People are our future

Success is essential to our corporate future. It is achieved through the efforts of our employees. At a time of dramatically intensified international competition, the company that can count on an enthusiastic, motivated staff has the advantage. These are simple truths, but not self-evident, in times of personnel cutbacks and lean structures. For the employees of the Daimler-Benz group, ideals and demands have undergone far-reaching change in recent years. Not spectacular, not coincidental, but a conscious adjustment to totally new conditions. It was and still is the task of corporate management to support this process by visibly and permanently Contents strengthening the premises for initiative and corporate thinking. 2 The Corporate Principles of The presentation of this year's annual report is a welcome Daimler-Benz

occasion for us to point this out once again. 3 Daimler-Benz Highlights

4 Letter to the Stockholders and Friends of our Company

6 Board of Management

8 Report of the Board of Management 8 Business Review 14 The Corporate Units at a Glance 16 Operating Activities of the Group 40 Central Corporate Functions

59 The Daimler-Benz Share

61 Discussion and Analysis of the Financial Situation

68 Financial Statements

88 Proposal for the Allocation of Unappropriated Profit

89 Supervisory Board

90 Report of the Supervisory Board

91 Executive Management and Daimler-Benz Group Representation and Liaison Offices

92 Principal Subsidiaries and Affiliated Companies

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

Our work at Daimler-Benz serves We aim to learn better and faster Our core businesses include vehicles people and their environment. We than our competitors. To achieve for passenger and freight transportation, aim to offer the world's most advanced this, we need not only flexible organiza­ rail systems, aerospace, propulsion products, systems and services. tional structures but also employees systems, defense systems, automation, This requires a continual commit­ who think entrepreneurially. energy systems technology and inform­ ment to technical, business and social Key to our success are employees ation-technology services. In these innovation as well as a corporate culture with a sense of responsibility, inde­ areas, Daimler-Benz strives to be a characterized not by complacency, but pendence, creativity, drive, teamwork world leader. by creative unrest. and openness to new ideas. We there­ Furthermore, we are active in In a world increasingly complex, with fore promote every employee's personal certain specialized areas, such as promising opportunities - but also risks - development to the best of our abilities. applied microelectronics, selected even minor events can take on conse­ financial services, and countertrading, quences of major proportions. There­ Daimler-Benz does business in all where we aim to be highly competitive. fore, we must carefully weigh our every corners of the globe. We are con­ To a great extent, these activities inter­ action. vinced of the advantages to everyone of link our core business areas. We owe it to future generations to open trade borders throughout the Each of our business areas falls use our natural resources prudently and world. Therefore, we view competition under the responsibility of one of our sparingly. This sense of responsibility as a welcome proving ground. The four corporate units. Thus, Mercedes- must be reflected in all our thoughts and measure of our success is the recog­ Benz, AEG Daimler-Benz Industrie, activities throughout the Group. nition our work receives, and economic Daimler-Benz Aerospace and Daimler- success is an undeniable part of this Benz InterServices (debis) work together Our customers are the focus of our recognition. under the umbrella of Daimler-Benz, the efforts. We must strive not just to Inherent to our philosophy is respect managing holding company of our meet their expectations, but to exceed for other cultures. As an international group. them. Cooperation and the open ex­ company, we reject all forms of dis­ change of know-how throughout all crimination. This principle applies, areas of our companies are central to moreover, to the filling of management Our cooperation aim to: meeting this goal. positions, where we will extend equal Just as we are accountable to our opportunities to every employee Combine know-how and experi­ customers, we are equally responsible regardless of nationality. ence to create new dimensions - to the companies' owners as well as to Responsibly promoting progress the public. This means we must be Daimler-Benz is an integrated for everyone. willing to provide feedback to others and technology group. This means that to assess ourselves openly and honestly. our various business areas are linked by We are proud to continue a distin­ cross cutting technologies and system guished tradition guided by these structures. We place a special emphasis principles. on our know-how and experience in traffic management systems and trans­ portation technologies.

The Corporate Principles of Daimler-Benz

Letter to the Stockholders and Friends of our Company

export-oriented companies cannot be It is not only the foreseeable enorm­ passed on in the form of prices. More­ ous demand for means of transportation over, there are many indications that that defines our company's tremendous despite all efforts, German industry is potential in these countries. Our corp­ already in danger of losing market orate structure, with its wide range of shares in its traditional export markets. products and services, allows us to offer The only effective short-term counter- the comprehensive mobility and infra­ measure that remains is the resolute structure solutions so desperately continuation of cost-cutting programs, lacking there. From airport outfitting in particular rationalization. and modernization to traffic studies for We have also undertaken foreign Singapore, there is a tremendous exchange hedging transactions, with demand in these markets, and equally very long-term effects for some of the great potential, for communications divisions of our company. But this does infrastructures, energy and trans­ not alter the fact that changes of such portation. dramatic dimensions as we saw last At the same time, we are working year, and especially this year, against hard to strengthen our competitive Looking back, 1994 was a satis­ both the U.S. dollar and nearly all other position in the triad markets - our factory year. The strategies we initiated important currencies in international European home market, NAFTA and to update our products, streamline and trade must eventually have a noticeable Japan. For instance, we are constructing rationalize all processes, and broaden impact on earnings. a plant in Tuscaloosa, Alabama, where our international presence have pro­ To overcome these difficulties, we we will produce a new recreational ceeded as planned. The reversal we must become less dependent on such vehicle - the All-Activity Vehicle - be­ achieved in the development of our incalculable, currency-related factors by ginning in 1997. Last December, we earnings was more than remarkable, shifting production activity to other selected a production site for the Micro and not only in comparison to 1993. countries. There clearly is no other Compact Car, a car designed specifically As with other companies, this solution. In addition, the trend in recent for urban areas that we are developing development was of course facilitated years has reconfirmed that economic together with the Swiss company SMH. by the general economic recovery that conditions follow different cycles in In addition to the three major global has since stabilized in the important mature and developing regions. This too markets, however, we must also create regions of the world. However, the sole prompts us to spread out our industrial all the necessary conditions for opening reason why we were able to take ad­ activities and by doing so minimize up new growth markets with new pro­ vantage of the trend to such an extra­ unavoidable risks to the greatest ducts. But if we attempt to enter every ordinary degree is that we created the extent possible. market of our own accord, we run the necessary conditions in terms of cost As it is, the proximity to the re­ risk of wasting our resources. We there­ structures, productivity, and not least spective market - production on site - fore attach the greatest importance to of all in terms of strategy. is becoming an increasingly important expanding our long-term cooperative After all, 1994 was certainly not an factor in competition. Especially the arrangements with partners around easy year. This is especially true in view markets in the Asian-Pacific region and the world. of the persistent weakness of important in Latin and Central America, all regions currencies against the German mark, still characterized by very dynamic above all the U.S. dollar, the drastic growth, demand new, different product undervaluation of which is clearly un­ concepts based on their respective justified by any objective economic requirements. A good example is our factors. From past experience we know Family Car China, a vehicle concept that currency-related burdens on developed specifically for Chinese needs.

Letter to the Stockholders and Friends of our Company Despite heightened concern over the business units at AEG Daimler-Benz This year, 1995, will not be easy competitiveness of Germany as a pro­ Industrie, the new management struct­ either. We have already addressed our duction site in the wake of this year's ures at DASA, especially in its Aviation, concerns and the tasks at hand. In collective bargaining agreement for the Defense and Civilian Systems divisions, addition, we face further non-recurrent German metal industry, we are by no and the restructuring of debis System- expenditures for structural measures. means contemplating a gradual with­ haus. But the course has been set. Despite all drawal from Germany. Rather, our mis­ All in all we are continuing to work the turbulence and adversity, we are sion is to ensure long-term corporate on setting up our structures in such a counting on a satisfactory earnings success by globalizing our activities, way that we can react more rapidly, trend overall, and barring unforeseen thus ultimately ensuring domestic more efficiently, and more forcefully to events and factors, we expect even employment as well. the requirements and changes of the stronger growth in the years to come. This goal is also furthered by the market. As you know, in so doing we are The targeted earnings will be both comprehensive programs to improve not afraid to make controversial deci­ welcome and necessary, because there cost structures and efficiency that we sions or to take unconventional paths is no denying that in 1994 we ended up introduced several years ago. Between of action. far short of the level we have to achieve 1991 and 1994 alone, we achieved It has been and remains our policy to in the medium and long term. Never­ increases in productivity of up to 30%; be flexible in taking the necessary steps theless, I am proud to say that in 1994, this is true of Mercedes-Benz, as well as to expand our core areas and consolid­ thanks to their know-how and willing­ divisions of Daimler-Benz Aerospace and ate our integrated technology corpora­ ness to work, our employees laid solid AEG Daimler-Benz Industrie. By 1997, tion with flexibility. Our objective is also foundations for a good future. that figure will be over 40% group-wide. to demonstrate the necessary resolve in In the past, we have always been Our consistent pursuit of decentral­ adapting to any changes in the environ­ guided by the principle of allowing you, ization, which has lived up to all expect­ ment. Such steps have made deep, even our stockholders, to share in the long- ations, also plays a key role in these painful cuts necessary, particularly in term earnings trend. For this reason, strategies. The formation throughout the the past two years. This is true especial­ dividends were reduced last year only corporation of small units close to the ly of the extensive capacity adjustments from DM 13 to DM 8, even though the market and with a high degree of res­ throughout the company, which thus far earnings situation actually would have ponsibility has noticeably improved the we have been able to implement, with­ suggested no dividend at all. It therefore flexibility of our organizational struct­ out exception, in a socially acceptable seems appropriate, in view of the ures. Moreover, it has fostered an manner. change for the better and our future entrepreneurial spirit that in turn has We have had to make careful deci­ prospects, to recommend that the generated an entirely new cost sions on plant closings or on divesting dividend for 1994 be raised to DM 11. awareness. activities that are only slightly - if at all - Another essential step is the re­ connected to the core purpose of this structuring of the Mercedes-Benz Board company, mobility. We have achieved of Management, which will take effect many of our targets, and many others on July 1 of this year. Basically, this are still in the works. involves replacing the still largely Obviously, these considerations also functional task structure with product apply to activities that are not yet big and regional fields with comprehensive enough to survive alone in the increas­ responsibility. ingly fierce international competition. In Similar processes are underway other instances, due to a number of or have been completed in our other developments, full capacity utilization divisions as well. Examples include the has been limited to a European scale. implementation of bottom-line oriented Thus, realignments and partnerships will remain on the agenda. A recent example is the planned cooperation with ABB, Asea Brown Boveri, in the area of railroad engineering.

Letter to the Stockholders and Friends of our Company 5

Report of the Board of Management

Business Review

Against the backdrop of the improved global economic environment, sales Mercedes-Benz Passenger Cars: in the Daimler-Benz group rose to DM 104.1 billion in 1994. This was the Market Position Strengthened first time we topped the DM 100 billion mark. With the exception of DASA, Worldwide all corporate units contributed to the 7% growth. The steps we took to The international automobile boom reduce costs and improve production processes were clearly successful. gained momentum again in 1994. In Along with the business expansion, these were primary factors in the Western Europe the market situation significant progress we made in 1994 toward a generally satisfactory was more favorable than in the crisis profit position. year 1993, following the general eco­ nomic recovery. While positive market stimuli came from the U.S.A. and the Global Economic Environment Carried by the momentum of invest­ newly industrializing countries, the Much Improved ment activity, economic growth in the demand for cars in Japan stagnated at The global economic upswing was U.S.A. accelerated. To avert the dangers a low level. Worldwide passenger car significantly stronger in 1994. The natio­ of an overtaxed economy, the U.S. production rose 5% to 36.1 million nal economies of Western Europe, in Federal Reserve Bank was obliged to vehicles. particular, were able to emerge from the resort to higher prime interest rates Mercedes-Benz sold 592,400 cars, recession surprisingly fast. Appreciable several times in 1994. achieving above-average growth in stimuli for economic recovery initially Until the end of 1994 the Japanese almost all major regions. Even in the came from trade within Europe and from economy was not able to join the stagnating German market, sales of new exports to Asia, North America and the general upswing. The primary factor Mercedes-Benz vehicles increased by former East Bloc countries. It was not here was domestic demand. Japanese 19% to 249,800, so that our market until the latter part of the year that the industrial exports are still hampered share rose from 7.0 to 8.2%. Outside economic boom was supported by by the strong yen. Germany we sold a record 341,300 investment activity as well. Rounding off the generally positive passenger cars, exceeding the figure The German economy - starting with global economic picture was sharp of the previous year by 18%. expanding foreign trade - is on the road growth in the newly industrializing The generally favorable market to recovery. Although the healthy growth countries of Asia and Latin America, situation enabled us to increase in the New Federal States was financed as well as early signs of stabilization in production by 23% to over 590,000 largely through western transfers, the several former East Bloc countries. passenger cars; thus we produced at first signs of more efficient economic full capacity. structures began to emerge there. Group Sales Top DM 100 Billion Through massive layoffs and significant for the First Time Mercedes-Benz Commercial enhancement of productivity, German Daimler-Benz group sales climbed to Vehicles: Sales Increase Sharply industry was able to improve its inter­ DM 104.1 billion in 1994. This repre­ The trends in the commercial vehicle national competitiveness, thereby sents an increase of 7% over the figure markets were also predominantly positi­ strengthening its position in the export for 1993 considering significant changes ve. The largest contributing factor to the markets. in consolidation. Sales in the European recovery in Western Europe was the Union, at DM 59.9 billion, were 4% large replacement need and the growing higher than the 1993 level; in Germany, demand for transport capacity. The they rose 3% to DM 39.0 billion. We truck business in the U.S.A. was espe­ achieved above-average growth in the cially brisk in classes 7 and 8 (over 11.8 U.S.A. with sales of DM 18.3 billion tons). The total world production of (+13%) and in the other markets with commercial vehicles rose by 12% to DM 25.9 billion (+11%). 14.2 million units. Excluding deliveries within the group, Mercedes-Benz generated 66%, AEG Daimler-Benz Industrie 10%, Daimler- Benz Aerospace 16%, and debis 8% of the group sales.

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

Business Review Unit sales for Mercedes-Benz Sales at Daimler-Benz Aerospace commercial vehicles rose 14% in 1994 (DASA) Decline to 290,400 units. The growth stimuli On January 1, 1995, the corporate came mainly from North America, other unit Deutsche Aerospace was renamed Western Europe countries and Latin Daimler-Benz Aerospace. This step not America. In Germany, however, our only underscored the affiliation with the registrations of new vehicle dropped Daimler-Benz group, it also took into 4% to 79,000 because of the difficult account the growing internationalization market situation throughout the of the aerospace industry. industry. Although the demand for air travel The production volumes of our rallied in 1994, the positive trend did foreign subsidiaries reached a new high not carry over to the market that is of nearly 148,900 commercial vehicles. important to Daimler-Benz Aerospace, A total of 291,900 commercial vehicles the aircraft market. Furthermore, budget rolled off the assembly line at our 46 cutbacks of public contractors for space German and foreign production sites. and defense systems hurt DASA's business. AEG Daimler-Benz Industrie In particular, the sales decline in the Expands Slightly Aircraft Division, which accounted for The general economic upswing in roughly 50% of DASA's business, result­ 1994 was felt in the German electrical ed in a 7% drop in overall sales to DM engineering industry only after some 17.4 billion. On the other hand, incoming delay. While the foreign demand in­ orders totaling DM 16.4 billion repre­ creased as the year progressed, orders sented a slight growth of 5%. Significant­ from Germany showed signs of a weak ly higher orders in the Aircraft Division revival only after the midpoint of the stood in contrast to declines in the other year. Trends varied widely for the indi­ divisions. vidual product groups in the electrical Against the backdrop of a difficult engineering industry. Incoming orders economic situation, we proceeded with and sales of capital goods relevant to the capacity adjustments and structural AEG Daimler-Benz Industrie continued improvements already begun at DASA. to decline. In addition, we established several joint New orders for AEG Daimler-Benz ventures with international partners in Industrie reached DM 11.5 billion. 1994 to increase our competitiveness Calculated on a comparable basis, i.e. worldwide. after adjustment for the values of the discontinued activity in household debis Continues to Pursue appliances, meters and lighting systems, Growth Course this represents a 6% growth. Both the The services relevant to Daimler- German (+4%) and foreign markets (+8%) Benz InterServices (debis) contributed contributed to this increase. Sales in disproportionately to the overall eco­ 1994 reached DM 10.3 billion. Com­ nomic recovery. Debis was able to parably calculated, this represents a increase its sales by 14% in 1994, to 5% growth. DM 10.8 billion. Even when additional companies were integrated in the course of the business expansion, debis continued to grow primarily on its own strength.

Business Review Sales in the Systemhaus Division Purchasing Volume Exceeds Level the new A-class and the small roadster rose 9% to DM 1.8 billion, while in of Previous Year (SLK). An important foreign project in Financial Services they increased 12% to In 1994 the Daimler-Benz group 1994 was the new plant in Tuscaloosa, DM 7.6 billion. Business was especially purchased goods and services world­ Alabama, where production of the good in the mobile communications wide in the amount of DM 61.1 billion recreational All Activity Vehicle (AAV) market. Through the acquisition of (1993: DM 56.7 billion). Nearly 70% of is scheduled to begin in 1997. Bosch Telecom Service, which holds the purchases pertained to Mercedes- In the Commercial Vehicles Division, second place in its sector, debitel was Benz, 9% to AEG Daimler-Benz Industrie, approximately DM 1.3 billion were ex­ able to significantly increase its market 14% to Daimler-Benz Aerospace, and 8% pended worldwide to prepare for new share in Germany. to Daimler-Benz InterServices. vehicle generations and to adjust cur­ The 8% increase in purchasing vol­ rent product lines to changing customer Personnel Adjustments Necessary ume is primarily due to the higher pro­ demands. In Europe, the focus was on The Daimler-Benz group had duction level, especially for Mercedes- preparations for two new van families, 330,551 employees at the end of the Benz, as well as to our activities to Sprinter and City Transporter, model year (366,736 in 1993). The cutback further reduce vertical integration. updates for the light, medium and affected above all the workforce in Because we stepped up our global heavy-duty truck classes, and the switch Germany, where the number of em­ sourcing activity, material purchases to environmentally friendly EUR02 en­ ployees dropped from 284,576 to from foreign sources continued to gines. The MB 700, a light-duty truck 251,254. At the end of 1994 Mercedes- increase. We purchased goods and produced in Indonesia for the Asian Benz had 197,568, AEG Daimler-Benz services from the New Federal States in market was an additional investment Industrie 44,769, DASA 75,581, debis the amount of DM 1 billion in 1994. The focus. 9,226, and Daimler-Benz AG 3,407 billion-DM threshold was thus reached Capital expenditures at AEG salaried and hourly-paid employees. one year ahead of schedule, a success amounted to DM 0.6 billion; at DASA, For group management tasks, all in all primarily attributable to the "Purchasing DM 0.7 billion; at debis, DM 0.2 billion; 520 employees were employed at Drive in the New Federal States". and at headquarters, DM 0.1 billion. headquarters. Additions to leased equipment The adjustment of capacities to an Investments for the Future totaled DM 5.6 billion (1993: DM 5.9 internationally competitive level, initia­ The investments in property, plant billion). The amount of outside capital ted in previous years, was continued in and equipment in 1994 totaled DM 4.7 used for leasing and sales financing was 1994. We were able to make personnel billion (1993: DM 5.4 billion). If the DM 14.5 billion (1993: DM 13.7 billion). cutbacks in a socially acceptable man­ effects especially of the first-time ner for the most part; only in exceptional inclusion of Fokker in 1993 are taken DM 8.7 Billion Expended for cases were layoffs necessary. The into consideration, investments reached Research and Development Projects number of employees also declined the same level as in the year before. The We spent a total of DM 8.7 billion through the dissolution of divisions increase in intangible assets amounted (1993: DM 9.0 billion) on research and and divestiture of business interests. to DM 0.6 billion. Depreciation and development. Included in this figure is In many parts of AEG Daimler-Benz disposal of tangible and intangible DM 3.5 billion for contract-related Industrie and DASA, working hours assets amounted to DM 5.9 billion. development services, incurred almost also had to be shortened. We invested in new production exclusively by Daimler-Benz Aerospace. technology, product diversification, and The group continues to place high value rationalization measures. The focus of on environmental safety; our expenditu­ the investments was on Mercedes-Benz, res for environmental protection mea­ at DM 2.9 billion (1993: DM 2.6 billion). sures in 1994 came to over DM 680 In the Passenger Cars Division, the bulk million. of the investment budget of DM 1.5 billion was allocated to production preparations for the new E-class, the new engine plant in Stuttgart-Bad Cannstatt and the transition to water- based paint technology. In addition, we invested in production preparations for

