes-Benz Belgium Caracas/Venezuela2) Mercedes-Benz Credit of S. A./N.V, Brussels/Belgium Canada, Inc., Norwalk/U.S.A. UBG-Beratungsgesellschaft as well as three retail mbH,Graz/Austria Mercedes-Benz Canada, Inc., companies Toronto/Canada4) Mercedes-Benz Finance Belgium S. A./N.V, Brussels/ Belgium Mercedes-Benz Italia S. p. A., Rome/Italy

Tables and Graphs

125 126 127 128 129 130 131 132 133 (over 6 tons gross vehicle weight)

134 (over 6 tons gross vehicle weight)

135 Daimler-Benz AG Post Office Box 600202 D-7000 Stuttgart 60 Telephone (0711) 17-0 Telex 72524-0db d