DAIMLERBENZ

Annual Report 1990

Members of the Supervisory Board and the Board of Management

Directors and Daimler-Benz Group Representatives

To the Stockholders and Friends of our Company

Report of the Board of Management

Business Review

The Group's Corporate Units and Divisions

Mercedes-Benz

Passenger Car Division

Commercial Vehicle Division

AEG

Deutsche Aerospace debis

Research and Technology

Employees

Finance

Financial Statements

Proposal for the Allocation of Unappropriated Profit

Report of the Supervisory Board

Daimler-Benz in Figures

Principle Subsidiaries and Affiliated Companies

The Daimler-Benz Share HERMANN J. ABS ERICH KLEMM*) FRANZ STEINÜUHLER*) Frankfurt am Main Calw Frankfurt am Main Honorary Chairman, Chairman of the Labor Council, First Chairman, Metal-Workers' Union Deutsche Bank AG Sindelfingen Plant, Mercedes-Benz AG HERMANN-JOSEF STRENGER Honorary Chairman Leverkusen RUDOLF KUDA*) Chairman of the Board of Management, HlLMAR KOPPER Frankfurt am Main Bayer AG Frankfurt am Main Departmental Manager within Member of the Board of Management, the Board of Management, BERNHARD WURL*) Deutsche Bank AG Metal-Workers' Union Mainz Chairman Departmental Manager within (from March 7, 1990) HUGO LOTZE*) the Board of Management, Reinhardshagen Metal-Workers' Union KARL FEUERSTEIN*) Chairman of the Labor Council, Mannheim Kassel Plant, Chairman of the Corporate Labor Mercedes-Benz AG Retired from the Supervisory Board: Council, Daimler-Benz AG DlPL-ING. HANS-GEORG POHL HERBERT LUCY*) Chairman of the Joint Labor Council, Hamburg Mannheim Mercedes-Benz AG Chairman of the Board of Management, Chairman of the loint Labor Council, Deputy Chairman Deutsche Shell AG Daimler-Benz AG (from April 25, 1990) DR. RER. POL. WOLFGANG ROLLER Deputy Chairman PROF. DR. RER. NAT. GERD BINNIG Frankfurt am Main (on March 7, 1990) Munich Speaker for the Board of Management, Head of IBM Physics Group Dresdner Bank AG WILLI BOHM*) (from July 4, 1990) Kandel SIEGFRIED SAUTER*) Member of the Labor Council, DIPL.-ING. RICHARD BOLLMANN*) Frankfurt am Main Worth Plant, Mercedes-Benz AG Mannheim Deputy Chairman of the (on October 1, 1990) Senior Departmental Manager Corporate Labor Council, RICHARD HELKEN*) (from September 2, 1990) Daimler-Benz AG Bremen Chairman of the Joint Labor Council, PROF. DR.-ING. E.h. WERNER BREITSCHWERDT Chairman of the Labor Council, AEG Aktiengesellschaft Stuttgart (from October 11, 1990) Bremen Plant, Mercedes-Benz AG (on October 1, 1990) DR. RER. POL. HORST I, BURGARD DR. JUR. ROLAND SCHELLING PROF. DR. JUR. GERHARD TREMER Frankfurt am Main Stuttgart Grafelfing near Munich Member of the Board of Management, Attorney at Law Deutsche Bank AG Member of the Board of Management, Bayerische Landesbank Girozentrale PETER SCHONFELDER*) HELMUT FUNK*) Augsburg (on July 4, 1990) Stuttgart Member of the Labor Council, Chairman of the Labor Council, Messerschmitt-Bölkow-Blohm GmbH DIPL.-ING. Unterturkheim Plant and Main Office, (from October 11, 1990) Mercedes-Benz AG MARIA-CHRISTINE FURSTIN VON URACH*) DR. JUR. WALTER SEIPP Stuttgart Frankfurt am Main Director Chairman of the Board of Management, (died September 2., 1990) Commerzbank AG

PROF. DR. JUR. IOHANNES SEMLER Kronberg/Taunus Member of the Board of Management, Mercedes Aktiengesellschaft Holding EDZARD REUTER DR. JUR. MANFRED GENTZ Retired from the Board of Management: Stuttgart Stuttgart Daimler-Benz InterServices (debis) HEINZ DÜRR Chairman Frankfurt am Main DR. RER. POL. GERHARD LIENER AEG PROF. DR.-ING. E.h. DR. h.c. WERNER NIEFER Stuttgart (on December 31, 1990) Stuttgart Finance and Materials Mercedes-Benz DR.-ING. RUDOLF HÖRNIG Deputy Chairman JURGEN E. SCHREMPP Stuttgart Munich Research and Technology Deutsche Aerospace (on April 30, 1990)

HELMUT WERNER Stuttgart Mercedes-Benz

DR. JUR. HANS-WOLFGANG HIRSCHBRUNN (Deputy Member) Stuttgart Personnel (from July 1, 1990)

ERNST GEORG STÖCKL (Deputy Member) Frankfurt am Main AEG (from January 1, 1991)

PROF. DR.-ING. HARTMUT WEULE (Deputy Member) Stuttgart Research and Technology (from September 1, 1990) Directors

DR. JUR. BOY-JüRGEN ANDRESEN MATTHIAS KLEINERT*) KONRAD STRAUB Personnel and Social Policy Public Relations and Economic Policy Group Accounting Control

HANSJÖRG BAUMGART DR. MICHAEL KRÄMER (provisionally) DR. OEC. PUBL. PAUL WICK* Daimler-Benz Art Possessions Vehicle and Traffic Systems Research Finances and Taxes

MARTIN BERGER DR. RER. NAT. VOLKER LEHMANN DR. JUR. SOLMS WITTIG*) Annual Accounts and Disclosure Research Institutes AEG/Aerospace Staff Lawyer

DR. RER. POL. ROLF A. HANSSEN WERNER POLLMANN (provisionally) GERD WORIESCHECK Consolidated Planning and Controlling Technology Personnel Development for Senior Executives JÖRG SEIZER Subsidiaries and Affiliated Companies i With general power of procurement.

Daimler-Benz Group Representatives

BERLIN BRUSSELS TOKYO

PETER-HANS KEILBACH DR. JUR. HANNS R. GLATZ MICHAEL N. BASSERMANN Hohenzollerndamm 150 133, Rue Froissart - Bte 29 P.O. Box 510, Ark Mori Bldg. D-1000 Berlin 33 B-1040 Brussels Minato-Ku, Tokyo 107, Japan

BONN HONG KONG WASHINGTON D. C.