Business Review Mercedes-Benz spent a total of Platform satellites, as well as the Ariane DM 3.3 billion (1993: DM 3.2 billion) booster rocket program. In the Defense on research and development. The and Civil Systems Division, the focus research and development work is the was on the Pars 3 LR program; in Pro­ basis for our promotional campaign in pulsion Systems, on the engine EJ2000 the area of passenger cars and for the Eurofighter and on the commer­ commercial vehicles. cial jet engine programs conducted Mercedes-Benz AG, together with jointly with Pratt & Whitney. Schweizerische Gesellschaft für Mikroelektronic und Uhrenindustrie AG Consolidated Net Income (SMH), established MC Micro Compact Climbs to DM 0.9 Billion Car AG for the purpose of making a new The net income of the Daimler-Benz type of vehicle intended especially for group in 1994 was DM 0.9 billion (1993: densely populated urban areas under 0.6 billion). However, this increase does the project title Micro Compact Car not reflect the full extent of improved (MCC). A wholly-owned subsidiary of operating results, as a number of special the joint venture took over the work of circumstances had influenced the figure development and production prepara­ for the prior year. The dramatic turn­ tion. The French town of Hambach was around in earnings is perhaps best selected as the plant site. illustrated by the operating result, which At AEG Daimler-Benz Industrie, jumped from DM -3.3 billion to DM 2.7 DM 736 million went into research and billion. The DM 6 billion increase inclu­ development in 1994 (1993: DM 764 des one-time income of DM 1.4 billion million). The research pertained to our resulting from the deconsolidation of modular 12X locomotive and new jet MBL Fahrzeug-Leasing GmbH & Co. KG trains for regional rail systems, intelli­ and income from the AEG Daimler-Benz gent power components, systems and Industrie and Fokker divestments. DM components for vehicle electronics, 1.1 billion (1993: DM 3.5 billion) were airbag gas generators and sensors, and spent on restructuring measures. optoelectronic infrared modules. Addi­ Mercedes-Benz contributed DM 2.2 tional focuses were new component and billion (1993: DM -1.3 billion) to opera­ system concepts for medium-voltage ting profit. This increase was achieved technology and for network control above all through expanded sales in the technology at the station level, a new passenger car and commercial vehicle generation of programmable logic business in Germany and important control systems, and innovative modules foreign markets. In addition, our cost- for the recognition of address fields and cutting programs led to significant for mail distribution. savings. The expenditures for personnel Daimler-Benz Aerospace spent restructuring measures were substant­ DM 4.3 billion (1993: DM 4.8 billion) ially lower than in the previous year. on research and development. Of this The contribution of AEG Daimler- figure, DM 3.4 billion was for projects Benz Industrie to consolidated results carried out by third parties under was DM -0.1 billion (1993: DM -0.9 bil­ contract (including projects in progress). lion). The DM 0.8 billion improvement In the Aircraft Division, the Airbus is related to the divestment of the A330/340, Dornier 328 and Eurofighter Domestic Appliances Division and the (EF 2000) programs were developed. power meters and lighting systems The primary research focuses in Space units, with a book profit of DM 0.4 bil­ Systems were the ERS-2 and Polar lion. Moreover, expenditures for re­ structuring measures were lower than in 1993. The contribution of Daimler-Benz accounts payable trade, which also rose The economic upswing is expected Aerospace to consolidated operating by DM 0.9 billion to DM 7.7 billion. The to pick up speed in Germany as well. results improved, totaling DM -0.5 billion deconsolidation of MBL Fahrzeug-Lea- As in 1994, however, the primary growth (1993: DM -1.0 billion). Earnings were sing GmbH & Co. KG and the sale of the factors will be export demand and, to an limited by the persistently weak market AEG Daimler-Benz power meters, ligh­ increasing extent, investments. Con­ for commercial aircraft as well as by ting systems and domestic appliances sumption in the private sector is likely government budget cuts in the defense activities had the opposite effect on the to rally hesitantly at best, because of and aerospace industry and the attend­ balance sheet. Excluding the predomi­ higher taxes and the associated lower ant underutilization of capacities. Lower nantly third-party financed financial household spending latitude. expenditures for structural measures services business, the percentage of The growing markets in Asia con­ had a positive effect. stockholders' equity increased from tinue to offer good sales prospects. As in 1993, Daimler-Benz InterServi- 26% to 28%, while the percentage of Also, the countries of Latin America are ces (debis) contributed DM 0.4 billion to stockholders' equity covering non- expected to gradually resume the the group's operating profit. Its principal current assets was up from 78% to growth momentum of 1994 in the wake source of income was the financial ser­ 79%. As in the previous year, long and of the financial crisis in Mexico and its vices sector, where business continued medium-term capital amounted to 60% negative consequences for the entire to develop positively. The Systemhaus of the consolidated balance sheet total. Central and South American economic and Mobile Communications Services region. divisions experienced a significant Allocation of Earnings On the basis of the generally favor­ improvement over last year. The net income of Daimler-Benz AG able outlook for the global economy, the The financial results shown in the increased to DM 565 million (1993: DM rising trend in the international auto­ consolidated statements of income 390 million). The improved results in the mobile business will also continue. decreased significantly, from DM 2.0 operative area and the decrease in The Mercedes-Benz passenger car billion to DM 0.2 billion. The decrease is restructuring expenditures meant that business in 1995 will be affected by the largely the result of reduced earnings after losses in 1993, Mercedes-Benz introduction of the new E-class. A sales from the sale of securities, which were AG returned a profit in 1994. The ab­ decline in anticipation of the model DM 1.4 billion lower than in the previous sorption of losses from AEG Aktien- change will be followed by an expected year. Also, provisions totaling DM 0.6 gesellschaft and Daimler-Benz Luft- sharp upswing in the second half of the billion (1993: DM 0.3 billion) were taken und Raumfahrt Holding AG, the parent year. for losses on financial assets and company of the DASA group, decreased In the Commercial Vehicles Division, securities. noticeably over the previous year. the development of our most important At our Annual General Meeting on markets will probably allow additional Balance Sheet Structure Marked May 24, 1995, we will propose that a sales growth. Particularly the Sprinter, by Capital Increases dividend of DM 11 be paid per share of our new van in the 2.5 to 4.6 ton weight Mainly as a result of the inflow of DM 50 par value (1993: DM 8). The total class, will provide additional stimuli in liquid assets from the two capital dividend payment will thus amount to Western Europe. We expect competitive increases undertaken in 1994, total DM 564 million. advantages from the merger of our bus assets increased by DM 2.6 billion to activity with that of Karl Kassbohrer DM 93.5 billion. Liabilities were also up, Outlook GmbH in the new company EvoBus due to extensive liabilities from leasing The economic trend of the first GmbH. and sales financing, which at DM 14.5 months leads us to expect favorable billion were DM 0.9 billion higher than in business conditions to continue for 1993. The increase in business - above the remainder of 1995. While the U.S. all at Mercedes-Benz - is reflected in economy will lose momentum because of the restrictive rate of the U.S. Federal Reserve Bank, accelerated growth can be expected in Western Europe and in Japan.

Business Review Mercedes-Benz is betting on growth The invoicing of development through new markets. In the coming services for the Ariane 5 carrier booster years, it will develop buyer potentials by will bring about a sharp sales increase tapping new regions and offering addi­ for Space Systems. We are also likely to tional attractive models. The promo­ exceed last year's sales in Propulsion tional campaign for passenger cars and Systems and in the Aircraft Division, commercial vehicles will be accompa­ where sharp increases are expected nied by a comprehensive reorganization particularly from the Fokker 70 and of the unit's internal structures and Fokker 100 aircraft programs and from processes, and by increasing globaliza­ the Dornier 328. In the Defense and tion of the entire production chain. Civil Systems Division, however, a furt­ AEG Daimler-Benz Industrie expects her decline in sales looms. Daimler-Benz its business volume to grow in 1995 in will continue to pursue the cost-cutting all fields of activity, but especially in programs already initiated to ensure microelectronics. growth and jobs in its core activities. With the assumption of the industrial These measures include the further management of TEMIC as of January 1, tightening of company structures at 1995, AEG Daimler-Benz Industrie has Fokker, a worldwide cooperation policy now fully consolidated this company in and a global campaign to develop new its financial statements. The increase in business opportunities. sales connected with this move and with Daimler-Benz InterServices expects the organizational allocation of MTU to be able to continue smoothly on the Friedrichshafen will more than offset the favorable course established in 1994. reduction in business volume resulting This positive outlook is based not only from the disposal of the household on the momentum of the development appliance, meter, and lighting systems in its service sector but also on restruct­ activities. uring measures, primarily in the debis With a memorandum of under­ Systemhaus Division, which already standing, ABB and AEG Daimler-Benz showed the first signs of success in Industrie announced on March 16, 1995 1994. that they will be merging their activities Against the backdrop of a continuing in the track-bound products sector in a positive trend in the general economic fifty-fifty joint venture. The largest rail environment and the significantly en­ systems manufacturer in the world will hanced efficiency that we have realized be established with the founding of in all group sectors, we are confident ABB Daimler-Benz Transportation. The that we will be able to increase the planned joint venture will have to be business volume of the Daimler-Benz approved by the European cartel group once again and continue to authorities. improve our net income. There are, Daimler-Benz Aerospace expects however, uncertainties associated with a slight increase in sales group-wide, the currency front if the volatility of after adjustment for changes in the important currencies experienced in consolidated group. the first few months of 1995 persists for an extended period.

Business Review

Operating Activities of the Group

Corporate Unit Mercedes-Benz While American car and truck manu­ In 1994 Mercedes-Benz increased its sales by 9% to DM 70.7 billion. The facturers enjoyed the advantage of the Passenger Car Division and the Commercial Vehicle Division contributed continuing upward trend in their dom­ equally to these results. The most important impetus came from North estic market, the automotive industry in America, from Western Europe, and from Southeast Asia. Due to the Japan had to cut back production sub­ positive trend in sales and the progress that had already been made in stantially due to the rise in the prices for productivity, the annual profit of DM 1.8 billion (1993: DM -1.2 billion) was their vehicles abroad resulting from again clearly a positive result. We continued to expand our global presence exchange rate fluctuations and the during the year in review, and at the same time laid the groundwork for continuing weakness in the Japanese opening up new markets with both existing and new products. automotive market.

Mercedes-Benz: Over DM 70 billion The International Automotive demand for transport capacity. In the in Sales for the First Time Business Picks Up Speed passenger car sector, the incentives for The trend in the motor vehicle busi­ The international automotive scrapping introduced by some govern­ ness has been extremely positive at industry picked up speed again in 1994, ments provided a new upsurge. Demand Mercedes-Benz in comparison to the with essentially parallel developments for motor vehicles remained strong in rest of the industry. Group sales rose in the passenger car and commercial the U.S.A.; this is true both of the pas­ 9% to DM 70.7 billion. This gratifying vehicle markets. senger car market and the market for increase had a broad regional basis. The In step with the overall economic class 7 and 8 trucks (11.8 metric tons U.S. market must be singled out, where recovery, the market situation in We­ and heavier). In Japan the demand for sales rose 18% to DM 11.8 billion. In stern Europe was more positive than automobiles stagnated at a low level, Western Europe outside of Germany our in the crisis year 1993. An important however, although a slight improvement sales were 13.9 billion DM, 13% higher contributing factor in the commercial appeared at the end of the year in pas­ than the year before. We were also able vehicle sector was the great need for senger cars and commercial vehicles. to achieve significant increases in South replacements, as well as the growing Because demand stimuli from the America, Eastern Europe, and the emer­ emerging nations of Asia and Latin ging countries of Asia. Even in Japan, America were for the most part positive, where the automotive market continued passenger car production rose 5% world­ to be generally weak, we increased sales wide to 36.1 million vehicles. World by 13% to DM 2.8 billion. In Germany, production of commercial vehicles rose too, in spite of the unfavorable market by 12%, to 14.2 million units. situation, our business grew by 3% to The sales situation in Germany DM 26.9 billion. Since the bulk of continued to be less than satisfactory. growth took place outside of Germany, Retarding factors included the purcha­ however, the non-domestic share of sing reluctance of commercial vehicle group sales rose to 62% (1993: 60%). customers in connection with the attempts to unify European freight traffic and the continuing weakness in private consumption, which is a significant factor in the demand for passenger cars. Many European manufacturers used the years 1993 and 1994 to introduce comprehensive measures for increasing production, and to strengthen their in­ ternational competitive position with attractive new models. Overcapacities, the resulting fiercer competition, and the still unsatisfactory profit levels demonstrate that the structural deficits The E-class: With sales in this industry have not been complete­ of 2.7 million cars the most ly eliminated, however. successful Mercedes of all time.

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. In the Passenger Car Division, sales Mercedes-Benz Commercial were DM 42.1 billion, 9% higher than Vehicles: Significant Increases in the year before; the Commercial in Sales Volume Vehicle Division also registered growth Commercial vehicle sales for of 9%, to DM 28.6 billion. With these Mercedes-Benz rose by 14% in 1994 to figures the Passenger Car Division con­ 290,400 vehicles. We expanded group tributed 60% and Commercial Vehicles sales of trucks over 6 metric tons to 40% to the business volume of the 167,200 units (1993: 143,900), main­ Mercedes-Benz group. taining our position as the world's leading manufacturer in this market Mercedes-Benz Passenger Cars: segment. The greatest stimuli for growth Stronger Market Position Worldwide came from North America, Europe out­ Worldwide, Mercedes-Benz sold side of Germany, and Latin America. In 592,400 passenger cars in 1994, the Germany we strengthened our market second-highest annual sales volume in position, but new sales declined by 4% the history of the company. In almost to 79,000 vehicles because of the every important region we achieved difficult market situation in the entire above-average growth and thereby industry. increased our market share significantly. Due to the extremely fierce com­ In the stagnant German market the petition in pricing and terms, and price registrations of new Mercedes-Benz advantages afforded to major compe­ cars rose by 19%, to a total of 249,800; titors by favorable exchange rates, our our market share climbed from 7.0% 27% share in the Western European to 8.2%. market for trucks over 6 metric tons Outside of Germany we sold 341,300 was lower than in the prior year (30%). cars in 1994, 18% more than in the prior In contrast, our share of the Western year and at the same time a new high. European market for transporters bet­ Business was especially encouraging in ween 2 and 6 metric tons rose from the U.S.A., where we succeeded in 12% to nearly 13%. increasing sales to consumers by 18%, An important contribution to busi­ to 73,000 cars. Significant growth was ness abroad was again made by our also recorded in Eastern Europe, in Latin Freightliner subsidiary. Freightliner was America, and particularly in the emer­ able to increase its sales in the United ging nations of Asia. In Western Europe States by 25% to 51,400 units, taking outside of Germany sales rose by 16% to over the leading position in the U.S. 153,300 cars, and even in Japan new market for Class 8 trucks (gross vehicle registrations were 20% higher, at 33,400 weight 15 metric tons and above) with a cars. We have now maintained our market share of 25% (1993: 24%). position as the leading European import car for the fifth year in a row. As a consequence of the generally positive sales situation we increased our passenger car production by 109,500 units, or 23%, to over 590,000 cars, and are therefore producing close to capacity. 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. Since sales of our subsidiaries in Another supporting element of Latin America also rose, commercial our productivity drive is the process of vehicle production volume of our foreign "Continuous Improvement", which we companies reached a new high at nearly stepped up in 1994 in all of the divisions 148,900 units (1993: 120,400). We were of the company through extensive edu­ able to increase commercial vehicle cational activities and carefully targeted production in Germany by 18%, to information. These measures supported 143,000 units, on the basis of stronger and carried forward the productivity European demand outside of Germany; campaign initiated in 1993. a total of 291,900 commercial vehicles rolled off the assembly lines of the 46 Further Staff Reductions Mercedes-Benz production sites. To raise our productivity to an inter­ nationally competitive level over longer Increasing Motivation Through term, we had to continue personnel New Structures reduction, even though business in the The internal agreement on revising reporting year, and consequently the the performance and compensation capacity utilization of our plants, had system, concluded in 1994, was an improved greatly. important milestone for modernizing At the end of 1994 Mercedes-Benz time management. It grants employees had 197,568 employees worldwide a major role in determining their own (1993: 209,933). Mercedes-Benz AG working and productivity conditions. personnel was reduced by 12,037, to This makes it possible to work out 147,061 persons. The reduction in solutions tailored to the personnel affected both the automobile individual needs and cap­ and commercial vehicle plants as well abilities of the employee, as the sales organization. resulting in significantly higher acceptance of Successful Cooperation with the contractual productivity Supplier Industry standards. Furthermore, The TANDEM concept for coopera­ the new agreement allows tion continued to be the basis in 1994 leeway for adjusting time for successful cooperation with our schedules to the require­ suppliers. More than 500 teams of ments of modern labor employees from the suppliers and from systems and forms of our company were formed as part of work organization. TANDEM to work jointly on vendor- More than 30% of the supplied parts for our current vehicle production jobs in the range as well as for new development Mercedes-Benz AG plants had been projects. converted to group work by the end of the year. Group work, with its signifi­ cantly higher motivation for work and productivity and its more efficient organization of work processes, has become an important motivating force in our productivity drive. This has been confirmed by a company-wide study of employee experience with group work.

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The principal objective of the for the two new transporter families, the the interest of further expanding our cooperative undertaking was to make Sprinter and the City Transporter, on customer base, we are working on the entire value-added chain even more model maintenance for our light, introducing the CharterWay spectrum of efficient, all the way to the final product. medium and heavy truck classes, and services in other markets in the future. The results of the TANDEM projects on conversion of our model lines to the made it possible to achieve significantly environmentally friendly EUR02 engines. DM 3.3 Billion for Research improved price and cost levels for a Areas of focus outside of Germany and Development variety of vendor-supplied part as early included the preparations for the MB Research and development activities as 1994. 700 - a new family of light trucks devel­ are the basis of our product campaign in On the basis of increased production oped especially for the Asian market passenger cars and commercial vehic­ and of our activities directed at reducing that will first be marketed in its country les. The global distribution of our devel­ production depth our purchasing volume of production, Indonesia. In cooperation opment activities, which until recently nevertheless rose by 12% to DM 43.8 with our partner Ssang Yong we are were largely confined to the Commercial billion, with orders from abroad increa­ developing a transporter - also for the Vehicle Division, assures us maximum sing at a higher than average rate. Asian region - which we will present in proximity to markets and customers. South Korea in 1995. New forms of interdisciplinary project DM 2.9 Billion Invested in activities and greater involvement of the Property, Plant and Equipment Worldwide Sales supplier industry have enabled us to To continue expanding the innovative Organization Strengthened further increase the efficiency of our basis of our motor vehicle business and In 1994 we spent DM 135 million research and development efforts in thereby ensure our international com­ (1993: DM 224 million) on expanding 1994. Of the total of DM 3.3 billion we petitive position, we made extensive our worldwide sales and service organ­ spent on research and development in capital investments again in 1994. ization. The most important activities the year in review (1993: DM 3.2 billion), In the Passenger Car Division, pre­ were a number of construction projects DM 2.2 billion went to the Passenger parations for the new E-class, the new in the New Federal States, four additio­ Car Division and DM 1.1 billion to engine plant in Bad Cannstatt, and the nal centers for pre-owned commercial Commercial Vehicles. ongoing conversion to water-base paints vehicles, and the enlargement of our were the areas of focus of our invest­ central supply depot in Germersheim, Micro Compact Car - ments in property, plant and equipment, Germany. Investment volume abroad A Cooperative Venture with SMH totaling DM 1.5 billion (1993: DM 1.3 came to DM 72 million. The most In February 1994 we announced our billion). In addition, preparations are significant projects are the new admini­ cooperative venture with Schweizerische now underway for the production of the strative headquarters for Mercedes- Gesellschaft fur Mikroelektronic und new A-class in the Rastatt plant. In Bre­ Benz in Austria, the sales company in Uhrenindustrie AG (SMH) to build an men we began preparing for production Sweden, Avtomobili AOST in Moscow innovative vehicle intended specially of the new small roadster (SLK). Our and the new supply depot in Fontana, designed for densely populated areas. most important foreign project in 1994 U.S.A. To open up additional sales pot­ The project name is Micro Compact was the new plant in Tuscaloosa, Ala­ ential for our vehicles, we have further Car(MCC). bama; starting in 1997 a completely expanded our sales and service organi­ Responsibility for implementing the newly-developed four-wheel-drive re­ zations in Eastern Europe, Latin America project rests with MC Micro Compact creational vehicle ("All Activity Vehicle") and the emerging countries of Asia. Car AG (MCAG) in Biel, Switzerland, of will be manufactured there. which a 51% share is held by Mercedes- In line with the central idea of per­ CharterWay Services Expanded Benz AG and 49% by SMH. manent innovation, around DM 1.3 Although Mercedes-Benz Charter- billion was invested worldwide in the Way has only been offered in selected Commercial Vehicle Division to prepare European countries since 1992, the the next generation of vehicles and to name has become synonymous with adapt the current product lines to the expert service for every aspect of changing wishes of our customers. In Mercedes-Benz commercial vehicles. Europe the focus was on preparations We therefore decided to market long- term rentals and service leasing and, in some markets, our service contracts, as CharterWay services starting 1994. In

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The developmental activities and legal entity of MB Turk. Operational In the Commercial Vehicle Division, production preparations are being control will be held by EvoBus GmbH. too, we have begun a far-reaching pro­ carried out by a wholly-owned subsidiary The Mercedes-Benz and Setra product duct campaign that includes the comp­ of MCAG, Micro Compact Car Entwick- lines will be marketed independently. lete renewal of the existing lines as well lungsgesellschaft in Renningen, Ger­ as supplementing them with vehicles many. The designated production site Outlook tailored to the specific circumstances of is in Hambach, France. With the generally favorable pro­ new markets. spects for the world economy, the up­ The product drive in passenger cars Acquisition of Kassbohrer ward trend in the international automo­ and commercial vehicles is accompa­ Approved by EU Commission tive industry should continue in 1995. nied by a comprehensive realignment of Following a thorough investigation, Particularly in the rest of Western our internal structures and processes. the EU Commission approved the ac­ Europe, signs of continued growth in the This is the only way we will be able to quisition of Karl Kassbohrer Fahrzeug- demand for passenger cars and com­ give lasting strength to our cost position werke GmbH by Mercedes-Benz AG on mercial vehicles are appearing, and the in the face of increasingly tough com­ February 14, 1995. The European bus market situation can be expected to petition. In addition, we are working activities of Mercedes-Benz will now be improve in Japan as well. The American persistently to give an even more global consolidated into the newly founded motor vehicle market, on the other shape to the entire value-added se­ EvoBus GmbH, with its four industrial hand, is unlikely to be able to maintain quence involved in the creation of our bases in Mannheim, Germany, Ulm/Neu the dynamic level of recent years, while products. Ulm, Germany, Ligny, France, and Istan­ the emerging countries of Asia and Latin bul, Turkey. The Omnibus Division in America will continue to open up good Mannheim was spun off from Mercedes- opportunities for sales. Benz AG retroactive to January 1, 1995. In Germany the market situation The Turkish bus division will remain a remains difficult. The harmonization of European freight traffic and the resulting effects on the German trucking industry will further restrict the demand for com­ mercial vehicles, and there is only very limited room for growth in the German passenger car market due to the stagnating and even de­ clining purchasing power of private households. Mercedes-Benz is placing its hope on growth in new markets. We will be opening up new purchasing potential in both geographical terms and by means of attractive new models. After the model change in the E-class at the mid-year Mercedes- Benz will have an extremely up-to-date lineup of models in the Passenger Car Division, and we will be able to round this out in future years with additional cars. We will position ourselves as the top supplier in new markets with high growth potential.

Mercedes-Benz Corporate Unit AEG Daimler-Benz Industrie trend in orders at Modicon and in Sy­ In 1994, AEG Daimler-Benz Industrie achieved incoming orders totaling stems and Automation. In contrast, DM 11.5 billion and sales in the amount of DM 10.3 billion. This growth was orders for Project and Drive Systems fell essentially sustained by Rail Systems and Microelectronics. On the group below the 1993 level. level, although net income clearly improved compared with the previous year, it is still not satisfactory. For 1995, we are therefore continuing to DM 10.3 Billion in Sales focus our primary goals on speeding up the reorganization of the company AEG Daimler-Benz Industrie's sales by means of implementing structural and performance-improving measures in 1994 totaled DM 10.3 billion. Com­ in all business sectors. parably calculated, i.e., not including the Domestic Appliances, Power Meter and Lighting Systems activities, revenues Delayed Recovery in the Slight Growth in Incoming Orders increased by 5% to DM 8.5 billion. Sales Electrical Engineering Industry Incoming orders for AEG Daimler- revenues rose by 13% abroad, while re­ In the German electrical engineering Benz Industrie reached DM 11.5 billion venues in Germany fell by 2% compared industry, the upward trend in the econ­ in 1994. After making an adjustment for with the previous year. omy was delayed. While foreign demand the value of the divested domestic Rail Systems and Microelectronics, rose over the course of 1994, a slight appliances, power meter and lighting in particular, contributed to this largely recovery in customer orders from Ger­ systems activities, a growth of 6% satisfactory development. The growth in many did not set in until the middle of results. On the German market, custo­ Rail Systems is essentially based on high the year. Production in the West German mer orders were up by 4% to DM 5.2 project invoicing in Germany and the electrical engineering industry climbed billion, foreign orders climbed by 8%. U.S. In Microelectronics, the positive by 4% compared with the previous year. In Rail Systems, incoming orders business trend of TEMIC TELEFUNKEN Although capacity utilization did improve rose by 3%. The large orders of Deut­ microelectronic is responsible for the slightly, it was clearly below the level of sche Bahn AG, as well as orders for the increase in sales. utilization at the beginning of the '90s. Berlin U-Bahn, the Metro in Guangzhou, China, and the Airport Express Line in Inconsistent Development among Hong Kong played a major role in this Product Groups increase. Development progressed at varying The incoming orders of the Micro­ rates among the individual product electronics Division showed especially groups of the electrical engineering strong growth at 21%. This positive trend industry. Incoming orders and sales was due solely to a marked increase in continued to fall with respect to the customer orders at TEMIC TELEFUNKEN capital goods that are significant for microelectronic GmbH. Above all, new our company. This was especially true in orders for semiconductors, vehicle Energy Systems Technology, which was electronics, and gas generators should marked by cautious investment behavior be emphasized. on the part of important customers, The Energy Systems Technology Divi­ primarily abroad. With price levels that sion did not match the incoming order continued to decline, no recovery was volumes of the previous year; a decline registered in Drive Systems. However, occurred in almost all power trans­ Controller Technology profited from the mission and distribution activities, as upswing in manufacturing. well as in industry components and The recovery process developed electrical machinery. at an exceptional pace in electronic Because of several large orders in components. As a result of the good Postal Automation, incoming orders domestic and foreign economy, business were gratifyingly high. Moreover, in the expanded, primarily in vehicle electro­ fourth quarter of 1994, the newly nics, telecommunications, and home acquired U.S. firm ElectroCom Automa­ entertainment electronics. tion was included in the consolidation for the first time. The growth in Automa­ tion was also sustained by the positive

AEG Daimler-Benz Industrie In Energy Systems The restructuring costs incurred at Technology, sales reve­ the same time, which put a DM 600 nues stagnated at the million strain on the 1993 results, still previous year's level. The totaled DM 150 million in 1994. Over weak business activity in and above the structural measures Low and Medium-Voltage already introduced in the previous year, Systems caused by the we have adopted additional projects economy was offset by such as gearing the domestic and higher project invoicing in foreign sales organization specifically High-Voltage Systems. In toward the business units responsible contrast, the business for profits. volume in Industry Com­ The profits from the sale of various ponents and Electrical activities, particularly Domestic Appli­ Machinery was below the ances, Power Meters and Lighting 1993 level. Systems, improved the net income for In Automation, the 1994 by DM 300 million, so that the net previous year's revenues were not loss before loss absorption by the group matched. The strong competitive totaled DM 350 million compared with pressure in both the Project and Drive DM 1.2 billion in 1993. For AEG Aktien- Systems as well as Systems and Auto­ gesellschaft, the loss came to DM 552 mation sectors led to a sharp decline in million, because the income from the business. Modicon, however, registered divestiture of the Power Meters and a positive trend in sales. Lighting Systems activities had already been included in AEG Aktiengesell- Sale of AEG Hausgerate schaft's profit and loss statement in Following the approval by the EU the previous year. authorities of the sale of the Domestic Despite a marked increase in sales, Appliances Division to Electrolux, this the Rail Systems Division exhibited business activity was eliminated from operating losses close to the previous the group as of September 30, 1994. year's figure. The poor revenues from The profit and loss statement for AEG customer orders played a role in this Hausgerate is still included in the con­ development. solidated financial statements for nine Net income in Microelectronics months. improved considerably as a result of the gratifying business trend in vehicle Considerably Reduced Group Loss electronics and because of the cost- The profit and loss situation of AEG cutting measures implemented, but Daimler-Benz Industrie in 1994 was hurt still remain in the red, as expected. by the delayed economic upswing. The underutilization of capacities led to extremely fierce price competition. By carrying out restructuring programs and sweeping rationalization programs, we succeeded in cushioning the impact of these burdens, as well as the impact of increasing costs, and in maintaining operating losses at approximately DM 500 million compared with the previous year.

26 AEG Daimler-Benz Industrie 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. In Energy Systems Technology, the U.S. subsidiary ElectroCom Automation Outlook Power Transmission and Distribution were included in the profit and loss In the current business year, full business field broke even, even though statement for the fourth quarter of recovery of the German electrical revenues declined. Net income in the 1994. engineering industry can be expected. Components sector, which no longer On this basis, AEG Daimler-Benz includes the Power Meter and Lighting Reduction of Workforce Industrie assumes that business Systems activities, was burdened by a At year-end 1994, AEG Daimler- volumes will grow, sustained by all price-related decline in sales. However, Benz Industrie employed 44,769 people divisions, especially Microelectronics. because of the measures implemented worldwide. The drop in the employment However, the economic recovery will with respect to structural reorganization figure compared with 58,921 in 1993 have at best a delayed effect in sectors and cost improvement, losses were can basically be attributed to the nega­ with long-term contracts, in particular. reduced considerably. tive balance from the sale and takeover As of January 1, 1995, we took over The Automation Division countered of businesses. In addition, there were the industrial management of TEMIC, the intensified competitive pressure in cutbacks as a result of structural and which will be fully included in our con­ the industrial sector with intensive economic adjustments. Comparably solidated financial statements. The rationalization measures. However, calculated, this translates to a 5% sales-boosting effects resulting from because of the still insufficient utiliza­ decrease. this and from the organizational tion of streamlined capacities, as well allocation of MTU Friedrichshafen will as a further drop in prices, the net loss DM 1 Billion in Investments more than compensate for the decline was higher than in 1993. Although net Investment by AEG Daimler-Benz in sales associated with the divestiture income fell in postal automation due to Industrie companies in 1994, including of the Domestic Appliances Division. lower prices, it still remained gratifyingly the assets taken over from newly acqui­ Our goal remains to accelerate the positive. The activities of the acquired red companies, totaled DM 983 million structural reorganization of AEG Daim­ (1993: 764 million). This figure includes ler-Benz Industrie by means of strategic, DM 564 million (1993: 622 million) in income-boosting measures in the additions to property, plant and equip­ individual fields of activities, focusing ment, DM 215 million (1993: 105 million) primarily on Rail Systems. We will con­ of which involve foreign centrate our efforts on improving the companies. quality of revenues and the utilization of The full takeover of capacities by cutting costs and further ElectroCom Automation internationalizing our activities. represented the largest share of the investments. Investment activities in Germany also focused on the continued moderniza­ tion of the Hennigsdorf plant for Rail Systems. Outside Germany, the companies of AEG Daimler-Benz Industrie invested primarily in a new production line for Microelectronics at the plant in Nantes, France. Projects that were completed included the Technology Center for Systems Electronics in Pittsburgh, U.S.A., and the administration and services facility in Greece, which we had already begun in the previous year.

28 AEG Daimler-Benz Industrie 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. Corporate Unit Daimler-Benz Aerospace We entered into an agreement with In 1994, business trend for Daimler-Benz Aerospace was characterized by Thomson-CSF to merge the activities of declining sales and a shortage of orders. Although the air travel market both companies in the area of high- recovered, the positive development was not yet felt in our core business, performance explosives and form the the aircraft market. In the public sector, the funds available for space new company TDA Armements S.A.S. exploration and defense were cut even more drastically, and our business Activities in the field of projectile pro­ volume was painfully reduced. The programs we had introduced to adapt pulsion were consolidated under the structures and capacities and reduce costs in response to the adverse aegis of Bayern-Chemie. In a joint effort market conditions in the year before required further workforce reductions with Aerospatiale we will combine the in 1994. These measures represented an important step toward improving area of guided weapons systems within our earnings situation. EMS (European Missile Systems), a company to be founded for this purpose. We were able to reach an agreement Strengthening the Core Business In June 1994, the company and the with the American company Collins Through New Structures employees reached a consensus on the Avionics, a subsidiary of Rockwell Inter­ The dramatic deterioration in the proposed measures. The agreement national, to found Collins-Dasa Avionics economic environment forced DASA to confirms our intention to eliminate Systems GmbH. This joint venture will make incisive changes in order to 10,300 jobs, primarily in the Aircraft and be responsible for the definition and ensure the company's existence. In Defense and Civil Systems divisions. The worldwide marketing of products for October of 1993 an action plan was reductions also include the plan to close satellite-supported navigation systems presented that focuses on strengthening or sell a number of sites in Germany in and state-of-the-art avionics. With the the core fields of operation and discon­ the period between 1993 and 1996. Russian company Aviapribor AG, the tinuing business activities that were no Particularly in the Air Transport Division, leading manufacturer of avionics and longer strategically relevant. The pro­ we will eliminate overlap between indi­ aircraft equipment in the CIS, we will gram includes measures for adapting vidual activities and implement a new found the joint venture Davia. Davia will structures and capacities to the manufacturing structure in the plants. be headquartered in Moscow and will reduced and anticipated levels of In Defense and Civil Systems, the handle the development, production and capacity utilization. dramatic cutback in the budget of the marketing of selected avionics and flight Federal Ministry for Defense (BMVg) safety equipment for the CIS market. made a fundamental strategic reorient­ Later, Davia will expand its market west­ ation unavoidable. We converted the ward. former four product areas of the division In 1994, we entered into negotia­ into a new management structure con­ tions with Canada's Northern Telecom sisting of two product divisions with a concerning the joint founding of a number of profit centers and two inde­ company that will develop and offer a pendent profit centers. Further, we are broad range of services and systems for reallocating a variety of activities to ex­ modern telecommunications networks isting and future European companies. to telecommunications carriers in Germany and Eastern Europe. Recovering Our Competitive Edge Through New Cooperative Ventures As a consequence of reduced defense spending, certain defense capacities can only be maintained and utilized on a European scale. This prompted us to found additional Europ­ ean joint ventures in 1994. In the civilian sector too, we intensified our internatio­ nal cooperative effort to expand our worldwide market presence and pene­ trate new markets.

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. In the year under review we trans­ The exchange of experience bet­ Losses for Aircraft, New Orders Rise ferred solar technology, formerly a part ween industry and research is also to In the Aircraft Division, sales de­ of the energy and system technology be intensified in the Technology Center clined 15% to DM 8.7 billion (1993: product division, to the company Ange- founded jointly by Daimler-Benz Aero­ DM 10.3 billion). Almost all divisions wandte Solarenergie - ASE GmbH, which space Airbus and the Hamburg-Harburg were affected, but especially drastically was founded in cooperation with the University, which was inaugurated in hit were the Fokker and Military Aircraft RWE subsidiary Nukem. With Carl Zeiss, Hamburg-Finkenwerder in 1994. Divisions. In the civilian aircraft sector Oberkochen, we are working toward a revenues were adversely affected by the joint venture in the field of Optronics. Entering Markets of the Future: drop in the dollar exchange rate and - In the Space Systems Division, nego­ Marketing Companies Bring Us especially for Fokker aircraft - by fierce tiations continued with Aerospatiale on Closer to Our Customers competition over prices. In the short- founding ESI (European Satellite Indus­ During the year under review we haul aircraft sector a vigorous rise in- tries). In the aerospace sector, our continued the worldwide market drive sales was achieved with the Dornier cooperation with the People's Republic we began in countries that are of 328, which has been in series produc­ of China, begun over ten years ago, was interest to our company as potential tion since October 1993. Incoming reinforced during the reporting year with future markets. We founded marketing orders rose 14% to DM 8.7 billion (1993: the founding of EurasSpace GmbH, companies in Greece, Italy, Mexico, DM 7.6 billion), reflecting in particular Munich. This joint venture between Austria, Singapore, Spain, Turkey, the the increase orders in the Airbus pro­ CASC (China Aerospace Corporation) United Arab Emirates and the People's gram and the Dornier 328 program, but and DASA will take over the develop­ Republic of China to bring us closer they remained at an unsatisfactory level. ment, manufacturing and marketing of to our international customers. The satellites for communication and earth marketing companies will combine the Space Systems at the surveillance, and the associated ground technological competence and product Previous Year's Level stations. spectrum of several divisions, allowing Space Systems sales were at the The Propulsion Systems Land/Mari­ us to offer complex solutions to poten­ same level as the year before, at DM 1.4 ne Division entered into a comprehens­ tial customers in their own country. In billion. Along with the research satellite ive cooperation agreement with Detroit addition, our circle of traditional liaison ERS-2, one of the most important con­ Diesel Corporation for the purpose of offices was expanded worldwide. tributors to sales was the Ariane pro­ sharing the existing sales organizations gram. Incoming orders were unchanged of the two companies as well as devel­ Group Sales Decline at DM 1.5 billion. oping, producing and marketing new Group sales for Daimler-Benz Aero­ diesel motors. space, at DM 17.4 billion (1993: DM Downward Trend for 18.6 billion) were down 7% from the year Defense Technology Intensified Cooperation Between before. A major factor in this trend was Sales declined throughout the De­ Research and Industry a substantial decline in sales in the Air­ fense and Civil Systems Division. Only Together with Daimler-Benz AG and craft Division, which contributes around through extensive settling of accounts in the German Aerospace Research Institu­ 50% of the group's business volume. the Stinger program was there a growth te (DLR) we have reached a basic agree­ In Germany, sales declined 7% to of 8% to DM 3.1 billion (1993: DM 2.8 ment on closer cooperation. The goal of DM 5.4 billion (1993: DM 5.8 billion). billion). Orders were down 3% to DM 2.2 this innovative partnership is to jointly Foreign sales, which as in 1993 con­ billion (1993: DM 2.3 billion). The vol­ pursue research and development tributed 69% of total sales, declined 6% ume of orders was considerably lower objectives in future-oriented technol­ to DM 12.0 billion (1993: DM 12.8 bill­ than sales, as in the years before. ogies in order to significantly increase ion). The military portion of sales came the speed of innovation and make more to 29%, as in the prior year. Incoming efficient use of the shrinking pool of orders showed a slight growth, by 5%, to available funds. At the same time there DM 16.4 billion (1993: DM 15.6 billion). are efforts to engage in cooperation The significantly higher orders in the with additional industrial and research Aircraft Division were offset by declines entities. in other divisions.