DR. RER. POL. JURGEN MORLOK KLAUS BEHRENDT RICHARD H. IMUS Friedrich-Ebert-Allee 26 6th Floor, Ruttonjee House Suite 800, 1350 I Street, N.W. D-5300 Bonn 1 11 Duddell Street, Central Washington D. C 2005, U.S.A. Hong Kong 1990 was a year with which we can First and foremost exchange rates well be pleased. There were indeed have been considered. If the exchange specific problems not anticipated in rates of the D-mark to the US dollar the form in which they emerged, and and yen had remained unchanged with not least of all in parts of AEG. Nev­ respect to 1989, we would have been ertheless, we made commendable pro­ able to achieve DM 2 billion more in gress. After overcoming the quality sales revenue. Although measures to problems which appeared at times, our secure exchange rates may cause a cars gained considerable ground again certain cushioning effect over time, a facing tough competition, and consoli­ shift of this nature must, of course, be dated their continued leading position. reflected in our net result at the end Our commercial vehicles were able to of the day. further improve their international leading position. Deutsche Aerospace For important export areas in Ger­ is following the optimum course to­ man industry, this means that an on­ wards uniformly organizing its fields going currency parity which is below of activity, and is thus becoming a actual purchasing power demands con­ sought-after partner for international siderable structural efforts in order to cooperation ventures. Daimler-Benz be able to balance out disadvantages InterServices can look proudly at the on such a scale. In the long run they first steps it made on the services inevitably lead to the shifting abroad market. Most importantly, we can be of parts of net product added which confident that in the financial year are of fundamental importance to the under review we passed the point of productive power of the whole of Ger­ maximum costs and investment which man industry. It would be irrespons­ we consciously took on with the goal ible not to take this very seriously, of restructuring our company to be­ particularly as there are enough sec­ come an integrated technology group. tors of industry and products which will not be able to convert simply to We must not, however, overlook the the "Made in Europe" of the single fact that from a general economic European market. point of view many things have hap­ pened since last fall on a wide front It is therefore difficult to compre­ and with considerable momentum, hend which circumstances or interests which we too were not able to avoid. could force German exchange rate pol­ Since we wish to remain true to our icy to adopt a position which neces­ strategy of being traditionally oriented sarily leads in the long term to the in­ toward circumspection and adequate dustrial foundations of Germany being provisions, we are therefore proposing eroded. In other words, the people that the dividend should remain the bearing political responsibility must same as in 1989, at DM 12.00 per DM take note that the currency pain 50 share. threshold in the case of exchange rates has been considerably exceeded How have we reached this decision? in terms of how the latter have devel­ oped into 1991. The only option open as a short-term Moreover, an important factor is that All in all, the international economic counter measure to the export-oriented in Germany there is much public de­ scene has therefore altered drastically sectors is to take drastic action to bate about exports of defense technol­ over a short period of time. In Ger­ reduce costs within their own com­ ogy, which is energetically assisted by many, 1991 should on the one hand panies. Daimler-Benz is thus also politicians, yet for the most part with­ still see positive growth rates, but on applying measures to reduce costs, out a clear direction; a debate which the other hand also considerable addi­ which have now been in force over a extensively confuses an honorable tional pressure on profits, which will longer period of time, with added vigor strength of conviction with the mis­ not least of all be due to the new tax and more ambitious aims. We have guided view that a world without secu­ resolutions of the Federal government, promised ourselves a sustained re­ rity through defense and without secu­ however inevitable they may be. duction in the volume of costs over the rity based on balance would be self- next four to five years on a scale of regulating and that this should be at In order not to fall into a possibly DM 4 billion throughout the group. the top of the agenda. sustained exchange rate trap in the face of such conditions, we will closely However, as with the shifting of This subject also includes the funda­ examine the nature of our cost struc­ sourcing or of the company's own mentally justified and welcome in­ ture beyond the saving measures intro­ manufacturing facilities to other coun­ crease in export regulations for de­ duced. I cannot predict today the re­ tries, measures taken by German fense technology, including threats of sults which will emerge, but the stra­ industry on a comparable scale would greater punishment. The force behind tegic issues on the agenda are clear. have not only structural effects but that is partly what we had already Dogma regarding production locations also macro-economic consequences in established as a guideline within our or supplier preferences, taboos con­ the Federal Republic of Germany. group for our own export practise. cerning voluntary social payments, fi­ Against such a background, it is not Counter to many claims which were nancing means or company profiles in surprising that we at Daimler-Benz publicly made, in some cases, against our group will not be permissible. We now look to the future with somewhat better knowledge, the companies shall adhere to the fundamental expe­ reserved expectations and are critically within the Daimler-Benz group have in rience that anyone will only have examining the availability of our re­ no instance contravened the spirit or success with their strategy if they do sources. In addition, even with a con­ letter of existing laws. their homework both resolutely and in tinued favorable situation in Germany, good time, paying the necessary atten­ there will be sufficient difficulty in ad­ Nevertheless, that does not mean tion to proven traditions. vancing the rebuilding of industry in that the new conditions would be un- the new Federal German states with­ problematic without exception. Under Since we feel that we have the out initial exertion. the extended laws, export goods which capacity required, we also remain able include almost all products in the to make the necessary outlay towards There are, however, other diffi­ electro-technology and electronic sector becoming an integrated technology culties. Developments in the Soviet and which are required for the most group. Obviously, in the long term this Union and its former European satel­ varied purposes are subject to controls. can only be on the basis of corporate lite countries conceal risks which have If the definition of civilian goods which units which are autonomously profita­ now emerged as being more than just can be used to military ends ranges ble and capable of growth. We are purely economic factors. The additional though from light bulbs to trucks, then working in that direction at full steam effects of the Gulf Crisis are difficult to it must be obvious that the instru­ - which will become more apparent fathom in their entirety, and its spe­ ments available for monitoring export this year, after we were able to make cific effects for Germany in terms of goods not only become a frustrating such an impressive start in 1990 with important trade partners give rise to bureaucratic tool, but one which must the creation of debis. feelings of apprehension. also fail due to being overstrained. However, a technology group always A study for an overall transport Daimler-Benz is only acting consis­ remains a mixture of deliberately toler­ system which we have presented to tently in also using this instrument ated losses, i.e. investment in new united Berlin shows what it is all within the framework of our business fields of activity, income sources used about. We have demonstrated through policy. We now have a series of alli­ for innovations, i.e. "cash cows" and it our capacity to develop complex sys­ ance partners in various fields, and proceeds from planned disinvestment, tems in context and to deduce the cor­ with others, for example Mitsubishi, i.e. from business coming to a close. rect specifications for individual prod­ we are continuing promising discus­ The latter feature presupposes that ucts from an understanding of the sions. We attribute a particular signifi­ analyses are constantly carried out in whole. Conditions are required for this cance to the collaboration which has a company as to where things can be purpose which only Daimler-Benz can now been bindingly agreed between wound down before it becomes bla- provide in such a combination: mas­ Deutsche Aerospace/MTU and United tently obvious to all. Conversely that tery of all vehicle techologies on road, Technolgies/Pratt & Whitney in the means from the purchaser's point of rail and in the air, together with infor­ domain of aircraft engines, which could view that he can make more of the mation technology and systems knowl­ open up interesting further possibilities business concerned than the seller is edge. with this important US technology able to. Only then can a reasonable, partner. good sales price be achieved, and jobs The companies still of course rely on in the new corporate network are more politically favorable conditions for their Moreover, and I feel this point is not secure than before. conduct. We need open borders, since one of inconsiderable importance, a several projects such as the next gen­ partnership network of this nature can We can also continue this work with eration of aircraft engines, space sys­ contribute within the framework of improved accuracy because our inter­ tems and traffic guidance technology, business alliances to solving problems nal planning system allows us to oper­ together with products such as road not just in the economic and technical ate effectively calculated resource vehicles or helicopters, can only be spheres of our lives. Relationships management. Following the imminent mastered in an economically competi­ arise which promote, beyond the com­ conclusion of what has in part been tive manner if there is an international panies concerned, growth towards one extremely elaborate, methodical pre­ division of work. another for a community of interests liminary work, we will soon be in with the spirit of good neighborliness. a position to control management This can also be seen from the ex­ resources, the promotion of up-and- ample of a more recent form of inter­ All of our efforts would of course coming employees, capital and liq­ national cooperation between com­ founder without the employees who uidity, research, and project-related panies, when they merge to become work for the future of Daimler-Benz investment in accordance with criteria business alliances. Contrary to several with their ability, commitment and of corporate strategy. misunderstandings which still exist in enthusiasm. You, as our shareholders, the public eye, it is not a matter of a can place your trust in them in the We have proceeded with strategy new title for efforts which are ques­ same way as we are proud of this vital projects of this kind in many fields of tionable from the point of view of com­ prerequisite for the success of the the group's activities, without making petition, nor of indissoluble alliances. course we have chosen. external announcements. It is indeed The common interest is actually based enough for the competitors to become on the fact that neither of the partners acquainted with the resulting products. is able to implement the economic or At any rate, this work confirms to us technical aim of the collaboration en­ with each day that passes that the eco­ tirely through their own efforts. The nomic world is very much in motion. idea is therefore not to establish un­ Anyone wishing to be successful to­ restrained market power but rather to morrow using today's product concept, secure, through collaboration, advan­ with the exception of certain niches, tages comparable to those likewise will be bitterly disappointed. secured by competitors through similar cooperation.

Worldwide Decline in Economic Daimler-Benz: Worldwide Sales units, slightly below the previous Growth Over DM 85 billion year's volume; this drop was mainly due to the taxation on discounts for The economic growth stimuli in the In the 1990 financial year, Daimler- company employees, which came into industrialized countries of the west Benz continued its upward trend. Con­ effect in 1990, and to the continuing slackened off perceptibly during the solidated sales rose above the compa­ fiscal discrimination against diesel course of 1990. This development, rable previous year's (i.e. including cars. The compact-series models fa­ which had already become noticeable MBB) by 5.2 % to DM 85.5 billion. The vored by our employees were partic­ before the Gulf crisis, was accelerated increase in the domestic market, by ularly affected by this. By contrast, de­ by the temporary rise in oil prices. 11 % to DM 36.7 billion, was well mand from our customers for the mid- North America, the United Kingdom above average; in the other countries series cars grew. In the S-class new and the Scandinavian countries are in of the European Community our sales car registrations again reached last recession, with demand declining, the totaled DM 18.9 billion (+ 5.1 %). For year's volume. utilization of production capacity fal­ the EC market as a whole, there was Sales abroad went up by 3.0 % to ling, and inflation rising. At the same thus an 8.8 % rise, to DM 55.6 billion. 309,800 cars. Exports to the neighbor­ time, the competitiveness of European Outside the EC the volume of business ing countries of the European Commu­ products in price terms was considera­ remained at the same level as in 1989, nity rose by 5.3 % to 131,800 units, bly reduced by the weakness of the US at DM 30.0 billion. This can be attrib­ which was again above average. We dollar and the Yen. This resulted in a uted above all to the rise in the value achieved high growth rates particularly larger balance of trade deficit between of the D-mark and the downturn in a in Italy and Spain, while we were not the EC and the USA and Japan. number of major markets outside able to escape the weak state of the The economy of the Federal Repub­ Europe. markets in the United Kingdom and lic of Germany remained largely un­ More than two thirds of consolidated Sweden. Outside the EC, our passenger affected by general trends in the world sales were accounted for by the corpo­ cars benefited from the opening up of economy, experiencing an economic rate unit Mercedes-Benz. AEG and the East European markets. climate all of its own. As a result, par­ Deutsche Aerospace each contributed ticularly, of the enormous need to about 15%; the newly founded catch up in the new Federal German Daimler-Benz InterServices accounted states, industry in the old Federal Ger­ for 3.2 % of consolidated sales. man states was operating virtually at full capacity. Gross National Product increased by 4.6 %, a figure not Mercedes-Benz Cars: Considerable achieved for over ten years. At the Increase in Production Output same time, however, exports were con­ siderably affected by falling demand in Despite a tendency to slacken on some important foreign markets and the part of some important automotive the rise in the value of the D-mark. markets, the international passenger The balance of trade surplus declined car industry in 1990 matched the high sharply for the first time since 1983, level of unit sales of the preceding from DM 135 billion to DM 92 billion. years. One decidedly negative factor The generally healthy condition of was the car market in the USA, which the old Federal German states, how­ shrank by a further 4.8 %. In Japan, ever, must not be allowed to conceal the already exceptionally high level of the fact that no reversal of the difficult new-car registrations rose yet further; economic trend in the new Federal unit sales in Western Europe approx­ states is discernible. imately matched the previous year's. In the year under review, Mercedes- Benz sold 561,900 vehicles worldwide, 2.0 % more than in 1989. In Germany, new-car registrations totaled 245,600