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. More Favorable Sales Situation for hours had to be implemented for an For the same reason, we decided at Propulsion Systems extended period. the beginning of 1995 to undertake a Propulsion Systems sales, influenced By division, 42,220 persons (1993: restructuring program for Fokker in an by the departure of KKK from the con­ 46,863) were employed in Aircraft, effort to improve the earnings situation solidated group, were DM 3.0 billion 4,205 (1993: 4,463) in Space Systems, picture here as well. (1993: DM 3.1 billion), 3% lower than in 9,970 (1993: 12,387) in Defense and At the same time we are continuing the year before. When calculated in Civil Systems, and 12,618 (1993: 15,347, our policy of European cooperation and comparable terms, however, there was including 1,736 at KKK) in Propulsion downsizing by merging domestic activi­ an increase of 7%. The decline in orders Systems. In the other divisions, which ties in the sector. by 12% to DM 2.8 billion (1993: DM 3.2 include primarily the joint venture Finally, with our worldwide market billion) was also influenced decisively by TEMIC, listed pro rata, and Medical campaign, we are making a significant this change. Comparably calculated, the Technology, there were 6,568 emp­ contribution toward opening up new decline was only 5%. loyees (1993: 7,026). business opportunities in markets offer­ ing a high potential for growth. Workforce Reductions Continued Outlook With this program we are establish­ Daimler-Benz Aerospace had 75,581 As of the end of 1994 we owned a ing the prerequisites for securing jobs in employees throughout the group at the 50% share each in TEMIC TELEFUNKEN our core divisions, and for the healthy end of 1994 (1993: 86,086), including microelectronic GmbH. At year's end we growth of our company in the future. 3,058 apprentices and trainees. There sold a 1% share to AEG Daimler-Benz were 15,499 persons (1993: 16,713) Industrie, reducing our share to 49%. working in foreign countries. The decline TEMIC will therefore be listed as an in­ in workforce reflects the measures we vestment as of 1995, and will no longer introduced to adjust capacities. For be included pro rata in the consolidated example, we have largely withdrawn financial statements of DASA. With the from the Lernwerder site. In addition adjustment for the resulting effects, we to the workforce reductions, in many are anticipating a moderate increase in divisions of the group shortened working comparative sales for the group in 1995. In Space Systems the settlement of accounts for the development costs of the Ariane 5 will boost sales considerably. We are expecting a slight increase for Propulsion Systems and for Aircraft, where we are anticipating significant growth, partic­ ularly in the Fokker 70, Fokker 100 and Dornier 328 aircraft programs. However, a further decline can be expected in De­ fense and Civil Systems. The programs initiated to lower costs and improve profits are progressing according to plan, including the elimi­ nation of additional positions and the closing of a number of sites. This will bring our costs down to a level and enable us to compete internationally.

34 Daimler-Benz Aerospace Corporate Unit Daimler-Benz InterServices The business trends regarding soft­ Following the upswing in the industrial services sector, debis increased its ware projects and products varied. The sales 14% to DM 10.8 billion in 1994. Growth in the Mobile Communications Services, Telecommunications, Public Division was especially good, in no small measure due to the acquisition of Sector, and Traffic subdivisions posted Bosch Telecom Service. Significant growth rates were evident in the increases in incoming orders and sales. Systemhaus and Financial Services Divisions. The internationalization In the Industry and Standard Software of business activities was also a focus for Daimler-Benz InterServices. Products divisions, which operate in a Restructuring measures were quite successful, especially in the area of difficult environment, we implemented information technology. the majority of the restructuring mea­ sures decided on in the previous year. The attendant optimization of business debis Continues to Grow In addition, we partially restructured processes resulted in cost savings and In the year under review, debis the refinancing of our domestic leasing personnel cuts in these divisions. Con­ raised consolidated sales by 14% to DM and financing businesses. Through the tingency reserves were available for the 10.8 billion. Because of the conversion investment of external partners in a resulting non-recurring expenses. of the accounting system from the total vehicle holding company its sales are The software and management con­ cost method to the internationally no longer consolidated; the disposal sulting business at Diebold continued at prevalent cost of sales method, interest revenues at the point when the contract the previous year's high level. The order income from sales financing amounting expired are also no longer included in sposition was positive during the second to DM 1 billion is now included under the consolidated sales. The sales trend six months especially. sales; aside from minor inventory was also influenced by the fact that we The new joint venture with Mitsubi­ changes, this corresponds to the total expanded the sales financing business shi, debis Advanced Communication output that we reported in previous more strongly than the leasing business. Services, began offering enhanced fax financial years. A comparable effect was seen in the services in the fall of 1994. The aim here In all divisions, further internation­ countertrade area, through the change is to offer our customers innovative alization contributed to the growth in in the proportions of the consulting services surrounding this widely used sales. In terms of region, Germany business and own-account trading. transmission medium. accounted for 55% of 1994 sales, the partner countries of the European Union Systemhaus: for 7%, the U.S. market for 29%, and Higher Profitability other markets for 9%. debis Systemhaus was able to raise The acquisitions of Bosch Telecom its sales by 9% to DM 1.8 billion and Service, the Leipzig Data Processing make a positive contribution to profits. Center and several other firms account­ Computer Communication Services ed for DM 0.1 billion of the higher sales (CCS) again contributed disproportion­ figure. This is a clear indication that ately to this result. debis achieved the continuous growth We restructured the cooperation primarily by its own efforts. with CAP-Gemini in Germany. While maintaining the commitment in terms of value, our French partner now holds a 19.6% investment in the overall activities of Systemhaus. As part of this restruct­ uring, the separation of the individual areas under corporate law was aband­ oned in order to give CCS and the software projects and products the opportunity to enter the market together and under one name.

Daimler-Benz InterServices (debis) Financial Services: Mexico and Japan. In Italy and Spain, Another focus was continued inter­ Further Upswing the respective measures taken in a nationalization. Besides the opening of The Financial Services Division was difficult environment assured new new offices in Singapore and Italy, the able to expand its sales by 12% to DM business. In Portugal, Mercedes-Benz presence in France was expanded 7.6 billion. The biggest contribution to MultiServigos, and in Hungaria, Merce­ through an investment in the Théoréme this figure was made by the domestic des-Benz Lfzing Hungaria were founded, insurance broker. market, where the commercial and pre- specializing in the classical vehicle owned car business expanded in part­ leasing trade. Trading icular. The main source of foreign sales The debis leasing companies, which Despite the difficult political and revenue was our American company are concerned with financing other economic situation of important partner Mercedes-Benz Credit Corporation products of the group, were also able to countries for countertrade transactions, (MBCC). Despite the end of the special significantly expand their portfolio. The debis Trading was able to expand the programs launched with Mercedes-Benz development of the American debis countertrade volume by 16% to DM 0.6 during the previous year, the company Financial Services was especially positi­ billion by strengthening the consulting was able to further increase its sales. ve in this regard. During the year under business. Cooperation with the Russian An especially positive trend could be review, we founded new companies in company Gasprom as part of the observed in the Commercial Vehicle Switzerland, the Netherlands, Great DITGAS Handelshaus joint venture Division of MBCC, which works closely Britain and Japan in order to expand this continued to proceed positively. with the North American Mercedes-Benz business. Commercial Vehicle subsidiary, Freight- Worldwide, new business rose by Marketing Services liner. High sales increases were also 10% to 213,000 units, valued at DM 13.8 At DM 0.5 billion, sales of debis posted by the company in Great Britain billion. Accountable contract volume Marketing Services were in the same and by the new company operations in thus rose by 15% to 530,000 units, range as the previous year. The largest which correspond to a value of DM 25.1 contribution to this was made by the billion. Accountable contract volume Media subdivision. In order to cover includes all contracts for which debis international media budgets, a European bears corporate responsibility. This network of media agencies were also covers those contracts that were initiated. brought into non-consolidated comp­ anies as part of the effort to make refinancing more flexible or were di­ vested through other off-balance-sheet measures. debis Aviation Leasing was able to continue the successful business trend of the previous year and raise the num­ ber of realized aircraft leasing funds to five.

Insurance Brokerage: Expansion of Third-Party Business Through steady growth, especially in the external commercial customer trade, debis Assekuranz was able to raise the commission earnings posted as sales to DM 76 million. The premium volume amounted to DM 0.7 billion. In further developing the Insurance Brokerage Division, we focused on the reinsurance business.

Daimler-Benz InterServices (debis) 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. Mobile Communications Services: Real Estate Management: Progress The Financial Services Division will Acquisition of Bosch Telecom at Potsdamer Platz on Schedule continue its internationalization with the Service After excavation work began in the founding of further leasing and financing The Mobile Communications Ser­ spring of 1994, the cornerstone for the companies in Sweden and Argentina. vices Division took advantage of the construction project on Berlin's Potsda­ Growth opportunities for our leasing and strong market growth in Germany and mer Platz was laid in October, a project financing companies outside the auto­ the other deregulated European count­ which debis Immobilienmanagement motive sector should be seized by our ries. Sales in Germany rose to DM 0.5 (dIM) is managing for Daimler-Benz AG. own companies in Belgium, Italy and billion (1993: DM 0.2 billion). Because Construction continues to proceed com­ Argentina. There are outstanding pro­ the foreign subsidiaries and affiliated pletely on schedule. Thus, it is currently spects for an expansion of business in companies are still of secondary im­ projected that the first segment of con­ the United States, in part through the portance, they were not included in the struction will be completed in 1997. agreement to offer exclusive financial debis consolidated financial statements. During the past year, dIM has al­ services for the engine manufacturer Through the acquisition of com­ ready managed to win over the first Detroit Diesel Corporation. petitor Bosch Telecom Service (BTS), attractive operators for a hotel, a Trading and Insurance Brokerage will whose range of products is to be musical theater, a cinema complex, and vigorously continue their expansion of maintained as a second brand name, retail operations in the area offering business. Through the further develop­ debitel is in second place in Germany 340,000 square meters of gross floor ment of the international Media Net­ after Mannesmann Mobilfunk, with a space work, Marketing Services has good 19% market share (1993: 11%). debitel In addition, the company has begun prospects for tailoring its full service and BTS have taken steps to counter the offering developer and facility manage­ marketing services to the European loss of receivables outstanding that is ment services for other properties. In market. With the companies founded in especially serious in the mobile com­ this context, usage analyses and market­ the Netherlands and France, the Mobile munications market and represents a ing concepts are formulated for various Communications Services Division will major burden on the annual financial properties. take part in the dynamic growth of those statements. In an effort to better limit deregulated markets. In Germany, the losses, they are geared toward credit Outlook outstanding market position, combined solvency-oriented growth. The division Based on past performance, debis is with credit solvency-oriented growth, still managed to more than double the confident that it can take advantage of will make it possible for the division to number of customers - even without the opportunities present in the consist­ further strengthen its profitability. considering BTS. In Germany, around ently dynamic services sector. This posi­ 320,000 customers utilized the services tive expectation applies both to further of our two mobile communications increases in sales and to profits. companies at year-end. The restructuring measures taken in The French affiliated company the past, especially in the area of infor­ 2MTEL, which we are also operating mation technology, already had an effect jointly with our Europe-wide partner in the most recent financial year. For Metro, has in the meantime acquired that reason we are confident that we around 30,000 subscribers. That cor­ will further raise and solidify the earning responds to a share of 6% of the French power in this area. In the New Federal digital mobile communications market. States, the consolidation of the individ­ debitel Niederlande has handled around ual divisions of Systemhaus will make it 15,000 customers since the official possible to centralize the development network startup in July 1994, which of solutions for all work areas. We will corresponds to a market share of 12%. place particular emphasis on expanding comprehensive business solutions.

38 Daimler-Benz InterServices (debis) Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen.

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

Research and Technology This program is supported by a Internationalization is also accelerating in the Research and Technology newly developed procedure for planning Department. Greater international cooperation in several projects in 1994 research activities, which not only was accompanied by the establishment of new research centers in the demands innovation and but also U.S.A. and in China. A worldwide sensation was caused when we presented advances it. Europe's first roadworthy vehicle with a fuel cell that operates under ordinary conditions. At the same time, we have taken over the market Strategy Workshop leader position in this technology segment. As part of the annual strategy work­ shop, a process was introduced for crit­ ically reviewing the allocation of funds First Roadworthy Vehicle Research and Technology. In addition, for research areas and projects. Its with Fuel Cell we secured expertise not already avail­ objective is to adapt research priorities In the worldwide search for alter­ able within the group through interna­ to new knowledge and internal reorient­ native automobile propulsion systems, tional cooperation. ation. Less successful projects are Daimler-Benz has reached an important Now that Daimler-Benz has demons­ discontinued and the funds reallocated milestone: Europe's first vehicle with a trated that the fuel cell used is suitable to new and innovative undertakings. As fuel cell that operates under ordinary in principle and can be integrated in a a result, 20 long-range projects were conditions was unveiled to the public in vehicle, researchers are working on defined, and it became evident in the May 1994 at the new Research Center ways to reduce the cost, volume and process that information technology in in Ulm. The fuel cell generates electrical weight of the new propulsion system. particular would become considerably current directly from hydrogen gas. The They also hope to improve its efficiency more important in research. propulsion system is emission-free. The and substitute liquid methanol for the only by-product of the "cold combus­ hydrogen gas currently used as the Daimler-Benz Research Prize tion" is water vapor. energy source. When they succeed, the Awarded Our position as market leader in this ranges common today for vehicles that The Daimler-Benz Research Prize is technology was attainable only through run on gasoline or diesel fuel will be awarded to employees in Research and cooperation from several sectors. We attainable for the first time with an Technology who have made outstanding consolidated the fuel-cell research electric vehicle. achievements. With this prize, we aim to activities, formerly established at three With our expertise in fuel cell tech­ reward outstanding work at Daimler- subsidiaries, into one project under nology, we also hope to play an import­ Benz with an additional bonus over and ant role in the promising market of above the usual remuneration systems, decentralized electric power supply. in order to increase employee motiva­ However, it will take several more years tion. of research and development work The prize was awarded in 1994 for before the new technology is ready for the first time. It went to Dr. Peter the market. Konhauser, Prof. Boris Kerner and Mar­ tin Schilke, who were honored for their "Innovation Campaign" in Research in-depth studies of the phenomenon of The success of the fuel cell research traffic congestion. Their work made is a result of Research and Technology's possible the development of a new effort to expedite the transfer of know­ model that can help simulate traffic flow ledge from research to product and to on highways. The newly gained know­ foster innovation. ledge will enable us to develop approp­ Also serving this goal was the "Inno­ riate measures for optimizing traffic vation Campaign" begun in 1994. Its flow. purpose is to strengthen internal and external factors that promote inno­ vation, to reinforce international ties, and to intensify interdisciplinary cooperation.

Research and Technology Research Audit, a Research New Research Center Evaluation Process Established in U.S.A. Procedures to determine the effici­ Another result of the innovation ency and effectiveness of research are process is the Daimler-Benz Research being sought worldwide. In this context, & Technology Center established in Daimler-Benz developed and implemen­ California. Its purposes are to arrange ted the "research audit", in which re­ contacts and cooperative projects with search fields of strategic importance other research institutions in the U.S.A. are evaluated against world standards and to observe technological develop­ and the competition, as well as for their ments on site. The research center, prospects of success. The audit is based which became operational at the end on firmly established criteria. Both in­ of 1994, will also undertake its own ternal decision-makers and outside research, especially in information experts take part in the process. technology and microelectronics. In Daimler-Benz subjects about four addition, it will conduct research in research areas to this audit annually. the field of "technology and society". So far the process has brought valuable information to light, for example in Research Projects to Increase optical character recognition and in Production Efficiency combustion research, which allows us In national, pan-European, and glo­ to assess the status of our research bal cooperation, our researchers are accurately by international standards. working on projects to improve effici­ It has also reinforced our resolve to ency in production. become a leader in all relevant research The pilot phase of the aerospace fields by world standards. and automotive industry's pan-European project "AIT-Advanced Information Cooperation with the Chinese Technology in Design and Academy of Sciences Manufacturing", which we Another step toward internationali­ initiated, began in 1994. zation in the research sector was the In this project, over thirty establishment of a joint research insti­ manufacturers and supply tute with the Shanghai Institute of companies aim to pool Metallurgy, a member of the Chinese their research potential Academy of Sciences. This cooperative and make use of the project in the field of packaging tech­ latest information tech­ nology for microelectronic components nology to shorten dev­ is connected with a joint venture, TEMIC elopment and production TELEFUNKEN microelectronic GmbH. times drastically in the The joint venture, also headquartered in future. The procedure Shanghai, took over final production of used heretofore was semiconductor components destined for reversed, in that for the the world market. With new packaging first time users of the technologies, we hope to secure and information technology enhance TEMIC's competitive edge in defined the demands to be placed on power semiconductor technology. the future technology and set the priorities important for them. In the main phase, which will begin in 1995, they will work jointly with the suppliers of information technology to put the results of the research projects into practice.

Research and Technology Daimler-Benz also played a sub­ Global Networking sight simulation. At the same time, the stantial role in the establishment of the In support of the globalization of the data processing system was brought up project ProSTEP in the spring of 1994. group, Daimler-Benz is currently devel­ to date. The simulator's range of move­ The goal of this project is to enable the oping a series of innovative procedures ment has been increased, which essent­ exchange of standardized electronic that will make intercontinental net­ ially allows more realistic movements processing data, for example between working possible. An example of this and thus offers a broader range of automobile manufacturer and suppliers, cooperative work is the "Live-Board", an benefits. and thus considerably shorten produc­ electronic panel currently being tested During the last years, the driving tion time. Meanwhile nearly 100 comp­ in a pilot program at AEG Bahntechnik, simulator furnished valuable information anies - including some from Italy, with which empirical data are currently about the behavior of automobile dri­ Sweden and Switzerland - have joined collected from Pittsburgh, Pennsylvania, vers. In addition, Mercedes-Benz uses it in this initiative. and Nuremberg, Germany, as well as intensively in the development of new Under the auspices of the research from the research center in Ulm, model series to study driving behavior program IMS-Intelligent Manufacturing Germany. even before a prototype is built. System, we are working with partners in Canada, the U.S.A. and Australia. The Lower Pollutant Emissions and Germany as Innovation Site sub project "Rapid Product Develop­ Fuel Consumption In view of the increasing inter­ ment", completed in 1994, was a study Independent of its research in alter­ national competition to which German not only of how the prototype of a native propulsion systems, Daimler-Benz industry is exposed, we have joined in product can be quickly produced from will continue to pursue its goal of devel­ the public discussion concerning CAD data in the future, but also of how oping engines with lower emissions and Germany's future as a site for industry electronically readable design data can fuel consumption. For this research, we and research. Daimler-Benz would like be quickly retrieved from a modified have the most up-to-date engine-testing to contribute to this dialog, in the prototype. stations in Europe. We believe that it is interest of using the funds for research possible to reduce hydrocarbon and as efficiently as possible. We therefore The "Process Chain" Program nitrogen oxide emissions much further. advocate a research policy that has the Information technology is also used We are convinced that the potential for common support of industrial, scientific, to support process chains in the manu­ conserving fuel is far from exhausted. and political communities and will facturing of a product. In contrast to ensure the future of German industry. isolated applications still widely used, Fiber-Reinforced Plastics continuous information technology Daimler-Benz also sees potential for systems and software aim to optimize conservation in materials, whereby "in­ the process chain as a unit. The primary telligent light-gauge construction" merits goal is to improve product run times in special attention. Based on expertise manufacturing. derived from aerospace, we are working In addition to four pilot projects intensively to lay the technological pertaining to automobile, rail car and groundwork for the economical use of aircraft construction, the program also fiber-reinforced plastics in motor vehic­ addresses comprehensive interdiscip­ les and rail cars. The current projects linary topics, in order to quantify the have already shown that even the pas­ attainable benefits of the program, sive safety of future vehicles can be expand expertise within the group, and significantly improved. facilitate the exchange of practical knowledge. Reactivation of the Driving Simulator In the winter of 1994, the driving simulator in Berlin was officially put back in operation following an eight- month period of remodeling. After almost ten years of use, an extensive overhaul was needed in the area of

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. PROMETHEUS Project ITF Intertraffic Concentrates on Successfully Concluded the Environment and Mobility The research project "PROMET- ITF Intertraffic, a company special­ HEUS-Programme for a European izing in integrated traffic management Traffic with Highest Efficiency and Un­ systems, draws on the knowledge of the precedented Safety", which Daimler- entire group with the goal of this expert­ Benz initiated several years ago in ise as a service. In February 1995, ITF cooperation with the European auto­ opened an office in Berlin, where it will mobile industry, was successfully develop traffic concepts for Berlin and concluded in 1994. Preliminary market the New Federal States. research generated many suggestions for new products. The findings of the Market Preparation for study in the area of automotive safety, Microelectronic Components comfort, and environmental compat­ Our efforts to transfer research ibility are now being put into practice. knowledge into products at a faster One result of the PROMETHEUS pace are showing the first signs of project is the Daimler-Benz experimental success in the Microelectronics Divisi­ vehicle VITA II (Vision Technology Ap­ on. Here we have gained a position of plication), which is computer-controlled world leadership in silicon germanium and requires no human input. It is transistors, which are indispensable as capable of recognizing objects and can electronic switches. These transistors independently adjust distance intervals make excellent switching components, and speed to the given situation. This e.g. for the growing mobile communic­ "computer vision" enables the vehicle to ations sector, for satellite communic­ change lanes and pass other vehicles ations, or for global vehicle position automatically without collision. It is indication systems. TEMIC is now work­ supported by the ability to recognize ing to translate the existing possibilities traffic signs. into products. Series production will In addition, the PROMETHEUS pro­ begin soon in Heilbronn. gram also branched out into several In addition, researchers in Ulm hope subprojects, one of which was "Fleet to develop technologically superior and Management". The knowledge gained less expensive switching elements from this project is currently being based on the silicon germanium com­ applied to new products in the pound, as opposed to the components Mercedes-Benz Commercial Vehicle currently in use based on pure silicon. Division. Matra MHS, one of TEMIC's joint The subproject "Dual Target Control" ventures, has taken this project under is also being further pursued in the its wing. traffic management project "STORM", which tests modern traffic information and advice systems in the Stuttgart area. After construction of the infra­ structure at the beginning of 1995, STORM took over the pilot operation.

44 Research and Technology Environmental Protection Recycling — Less Pollution and Daimler-Benz stepped up its activities in the area of environmental Greater Conservation of Resources protection in 1994. With our reinforced efforts in waste prevention and In the course of global industrializ­ recycling, we are making a lasting contribution to the solution of environ­ ation, it has become increasingly evi­ mental problems. We begin by considering environmental protection dent that resources will not be available aspects in the design of a new product, and we are pursuing the use of forever and that nature's ability to ab­ natural raw materials. We are also concentrating on the separation of sorb pollutants is limited. Problems such waste into its individual materials and on the qualified processing of as the petroleum shortage and the these materials according to regulation. greenhouse effect cannot be solved by our continuing to pursue the industrial development course of the past; nor can Waste Legislation Daimler-Benz Environmental it be solved by placing the very concept The environmental legislation passed Report —Open Information Policy of the industrial society under question. in 1994 was essentially shaped by on Environmental Data What we need are improvements in both developments in the field of waste law. With its environmental report, first product and production technology, as Now that the Basel Accord has been presented for the year 1993, the Daim­ well as in the reprocessing and recycling translated into national law, the export ler-Benz group lives up to the claim of of used products and production waste. of waste into countries outside the EU "open information" expressed in its envi­ Daimler-Benz research made visible and EFTA is prohibited. It is also unlawful ronmental protection policy. progress in these areas in 1994. Using to export waste for use in countries In this document, we report compre­ intelligent processing and recycling outside the OECD if these countries hensively on the most important group procedures, and without harming the have neither signed the Basel Accord environmental data. The pollution levels environment, we succeeded in stripping nor concluded comparable bilateral connected with production are dis­ previously unrecyclable painted bum­ agreements. In such cases, the expor­ closed in the figures on significant pers of their paint and reclaiming the ting country is obligated to retrieve any emissions, energy consumption, and waste exported illegally. waste generation. Also adopted in 1994 was an amend­ Also documented are the efforts the ment to the waste law that had been group has made in recent years to mini­ under discussion for many years: the mize the effects of production on the recycling law. The responsibility this environment. Through several research legislation places on the generator of projects, some long-term, we show how the waste in terms of production and technological innovations can lead to product underscores the need for the ecological improvements. diverse efforts of the Daimler-Benz group in the field of waste prevention Investments and Expenditures for and recycling. Environmental Protection Mainly due to special factors such as the sale of the Domestic Appliances Division, the investments made in the area of environmental production were slightly lower in 1994, at DM 133 million. The highest single amount was contrib­ uted by investments for the conversion to water based paints in car production. Meanwhile, expenditures for environ­ mental protection -which, in contrast to investments, better reflect the long- term trend - rose to over DM 680 million.

Environmental Protection 45 high-grade plastic (polycarbonate) as a Cooperation with Mitsubishi base material for new bumpers. The The joint research efforts of Daimler- resulting paint sludge is then processed Benz and Mitsubishi Heavy Industries in into secondary polyol, a high-grade base the field of recycling plastic and elect­ material. ronic waste were intensified in 1994, Another focus of our recycling and the first phases were successfully research at the Ulm Research Center is concluded. the area of electronic waste processing. Through a feasibility study, we Experimenting with new procedures, we proved that the planned recycling pro­ succeeded in separating metal, pre­ cess is technically viable. Its economic cious-metal and plastic fractions on a feasibility is being studied in trials at the laboratory scale at a quality level never institutional level. In addition, joint before attained, thus laying the ground­ ventures with Mitsubishi in other areas work for high-grade reuse of the indi­ of environmental technology are being vidual materials. considered. In addition to the various recycling Building on the ecological balance processes, we are also studying applic­ sheet project begun in 1992, Daimler- ation possibilities for renewable raw Benz and Mitsubishi are stepping up materials. Besides the advantages of a work on an instrument that indicates natural material cycle, these raw mate­ environmental aspects of a component

rials also have an even C02 balance. The at the design stage. It will help the use of renewable raw materials in tech­ development engineer to recognize at nology - for example, in natural-fiber- an early stage the ecological impact of reinforced plastics - is only an inter­ the materials used and of the production mediate step toward the production of and disposal or reclamation processes. so-called "ecocomposites" in a biological recycling process. In these fiber- reinforced plastics, not only is the fiber made of a renewable raw material, but the plastic is also made from vegetable- based oils. In addition to studying mate­ rial properties, we are also developing suitable processes for economically recovering the usable fibers and oils from plants and processing them into components. The first concrete results of these efforts have already been carried over into series production. Parallel to the research into the use of new types of materials, we are also investigating new possibilities for environmentally friendly processing of conventional components. For instance, our goal in the dry processing project was to find new production processes and tool materials that would eliminate the need for the ecologically unsound cooling lubricants still necessary in many areas.

46 Environmental Protection 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. Personnel Daimler-Benz Aerospace had 75,581 In 1994, the number of employees in the Daimler-Benz group at the end of employees at the end of 1994, and of the year dropped 10% to 330,551. The decline was primarily due to the these, 60,082 in Germany. Because restructuring measures also implemented in 1994. Irrespective of the tight business in the fields of aeronautics, personnel situation, the professional development of our core employees space systems, and defense technology and the maintenance of a qualified junior staff remained top priorities in continued to be slow, extensive cuts in our Personnel Department. the corporate structure and personnel were necessary. Here again, we were able to adjust capacities to a large Fit for Global Competition In the future human resources will extent through normal attrition, early The strategic realignment of busi­ be shaped by the need to work - and retirement, severance agreements and ness areas in the Daimler-Benz group in especially to produce - closer to the reduced working hours. But wherever 1994 also affected the work of the per­ markets internationally, as well as by these possibilities did not suffice, we sonnel departments. Their main task further changes in the corporate had to announce layoffs. The entire was to keep abreast of the necessary structure. package of measures was the subject of changes and help shape them. a June 1994 reconciliation of interests/ A special emphasis in this regard Employment Situation social compensation plan and included was the further decentralization of At the end of the year, 330,551 per­ the Lemwerder plant, which was taken corporate responsibility. We were able sons (1993: 366,736) were employed over by a company owned by the state to pass on to other divisions the ex­ in the Daimler-Benz group, and of these, of Lower Saxony on January 1, 1995. perience we had gained with smaller 251,254(1993: 284,576) were in Daimler-Benz InterServices had a business units over the past few years Germany. total of 9,226 employees at the end of in AEG Daimler-Benz Industrie and As in the previous year, we were able 1994, and of these, 7,817 in Germany. Daimler-Benz Aerospace. To enable us to make most of the personnel cutbacks While the employment situation was to act more quickly and directly in the in the German companies (95%) through tense in parts of the Systemhaus Divisi­ markets, we also optimized work flow early retirement measures, severance on, expanding business enabled us to and set new challenges for ourselves in agreements, or outplacements. Layoffs hire new employees in the Mobile Com­ the formulation of quality goals. were announced only in exceptional munications and Financial Services cases. Further personnel adjustments Divisions. will therefore be necessary in 1995. At Mercedes-Benz a total of 197,568 persons were employed at the end of 1994, and of these, 148,194 in Germany. Hours had to be reduced only for some workers in the Commercial Vehicles Division. In the Passenger Cars Division we were again able to conclude a limited number of fixed-term work agreements, because of the sharp increase in de­ mand in the last half of the year. AEG Daimler-Benz Industrie had a total of 44,769 employees at the end of 1994, and of these, 31,828 in Germany. Reduced working hours remained in effect in several divisions. The Rail Sy­ stems Division had a particularly tight employment situation in 1994. The Household Appliances Division, with 9,800 employees, was taken over by the Swedish firm Elektrolux on September 30.

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

Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The group management function is 1994 Collective Wage Agreements Personnel and Social Welfare served by 520 (1993: 540) employees. In the Old Federal States, a 2% wage Expenses / Company Pensions An additional 1,734(1993: 1,274) increase was negotiated, effective June Personnel expenditures amounted to employees are work on group research 1, 1994. Wages remained unchanged for DM 30.1 billion in 1994. The core of our projects at headquarters, and another the first five months of the year. The employee benefit package is still the 1,153 (1993: 1,170) work in service collectively bargained claim to special company pension plan. Financed by the capacities for the corporate units and payments was lowered by ten percent­ company, the individual pension plans in the Mohringen site. age points. Through this arrangement, the Daimler-Benz group contribute to A total of 3,407 (1993: 2,984) combined with further cost-cutting the economic security of the employees persons were employed at Daimler-Benz measures, we were largely able to avoid and their families in retirement as well AG. The increase over the previous year a wage-based rise in personnel costs. as in the event of disability or death. is due primarily to the integration of Within the framework of a collective The pension plans for top managers research centers, to additional jobs for contract on occupational safety in effect have largely evened out within the undergraduate trainees and doctoral until the end of 1995, we made further group. The goal, in principle, is fixed candidates and to positions at head­ progress with the flexible structuring of compensation scales irrespective of quarters arising from the employment working hours. Furthermore, this con­ salary history. They are already fully in initiative of the Daimler-Benz group. tract makes it possible, for a limited effect at Daimler-Benz AG, Mercedes- time, to reduce the work week from 36 Benz AG, AEG Daimler-Benz Industrie, hours to 30 hours through voluntary and partially at DASA and debis. The shop agreements. revision of older DASA pension plans In the New Federal States, under a that do not conform with this principle is graduated plan, the parties to the underway. This measure ensures socially collective contract raised wages to 87% equitable and financially uniform man­ of the level of the Old Federal States, agement of the pension systems. effective July 1, 1994. After a further step on July 1, 1995, to 94%, the planned Capital Formation 100% level will become effective July 1, Employees of Daimler-Benz AG and 1996. This settlement affects most of Mercedes-Benz AG as well as some of the roughly 10,000 employees of the the debis member companies were able Daimler-Benz group in the New Federal to participate in the 1994 scheme for States. the formation of private capital. Appro­ ximately 47,000 employees - 31 % of Compensation Policy those eligible to participate - each In view of the economic situation, we acquired an employee share of Daimler- refrained from a general review and Benz AG at a preferential rate set by the increase of salaries in the German company. companies of the Daimler-Benz group in 1994. The bonuses for managers were cut. The compensation systems were reviewed in many parts of the group with a view to the promotion of autonomous managerial action. We decided to ex­ tend the group-wide uniform system of variable compensation based on qualita­ tive and quantitative goal agreements, already in effect at top management levels, to the second management level beginning in 1995.

50 Personnel Junior Staff Development Human Resource Development Thanks to Our Employees An important strategic task of the The strategic orientation at Daimler- We could not have achieved our Personnel department is the develop­ Benz requires a continuous, targeted renewed success without the efforts of ment of a qualified junior staff. In 1994, professional development program for our employees. We extend our thanks to in the context of our International Junior employees. everyone, and especially to the mem­ Management Group, we offered 50 The change processes within the bers of the labor councils and manag­ college graduates with internationally group have the primary goal of confer­ erial committees at all levels of the oriented training an opportunity to ring decision-making authority and group, for their great commitment. qualify for higher-level positions in the responsibility on our employees and group through project assignments in promoting independent managerial Germany and abroad. Overall, some 200 action at all levels. This idea is fostered junior management positions are not only through specialized continuing provided in the group. education but also through the newly To expand the development of junior implemented variable compensation management staff beyond the filling of plan. existing positions, we offered 100 To add impetus to the growing desire college graduates a one-year internship for new tasks and positions, we have to facilitate their entry into their career adopted a policy of assigning a manage­ field. Complementing this initiative were ment executive to any given task for a additional programs and models in the limited term only. An internal publication corporate units, such as part-time listing open management positions opportunities at the entry level. We throughout the group, also serving to continued to foster and expand our make employees' areas of competence contacts with colleges and universities, as broad as possible. and with students at both undergraduate Another emphasis in personnel and graduate levels. development is the international orient­ We also devoted special attention to ation of employees. Along with sponsor­ developing and securing junior technical ship of the International Junior Manage­ personnel, to maintain our preparedness ment Group, our primary goal is to make for expected medium- and long-term our German employees into even more needs. competent players in international busi­ At the end of 1994, there were ness through job rotation, international 11,200 young people in vocational project work and network forums. training at our German locations, and of these, 2,967 had begun their training Preventive Health Care and during that year. We provided training in Occupational Safety nearly 60 industrial/technical and 10 In our corporate social policy we commercial career fields. In addition, place great emphasis not only on we have 15 special training programs traditional preventive health care, but for high-school graduates, particularly also on the promotion of good health. in professional academies. Our goal is to promote healthy behavior Again the acceptance of trainees among our employees and to make posed problems. We tried to consider them conscious of their individual the interests of our young employees responsibility for their own health. We along with our own, through limited-term consider this an investment in the and part-time contracts as well as a future. number of permanent placements. For needs related to industrial health and safety, we employed some 200 full- time safety officers in Germany alone. They provided advice and support in all matters of safety in the workplace.

Personnel The Company´s Role in Society 1994 we established a Daimler-Benz In public relations work, our activity in 1994 was focused on supporting scholarship program for students at and promoting the globalization of the group through appropriate Beida University, the largest and oldest communication measures. One emphasis was the establishment of addi­ of the renowned institutions of higher tional group representation and liaison offices worldwide. We expanded learning in Beijing. In this program, we our social welfare activity by awarding scholarships to Chinese students. not only grant scholarships to students with outstanding grades; we also provide stipends for room and board for stud­ Expansion of the Worldwide Public International Presence Enhanced ents from low-income families through­ Affairs Network Through group presentations and out the entire four years of study. In 1994 we continued with the informational events, as well as through However, involvement and dialog development of group representation greater participation in fairs and exhibi­ also require willingness to take a stand and liaison offices begun in 1989. The tions in the Pacific Rim and NAFTA, we at home and abroad on current socio­ network now covers all strategically focused on regional interests in the political issues. For instance, in co­ significant regions. We have representa­ portrayal of our range of products and operation with political, humanitarian, tion in the important European cities of services, just as we do in Europe. Ex­ and scientific institutions, we tackled Berlin, Bonn and Brussels, as well as in amples are the group exhibitions on the subjects of xenophobia and vio­ Washington, Moscow, Beijing, Mexico traffic and environmental technology in lence. In the model Youth Against City, Tokyo and Jerusalem; there are Hanoi and Ho Chi Minh City, Waste-Tec Violence project, we are working with group liaison offices in London, Paris, in Tokyo and Technogerma in Mexico. others to develop concrete solutions. Singapore, Hong Kong, Cairo, Sao Paulo, We also increased our press and media Mulgrave and Pretoria. These group presence in the most important regions. representation and liaison offices per­ form tasks that are very important to our Enhancement and Concentration of internal and external communication as International Youth Advancement well as to our entry in the markets. They In the interest of continuity, our support our operating divisions by corporate grant activities are based on accompanying political delegations as long-term cooperation with international they endeavor to open new trade institutions. Especially in regions of channels, particularly in the developing growing significance to our business, it markets of the Far East, Mexico/NAFTA is important that the Daimler-Benz and the Middle East. The network is an technology group enjoy respect and important early warning system for public sympathy, not only because of changes in the general political and the technology and quality standards of socioeconomic climate. Finally, it its products, but also because of its ensures that our active employees in the public-mindedness and willingness for respective regions are kept abreast of dialog. We aim to be a responsible corp­ corporate activity beyond their own orate citizen in the countries in which work areas. we do business and are prepared to accept the duties that go along with it. Since 1991, our Award of Excellence program, which includes thousands of high schools and over 200,000 young people, has made it possible for stud­ ents from the U.S.A. and Canada to spend several weeks in Germany. In

The Company's Role in Society 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. Technology and the Environment New Financial Disclosure Guidelines A number of new instruments were When we went public at the New developed to better communicate the York Stock Exchange in 1993, we technological accomplishments and adjusted our financial disclosure policy potentials of the Daimler-Benz group to to the strict rules in effect there; similar relevant target audiences, particularly in rules became effective in Germany in environmental matters. For instance, we 1994 with the adoption of the Second were the first German company to offer Law for the Promotion of the Financial a service that provides audio reports - Market. Our clearing office, housed in and since 1993 also audiovisual reports the Public Relations department and - of selected events to radio and tele­ operated jointly with Investor Relations vision broadcasters, and increasingly to and the Legal department, examines educational and informational institu­ and distributes all corporate commun­ tions as well. These activities, which ications intended for publication, from have thus far focused mainly on Europe, the point of view that news relevant to are being expanded. market prices is forwarded to all secur­ Through the Daimler-Benz HighTech ities and exchange commissions by the Report, our quarterly technology maga­ stated deadline and made available to zine published in German and English, the public according to regulation. over 100,000 subscribers around the world are informed about the technological inno­ vations and leading ac­ complishments of our company, with good response. We reach an estimated 400,000 readers in 117 countries with this publication. Featured topics last year were the fuel cell, with which we are exploring an alternative to the com­ bustion engine in the automotive sector; "in­ telligent light-gauge con­ struction", as applied to road vehicles, aircraft, satellites and rail cars; image processing in factories, satellites and optical character recognition. For the first time in 1994, through a detailed year-end environmental report, we informed the general public of our company's environment-related ac­ complishments, thus continuing the tactic of dialog, especially with environ­ mental groups - something very few companies have done so far.