Note: The Business Review is combined for Daimler- Benz AG and the group as a whole. In the largest foreign market, the Mercedes-Benz: Our subsidiary in Mexico nearly USA, we once more succeeded in sell­ Leading Position with Commercial doubled its sales and considerably ing more Mercedes-Benz cars, despite Vehicles Improved improved its market share. Despite keener competition in the upper mar­ generally weaker demand in the USA, ket segment. In Japan we continued In 1990 most of the commercial ve­ Freightliner also increased its market the expansive trends of the last few hicles markets abroad were affected by share in the class 8, from 16 to 19 %. years with a 23 % increase; this made a general weakening of the economic Mercedes-Benz of South Africa and us the highest-selling import make. In situation. Demand-related cuts in out­ Mercedes-Benz Espana suffered a drop Indonesia, Malaysia and Singapore we put were necessary particularly in in sales; Mercedes-Benz Turk, by con­ sold over 70 % more cars than the year lapan, the USA and South America, trast, achieved significant growth in before and thus could reach a volume while commercial vehicle production in the case of both trucks and buses. of 6,500 units. Germany and Mexico experienced Altogether, our foreign commercial With all available facilities working strong growth. vehicle companies cut back their out­ to full capacity, we raised production Mercedes-Benz consolidated its posi­ put in 1990 by 10 % to 90,100 vehi­ output in 1990 by 5.9 % to 574,200 tion of world leadership as a manufac­ cles. For that reason, production output cars. Growth was achieved above all turer of trucks of over 6 tonnes GVW. for the group as a whole was slightly by the mid-series - including the In Germany our new-vehicle registra­ below the previous year's high level, T-models - and by the coupes and the tions went up by a total of 20 %; of at 258,900 worldwide. roadsters. The proportion of diesels to these, registrations of trucks over In the fall of 1990, Mercedes-Benz total cars produced fell yet again, 6 tonnes rose by 24 %, and those of entered into a joint venture with Auto- to 23.6% (24.5% in 1989). heavy-duty trucks of 16 tonnes and mobilwerk Ludwigsfelde GmbH (IFA) above by 26 %. Due to a decline in and the Treuhandanstalt (Federal Ger­ some European markets our exports man agency in charge of privatizing out of our German plants decreased by industry in the former East Germany), 14 %, as compared with the previous based in Berlin. For a transitional year, to 87,100 units; among heavy- period, the agreement provides for the duty trucks over 16 tonnes, the de­ assembly of vans and trucks on a com­ cline amounted to 22 %. Nonetheless, mission basis. For the medium term, we succeeded in improving our posi­ we plan to build a new assembly plant tion in important countries like France in the Ludwigsfelde area, south of and Italy. For trucks over 6 tonnes, Berlin, which is to reach an annual Mercedes-Benz increased its market capacity of 40,000 commercial share by 3.0 percentage points to 26 % vehicles by the mid-90's. and thereby considerably expanded its leading market position. Domestic manufacturing plants were operating at full capacity and produced 168,800 units, again 5.0 % more than in 1989. Output of kits for production abroad went up by 66 % to 21,200 units. The fall in demand for commercial vehicles in South America made it necessary to cut the output of our sub­ sidiaries in Brazil and Argentina by 18 % and 11 %, respectively. While this also resulted in a loss of market share in Brazil, the market share of Mercedes-Benz vehicles in Argentina increased. AEG: Further Increase in Sales and the divisions AEG Electrocom and tems, this is partly the result of ac­ and Incoming Orders Components boosted their volume of quiring the track-bound vehicle sector foreign business. In both the domestic of MAN GHH. In the field of activity In the German electrical industry and foreign markets, sales of Industrial Electrotechnical Systems and Compo­ the pleasing development of former Systems, in the Automation field of nents, increases were achieved espe­ years continued on a high level. The activity, were clearly above average. cially by the divisions Components, AEG group fully participated in this Incoming orders for the AEG group and Power Transmission and Distribu­ growth and in some areas performed exceeded the previous year's high tion; a gratifyingly high number of im­ better than the sector as a whole. The level in 1990, at DM 14.2 billion. The portant orders were also received in increase in sales is principally attribu­ 1.9 % rise came entirely from the the Industrial Systems sector of Auto­ table to domestic business. The fields domestic market. Here, AEG achieved mation. of activity Rail Systems, Electrotechni­ growth of 11 %, to DM 7.9 billion, The drop in export sales was due cal Systems and Components, Office while orders from abroad were 7.2 % primarily to the fact that we had re­ and Communication Systems, and Do­ down on those for 1989. ceived a number of major orders in mestic Appliances contributed two- The increase in orders for Germany the field of activity Rail Systems in the figure growth rates to this increase. is due mainly to the fields of activity previous year; moreover, the cyclical New acquisitions also added to total Rail Systems, Electrotechnical Systems downturn in some important foreign sales volume. Our microelectronics and Components, as well as Office and markets, together with unfavorable subsidiary TELEFUNKEN electronic Communication Systems. In Rail Sys­ trends in the dollar exchange rate, had an adverse effect on business.

DASA: Progress Despite increased Competition

Under the umbrella organization of Deutsche Aerospace (DASA), the com­ panies Dornier, Messerschmitt-Bölkow- Blohm (MBB), MTU Motoren- und Turbinen-Union and Telefunken Sys- temtechnik (TST) have been integrated to form an efficient network. In bring­ ing this about, we are catering for the growing globalization of markets, in which the only companies to survive are those with comprehensive know- how, coupled with the capability of as­ suming a leading role in international programs. Both as a competent partner and as a main contractor, the DASA group is participating in a number of international joint ventures, partic­ ularly in the fields of aviation and space technology, defense systems and propulsion units. At Dornier, the Space Systems TST hived off the Marine Systems 377,000 Employees in the sector showed strong growth in sales division at the beginning of 1990; at Daimler-Benz Group turnover due to the settlement of in­ the same time, the company took over voices within the programs for the Eu­ Telefunken Sendertechnik GmbH from At the end of 1990, the Daimler- ropean Earth Reconnaissance Satellite AEG. When adjustment is made for Benz group employed 376,785 people ERS-1 and the X-ray satellite Rosat. these structural changes, TST achieved worldwide (1989: 368,226); of these, Other contributors were the Dornier an increase in sales. The chief focus of 303,404 were in Germany and 73,381 228 regional aircraft, assemblies for business was in radar systems for the abroad. Of the total workforce, 17,565 the Airbus program, as well as further army and air force, increased scopes of young people were trainees or appren­ development work on the JF90/EFA delivery for remote reconnaissance tices (1989: 17,032). Daimler-Benz AG fighter aircraft. In Defense Systems, systems, and large transmitting sta­ and holding companies alone had major deliveries of the CL 289 recon­ tions. 2,707 employees. naissance drone were invoiced. In the Altogether, at the end of 1990 Deut­ The increase in the workforce in Medical Systems division, the rise in sche Aerospace had an extensive order Germany of 5,205 was due primarily sales did not meet expectations. backlog of DM 25 billion, which also to the taking on of new personnel MBB achieved almost half of its reflects incoming orders for major pro­ which became necessary in the Pas­ sales in the Aviation sector, mainly jects from 1989. senger Car and Commercial Vehicle di­ due to the Tornado, the Airbus pro­ visions of Mercedes-Benz AG. Abroad, gram and the helicopter types BO 105, employment levels of the production BK 117 and Tiger (PAH-2). The Space Good Start for debis and assembly companies in some Systems division invoiced products countries were affected by a more dif­ and services in the programs Ariane, The new Daimler-Benz InterServices ficult economic and political environ­ Columbus, DFS Kopernikus and (debis) AG started actual trading at the ment. The increase by 3,354 em­ Hermes. In defense technology, the beginning of 1990, as the fourth corpo­ ployees is primarily attributable to the main sources of revenue were the Ro­ rate unit in the Daimler-Benz group; first-time inclusion of employees from land air defense weapons system and legally, it has been operating as a joint Mercedes-Benz Turk. the Pars 3 and Milan anti-tank sys­ stock company since July 1, 1990. The At corporate unit level, Mercedes- tems. company initially consists of five divi­ Benz had 230,974 employees at year- At MTU, the proportion of foreign sions, incorporating the services end (1989: 223,219), AEG had 76,949 business to the slightly lower total already existing in the Daimler-Benz (1989: 77,722) and Deutsche Aero­ sales stabilized at the previous year's group: Software House, Financial Ser­ space 61,276 (1989: 62,959). Follow­ high level, although sales of diesel en­ vices, Insurance, Trading and Market­ ing its foundation as a new company, gines and of aero-engines for civil avi­ ing Services. debis took over staff from Daimler- ation suffered considerably due to a Despite considerable initial diffi­ Benz AG as well as from Mercedes- weak dollar. Activities centered around culties and keener international com­ Benz, AEG and DASA; at the end of aero-engines for the Tornado and the petition in 1990 the first year of trad­ the year 4,879 people were working IF90/EFA fighter aircraft, as well as on ing, was generally encouraging. Total for the new corporate unit. various civilian aircraft programs. In output was higher than originally ex­ the Diesel Engines division, the main pected. The reasons for this were the volume of business was accounted for generally positive trend in business by marine engines. and a number of acquisitions made in 1990. The latter include the purchasing of majority interests in Systemhaus Cur- adata GmbH, Hamburg, and in Metall- gesellschaft Informationsverarbeitung GmbH, Frankfurt am Main, as well as the foundation of the new companies Mercedes-Benz Finance Ltd in the United Kingdom and sfi Systemhaus fur Informationsverarbeitung GmbH, Berlin. Also, debis took over the sys­ temhaus GEI - Gesellschaft fur Elek- tronische Informationsverarbeitung mbH, Aachen, from AEG. Further Rise in Group Purchasing Our efforts to internationalize pur­ product development at an early stage. Volume chasing ("global sourcing") reduced In our decision-making on procure­ costs. In future we will make greater ment, we are according more and In 1990, the Daimler-Benz group use of foreign manufacturing bases more importance to the environmental worldwide purchased goods and ser­ belonging to domestic suppliers and compatibility of products and manufac­ vices to a value of over DM 50 billion thereby create new purchasing poten­ turing processes, as well as to the re- (1989: DM 45 billion). More than two tial. We have incorporated the new cyclability of externally sourced parts. thirds of the total volume was ac­ Federal German states to a greater In the year under review we further counted for by Mercedes-Benz, 14 % by extent into our procurement policy; in improved communication concerning AEG and 13 % by Deutsche Aerospace. the medium term, we expect important goods and services to be purchased, The price situation in the procure­ stimuli from this region in particular. by applying an integrated material re­ ment markets was marked by higher We aim to further intensify business quirements planning system and by personnel costs on the part of sup­ relations with our suppliers by acquir­ making greater use of remote data pliers, and by falling raw materials ing complex systems and components, transmission. The logistics from the prices. As a result of the Gulf crisis, extending quality assurance measures supplier through to the final destina­ oil-dependent products became signifi­ and increasing the scope of parts re­ tion of the procured material in our cantly more expensive in the latter quired from them. We are already in­ factories have been optimized so as to half of the year. cluding a growing number of them in ensure that production facilities are supplied smoothly. At this point, we would like to ex­ press our thanks to all supply, trans­ port and service-rendering companies for their good cooperation. Our sup­ pliers, above all the medium-sized firms, showed a high degree of flex­ ibility and innovative capability in 1990.