The Company's Role in Society Finance and Materials The second capital increase, inten­ The main focuses of our financial activity in 1994 were two successful ded exclusively for the employees of the capital increases. As a result, Daimler-Benz AG acquired a total of DM 3 group, was carried out in November. billion in new stockholders1 equity. As a result of the New Federal States This was the first time we made use of Purchasing Drive, the Daimler-Benz group purchased goods and services the capital approved for the issue of from Eastern Germany valued at one billion DM in 1994, reaching that level employee shares, in the amount of DM a year ahead of schedule. 20 million. The new shares were issued at a price of DM 832 and offered to employees at DM 532, taking into Group Treasury Expanded Outside capital for the group is pro­ account the maximum amount permis­ In 1994 we expanded our central cured primarily through Daimler-Benz AG sible under the tax law. Thus Daimler- Cash Management Department by and our network of regional holding and Benz AG received additional stock­ integrating our European group member finance companies. The sustained holders' equity of roughly DM 25 million. companies into the cash concentration growth of the Financial Services Division The capital stock increased to DM 2,565 process technically and conceptually, led to a greater need for outside capital. million. making it even more flexible and eco­ This need was covered to a large extent We were able to meet our goal of nomical. We made greater use of the through our Euro medium-term note broadening our worldwide stockholder commercial paper programs available in program, which we also use increasingly base in 1994 by internationalizing our various countries for short-term to issue Eurocurrency loans. To enable offer and by creating a new globally financing of regular business traffic. us to take advantage of opportunities oriented underwriting structure. Besides In the context of asset allocation, offered by the international capital expanding the purchasing syndicate to funds available for a longer term were markets at any time, we have boosted include foreign banks, we established an invested in fixed-interest-rate instru­ the program from two billion to three international and a U.S. selling syndic­ ments of first-class issuers. For these, billion U.S. dollars. We were able to ate. These selling groups had the task we use instruments of modern portfolio keep our group debt within bounds by of selectively placing the new shares management in which risk-control selling off sales financing receivables procured by the purchasing syndicate factors are taken into account. in securitized form again in 1994. on the large capital markets, especially The duties of the foreign exchange For all treasury activities, limits were in the U.S.A. Because of the high management consisted of recognizing set on contracting parties, transaction demand in the U.S.A., the share of the currency risks in the area of opera­ types and dealers on the basis of risk American investors in the capital stock tion and limiting them through approp­ analyses. With the help of data-proces­ increased to over 8%. riate hedging measures. We tailor the sing systems, we not only keep track of The funds generated from the capital hedging strategy in each case to foreign credit and market risks, but we also increases, together with our savings and exchange rate expectations, which are examine liquidity, business and legal the capital available from other financ­ constantly reviewed, adjusting the finan­ risks. ing, are used both for investments to cial instruments to individual currencies further corporate growth and for new and fields of business activity. Because Successful Capital Increases products and production facilities. of our increased business volume in More than four years after Daimler- newly industrializing countries, foreign- Benz AG's last capital increase in 1989, exchange hedging is becoming increas­ we implemented two successful capital ingly important for currency risks in increases in 1994. For the first, more these countries. significant increase in June/July, we raised the capital stock by DM 233 million to DM 2,563 million, at a ratio of 10:1, using part of the approved capital. In addition, 4,659,276 new shares were issued at a par value of DM 50. At an issue price of DM 640, Daimler-Benz AG gained a total of roughly DM 3 billion in new stockholders' equity.

Finance and Materials Financial Planning and Control Sales and Project Financing Investor Relations Activities On the basis of our corporate financ­ For marketing the products of our In the course of our investor rela­ ial plan, we are optimizing the use of the group internationally, we see a growing tions activities, we provided compre­ funds available to the group, our goal need for product and customer-specific hensive information about our business being to minimize financing costs and at solutions beyond traditional export fin­ and its development to financial analysts the same time preserve the solid quality ancing, which will allow us to offer suit­ and institutional investors, as well as to of the group's financing. In 1994 our able financing and still hedge against our individual stockholders and potential quality claim was once again confirmed economic and political risks. In guarding domestic and foreign investors. We by agency ratings of Aa3 by Moody's against outside risks, we are essentially communicate with our stockholders, as Investors Service and AA- by Standard striving to select financing solutions that well as the general public, through our & Poor's Ratings Group. will ease the strain on the balance annual report and through periodic in­ In addition to procuring outside sheet. terim reports. capital, our centrally controlled regional We especially need new and innova­ For individual stockholders, we holding and finance companies also tive financing and hedging structures for cooperated with DG Capital Manage­ fulfill important internal capital alloca­ the projects of divisions involved in the ment in sponsoring an investor relations tion functions. For instance, we en­ infrastructure sector. Financing models forum in Düsseldorf/Neuss in October hanced our potential in 1994 by estab­ from the private business sector are fast 1994. At this event, we provided over lishing a regional holding structure in gaining recognition. 1,000 interested guests with a brief Mexico, which allows us to realize a While the economies in the countries overview of the activities of the Daimler- whole range of synergistic financial of Latin America, Central Europe and Benz group. In light of the overwhelm­ effects there. the Far East continued to rally, the ingly positive response, we will continue In 1994 we also devoted special political stability and general economic to hold events aimed at communicating attention to capital tie-up within the conditions of some African and Eastern with individual investors. group. Despite a higher business European countries (including the CIS) In addition, we address the informa­ volume, we managed to reduce working deteriorated in 1994, or they stabilized tional needs of institutional investors capital. We intensified our efforts to use at a low point. In these areas we re­ and financial analysts through round- the capital tied up in noncurrent assets sorted to state export credit insurance table discussions and corporate pre­ efficiently. For the management of our wherever possible, although the restrict­ sentations. The sharply rising demand real estate in particular, we developed ive authorization policy for credit insur­ for such programs reinforces our resolve concepts that allow more economical ance limited the financing possibilities. to intensify this form of communication use and improve the management and The risk commitment of the international with the capital market in the future. organization of our real estate. For banks continues to be limited. If any We hold the corporate presentations individual properties with unneeded acceptable solutions are to be found, it in Germany, as well as in the major space, we made plans to develop and will only be through elaborate structur­ financial centers abroad, in close use them or otherwise turn them to ing of financing. cooperation with renowned business good account. Sponsorship programs offered by and investment banks. On the docket as public and supranational institutions for early as January 1994 was an extended the financing of delivery and investment road show in the U.S.A., through which projects are important for the newly we supported the placement of Daimler- industrializing and developing countries Benz shares from the holdings of the of Africa, Asia, and Latin America, as Deutsche Bank. Over a period of ten well as for the countries of Eastern days, we made 11 presentations and Europe and the CIS. For these countries, conducted 55 one-on-one sessions financing is also possible within the in 21 cities. framework of technical assistance and rehabilitation programs, which are used to a very limited extent to finance our group's products.

Finance and Materials Further highlights were the present­ Global Sourcing Activities To preserve jobs in the New Federal ations in connection with the introduc­ With our global sourcing activities, States and increase them in some tion of our shares on the Stock Ex­ we were again able to increase purcha­ cases, our purchasing drive is not change of Singapore and the road show ses from foreign suppliers. The expan­ limited to awarding more contracts to we conducted in May and June in pre­ sion of our international supplier con­ Eastern German businesses. We also paration for the capital increase. The tacts also allows worldwide expertise to promote economic expansion by intro­ latter included events in Frankfurt, flow into our products. Global sourcing ducing appropriate technology to our Zurich, Paris, Vienna, London, and ensures us not only an influx of new suppler companies. Against this back­ Edinburgh, as well as in numerous technology but also supplier prices at ground, our purchasing drive, scheduled cities of the U.S.A. the attractive world-market level. We to continue until the end of 1996, is see new potentials for global sourcing increasingly becoming an industrializa­ Investments in Related Companies / primarily in the input markets of the tion drive. Mergers & Acquisitions Asian Pacific Rim. Within the framework of the general In 1994, with the cooperation of all corporate policy, we continued to work corporate units, we held a group sup­ on adjusting or rounding out the core plier fair focusing on Italy. Our buyers Again in 1994, our business policy at businesses of the group through joint were able to establish contacts with home and abroad was in conformity with ventures, divestitures, and selective over 100 capable suppliers in Italy, and the OECD Guidelines for Multinational acquisition, in order to safeguard our are now following up and expanding the Corporations. The internal transfer competitive position. This activity inclu­ relations they forged. We realized the prices between the individual companies ded working out a transaction structure, first successes of the initiative before in the group are set on the basis of the determining valuations for enterprises, year end, in contracts awarded to "arms-length" principle. performing business analyses (due dilig­ companies that had participated in the ence) for purchasing procedures, and supplier fair. developing investment and management concepts. Purchasing Drive in the In addition to our consultation du­ New Federal States ties, we administered the group assets. In 1994, one year earlier than ex­ The group's investments in subsidiaries pected, the Daimler-Benz group reached and affiliated companies were evaluated the DM 1 billion threshold for goods and in terms of their performance, and if services purchased from the New Fed­ necessary corrective measures were eral States. The purchase volume will conceived jointly with the group plan­ continue to increase as companies in ning department and the corporate Eastern Germany become better known units. These measures ranged from and expand on the existing commercial optimization of the capital invested to contacts. consideration of joint ventures and The purchasing activities were divestitures. shown to inspire great personal commit­ In the context of portfolio-invest­ ment and raise the self-confidence and ment management, we performed duties motivation of the people in the New related to service on the Supervisory Federal States. Furthermore, our in­ Boards of group member companies, volvement so far has saved some 11,000 tracked and evaluated current projects jobs. and prepared draft resolutions. Managers from the Daimler-Benz group have sponsored 180 Eastern German businesses to date. As a result of this support, order volumes quadrup­ led in comparison to 1993.

Finance and Materials

The Daimler-Benz Share Interest in Daimler-Benz stock has increased worldwide. With the intro­ duction of our shares on the Singapore stock market in May 1994, we acknowledged the increased importance of Southeast Asia as an invest­ ment region. After our capital increase in June 1994, the portion of Daimler- Benz stock held in the U.S.A. rose to roughly 8% of our share capital.

The price of the Daimler-Benz share essentially followed the course of the market in general. At the end of the year, our stock, at DM 759.50, stood 10% below the relatively high level at the end of 1993; in the preceding year, it had gained more (+57%) than the DAX (+47%). In the first two months of 1995, after an initial weak phase, the DAX began an upward trend, only to be interrupted toward the end of February by the strike in the metal industry and a further drop in the U.S. dollar. The price of a Daimler- Benz share continued to lag behind the general market during this period, and at the end of February it was 6% below the 1994 closing price, while the DAX declined only slightly. After brisk activity in 1993, the trading volume on the German stock exchange declined in 1994. Trading in Daimler-Benz stock declined 15% to 263 Stock Exchange Trend million shares. However, our stock re­ After the splendid record of the mained one of the most heavily traded previous year, the stock exchange year securities on the German stock ex­ 1994 failed to meet our expectations. change. This volume, at a market value The indexes declined sharply in all major of DM 211 billion, represented 11% of stock markets except for Japan. A prim­ all domestic share trading. Also in the ary factor in the price declines was the German futures market, options on global rise in interest rates, which made Daimler-Benz shares, at one million bonds appear much more attractive contracts, continued to be among the than stock investments. most heavily traded securities. The German stock market was also unable to escape the negative effects International Financial Profile of the bond market in the course of the The international range of investors year, after the German stock index in our stock expanded again in 1994. (DAX) reached a record high of 2.271 At the beginning of the year, Deutsche points in the middle of May. It was only Bank placed shares from its Daimler- the favorable prognoses for corporate Benz holding on the American market, profits and the unexpectedly fast thus reducing its stake in Daimler-Benz recovery of the German economy that AG to 24.4%. This move raised the kept prices from falling still further. At portion of our share capital held by the end of the year the DAX stood at U.S. investors to over 7%. 2,107 points - 7% below the closing level of the previous year.

The Daimler-Benz Share In May we became the first German Widely Held Stock An investment in Daimler-Benz stock company to introduce stocks in Singa­ After Deutsche Bank, at 24.4%, the for about twelve years calculates to an pore. As on the New York Stock Ex­ Emirate of Kuwait is the second-largest average return of 9.6% per year. For a change, they are traded in Singapore shareholder of Daimler-Benz at almost commitment of only three years, on the in the form of Singapore Depository 13%. Stella Automobil-Beteiligungsgesell- other hand, it was -0.7%. The assump­ Shares (SDS). The SDS are issued in schaft mbH, which formerly held a 12.3% tion in these calculations is that the U.S. dollars and denominated at one share, was merged with our company in proceeds from the stock rights and the tenth of the par value of a German March 1995. Just under two-thirds of our cash dividends (excluding tax credit) share, just as they are in New York. capital stock is now widely held. With a were always reinvested in Daimler-Benz At the time of our capital increase market value of DM 36.6 billion (end of shares and that the investor made no in June 1994, stock rights not used in February 1994) and over 450,000 additional payments. Germany were largely placed in the stockholders, Daimler-Benz is one of United States, so that the portion of Germany's largest public corporations. American-held shares increased to more than 8% of our capital stock. We expect Dividend 11 DM for Each Share this percentage to increase in the next of DM 50 Par Value few years. For the financial year 1994, a divi­ Since the stockholders voted an dend of DM 11 (1993: DM 8) for each authorized but unissued capital increase share of DM 50 par value will be pro­ in the amount of DM 300 million at the posed at the Annual General Meeting on Annual General Meeting in May 1994, May 24, 1995. For stockholders subject we can now also issue convertible to income taxes in Germany, the gross bonds up to a par value of DM 2 billion dividend amounts to DM 15.71. until 1999. In addition, DM 367 million in approved capital is available for rights Good Return Prospects issues until the middle of 1996, and A long-term investment in Daimler- roughly DM 18 million for the issue of Benz stock has good return prospects, employee shares until the beginning of although interim price declines, such as 1999. the one in 1994, can also result in a Today Daimler-Benz stock is listed much lower or even negative return. on nine foreign stock exchanges: On the other hand, slump periods offer favorable striking prices and thus the prospect of a high return. Foreign investors also have the chances and risks due to fluctuation in the exchange parities, so that the return can deviate considerably from the return in German marks.

The trading volume for our stock on foreign stock exchanges reached 20 million shares in 1994. Trading was especially heavy in London and New York.

The Daimler-Benz Share Discussion and Analysis of the Financial Situation

The rise in the consolidated net income in 1994 from DM 0.9 billion (1993: Total selling expenses increased by DM 0.6 billion) inadequately reflects the improvement in performance in DM 0.2 billion to DM 11.1 billion; as a the operative area, since the previous year's figure was characterized by percentage of sales they remain at 11%. high non-recurring earnings. The net income determined on the basis of The absolute level of general administra­ U.S. accounting principles (U.S. GAAP) shows a turnaround from DM -1.8 tive expenses dropped by DM 0.2 billion billion to DM 1.1 billion. The operating profit also improves clearly from to DM 3.3 billion, so that the correspon­ DM -3.3 billion to DM 2.7 billion. ding percentage is only 3.2% (1993: 3.5%). Of the basic types of expenses Statements of Income According on the functional areas of production, contained in selling and general admini­ to Cost-of-Sales-Method sales, and general administration, strative expenses, personnel expenses In 1993, for the first time for a Ger­ another factor distinguishing the cost- decreased by DM 3.7 billion to DM 30.1 man company, we published a reconcil­ of-sales-method from the previously billion, reflecting the lower number of iation of net income and stockholders' used total-cost-method is that interest employees and lower additions to equity according to the German income from the sales financing busi­ restructuring provisions. In contrast, Commercial Code to values under U.S. ness and interest expenses from the as a result of the pronounced increase GAAP. The response of the financial refinancing of leasing and sales finan­ in production at Mercedes-Benz, the press and the widespread approval by cing activities are no longer recorded costs of materials rose considerably by analysts and investors have confirmed under interest income net, but rather DM 5.2 billion to DM 56.3 billion. that the international financial world under sales or cost of sales. The financial result in 1994 was low welcomed our step. (DM 0.2 billion) as compared to 1993 The financial analyses since pub­ Consolidated Net Income Up by (DM 2.2 billion) showing much higher lished on Daimler-Benz reveal that in DM 280 Million to DM 895 Million figures due to the sale of securities. their statements and recommendations, The consolidated financial state­ Another negative element was the fact leading financial analysts rely predomi­ ments according to the German Com­ that provisions had to be made for nantly on U.S. figures. The most import­ mercial Code were characterized in losses on the investment portfolio and ant reason is perhaps that American 1994 by a substantial improvement of securities due to the drop on the bond accounting practices are accepted operating income; non-recurring income market. worldwide, and hence allow accurate is included to a much lower extent than Calculated on comparable bases, the comparisons irrespective of a comp­ in 1993. results from ordinary business activities any's home base. Therefore, we will Sales rose by 5.6% to DM 104.1 clearly improved from DM -1.5 billion to continue to observe the trends in inter­ billion in 1994. Of critical importance to DM 2.1 billion. national accounting with utmost care, this development was the strong growth After subtracting the income taxes, and we will also critically participate in in business volume at Mercedes-Benz. which rose from DM 0.5 billion to the discussion of future developments debis too was able to achieve a marked DM 1.2 billion as a result of increased in the interest of providing maximum increase in sales. In contrast, revenues profits of the foreign Mercedes-Benz disclosure and improved quantitative decreased at AEG Daimler-Benz Indu­ production and sales companies, net information to our investors. strie, based on changes in the con­ profit is up from DM 615 million to To best meet these goals, we have solidated group, as well as at DASA, DM 895 million. This increase inade­ changed the presentation of the state­ due to the persistently poor demand for quately reflects the improvement of the ments of income to the internationally aircraft and budget restrictions in the operating profit from DM -3.3 billion to accepted cost-of-sales-method; data for public defense and aerospace areas. DM 2.7 billion. Non-recurring income of 1993 have been reclassified accordingly. After subtracting the cost of sales, DM 1.4 billion was included in 1994 as Aside from recording expenses based which because of cost-cutting measures well, of which DM 0.6 billion related to showed a disproportionately low increa­ the deconsolidation of MBL Fahrzeug- se of DM 0.4 billion to DM 90.3 billion, and which dropped from 91 % to 87% as a percentage of sales, the gross profit rose by DM 5.2 billion to DM 13.8 billion.

Discussion and Analysis of the Financial Situation 61 Leasing GmbH & Co. KG and DM 0.4 The main contributor to the debis Our stock of leasing and sales billion related to capital gains from operating profit, which was virtually financing contracts comprises a total divestments at AEG Daimler-Benz Indu­ unchanged as compared to 1993, was volume of future payments amounting strie and Fokker, each. These earnings the Financial Services Division. Signi­ to DM 20,274 million, distributed over were offset by restructuring expenses ficant improvements were seen at the coming years as follows: totaling DM 1.1 billion (1993: DM 3.5 Systemhaus and Mobile Communi­ billion) associated with the measures cations Services. 1995 1996 1997 1998 1999 2000, to restructure technical capacities and In contrast to the net income there- in millions of DM after reduce the workforce. The reconciliation according to the German Commercial of the operating profit to the results Code, net income according to U.S. 7,716 5,452 3,931 1,975 752 448 from ordinary business activities is GAAP shows a clear turnaround from shown on page 66. DM -1.8 billion to DM 1.1 billion. This Changes in the Consolidated was due to the fact that non-recurring Balance Sheet Through income was eliminated from the 1993 Capital Increase net income. Although the U.S. net The group's total assets increased income is thus in the same order of 2.9% to DM 93.5 billion as a result of magnitude as the net income according the mid-year capital increase and the to the German Commercial Code, there further expansion of the leasing and are significant differences in the com­ sales financing business. A neutralizing position of the respective values (see effect was provided by the restructuring reconcilation chart on page 67). In the of the domestic leasing business and reconciliation to U.S. GAAP, non-recur­ the sale of company units at AEG Daim­ ring income from deconsolidation of the ler-Benz Industrie. On the whole, non- Decisive factors for the rise in domestic leasing company and the current assets increased 2.5% to DM operating profit at Mercedes-Benz capital gains from divestments at Fokker 36.2 billion. Without the influence included the expansion of passenger were eliminated. In contrast, net income of the financial services business, non- and commercial vehicle sales and the is increased by the fact that under U.S. current assets rose by DM 1.4 billion to cost-cutting measures implemented in GAAP unrealized profits from financial DM 24.9 billion. While property, plant previous years. Restructuring expenses instruments must be recognized. The and equipment decreased by DM 1.2 related to personnel amounted to only differences in determining and calculat­ billion to DM 17.7 billion due to high DM 0.3 billion, compared to DM 1.7 ing deferred taxes and provisions also depreciations on investments made in billion in 1993. have a positive effect on net income. the preceding periods with a low level The contribution to profit from AEG of additions, financial assets increased Daimler-Benz Industrie includes gains Balance Sheet and by DM 3.4 billion to DM 7.4 billion. This from the sale of the Domestic Applian­ Statements of Income Influenced reflects both the reclassification of long- ces Division and of the power meters by Financial Services Business term securities from current to non- and lighting systems company units, Both the statements of income and current assets and the restructuring of totaling DM 0.4 billion. A further im­ the balance sheet of the Daimler-Benz the domestic leasing business, since the provement of DM 0.4 billion resulted group are still strongly influenced by the previously fully consolidated company from the reduction in restructuring continued expansion of our leasing and is included as an associated company costs. sales financing business. at equity and is recorded under financial Net losses of DASA were reduced assets. Similar considerations apply to considerably because of, except for the decrease of the book value of leased Fokker, improved operating results. A equipment by DM 1.7 billion to DM 10.2 positive effect was due to lower re­ billion; without this effect, there would structuring expenses of DM 0.7 billion have been a further increase of this (1993: DM 1.1 billion). The persistently caption in the balance sheet. Thus, the difficult market for civil commercial investment quota (excluding the effect aircraft and the restrictive budget policy of the financial services business) in the areas of defense and aerospace increased from 25.8% to 26.6%. hindered a further improvement in Receivables from sales financing performance. business increased again, by 15.9% to DM 10.2 billion.