Substantial Investment to Secure the Future

In the year under review, substantial funds were again invested to secure the future existence of the companies in the Daimler-Benz group. Despite good capacity utilization, we were able to implement our investment program smoothly and according to schedule. Additions to fixed assets amounted to DM 5.7 billion in 1990; the previous year's figure of DM 5.9 billion in­ cluded the fixed assets taken over from MBB (DM 1.2 billion). Daimler- Benz invested DM 0.3 billion both in intangible and in financial assets. Following the restructuring of the Daimler-Benz group, a goodwill amount of DM 124 million has been shown; this is being written down as planned. Additions to intangible, fixed and financial assets were again fully financed from the cash flow of DM 6.7 billion. The goodwill of DM 591 million aris­ to fixed assets totaled DM 774 million In the two divisions of Passenger ing particularly from the acquisition of for AEG, DM 938 million for DASA Cars and Commercial Vehicles, a further interest in MBB raised the and DM 333 million for debis. Efforts Mercedes-Benz spent a total of DM 3.1 total volume of investments to DM 6.9 by all the corporate units concentrated billion on research and development. billion. This was directly offset against on new products and features, intro­ On the passenger car side, the the stockholders' equity of the group, ducing new technology and raising 190 E 1.8, a model for first-time Mer­ since it arises from the group's productivity. cedes buyers, received a positive re­ restructuring. In future, acquired Investment in the vehicle leasing ac­ sponse both in Germany and abroad. goodwill amounts will be depreciated tivities of Daimler-Benz InterServices At the beginning of 1991 we further in instalments. amounted to DM 3.6 billion (1989: DM improved standard equipment and en­ Of the investments made by the 3.1 billion), financed by depreciation gine capacities in our compact class. Daimler-Benz group in fixed assets, and disposals of fixed assets, and by In the mid-series, the Mercedes-Benz DM 3.5 billion (1989: DM 3.0 billion) sequential additions to liabilities. For 500 E was launched as a new top was accounted for by Mercedes-Benz. the refinancing of our entire leasing model in October 1990; with its 5-liter, The main focus was again on the pas­ and sales financing business, we bor­ V8, 4-valve engine it is the most pow­ senger car division and pertained ad­ rowed DM 6.2 billion. erful car in this series. vance outlay for the production start­ In the spring of 1990 we introduced up of the new S-class in particular. On a new emission control system for our the commercial vehicle side, nearly DM 8.2 Billion for Research diesel cars consisting of exhaust gas DM 1 billion was invested. Additions and Development recirculation and an oxidation catalytic converter; this is being offered as an Expenditure on research and devel­ optional extra. The system makes it opment in the Daimler-Benz group - possible to further reduce the already including MBB for the first time - rose low emissions of hydrocarbons, carbon to DM 8.2 billion (DM 7.5 billion in monoxide and particulates. 1989). Worldwide, more than 36,000 At the Geneva Motor Show in March people are employed in research, de­ 1991, two years after the premiere of velopment and testing, to consolidate our roadster, we presented the new and further improve our position as an S-class. It met with an exceptionally integrated technology enterprise. positive response internationally. This "Research" at Daimler-Benz comes standard-setting automobile will fur­ under the auspices of the executive ther consolidate our leadership in the holding company as a task which goes beyond corporate unit areas of compe­ tence. Accordingly, we devised re­ search institutes which belong to the central "Research and Technology" di­ vision, but which are geared to the re­ quirements of the individual corporate units and their fields of activity. In "Technology" we have concentrated all the instruments of knowledge and technology transfer, to ensure rapid and efficient exchange within Research and between the corporate units. automotive upper class. With an abun­ At AEG, expenditure on research Consolidated Net Income dance of innovations in vehicle and en­ and development, at DM 782 million, DM 1.8 Billion vironmental engineering, it sets new nearly equaled the previous year's standards in comfort, motoring enjoy­ level and represented 5.9 % of the AEG The 1990 consolidated statement of ment and handling, without neglecting group's total sales. A sum of DM 112 income shows the generally satisfac­ our basic values of solidity, security million was spent on research and de­ tory amount of DM 1.8 billion. The and high quality. In order to reconcile velopment work related to specific or­ slight increase over the calculated, no­ the desire for top-quality individual ders. A total of 4,750 employees were tional net income of the previous year mobility with the demands of society working on the development of new (DM 1.7 billion) can be attributed to and the environment, we have devoted products and processes. In 1990, AEG the lower taxes on income in the year particular attention to achieving the participated in 35 national and interna­ under review. Operating income, at maximum ecological compatibility of tional research projects; these mainly DM 4.2 billion, was 10 % below the all features and design criteria. involved the fields of activity Micro­ comparable figure for the previous On the commercial vehicle side, we electronics, Automation, Rail Systems year. launched the models 1324 and 1524 and Communication Systems. The mainstay of income in the from the "LK" or light Worth series, The companies of the DASA group Daimler-Benz group continues to be fitted with the 177 kW/240 horse­ altogether spent DM 4.2 billion on re­ automotive business. However, the power OM 366 LA engine. In the search and development, representing strength of the D-mark, which ham­ equally new models of the Worth 34 % of sales. Of this sum, DM 0.8 bil­ pered exports, together with uncer­ "MK", or medium-heavy series, with lion was accounted for by free re­ tainty regarding the international gross vehicle weights of 12, 14 and 17 search and development projects not political situation, had a perceptible tonnes, major technical elements from related to specific orders. In the avia­ damping effect. This contrasted with the heavy-duty series have been incor­ tion sector, development effort was positive stimuli resulting from the porated. The Diisseldorf-made T2 van concentrated on the 30-seater Dornier unique upturn in the German market, range was extended by the addition of 328 turboprop aircraft, the A321 and from increased sales in a number of vehicles with permanent all-wheel A330/A340 Airbus programs, and on major volume markets abroad, from a drive, and by the introduction of the the IF90/EFA European fighter aircraft. more favorable model mix, and from anti-lock braking system, ABS, as an Work on the BO 108 light helicopter cost-reduction programs. optional extra. made good progress. In the space tech­ At AEG, losses incurred in current With a view especially to safety and nology sector, the Rosat X-ray satellite business, coupled with investments ecology, Mercedes-Benz has developed was put into orbit, and the Ulysses which had to be made in the interest an engine brake of considerably im­ space probe launched. In the Defense of the group as a whole, depressed re­ proved efficiency; this not only raises Systems division, we continued to de­ sults considerably. Deutsche Aerospace active safety, it also reduces both wear velop the second and third-generation shows a negative result in its state­ and noise, and relieves stress on the anti-tank systems as commissioned. ment of income, although this is wheel brake. For Mercedes-Benz com­ Work on the engines for commercial entirely due to the year's net loss mercial vehicles already in operation, and executive aircraft, and on military incurred by Deutsche Airbus GmbH. our retail branches and agencies are fixed-wing aircraft and helicopters was Because of provisions made the year offering an "eco-check", with low-cost continued. In September 1990 we in­ before, this loss does not affect the repairs and environment-friendly retro­ troduced the completely new 595- consolidated statement of Daimler- fit packages. More noise-damping series diesel engines. Benz, so that DASA made a positive equipment is also being developed for contribution to consolidated net in­ all Mercedes-Benz commercial vehi­ come in 1990. This also applies to cles, and in some cases this can also debis, whose result was distinguished be retrofitted. by gratifying trends on the part of the leasing and finance companies. In the non-operating area, average Allocation of Earnings Outlook liquidity for the year was low, and in­ come from interest declined by 12 % to The net income of Daimler-Benz AG In a number of important Western DM 989 million. As in previous years, amounts to DM 1,120 million, roughly industrialized countries, economic a monetary adjustment was made on equaling the previous year's level. As growth slackened off still further in the financial statements for subsid­ the executive holding company, the first few months of the year. How­ iaries in high-inflation countries, which Daimler-Benz again applied §58 Ak- ever, following the swift conclusion of to some extent eliminates apparent tiengesetz (German Stock Corporations the Gulf war, the prospects that the profits. Law) and transferred half of this sum world economy will pick up in the sec­ to retained earnings. By far the great­ ond half of 1991 have improved. The est part of the net income was contrib­ German economy will be able to con­ Balance Sheet Structures uted by Mercedes-Benz AG, which tinue the upturn stimulated by internal Remain Favorable once again transferred its entire earn­ demand, although the situation in the ings for the year, DM 980 million. As new Federal German states gives rise The expansion in the volume of laid down in the existing control con­ to considerable concern. business to DM 85.5 billion led to a tract, we assumed responsibility for The car industry is optimistic that DM 4.6 billion rise in the balance the loss made by AEG Aktiengesell- the catching up still necessary in the sheet total to DM 67.3 billion. Due to schaft of DM 214 million. new Federal German states will greatly higher investments and another con­ To the Annual General Meeting of benefit both domestic manufacturers siderable increase in the inventory of Stockholders on June 26, 1991, we and import makes in 1991. The num­ leased vehicles, the assets side of the propose the paying out of a dividend ber of cars sold in important export balance sheet has become more of DM 12 per DM 50 share. The total markets, on the other hand, is ex­ heavily weighted towards long-term in­ dividend paid thus amounts to DM 557 pected to fall further. Mercedes-Benz vestments. Currents assets, which rose million. The remaining DM 3 million is expects sales opportunities for its cars in value by DM 0.8 billion, make up to be carried forward, together with to be generally good, with the market 63 % (1989: 66 %) of total assets. Since the sum carried forward the previous launch of the new S-class having a the ratios of items on the liabilities year (DM 5 million). positive rub-off effect on the whole side, especially the equity ratio at The share capital increase autho­ model range. 26 %, remain virtually unchanged, the rized by the Annual General Meeting Fiercer competition in a number of rise in non-current assets has caused of July 2, 1986 is valid until June 30, major international markets, and the coverage of fixed assets by stock­ 1991. To provide advance security for pressure this causes on profit margins, holders' equity to decline from 109 % the complex tasks facing us in the is having an increasing effect on the to 102 %; this does not include leased future, and to ensure entrepreneurial performance of the European commer­ items, which are mainly financed by flexibility, we propose that a new capi­ cial vehicle industry. At the same borrowing. After inclusion of long and tal increase in the amount of DM 600 time, the creation of the single Euro­ medium-term provisions, especially million be authorized. pean market and the opening up of pension provisions, and liabilities due Eastern Europe are creating attractive after more than one year, the share of opportunities to adapt the quality of medium and long-term capital in the the product range to the growing de­ consolidated balance sheet total mands of the movement of freight. amounts to 64 % (1989: 65 %). This Mercedes-Benz is prepared for such a means that non-current assets, inven­ development. We have a broad-based, tories and parts of the remaining technically mature vehicle range. assets are covered. Moreover we can offer services which optimize vehicle operation as well as environmental acceptability. For 1991 we expect the sales volume of Mercedes-Benz commercial vehicles to be high once again, with a special set of economic circumstances continuing in Germany and with generally im­ proved market opportunities outside Europe. AEG expects its volume of business the longer term, this sector is subject Altogether, Daimler-Benz as an in­ to grow again in the current year. The to a degree of uncertainty because the ternationally oriented technology group main contributors to this will be its space flight programs of ESA are being views these developments as tanta­ Automation and Rail Systems fields of totally revised. In the defense sector, mount to a major challenge. In order activity. After the modest rise in ex­ the first payments for work on the pro­ to remain successful in the face of port sales in the year under review we gram for the European version of worldwide competition, we will there­ expect a significant improvement in Stinger will be made. Deliveries of the fore systematically continue our cost- 1991. In Germany we expect growth to CL 289 drone are also expected to be reducing programs, which have be boosted by our activities in the five stepped up. We will have to wait and already proved effective. At the same new Federal German states; it is espe­ see what effects the political decisions time, we aim to offer our customers cially in this region of Germany that still to be made will have on defense innovative services and systems in we wish to build on our old traditions. spending. In the propulsion systems accordance with market requirements The historically close contact between sector, business will greatly depend on and to an even greater extent than AEG and the countries of Eastern Eu­ exchange rate parities and on military before. This includes the development rope is to be further developed as the procurement programs; cooperation of new concepts in transport, on which political and economic situation allows. with international partners will provide we are working intensively. In view of The basis for this is provided by the us with important additional market the ever-increasing volume of goods branches we have already opened in opportunities. traffic, for instance, the truck must be Poland, Hungary and Czechoslovakia, Daimler-Benz InterServices has set better integrated into transport chains together with the agency agreement itself some ambitious objectives for its which employ different types of concluded with a Bulgarian partner, future business. By extending the exis­ carrier. The linking together of various which involves the entire AEG product ting fields of activity, by consistently means of transport - and this applies range. Despite the great significance tailoring the range of services to the right across international frontiers - which the new Federal German states specific requirements of customers and will therefore become more and more and Eastern Europe have for us, how­ by greatly expanding the volume of important. ever, we will not be neglecting to im­ business with customers inside and We expect the creation of the single prove our position in the economic outside the Daimler-Benz group, debis European market and the fundamental areas of the European Community, the aims to double the total revenue of the political and economic changes in USA and the Far East. year under review in the medium Eastern Europe to provide more poten­ Deutsche Aerospace also expects term. The expansion of the corporate tial for increases across our business sales to increase further in the current unit is taking place against the back­ spectrum. Our confidence in the devel­ year. In the aviation sector, settle­ drop of a fundamental change in Eu­ opment of the Daimler-Benz group is ments of invoices in the aircraft and rope's economic environment, because emphasized by the fact that we plan to helicopter programs should be higher services are increasingly being offered invest about DM 30 billion in the next overall; for the Tornado, by contrast, across international borders, and there­ five years. Added to this are expendi­ sales will decline. In the space sector, fore have to take account of European tures on research and development to­ we expect major payments to be made - and indeed global - competition in taling over DM 43 billion. for the development projects Hermes terms of both structure and approach. and Ariane 5, for the launching of the The processes of concentration in the ERS-1 and for the Eureca platform; in field of information technology and among companies offering marketing services is accelerating. The opening up of the Eastern European markets is making increasing demands of barter trading. In the classic fields of finance services and insurance, additional and more varied services are being offered.