62 Discussion and Analysis of the Financial Situation The decrease in net inventories by DM 2.0 billion to DM 15.0 billion is primarily due to lower inventories at the foreign sales companies of Mercedes-Benz and at Airbus and Fokker. As a result of the capital in­ crease, liquid assets increased by one- third to DM 14.0 billion; their share of total assets rose from 11.5% to just under 15%. On the liabilities side, stockholders' equity - excluding planned dividend distribution - increased by DM 2.0 billion to DM 19.7 billion. Transfers from the capital increase and from net income were partly offset by decreases in stockholders' equity due to currency influences and offsetting goodwill resulting from the acquisition of shares in DASA from the State of Bavaria. On the whole, stockholders' equity as a percentage of total assets rose from 19.5% to 21.1%. Without the financial services business, which due to busi­ ness considerations was predominantly externally financed, stockholders' equity as a percentage of total assets is 27.6% (1993: 26.0%); coverage of the non- billion is related to the utilization of current assets (without the influence the restructuring provisions set up in of the financial services business) by previous years. Both the non-current stockholders' equity increased from assets (without the influence of the 77.5% to 79.1%. financial services business) and the net Liabilities from leasing and sales inventories continue to be covered by financing continued to rise, up 6.5% to stockholders' equity and long- and DM 14.5 billion. In contrast, provisions medium-term provisions. decreased slightly by 0.8% to DM 35.6 On page 64 we have provided the billion. While pension accruals rose only segment report based on German DM 0.4 billion to DM 13.2 billion due accounting in the same form contained to normal additions, the DM 0.7 billion in the report according to Form 20-F, drop in other provisions to DM 22.4 which we will file with the SEC.

Discussion and Analysis of the Financial Situation

Cash Flow from Operating Activities The cash flow from financing activ­ is taken from our annual report; how­ Considerably Up ities was principally influenced by the ever, additional data and financial The increase in the cash flow from capital increase of Daimler-Benz AG information are provided that were operating activities to DM 11.3 billion (DM 3.0 billion); outside financing in­ determined on the basis of U.S. reflects both the improved operating creased by DM 0.7 billion. The financial accounting principles. Since there are income and the decrease in working trend is reflected in the increase in cash substantial differences, especially in net capital. At DM 10.6 billion, the cash flow by DM 0.4 billion to DM 6.9 billion and income and stockholders' equity, the from investment activities remained in liquidity by DM 3.5 billion to DM 14.0 reconciliations are required to convert similar to 1993 (DM 10.5 billion). This billion. certain financial data from the German was due to lower net expenditures for consolidated financial statements to the our leasing and sales activities (1994: Additional Information values calculated using the U.S. GAAP. DM 4.9 billion; 1993: DM 6.6 billion) in Accordance with the An explanation of the most important and for investments in related comp­ U.S. Generally Accepted items is provided on page 96. anies. Additionally, this was due to Accounting Principles (U.S. GAAP) outflows of funds for short-term capital With the listing of Daimler-Benz investments amounting to DM 2.0 billion stock on the New York Stock Exchange, after DM 1.0 billion had flowed in during we are obligated to file an annual report 1993. We expect investments in the on Form 20-F with the Securities and Daimler-Benz group to remain high in Exchange Commission (SEC). Much of the coming years as well. the information contained in this report

66 Discussion and Analysis of the Financial Situation

Notes to the Consolidated Financial Statements Summary of Significant Accounting Policies

The consolidated financial state­ Accounting and Valuation Buildings are depreciated using the ments have been prepared in accord­ Where the circumstances are the greater of the straight-line method or ance with German generally accepted same within the consolidated group, the declining balance method. Moveable accounting principles ("German GAAP"). assets and liabilities are valued uni­ property in Germany having a useful life All amounts shown herein, unless formly in the consolidated financial of four years or more is depreciated separately stated, are in millions of statements. using the declining balance method. German marks ("DM"). Intangible assets are valued at We employ the straight-line depreciation The 1994 income statement has acquisition cost and are amortized on a method as soon as even distribution of been prepared according to the inter­ straight-line basis over their respective the residual book value over the remain­ nationally prevailing cost-of-sales useful lives. Goodwill resulting from ing useful life yields larger depreciation method for the first time. The figures capital consolidation is amortized over a allowances. For foreign companies, for the prior year were classified period of five years, providing it relates moveable property is depreciated for accordingly; the net income remained to the expansion of the group. Where it the most part using the straight-line unchanged. relates to the restructuring of the group, method. According to the cost-of-sales it is charged to retained earnings. Good­ Depreciation on plant, property and method, operating expenses are will resulting from strategic alliances is equipment additions in Germany during assigned to the functional areas of split; the amount relating to the expan­ the first and second half of the year is manufacturing, distribution and general sion of the group is charged to earnings calculated using full or half-year rates, administration. The manufacturing costs and the amount relating to restructuring respectively, on the basis of the tax of sales-generating activities are ident­ is charged to retained earnings. simplification rule. Items having an ified in the statements of income under Property, plant and equipment is immaterial value are expensed when cost of sales. This item also includes the valued at acquisition or manufacturing purchased. expenses for personnel and materials for cost - less accelerated depreciation. Investments in affiliated companies research and development, as well as Additional depreciation is recorded and other financial assets are valued at for warranties and the depreciation of where a lower reported amount is the lower of cost or market; long-term inventories. Also included in the cost required. In addition, where applicable, non-interest or low-interest bearing of sales is interest expenses from accelerated depreciation methods are loans are recorded at present value. refinancing the leasing and sales used in Germany pursuant to certain Significant investments in associated financing business, which in previous sections of the German tax guidelines. companies are valued at-equity years was listed under net interest The manufacturing costs of comp­ according to the book value method. income. The interest income previously any-built equipment and facilities cover Leased equipment is valued at included in the net interest income from direct costs, as well as allocable over­ acquisition or manufacturing cost. It is the sales financing business is now head costs of materials and manufact­ depreciated to residual value primarily recorded under sales, resulting in a uring, including depreciation. using the declining balance method. slight change of the figure for the Property, plant and equipment is We employ the straight-line depreciation previous year. depreciated over the following useful method as soon as even distribution of In the financial results we have lives: 10 to 50 years for buildings, 8 to the residual book value over the summarized the income from affiliated, 20 years for site improvements, 3 to 20 remaining useful life yields larger associated and related companies, net years for technical equipment and depreciation allowances. interest income and other financial machinery and 2 to 10 years for factory, results; the individual components office and other equipment. If equip­ are explained in Note 26. ment is used in multiple-shift opera­ tions, the useful life is reduced accordingly.

72 Notes to the Consolidated Financial Statements Raw materials, supplies and goods Consolidated Group Two hundred and ninety-one (1993: purchased for resale are valued at the In addition to Daimler-Benz AG, the 271) subsidiaries were not included as lower of cost or market; finished goods consolidated group consists of 357 their effect on the financial position and are valued at manufacturing cost. (1993: 305) domestic and foreign results of operation was not material. In Manufacturing costs include direct subsidiaries and 16 (1993: 12) joint addition, 11 companies administering material, labor and applicable manufact­ ventures. The joint ventures are accoun­ external pension funds, whose assets uring overhead including depreciation. ted for using the pro rata consolidation are subject to restrictions, have not Loss provisions are recorded for method. been included in the consolidated finan­ inventories that have long periods of During 1994, 80 subsidiaries and 5 cial statements. The entire consolidated storage or changes in construction. joint ventures were added to the group of Daimler-Benz AG is contained Non-interest or low-interest bearing consolidation. in the list of investment holdings filed in receivables and other assets with more Daimler-Benz Aerospace and the the Stuttgart Commercial Register as than one year remaining to maturity are Thomson-CSF group (France) contrib­ entry No. HRB 15 350. discounted as of the balance sheet date uted individual divisions to new joint and valued after taking into account all ventures; the shares of the new joint Consolidation Principles known risks. An allowance for doubtful ventures are held equally. As they were Capital consolidation is accomp­ accounts is deducted from the receiv­ part of the group until mid-December lished using the book value method by ables. 1994, the statements of income for the netting the acquisition cost and the pro Short-term securities are valued at contributed Daimler-Benz Aerospace rata share of stockholders' equity of the the lower of cost or market as of the subdivisions are fully included. By subsidiary at the time of its acquisition balance sheet date. contrast, the balance sheets of the or when it is first included in the consol­ Provisions for pensions and similar joint ventures are included pro rata. idation. Joint ventures are also account­ obligations, including postretirement ElectroCom Automation, Inc. (Arling­ ed for under this method. medical benefits for retirees of U.S. ton, U.S.A.), which was previously in­ Wherever possible, the accrued subsidiaries, are actuarially determined cluded as a participation at equity (26% differences arising from capital consolid­ on the basis of an assumed interest rate share), was fully consolidated upon ation are shown under the respective of 6% using the entry age actuarial cost acquisition of the remaining shares consolidated balance sheet item and are method. in 1994. amortized to income over the expected Provisions for taxes and other Twenty-eight subsidiaries and one useful life. Goodwill is amortized in provisions have been recorded using the joint venture were not included in the accordance with the method discussed principles of reasonable accounting consolidated group. The major effects in "Accounting and Valuation" above. valuation. The obligations in employee on the consolidated balance sheet and A deferred difference arising from benefits and social costs are generally on the consolidated statements of in­ capital consolidation is shown separat­ recorded for the most part using the come are explained under the individual ely under "Other provisions" as "Differ­ entry age actuarial cost method. Deriva­ balance sheet items. ence from capital consolidation with tive financial instruments (primarily As part of the further development accrual character." future exchange transactions and of our leasing business in Germany, MBL Appropriated retained earnings of currency options, interest rate and Mercedes-Benz Leasing GmbH & Co. acquired subsidiaries are included in currency swaps) are valued individually. oHG (Stuttgart) was transformed into the company's retained earnings. The If there is a direct relationship between MBL Fahrzeug-Leasing GmbH & Co. KG unappropriated profit reported in the a derivative financial instrument and a (Stuttgart) in which external bank consolidated financial statements repre­ basic transaction, a valuation unit is partners hold a total participation of sents the unappropriated profits of formed. Provisions exist for interest rate 80%. Accordingly, MBL Fahrzeug-Lea­ Daimler-Benz AG. Accordingly, the and currency risks as well as for general sing GmbH & Co. KG is no longer con­ proceeds from consolidation measures credit risk. solidated as of June 30, 1994; instead, affecting operating income and the Liabilities are recorded at their it is included as a 20% investment at unappropriated profits of the subsid­ repayment amount. equity. iaries have been offset against the Due to the sale of the domestic retained earnings of the company. appliances division of AEG Daimler-Benz Industrie, 4 companies are no longer included in the consolidated group.

Notes to the Consolidated Financial Statements 73 Investments in 143 associated comp­ The difference resulting from the anies are recorded in the consolidated currency translation of the balance financial statements. sheet items is charged or credited to For the year ended December 31, stockholders' equity; for companies 1994, 22 associated companies have operating in highly inflationary countries been included in the consolidated translation gains or losses are applied financial statements at equity using to income. the book value method. Expense and income items and the The remaining associated companies annual results are translated at the are reported as investments at acquisi­ annual average exchange rate. Where tion cost net of applicable depreciation such items concern non-current assets because the ownership is immaterial to and inventories of companies in highly the financial position of the company. inflationary countries, the historical Payables and receivables between exchange rates are used and the annual the consolidated companies are offset; results are adjusted accordingly. The differences resulting from the consolid­ difference resulting after translation of ation of debts are treated according to the change in reserves and the balance their effect on results. sheet profit or loss is charged or Intermediate results deriving from credited to the stockholders' equity. transactions within the group are elimin­ ated, if they are not already insignificant. In the consolidated income statement, proceeds from internal sales, as well as other internal revenues, are charged against the corresponding expenses. The consolidated balance sheet includes deferred taxes from elimination procedures affecting net income.

Currency Translation Foreign currency assets are translat­ ed at the lower of the entry date ex­ change rate or year-end exchange rate; foreign currency liabilities are translated at the higher of the selling rate on the entry date or at the year-end selling rate. The year-end exchange rate is generally used to translate balance sheet items of foreign companies from the respective local currency to German marks. Excluded from this treatment are the non-current assets and inventories of companies in highly inflationary countries, where historical exchange rates are used.

Notes to the Consolidated Financial Statements Notes to the Consolidated Balance Sheet

At December 31, 1994, intangible assets amounting to DM 880 million (1993: DM 523 million) consist of goodwill, acquired computer software, patents and, to a lesser extent, advance payments. The increase over the previous year is related primarily to the acquisition of ElectroCom Automation, U.S.A. The year under review included additional amortization amounting to DM 9 million (1993: DM 88 million).

The decrease in property, plant and equipment by DM 1,194 million to DM 17,727 million is a result of DM 4,918 of depreciation expense, DM 757 million in disposals, DM -162 million in currency fluctuations and DM -9 million in reclassifications; this amount is offset by DM 4,652 million in additions. In accordance with tax regulations, depreciation of DM 326 million (1993: DM 76 million) was taken. Non-scheduled depreciation amounted to DM 148 million (1993: DM 287 million). As part of the first inclusion of subsidiaries, capital expenditures and depreciation increased by DM 353 million and by DM 223 million, respectively.

The financial assets of DM 7,423 million (1993: DM 4,031 million) primarily include securities in non-current assets and participations in associated companies. The increase in financial assets is related primarily to the addition of MBL Fahrzeug-Leasing GmbH & Co. KG which is now included as a 20% share under financial assets instead of being consolidated. Moreover, due to an altered investment strategy, securities with fixed interest rates were reallocated from current assets to non-current assets. Non-scheduled depreciations amounting to DM 253 million (1993: DM 298 million) were recorded in participations and participations in associated companies.

The decrease in leased equipment of DM 1,670 million to DM 10,209 million reflects primarily the deconsolidation of MBL Fahrzeug-Leasing GmbH & Co. KG, effective June 30, 1994. In accordance with the provisions of tax law, depreciation has been recorded in the amount of DM 8 million (1993: DM 5 million).

The majority of the inventory is owned by Mercedes-Benz and Daimler-Benz Aerospace. The decrease in 1994 is mainly due to a decrease in inventory levels at the foreign Mercedes-Benz sales companies and fewer semifinished goods at Airbus and Fokker.

Notes to the Consolidated Financial Statements 75 Advance payments received in the amount of DM 6,788 million (1993: DM 7,317 million) primarily represent projects and long-term contracts with AEG Daimler-Benz Industrie, Daimler-Benz Aerospace AG, Fokker, Dornier and MTU. Such payments have been deducted from inventories.

This item represents receivables from customers in the amount of DM 10,151 million (1993: DM 8,771 million), of which DM 5,831 million (1993: DM 5,569 million) are long-term receivables. An allowance for losses of DM 236 million has been recorded on these receivables.

In 1994 we purchased a total of 78,705 treasury shares at an average price of DM 823 per share to transfer to employees of Daimler-Benz AG and the corporate units and to fulfill the exchange offer still in effect for AEG shareholders. Of this, 46,700 shares are allocated to the capital increase for issuing employee shares and 32,005 shares to acquisitions in the market (5,702 in March, 6,701 in April, 9,703 in October, 56,380 in November and 219 in December).

In November 1994, Daimler-Benz AG and the corporate units sold 46,969 shares (par value of DM 2.3 million, or 0.09% of equity) to employees at a discounted price of DM 532 per share. As part of the exchange offer, AEG shareholders received 31,736 Daimler-Benz shares. No treasury stock was on hand on December 31, 1994. Other securities consist primarily of fixed-interest debt instruments. Certain current assets could have been increased by DM 22 million to their original values in accordance with German GAAP; however, the revaluation was not recorded due to a negative effect on currently payable income taxes.

76 Notes to the Consolidated Financial Statements The balance of DM 6,915 million (1993: DM 2,954 million) includes cash in banks, cash on hand, cash in the German Bundesbank and Postbank as well as deposits in transit. The liquid assets included in the various balance sheet positions total DM 14.0 billion (1993: DM 10.5 billion); of this, DM 1.8 billion is committed between one and ten years through valuation units with derivative financial instruments. The increase in liquid assets over the previous year in the amount of DM 0.4 billion is related to the altered reporting of the checks written to compensate for supplier commitments which were not yet redeemed by the receiver.

This item primarily reflects deferred rents, interest, insurance premiums and discount sums of DM 26 million (1993: DM 16 million). In contrast to the previous year, at December 31, 1994, deferred taxes generated from elimination procedures affecting income were reported as a liability.

Stockholders' equity has developed as follows:

The offsetting of goodwill against stockholders' equity is based primarily on the acquisition of all shares in Bayerische Beteiligungsgesellschaft fur Luft- und Raumfahrtwerte mbH, Munich, which in turn holds 10% of the shares in Daimler-Benz Luft- und Raumfahrt Holding AG, Munich.

The capital stock increased by DM 235.3 million to DM 2,564.9 million through the capital increase in June 1994 in the amount of par DM 233.0 million and the capital increase for issuing employee shares in November 1994 in the amount of par DM 2.3 million. Following these two capital increases, the number of votes is 51,298,736. Of the DM 600 million of additional share capital approved on June 26, 1991, the remaining amount is DM 367.0 million, which may be utilized until June 30, 1996. Of the DM 20 million of additional share capital for issuance of employee shares approved on May 18, 1994, the remaining amount is DM 17.7 million, which may be utilized until April 30, 1999. In addition, as authorized by the shareholders on May 18, 1994, the company maintains authorized but unissued capital in the amount of DM 300.0 million which is intended for the extension of subscription rights to the holders of convertible bonds and options issued by the Board of Management. No use has yet been made of this authorization, which extends through April 30, 1999. The increase in paid-in capital to DM 4,904 million (1993: DM 2,117 million) is to be attributed to the premium from the two 1994 capital increases.

Notes to the Consolidated Financial Statements 77 Retained earnings contain the German statutory provision of DM 160 million and other retained earnings of Daimler-Benz AG totaling DM 13,091 million. Retained earnings also include the group's share of the consolidated subsidiaries' retained earnings and balance sheet results, provided the earnings were generated by such subsidiaries since joining the company. Additionally, retained earnings include the cumulative effect resulting from the elimination of inter-company profits from the consolidation and foreign currency translation gains and losses.

The interest held by third-parties in the stockholders' equity of the consolidated subsidiaries primarily consists of AEG Daimler-Benz Industrie, Daimler-Benz Luft- und Raumfahrt Holding AG, Mercedes-Benz (Switzerland) AG, Dornier, MTU and Eurocopter. In addition to the above, a negative minority interest amounting to DM 973 million relates to Fokker.

Pension accruals have increased by DM 391 million to DM 13,150 (1993: DM 12,759 million) as a result of the annual increase in pension provisions. The pension accruals and the plan assets of the external pension plan fully fund the company's pension obligations.

12/31/94 12/31/93 18 Other Provisions DM in mill. DM in mill.