At the end of 1990, the Mercedes- Benz group employed 230,974 (1989: 223,219) people around the world, 179,120 (1989: 173,510) of these in Germany and 51,854 (1989: 49,709) abroad. Of this total, 11,288 were trainees and apprentices. In 1990 we again undertook sub­ stantial investment to secure the fu­ ture of our vehicles business and our comprehensive investment program In the year under review, Mercedes- proceeded according to schedule. DM Downturn in International Vehicle Benz increased employment and pro­ 3.5 billion (1989: DM 3.0 billion) was Markets duction and again achieved gratifying invested in fixed assets worldwide, DM results, amounting to DM 1.5 billion. 2.7 (1989: DM 2.0 billion) of this in After seven years of continuous At DM 59.8 billion, the sales of the Germany. The main focus was again boom in international car business, group exceeded those of the previous the Passenger Car division, with an ex­ 1990 saw a downturn in the vehicle year by 6.1 %. Sales of the Passenger penditure of DM 2 billion, chiefly com­ markets. Despite this however, the Car division increased sharply by 8.0 % prising preparations for production of high sales volume of the previous to DM 35.5 billion, while commercial the new S-class and the setting up of years was repeated. World production vehicles contributed DM 24.3 billion the Rastatt car assembly plant. Of the again exceeded 36 million cars. In the (+ 3.4 %). Cars thus accounted for 59 % investments in the Commercial Vehicles USA, sales fell by a further 4.8 % in of consolidated sales and commercial division, DM 500 million was ac­ 1990 to 9.3 million cars. The US man­ vehicles for 41 %. counted for both by the German facto­ ufacturers were particularly affected. The importance of the EC markets ries and by the foreign production They had to reduce their production by for Mercedes-Benz continued to in­ companies. Mercedes-Benz spent a to­ 16 % to 4.9 million cars. By contrast, crease; DM 37.0 billion, or 62 % (1989: tal of DM 3.1 billion on research and the Japanese manufacturers increased 58 %) of total business, was generated development. their production in the USA by 17 % to in this important economic zone. In About DM 300 million was invested 1.1 million cars; in conjunction with Germany alone, we increased our sales in further extending the performance the 1.5 million cars imported from la- by 19 % to DM 24.3 billion. In the of our worldwide sales and service or­ pan, they increased their market share markets outside the EC, the strong ganization. The main emphasis was on from 25 % to 28 %. 85,000 of the new Deutschmark and declining commer­ branches and supply depots in the ter­ lapanese luxury cars were sold in cial vehicles business in South and ritory covered by Mercedes-Benz Ver- their very first year. The German car North America meant that sales were triebsorganisation Deutschland (MBVD) manufacturers represented in the high- slightly short of the previous year's and Mercedes-Benz Japan. quality market segment sold 168,000 high level at DM 22.8 billion (1989: In the coming years, Mercedes-Benz cars, 1.4 % more than in the previous DM 23.4 billion). Mercedes-Benz AG expects sales to increase substantially. year. on its own increased its sales by 12 % The exploitation of inherent technologi­ to DM 48.6 billion (1989: DM 43.6 cal potential within the Daimler-Benz billion). group will open up promising pros­ pects for the future of the motor vehi­ cle. We shall seize this opportunity by investing DM 21 billion in fixed assets over the next five years, and spending a further DM 16 billion on extensive research and development activities. In Japan, with an increase of 16 % to 5.1 million new car registrations, the previous year's results were substan­ tially exceeded. Imported makes in­ creased their sales by 19 % in 1990, to 209,000 cars. German importers, who account for around two thirds of car imports, made large gains particularly in the category over 2 liters engine displacement. Ex­ ports of cars by Japan increased only slightly, by 1.8 %, to 4.5 million vehicles. In the year under review, some 2 mil­ lion cars carrying Japanese makers' names were produced outside the country; in total, Japanese vehicle companies built some 12 million cars. In Western Europe, including the new Federal German states, car sales attained a similar magnitude to those of the previous year at 13.2 million units. While there were substantial falls in sales in the United Kingdom, Spain and Sweden, the large French and Italian markets maintained the high levels of the previous year. At 13.6 million cars, production in West­ ern Europe was slightly below the previous year's level (13.7 million).