The other provisions consist of:

Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Liabilities to associated and related companies include approximately DM 77 million (1993: DM 243 million) due to financial institutions. The remaining liabilities to associated and related companies are primarily obligations of Daimler-Benz Aerospace Airbus GmbH to Airbus Industrie G.I.E., Toulouse, and accrued liabilities of Daimler-Benz Aerospace due to project companies. Commercial paper is recorded at a discounted basis plus accrued interest. Miscellaneous liabilities consist primarily of accrued payroll and related payroll withholding tax deductions. Liabilities to financial institutions, notes payable, liabilities to affiliated and related companies and miscellaneous liabilities are secured by mortgages, liens and assignment of receivables of approximately DM 911 million (1993: DM 1,934 million).

Notes to the Consolidated Financial Statements Notes to the Consolidated Statements of Income

The selling and general administrative expenses include restructuring costs amounting to DM 1,114 million (1993: DM 3,486 million). Interest expense from leasing and sales financing business included in the cost of sales is DM 918 million (1993: DM 1,139 million). Miscel­ laneous taxes total DM 297 million (1993: DM 390 million).

Other operating income primarily includes income from dissolved provisions in the amount of DM 1,610 million (1993: DM 2,348 million). This item also includes income from the sale of corporate units and from deconsolidations in the amount of DM 1,029 million and income from land sales, which for the most part were further committed based on depreciation methods pursuant to German tax law. DM 2,718 million (1993: DM 3,581 million) of the other operating income relates to other fiscal years.

Other operating expenses include increases to provisions that cannot be allocated to selling and general administrative expenses as well as expenses from investment disposals. DM 121 million (1993: DM 224 million) of the other operating expenses relates to other fiscal years.

Notes to the Consolidated Financial Statements The provisions for losses on financial assets and long-term investments total DM 552 million (1993: DM.300 million).

The income taxes of DM 1,182 million (1993: DM 515 million) primarily represent income taxes of the foreign Mercedes-Benz group companies.

The net group income of DM 895 million was influenced by statutory depreciation of financial and current assets as prescribed by German tax law in the amount of DM 270 million. Future effects are immaterial.

82 Notes to the Consolidated Financial Statements Other Information

Derivative financial instruments are used to hedge against interest rate and currency risks. They primarily cover the basic supplier and services transactions. They are used to a minor extent to optimize the interest rate and currency results. Contracts are signed only with reputable international financial institutions. The derivative financial instruments are subjected to risk checks appropriate to the extent of the transactions and are executed under strict functional division into trade, administration, documentation and control. The necessary critical organization and work procedures are stipulated by internal guidelines. The effectiveness of the internal controls and the reliability of the procedures are subjected to continual examination. For decision-making purposes, the current risk positions are presented in each case based on regular, standardized financial reports. The currency instruments relate primarily to future exchange transactions and options in the currencies of the major industrialized countries. The interest-rate instruments primarily include interest-rate swaps and combined interest-rate/currency swaps, forward rate agreements, futures and related options. The face values are calculated from the non-balanced sum of all buy and sell amounts for derivative instruments. The market values are derived from the prices at which the derivative instruments are traded or quoted on the balance sheet date without taking into account contrary trends in the basic transactions.

In addition, the company is liable for compensatory payments guaranteed by Daimler-Benz Aerospace AG which cannot be reasonably estimated for 1995 and future years. For outside shareholders of AEG AG and Daimler-Benz Luft- und Raumfahrt Holding AG, claims also exist for compensatory payments which cannot be reasonably estimated for 1995 and future years.

Notes to the Consolidated Financial Statements 83 The other financial obligations deriving from rental, leasehold and leasing agreements amount to an average of approximately DM 1,102 million; the average contractual period is 6 years. Other financial obligations toward non-consolidated subsidiaries represent annual payments due of approximately DM 751 million over an average contractual period of 4 years. In connection with the fiduciary settlement by Daimler-Benz Aerospace Airbus GmbH of the federally guaranteed serial credits, the effective amount cannot be determined until the beginning of 1995 when the German Federal Government's last tranche of DM 1 billion is due; this also applies to the reorganization profit received in 1989. Within the scope of the government-supported Airbus Development Program, Daimler-Benz Aerospace Airbus GmbH has agreed to assume performance portions itself. DM 127 million thereof relate to the time after the balance sheet date, to the extent that they are not already reflected in the annual accounts. All assets acquired by Daimler-Benz Aerospace Airbus GmbH with subsidy funds have been transferred to the Federal Republic of Germany as security. With reference to the development work for the Airbus program, Airbus Industrie G.I.E. has given a performance guarantee to Agence Executive (the government office in charge of Airbus); this guarantee was taken over by Daimler-Benz Aerospace Airbus GmbH - to the extent of its share interest - without restriction. Daimler-Benz Aerospace Airbus GmbH considers the obligation fully covered by the relevant agreements for the financing and execution of the development work. Beginning in 2002, the profit sharing agreement provides that the German Federal Government will share 40% in the profits of Daimler-Benz Aerospace Airbus GmbH. This requirement, in its economic effect, stipulates the sequence of the government's repayment demands. The remaining financial obligations, particularly purchase order commitments for capital investments, are within the scope of normal business activities. The obligation arising from stock and capital subscriptions pursuant to Section 24 of the GmbHG (Limited Liability Company Act) amounts to DM 79 million. Within the scope of sales financing, Daimler-Benz Aerospace has submitted to industry- standard liabilities. The company is jointly and severally liable for certain non-incorporated companies, partnerships and joint ventures. In addition, there exist performance and miscellaneous guarantees in connection with normal business transactions. In order to finance the construction project on Potsdamer Platz in Berlin, the company has signed leases with several special companies committing to pay future leasing rates. These leasing rates, which are computed on the basis of the estimated production costs for the entire complex of DM 3.3 billion and are expected to take full effect at the end of 1998, cannot be valued at the present time.

Executive Bodies Under the presumption that the proposed dividend is ratified by the shareholders at the Annual Meeting on May 24, 1995, the remuneration paid by the group companies to the members of the Board of Management and the Supervisory Board of Daimler-Benz AG amounts to DM 16,759,041 million and DM 1,736,035 million, respectively. Disbursements to former members of the Board of Management of Daimler-Benz AG and their survivors amount to DM 12,271,514 million. An amount of DM 90,943,099 million has been accrued in the financial statements of Daimler-Benz AG and Mercedes-Benz AG for pension obligations to former members of the Board of Management and their survivors. As of December 31, 1994, advances and loans to members of the Board of Management of Daimler-Benz AG amounted to DM 58,017. Home mortgages included herein are not subject to interest; other loans and advances bear interest averaging 5.5%. During 1994, DM 111,846 of outstanding loans was repaid. The terms for home mortgages are ten years and less than one year for loans and advance payments.

Notes to the Consolidated Financial Statements Auditor's Report

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

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

Frankfurt/Main, March 22, 1995

KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft

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

Auditor's Report 85

Supervisory Board

HILMAR KOPPER WOLFGANG GABELE1) DR. RER. POL. MANFRED SCHNEIDER Frankfurt/Main Bremen Leverkusen Member of the Board of Management, Deputy Chairman of the Corporate Chairman of the Board of Management, Deutsche Bank AG Labor Council, Daimler-Benz Group Bayer AG Chairman of the Corporate Labor Chairman Council and the Joint Labor Council, PETER SCHONFELDER1) AEG Augsburg KARL FEUERSTEIN1' Member of the Labor Council, Mannheim MANFRED GOBELS1) Daimler-Benz Aerospace AG Chairman of the Corporate Labor Stuttgart Council, Daimler-Benz Group Senior Manager, Mercedes-Benz AG PROF. DR. JUR. JOHANNES SEMLER Chairman of the Joint Labor Council, Chairman of the Senior Managers' Kronberg/Taunus Mercedes-Benz AG Committee, Daimler-Benz Group Lawyer Deputy Chairman Chairman of the Senior Joint Managers' Committee, Mercedes-Benz AG BERNHARD WURL1) PROF. DR. RER. NAT. GERD BINNIG Frankfurt/Main Ruschlikon ERICH KLEMM1) Departmental Manager within the Board Project Manager IBM Research Division Sindelfingen of Management, Chairman of the Labor Council, Metal-Workers' Union WILLI BOHM1' Sindelfingen Plant, Mercedes-Benz AG Worth Member of the Labor Council, MARTIN KOHLHAUSSEN Committees of the Worth Plant, Mercedes-Benz AG Frankfurt/Main Supervisory Board: Chairman of the Board DR. H.C. BIRGIT BREUEL of Management, Committee pursuant to Berlin Commerzbank AG §27 Sec. 3 MitbestG President of the Treuhandanstalt (Government Agency for Privatization, RUDOLF KUDA1' HILMAR KOPPER (CHAIRMAN) until 12/31/94) Frankfurt/Main KARL FEUERSTEIN General Commissioner of EXPO 2000 Departmental Manager within the Board PROF. DR. JUR. JOHANNES SEMLER of Management, BERNHARD WURL PROF. HUBERT CURIEN Metal-Workers' Union Paris Executive Committee Former Minister for Research and HELMUT LENSE1) Technology of the Republic of France Stuttgart HILMAR KOPPER (CHAIRMAN) Chairman of the Labor Council, KARL FEUERSTEIN DR. JUR. MICHAEL ENDRES Untertürkheim Plant, PROF. DR. JUR. JOHANNES SEMLER Frankfurt/Main Mercedes-Benz AG BERNHARD WURL Member of the Board of Management, Deutsche Bank AG WALTER RIESTER2) Audit Committee Frankfurt/Main Vice-Chairman, Metal-Workers' Union HILMAR KOPPER (CHAIRMAN) KARL FEUERSTEIN JÜRGEN SARRAZIN WILLI BOHM Frankfurt/Main DR. BIRGIT BREUEL Chairman of the Board of Management, Dresdner Bank AG

DR. JUR. ROLAND SCHELLING Stuttgart Attorney at Law 1) Elected by the employees. 2) Judicially appointed as employee representative.

Supervisory Board Report of the Supervisory Board

Selected areas of focus were the At its meeting on June 29, 1994, measures for globalization and localiz­ the Supervisory Board designated Mr. ation and for strengthening our interna­ Schrempp to succeed Mr. Reuter as tional competitiveness. Highlights were Chairman of the Board of Management the restructuring at AEG Daimler-Benz effective from the date of the Annual Industry, the selling off of the household General Meeting on May 24, 1995. appliance and cable harness activities Thus, the future leadership of the as well as meters and lighting systems, group was clarified at an early date. the joint ventures with CEGELEC and At the meeting on November 2, Magna, and the acquisition of ECA in the 1994, we then made further decisions Postal Automation Division. Highlights regarding appointments to the Board of for Mercedes-Benz were the takeover Management after the Annual General of Kassbohrer and the decision for the Meeting on May 24, 1995. Dr. Hirsch- In 1994, the Supervisory Board held Micro Compact Car. For Daimler-Benz brunn, Personnel, and Dr. Liener, four regular meetings. Independent of Aerospace, we thoroughly discussed the Finance and Materials, will leave the these, the Executive Committee, which development at Fokker as well as the Board of Management at this time. Dr. is also responsible for the contractual pan-European cooperative ventures. Gentz will assume the management of affairs of the Board of Management, Other important topics commanding the both departments at the same time. met three times. The Balance Sheet Supervisory Board's attention were the Dr. Mangold was appointed to the board Committee dealt thoroughly with the 1994 capital increase, refinancing and effective April 1, 1995. He will succeed mid-year report, as well as the financial sales financing (e.g. aircraft leasing) Dr. Gentz as President and Chief statements for the entire year. There and the Potsdamer Platz project in Executive Officer of Daimler-Benz was no need to convene the conference the corporate unit debis. InterServices (debis) effective May 25, committee formed pursuant to the Law The developments listed testify to 1995. In the corporate unit Daimler- on Codetermination. the fact that the Board of Management Benz Aerospace, Dr. Bischoff has In addition to providing periodical has defined the challenges arising from been appointed as the successor of reports on the course of business, the the markets and implemented approp­ Mr. Schrempp effective May 25, 1995. Board of Management reported in detail riate measures to maintain the inter­ on the position of the corporation and national competitiveness of the basic business policy. We were also corporation. informed in detail about the develop­ The Supervisory Board is satisfied ment of the corporation through that the accounting, the annual financial numerous other reports on the general statement of December 31, 1994, and situation and on special topics, which the consolidated business review for we discussed thoroughly with the Board Daimler-Benz AG and the group were of Management. audited by KPMG Deutsche Treuhand- Among the topics addressed were Gesellschaft AG auditing company in the details of the medium-term business Frankfurt/Main and affixed with the plan, including the investment, employ­ unqualified audit certificate. In our own ment and profit plans, and the develop­ thorough examination, we found no ment of the group structure and signifi­ grounds for complaint, and we agree cant individual business transactions. with the findings of KPMG. With the approval of the Supervisory Board, the annual financial statement is hereby ratified. We concur with the proposal of the Board of Management regarding the allocation of unappropriated profit.

90 Report of the Supervisory Board Executive Management and Daimler-Benz Group Representation and Liaison Offices

Executive Management Daimler-Benz Group Daimler-Benz Group Representation Offices Liaison Offices DR. JUR. BOY-JÜRGEN ANDRESEN Personnel Policy Berlin Egypt PETER HANS KEILBACH RUDI STOECKER HANSJÖRG BAUMGART Englerallee 40 P. 0. Box 2 70 Daimler-Benz Art Possessions 14195 Berlin 48, Giza Street Cairo MARTIN BERGER Bonn Annual Accounts and ALFONS PAWELCZYK Australia Accounts Planning Friedrich-Ebert-Allee 26 BERT SCHLICKUM 53113 Bonn 12-16 Dunlop Road DR. RER. POL. ECKHARD CORDES1) Mulgrave, Vic. 3170 Corporate Planning and Controlling Brussels

1 DR. HANNS GLATZ Brazil MATTHIAS KLEINERT ) Public Affairs and 133, rue Froissart - Bte. 29 DR. JOACHIM ZAHN Political-Economic Policy 1040 Brussels Av. Maria Caelho Aguiar, Belgium 215-BI. E-1. andar DR.-ING. MICHAEL KRAMER 05805-000 - Sao Paulo (SP) Research 1 Jerusalem/Tel Aviv BENJAMIN NAVON France DR. RER. NAT. VOLKER LEHMANN Ramban Street 11 DR. PETER KOSTKA Research 2 Jerusalem Pare de Rocquencourt Israel B.P. 100 WERNER POLLMANN 78153 Le Chesnay Cedex Technik, Moskow Technology, Environmental Officer DR. ANDREAS MEYER-LANDRUT Great Britain Daimler-Benz Kolobowski Per. 23 DR. REINER ELLENRIEDER 103009 Moskow 25 St. James's Street PROF. DR. RER. NAT. Russia London SW1A 1 HA ROLF SCHARWÄCHTER1) 2) Directorate for Group Business in Beijing Hong Kong Emerging Markets NORBERT GRAEBER M. A. KARL-HEINZ MICHEL 1601, Landmark Building 59th Floor, Central Plaza JÖRG SEIZER 8 North Dong San Huan Road 18 Harbour Road, Wanchai Subsidiaries and Affiliated Companies Chaoyang District Hong Kong Beijing 100004 HUBERTUS BUDERATH PR China Italy Corporate Auditing DR. JOCHEN PRANGE Tokyo Via Campo nell'Elba 12/30 DR. OEC. PUBL. PAUL WICK1) Finance and Taxes WOLFGANG DIETRICH 00138 Rome Roppongi First Bldg. Singapore DR. JUR. SOLMS WITTIG1) 9-9, Roppongi 1-chome Staff Lawyer Minato-ku, Tokyo 106 DR. KLAUS OBERLANDER Japan AEG Building; #02-07/08 GERD WORIESCHECK 25 Tampinex Street 92 Personnel Development Washington D.C. Singapore 1852 for Senior Group Executives ALBERT D. BOURLAND 1350 I Street, N. W. Suite 800 Spain Washington D.C. 20005-3305 CARLOS ESPINOSA DE LOS MONTEROS U.S.A. Jose Ortega y Gaset 22-24 28006 Madrid

South Africa 1) With general power of procurement. CHRISTOPH KOEPKE 2) Also deputy member of the Mercedes-Benz Board of Management without an own P. O. Box 1717 department. Pretoria 0001

Executive Management and Daimler-Benz Group Representation and Liaison Offices

Notes to the Reconciliation of Consolidated Net Income and Stockholders' Equity to U.S. GAAP

Appropriated Retained Earnings: GAAP, goodwill must be capitalized and Securities Provisions, Reserves and amortized over a period not exceeding Under German accounting princip­ Valuation Differences 40 years. The expenses of 1994 are les, securities are valued at the lower of U.S. accounting principles by far do principally based on one event at Fokker cost or market. In contrast, U.S. GAAP not allow provisions and reserves to the that must be reversed under U.S. GAAP. requires that securities be marked to same extent as the German Commercial The sale of technology resulted in a higher market value. The changes in the Code. Non-recognized provisions and profit of DM 366 million, which accord­ market value are recorded either directly reserves have to be eliminated, which ing to U.S. GAAP had to be offset in the statements of income or in the has an effect on net income as well against the company's goodwill. stockholders' equity. as stockholders' equity. According to U.S. GAAP, the stockholders' equity Deconsolidation Other Valuation Differences increased by DM 6,205 million as of Under German accounting princip­ Additional differences between December 31, 1994, also affecting pro­ les, a company can be deconsolidated German and American accounting visions, net inventories and receivables. once the majority of the shares have methods may occur with respect to We use the term "appropriated retained been sold. According to U.S. GAAP, inventories, minority interests and earnings" to disclose to the American however, a leasing company of which a leasing activities. investors that such retained earnings majority interest has been sold to non- are not available for distribution as group entities must remain consolidated Deferred Taxes dividends. This term also establishes until the economic risks and rewards In the German consolidated financial a bridge between the two different have been fully transferred. statements, deferred tax assets result accounting cultures. primarily from elimination entries affect­ Pensions and Other ing net income. According to U.S. GAAP, Long-Term Contracts Postretirement Benefits future advantages from (temporary) dif­ Customer revenues and cost of sales According to U.S. accounting prin­ ferences between tax and book values are recorded under German law in ac­ ciples, the determination of provisions and from tax losses carried forward are cordance with the completed contract for pensions is based, among other also taken into consideration. method, whereas U.S. principles gene­ things, on anticipated increases in rally require that the percentage of wages and salaries. The calculation is completion method be used. The not based on a discount rate of 6%, majority of contracts within the group which is applicable under German Tax require partial prepayment as well as Law, but instead, on the interest rate of partial recognition of profits based upon the countries involved. Another differ­ payments received. Contracts of this ence relates to the requirement that nature are also customary in the U.S.A., health care costs for retirees be and are recognized under its accounting actuarily calculated and accrued regulations. The resulting differences for in the U.S.A. are therefore not material. Foreign Currency Translation and Goodwill and Business Acquisitions Financial Instruments Under German accounting regu­ Unrealized profits and losses lations, goodwill can be offset against related to the valuation of amounts stockholders' equity, or capitalized and denominated in foreign currencies and amortized generally over the expected to financial instruments are treated useful life, which in Germany ranges differently in the two accounting between 5 and 15 years. Under U.S. systems. Under German law, according to the imparity principle, only unrealized losses are to be recorded, whereas under U.S. GAAP, as well unrealized profits must be recognized.

96 Notes to the Reconciliation of Consolidated Net Income and Stockholders' Equity to U.S. GAAP Balance Sheet Press Conference:

April 12, 1995 10.00 a.m. Haus der Wirtschaft Stuttgart

Annual General Meeting:

May 24, 1995 10.00 a.m. Hanns-Martin-Schleyer-Halle Stuttgart

Daimler-Benz reports on the first quarter of 1995 during the Balance Sheet Press Conference on April 12, 1995, on the first six months with an audited semi­ annual report on September 11, 1995, and during early November on the first nine months of 1995.

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

This report has been printed on environment-friendly paper bleached without the use of chlorine.