Federal Republic of Germany: Record Number of Registrations in the West German States

In the states of former West Ger­ many, new car registrations for the first time exceeded the 3 million mark. This gratifying trend was due to the increase in real income in the old West German states and buoyant used vehicle business in the new Federal German states, which had a positive effect on substitution demand for new vehicles. In the new Federal German states, approximately 1 million cars were registered, including 280,000 new vehicles. The unexpected increase in demand in Germany led to substan­ tial delivery problems for West Ger­ man manufacturers. European and Ja­ panese competitors profited from this and sharply increased their market share in the former West German states. The share of foreign makes sup­ plying the German market increased to 32.3 % (1989: 30.2 %); in the new Fed­ eral German states, their share of new registrations was considerably higher still, at almost 40 %. In former West Germany, 96 % of vehicles newly registered in 1990 were in the pollutant-reduced category; 90 % of all gasoline-engined cars were equipped with a closed-loop catalytic converter. There was an increase in sales of diesel cars for the first time since 1986 (+ 15 %); their share of the total market increased to 11%. Clearly, the objective arguments for buying a diesel, such as high economy and long life, seem to be gaining recognition once again. As far as exports are concerned, the German vehicle industry achieved its second best ever result (2.6 million cars (-4.6 %). Higher exports to Japan and the USA contrasted with a decline in deliveries to Western Europe. West German car production climbed during 1990 to a new record level of 4.7 mil­ lion cars (+2.1 %). Foreign production by German manufacturers increased further to 1.6 million (1989: 1.5 mil­ lion) vehicles.

Mercedes-Benz: Domestic Registrations at Last Year's Level

There were 245,600 new registra­ tions of Mercedes-Benz cars in the Federal Republic of Germany in the year under review (1989: 247,100). Sales to company employees suffered noticeably - though less than expected - from the new taxation of employee car sale discounts. The resulting drop in sales to employee customers af­ fected particularly diesels. 86,000 com­ pact class cars were registered in the year under review, 7 % less than in the previous year. The gratifying demand for our mid-series, continued unabated in the year under review, with view, 38,700 Mercedes-Benz cars were Further Attractive Models 139,000 new registrations (+3.5 %). registered there (+23 %). Our mid- and Environment-Friendly 14,100 (1989: 14,600) S-class vehicles series models were again particularly Diesel Engines were newly registered in 1990; given successful as were the S-class models the advent of the new generation an­ and the coupes and sports cars. Out­ A variety of technical improvements nounced for spring 1991, this was a standing sales successes were and new model versions have now remarkable success. achieved also in Indonesia, Malaysia made our car range even more attrac­ and Singapore, where we increased tive. The four model series offer our our sales by 74 % to 6,500 Mercedes- customers 56 different models to Foreign Sales Record Benz cars. choose from. In the year under review, Mercedes- Further upgrading of our compact In 1990 we increased our sales Benz built 574,200 cars (+5.9 %). The series took place at the beginning of abroad by 3.0 % to 309,800 cars, diesel share of this fell further for de­ 1991 when the range of standard which represented our best sales mand reasons from 24.5 % to 23.6 %. equipment was extended. result to date. In the markets of the Licensed production of cross-country At the Paris Motor Show in October European Community excluding Ger­ vehicles at Steyr-Daimler-Puch AG in 1990, we presented our new top model many, we sold 131,800 cars (+5.3 %), Graz, Austria, was stepped up consid­ in the mid-series, the 500 E. Wider the largest volume ever. Italy, with a erably during 1990 due to the new wheel arches, 225/55 ZR16 tyres and 13 % rise in Mercedes-Benz sales to model generation. greater track width are among the 39,200 cars, was again our largest more striking outward features; the market. In France, we gained ground four-valve 5-liter V8 engine already with an increase of 4.0 % to 28,700 proven in the SL series provides per­ vehicles, while the economic situation formance to match the calibre of the in the United Kingdom resulted in a vehicle. A breath-taking stride has 5.2 % fall from the record year of 1989 been taken in engine and drive man­ to 27,300 cars sold. agement with sequential fuel injection, Sales in the USA were 3.5 % up on which supplies the correct quantity of those of 1989 at just under 78,400 fuel to each cylinder at exactly the Mercedes-Benz cars, despite the gen­ right moment. eral worsening in market conditions. Since December 1990, the 500 SL There was a high demand particularly has been offered with acceleration skid for our roadster and also for our mid- control (ASR) as standard. series coupes and the S-class. In September 1990, we brought out The East Asian markets are becom­ a completely new generation of stereo ing more and more important for equipment which combines the latest Mercedes-Benz. This applies partic­ technology with a perfect matching of ularly to Japan. In the year under re­ all systems to the interior design of the vehicle. In spring 1990, we introduced as an option for diesel cars a new emission control concept consisting of exhaust gas recirculation and oxidization cata­ lyst. The already very low hydrocar­ bon, carbon monoxide and particulate emissions are thereby reduced still fur­ ther. The Geneva Motor Show in March A case in point is the production of Good Collaboration With Suppliers 1991 - two years after our sports car our new S-class. A highly flexible made its premiere at the same event - bodyshell production set-up was in­ In order to maintain at all times the saw the presentation of the new stalled at the Sindelfingen plant, capa­ supply of bought-in parts to our pro­ S-class. It met with an exceptionally ble of reacting at short notice to mar­ duction lines and to minimize the positive response from the interna­ ket requirements by reallocating pro­ strains imposed by the more difficult tional public. We are convinced that duction between different model series. situation as far as environmental mat­ this vehicle series will consolidate our We have broken new ground with ters are concerned, we have taken the leading position in the luxury market modular assembly technology which step of overhauling our information segment, particularly since its many allows separate pre-assembly of the and communication systems. At the innovations in vehicle and environ­ doors, the cockpit and major assem­ same time, collaboration with the sup­ ment technology entail no sacrifices in blies. A progressive elimination of ply industry is geared to keeping costs our basic values of sound workman­ overhead work - the bodies are tilted under control. Amongst other things, ship, security and high quality. to a convenient working position - and this entails making greater use of the further automation measures for international procurement markets. We example in window installation have always consider foreign materials Innovations in Vehicle Safety brought major benefits in workplace sourcing as an alternative when the design. To accommodate the many parts can be supplied with precisely Mercedes-Benz has more than 50 technological and logistic restructuring the same high quality standards, with­ years of experience in the field of ve­ measures, an increase in the factory out major risk of interruptions in sup­ hicle safety. Innovation followed inno­ area was necessary. ply and at competitive prices. vation, pointing the way for others to We further stepped up our collabora­ follow. Mercedes-Benz has fitted more tion with suppliers in the fields of re­ than 2.5 million ABS systems, more Modern Development Methods search into, development of and imple­ than 7.2 million belt-tensioners and mentation of new technologies. The more than 750,000 airbags into its New methods of vehicle develop­ high flexibility and commitment of our cars, thereby making a major contribu­ ment are required to keep pace with suppliers were in particular evidence tion to greater active and passive road the ever greater complexity of vehicle among those firms who helped us pre­ safety. In the event of an accident, the technology and ensure development pare for production of the new S-class. new S-class offers occupants and other progress in the space of shorter model road users even greater protection cycles. Computer Aided Design (CAD) than its predecessor thanks to a more and Simultaneous Engineering are par­ Continuing Success in Motor Sport rigid passenger cell and longer defor­ ticularly useful instruments here. mation zones front and rear. It is increasingly important when In 1990, we again had a very suc­ testing the vehicle as an overall sys­ cessful motor sport year. For the sec­ tem to check all electric and electronic ond time in succession, Mercedes-Benz Greater Investment in the Passenger components in the vehicle for their won the teams' and drivers' title in the Car Division electro-magnetic compatibility (EMC). World Sports Prototype Championships A large EMC test shop went into ser­ (Group C), thus consolidating its posi­ During the year under review, DM vice this year, where highly informa­ tion at the head of the field. 2 billion was invested in the Passenger tive tests, which can be reproduced in­ With eight wins - including five Car Division, some 10 % more than in finitely, can be carried out quickly on double wins - in nine races, the Silver the previous year. The main activities vehicles and their components. Our Arrows and the Sauber Mercedes team were again directed at the introduction aim is to ensure even more reliable took first place among the teams. The of new products built on efficient, in­ functioning of the electronic systems drivers' title was fought out among the novative and economical production fa­ in our vehicles. Mercedes works drivers: Frenchman cilities. The use of the latest technolo­ Jean-Louis Schlesser and Italian Mauro gies guarantees product quality, re­ Baldi won six races and became joint duces the strain on employees at the World Champions, just in front of workplace and at the same times pro­ Jochen Mass. motes effective environmental protec­ tion. Although not winning a title, Mercedes-Benz had a good season overall in the German Touring Car Championships (Group A), whose rules were the subject of some debate. The AMG team took third and fifth places among the drivers with the Dane Kurt Thiim and the German driver Klaus Ludwig respectively; this is an extremely satisfactory result for the Mercedes-Benz 190 E 2.5-16 Evolution II.

Outlook

The outlook for the German car mar­ ket remains favorable. The demand for used vehicles in the new Federal Ger­ man states will again be the major fac­ tor. There are many indications that the German car industry may be able to repeat the high sales volume of 1990, although the continuing high interest rates and tax increases approved by the German government in early 1991 pose a threat to the German vehicle market. The Gulf War has had a depressing effect on already slackening car de­ mand in important markets in Europe and in Japan. In the USA, sales are further handicapped by the decision to impose a luxury tax on cars designed to hit hardest the German manufac­ turers represented in this market segment. Despite the prevailing risks, Mercedes-Benz believes there is a good chance of maintaining the high level of production and sales estab­ lished in recent years. In the German market particularly, we expect contin­ ued growth in sales, influenced to an increasing extent by rising demand in the five new Federal German states, where we are steadily expanding our sales network. We have high hopes that the new S-class will act as a stim­ ulus to a growth in sales of all models in our car range. We are therefore also confident that it will be possible to partially offset the substantial fall in sales in the USA by increases in other markets. In Western Europe, demand for com­ Successful Performance of mercial vehicles fell appreciably fol­ Mercedes-Benz Commercial Vehicles lowing five years of expansion. A in European Market depressing effect was exercised partic­ ularly by an economic downturn and With worldwide sales of 261,800 the increased interest rates; the head­ commercial vehicles (+ 2.5 %), we long modernization of vehicle fleets in maintained our position as the world's recent years was another factor. New largest truck manufacturer and in im­ registrations of commercial vehicles in portant markets improved our standing the countries of the European Commu­ further. In the Federal Republic of Ger­ nity fell by a total of 3.0 % to 1.7 mil­ many, new Mercedes-Benz registra­ Decline in World Demand for lion units; production fell by 6.1 % to tions climbed 20 % to 84,700 units. Commercial Vehicles 1.8 million units. The increase for trucks over 6 t was above the average, with a rise of 24 % The international commercial vehicle to 39,500 vehicles. Heavy-duty trucks market declined further in the course German Commercial Vehicle Industry: upwards of 16 t registered an increase of 1990. The fall in demand on the Domestic Market Continues Strong of 26 % to 19,300 units. Mercedes-Benz American continent and in Japan in was not able to escape the downturn particular led to a reduction in world­ Demand for commercial vehicles ex­ wide production to 12.5 (1989: 13.7) panded sharply in the Federal Repub­ million commercial vehicles. lic of Germany in 1990. Crucial factors In the USA, sales fell by 4.5 % to 4.8 in this were the favorable macro- million vehicles. The American vehicle economic conditions, the lively state of industry cut back its production by the capital goods and construction in­ 8.9 % to 3.7 million commercial vehi­ dustries and additional market capac­ cles. In Argentina and Brazil, restric­ ity in the new Federal German states tive anti-inflation measures depressed for new and used vehicles. Total new demand for commercial vehicles. The registrations of commercial vehicles in stabilization and liberalization in Mex­ Germany increased by 18 % to ico on the other hand led to a further 203,400. Exports at 167,900 units substantial improvement in truck and were in the order of last year's high bus business. In Japan, new registra­ level. Domestic production by all man­ tions of commercial vehicles fell by ufacturers increased by 10 % to 6.2 % in the year under review to 2.7 315,900 vehicles. million units. Japan remained by far the world's largest exporter of com­ mercial vehicles with exports of some 1.4 million vehicles. Its production fell by 11 % to 3.5 million units. in important commercial vehicle mar­ kets around the world. Exports from the German plants therefore fell by 14 % to 87,100 units. In the truck cate­ gory over 6 t, Mercedes-Benz remained the largest supplier in Western Europe with a growth in market share of 3 percentage points to 26%. The coun­ tries of the European Community ab­ sorbed 73,300 commercial vehicles in 1990, 7.8 % fewer than in the previous year.

Substantial Recovery in Bus Demand

In the former Western German states, new registrations of Mercedes-Benz buses increased by 1.4 % to just short of 1,500, raising our market share there to 37.1 %. Exports of buses over 8 t were 22 % higher than in the pre­ vious year at 3,600 units. At the Ger­ man plants of Mercedes-Benz AG, total production in all weight categories amounted to some 5,500 buses and bus chassis (+ 11 %). Worldwide pro­ duction of Mercedes-Benz buses and bus chassis increased by 15 % to 22,000 units. High Sales of Unimogs and MB-tracs

Sales of Unimogs increased in the year under review by 14 % to 4,200, with an increase of 26 % in Germany alone to more than 2,000 units. The new, most powerful, Unimog with 214 hp output as well as the Unimog with 240 hp output for fire-fighting, airfield and disaster-aid application have proven very popular on the market. Sales of the MB-trac increased world­ wide. As planned, production of the MB-trac will be discontinued at the end of 1991.

Industrial Engines: Stabilization at a High Level

Sales of industrial engines and in­ stallation engines from the German plants to manufacturers of agriculture and construction machinery, fork-lift trucks, buses and special-purpose vehi­ cles were in the same order as those for 1989 at 15,900 units. As a result of continued growth in demand in the crane and bus segments, we were able to supply more powerful engines with a higher invoice value. Sales of axles and transmissions totalled 4,700 (1989: 4,900).

Commercial Vehicle Capacity Fully Stretched in the Federal Republic of Germany

Output at our plants in the Federal Republic of Germany increased further in 1990 by 5.0 % to 168,800 commer­ cial vehicles. Manufacture of parts kits for production at our plants abroad climbed by two thirds to 21,200 units. Capacity at our German commercial vehicle plants was fully utilized throughout the entire year. Production in the New Federal Mercedes-Benz do Brasil sold only creased its sales by 73 % to almost German States Planned 21,300 commercial vehicles (1989: 6,000 vehicles. Its share of the truck 27,600) in 1990. Production was ham­ market remained roughly constant at In the fall of 1990, a co-operation pered by strikes and a five-week close­ 36.4 %; in the bus market, its share agreement was drawn up between down, causing the market share for surged from 11.1 % to 31.2 %. Mercedes-Benz AG, Automobilwerk trucks over 6 t to fall from 43 % to Due to the continuing slow-down of Ludwigsfelde GmbH (IFA) and the 34 % and that for buses from 76 % to the commercial vehicle market in the Berlin-based Treuhandanstalt, the state 75 %. Production fell by 18 % to 31,200 USA, particularly in Class 8 (upwards agency in charge of privatization in trucks and buses. At Mercedes-Benz of 15 t GVW), our subsidiary Freight- the former East Germany, providing Argentina, sales fell by a further 12 % liner recorded a fall in sales to 23,000 for assembly of Mercedes-Benz com­ to 2,700 vehicles. Nonetheless, the vehicles (-1.5 %), although its market mercial vehicles for a limited period at market share for trucks increased to share increased from 16.1 % to 19.0 %. the present plant to the south of Berlin 46 % (1989: 39 %) and that for buses In the USA and Canada, the company in liaison with the Worth and Düss- climbed slightly to 69 % (1989: 67 %). produced a total of 24,800 vehicles eldorf truck plants. Production was cut back to 2,700 (1989: 26,500). By 1993/94, it is planned to step up vehicles (1989: 3,100). Sales at Mercedes-Benz of South truck production in stages to more Our Mexican subsidiary, which Africa were hit during the year under than 20,000 trucks. In the medium changed its name at the beginning of review by a strike lasting eight weeks term, we are planning to set up a new 1991 to Mercedes-Benz Mexico, in- and a recession in the market. Sales commercial vehicle assembly plant in fell 29 % to 2,700 commercial vehicles; the Ludwigsfelde region. When this is production was cut back to 2,245 units fully operational, it will be capable of (1989: 3,764). manufacturing up to 40,000 vehicles Mercedes-Benz Espana sold 23,100 annually. vans from its own production (-6.1 %). New registrations of commercial vehi­ cles imported from Mercedes-Benz AG More Difficult Market Conditions for declined due to the fall in the market Foreign Production Companies by 3.1% to 5,100. Following an increase in the Production at our foreign commer­ Daimler-Benz holding to 50.3 %, our cial vehicle companies had to be cut Turkish subsidiary was renamed back during the year under review by Mercedes-Benz Turk A.S. (MBT). It 10 % to a total of 90,100 vehicles, due sharply increased its sales of commer­ particularly to the generally difficult cial vehicles in 1990 to 2,800 (1989: economic situation in South and North 1,700) units of which 1,160 were America and also in South Africa. By buses (1989: 840). contrast, the trend in Mexico and Tur­ key was positive. Total commercial ve­ hicle production by the Mercedes-Benz group fell slightly short of the previous year's high production volume, at 258,900 vehicles. Trend at the New Products and Product Developments in the Interests of Road Associated Companies Improvements Safety and Environmental Protection

The Indonesian affiliates P.T. Ger­ 1990 saw further additions and In the Commercial Vehicle Division, man Motor Manufacturing, P.T. Star product improvements in the broad we devote around a third of our annual Engines Indonesia, Wanaherang, and range of individually-tailored, environ­ research and development expenditure P.T. Star Motors Indonesia, Jakarta, mentally advanced Mercedes-Benz to improving the environmental com­ were able to profit from the favorable commercial vehicles designed for eco­ patibility and safety of our vehicles. economic trend in the country and to nomical transport work. One valuable result of this work can increase their sales to 2,300 commer­ The new light Worth "LK" models be seen in the new engine brake with cial vehicles (1989: 2,000). 1324 and 1524 and the vehicles in the enhanced performance, which offers NAW Nutzfahrzeuggesellschaft Ar- new heavy-duty Unimog series are fit­ greater safety on downhill gradients bon & Wetzikon AG, Switzerland, ted with an upgraded 177 kW/240 hp and which in the meantime is avail­ which converts and assembles OM 366 LA engine. While the light- able for all V8 engines. This engine Mercedes-Benz commercial vehicles series trucks are designed for partic­ brake with a constantly open throttle built 1,700 units during the year un­ ularly economical long-distance opera­ valve - incorporated as an additional der review (1989: 1,900). tion, the heavy-duty Unimogs are used valve in the cylinder head - increases particularly in fire-fighting, airfield and engine brake performance by about disaster-aid application. The new 60 % in the top engine speed range medium-heavy "MK" models with and up to 100 % at the lower end of gross weights of 12, 14 and 17 t fea­ the range. There are further advan­ ture many of the technical specifica­ tages in terms of brake lining wear tions of the heavy-duty series. This ap­ and quieter operation. plies particularly to the cabs and the The Mercedes-Benz branches and central lubrication system, so that in agents offer an "environmental check­ this category too, maintenance inter­ up" for the Mercedes-Benz vans, vals are increased to as much as trucks, buses and Unimogs on the 45,000 km in long-distance operation. roads today. This consists of attrac­ In the bus sector, we presented the tively priced repair packages for the new O 600 bus series based on the T injection system and a retrofit package 2 vans (O 609 D, O 611 D and for the flame-starting system, which O 614 D). prevents white smoke emission when The 814 DA models in the T 2 van starting the engine. The "environment series from Düsseldorf offer permanent check 90" also includes a whole series all-wheel drive and the anti-lock brak­ of checks covering amongst other ing system is optionally available. The Tl and T2 series vans with M 102 gasoline engines can optionally be sup­ plied with closed-loop three-way cataly­ tic converter, exhaust gas recirculation systems. things the intake, fuel and exhaust systems and the engine brake. A noise package developed for all Mercedes- Benz commercial vehicles reduces emission of noise by vehicles with en­ gines above 150 kW/204 hp rating to a maximum of 84 dB (A), correspond­ ing to a reduction in noise intensity of 60 %. The noise package is also avail­ able for retrofitting.

Substantial Investment in New Products and Production Technologies

With the goal of ensuring pro­ gressively designed products and effi­ cient production technologies, we in­ vested almost DM 1 billion worldwide in the Commercial Vehicle division. The "Truck of the Year 1990" award for the SK series is an incentive for us to continue to produce tailor-made ve­ hicles with the customary high utility value on economical and ergonomically and environmentally advanced produc­ tion facilities at our plants. Integration of Purchasing Function Preparation for the A further element in our environ­ into the Commercial Vehicles Division Single European Market ment strategy is the development of new transport concepts. As goods With the aim of co-ordinating our The creation of the single European transport continues to grow, better in­ materials procurement even more ef­ Market including a united Germany tegration of the truck in transport fectively with our diversified commer­ and the opening up of Eastern Europe chains which embrace a range of dif­ cial vehicle product range, we took the give European industry the chance of ferent types of transport is required. step in 1990 of integrating purchasing acquiring a new dimension. This ap­ Thus in the future the importance of activities in the Commercial Vehicles plies particularly as far as the haulage combining different types of transport division. In this way we will be better market is concerned. At the same time will grow considerably. able to co-ordinate our global procure­ as the quantitative increase in trans­ ment activities with our international port demand, the demand for greater production locations. quality and efficiency in haulage oper­ Outlook We continued to implement our ations has also grown. As market long-term purchasing strategy. In par­ leader in the truck category over 6 t, The European commercial vehicles ticular, in the year under review, we with a full and diversified product market, which declined considerably optimized the numbers of our sup­ range, we are able to offer high-calibre over the last year following five years pliers and the allocation of components vehicles and services for all transport of uninterrupted growth, will probably between them. We also concluded a tasks. In the interests of swiftly imple­ diminish only slightly this year. While greater number of long-term supply menting environmental solutions to diverging sales trends can be expected contracts. At the same time, we main­ goods haulage, we are keen to opti­ in the West European markets, the tained our traditional commitment to­ mize vehicle operation by means of markets now opening up in Eastern wards medium-sized and smaller com­ new technologies and innovative ser­ Europe so far lack adequate purchas­ panies and in the social sphere, for ex­ vices. Our formula for the 1990's is: ing power. The increasing intensity of ample to workshops for the "Vehicle plus intelligent service". As competition will accelerate the process handicapped. well as flexible maintenance and diag­ of co-operation and concentration in Our procurement logistics in 1990 nosis systems, an extensive service the European commercial vehicles in­ again reflected the high standards of network and 24 Hour Service, this also dustry. our product range and our increasingly embraces our Fleet Information Sys­ Mercedes-Benz is confident that it international production structure. Our tems. will be able to repeat in 1991 the sat­ efforts to reduce transport and storage Within the framework of a European isfactory overall trend of the previous costs and improve in the area of just- environmental strategy it is important years, in contrast to the general mar­ in-time materials requisitioning sys­ to further reduce exhaust and particu­ ket trend in Europe. With its competi­ tems, were successfully continued. late emission. Against this background, tive product range, broad European The close collaboration with our sup­ Mercedes-Benz will be moving in two presence and the relatively favorable pliers not only made it easier for us to stages to cut the pollutant emission of state of the German commercial vehi­ reorganize purchasing but also helped trucks by up to 60 % by the mid cles market, we again expect in markets with capacity problems to 1990's and thus to offer our customers Mercedes-Benz to generate a high vol­ ensure a trouble-free supply of mate­ environmentally advanced vehicles ume of sales. In the Commercial Vehi­ rials at all times. Our requirements in across the entire product spectrum. cles division, the immediate future will terms of quality, reliability and innova­ tion were fulfilled most satisfactorily. We should like to take this opportunity to express our thanks to all our sup­ pliers and transport and service com­ panies for their support. see wide-ranging and ambitious cost- cutting programs. New products and production facilities require a large amount of investment; with an invest­ ment budget of some DM 6 billion over the next five years, we shall be doing everything in our power to maintain our technical and qualitative lead on the European commercial vehi­ cle front. We are convinced that the truck will retain its leading position in European goods transport. Without it, swift inte­ gration of the outlying parts of Europe and Eastern Europe into the interna­ tional division of labor will not be pos­ sible. As market leader, Mercedes-Benz has the capability to make a major contribution to efficient and environment-friendly goods transport in Europe. over, the cyclical downturn in a num­ and monolithically integrated micro­ ber of important foreign markets, and wave circuitry with very high cutoff the unfavorable trend in the dollar ex­ limits. In the field of digital data trans­ change rate, tended to dampen overall fer we are concentrating primarily on performance. developing the scientific foundations At the end of 1990 AEG had 76,949 for video telephones. In pattern recog­ employees worldwide; 57,173 in Ger­ nition, research is focusing on hand­ many and 19,776 abroad. Of the total writing recognition and document number of employees, 3,030 were analysis. In the field of large-area elec­ trainees and apprentices; about 80 % of tronics, electronic circuitry is being the employees work in technical pro­ based on glass and other electrically fessions. inactive substrates. In systems engi­ DM figures in millions 1990 1989 Investment by AEG, including non- neering and software technology a pro­ Sales 13,149 12,244 current assets taken over from newly totype "switchgear expert" was devel­ Year-end result (205) 275 acquired companies, amounted to over oped. As part of a joint venture, AEG DM 1 billion in 1990. Additions to heads a project to develop the high- Incoming orders 14,156 13,893 fixed assets worldwide amounted to energy sodium/nickel-chloride battery Investment in DM 774 million; DM 128 million was for industrial use. Research work in fixed assets 774 7 39 invested in the equity of affiliates. Im­ the field of environmental technology portant projects include the integrated has led to the development of new R + D expenditure 782 787 technology center for medium-voltage equipment for measuring the sulphur Employees (12/31) 76,949 77,722 switchgear and circuit breakers in Re- and nitrogen oxide emissions of large The West German electrical industry gensburg (construction of which began and small furnaces. was able to profit from a generally fa­ in 1990), the extension of the factory AEG will continue its expansion in vorable economic climate and continue in Rothenburg ob der Tauber for cook­ the former GDR begun at the end of the upward trend of the last few years ing and floor-care appliances as well 1989. At an early stage, we achieved on a high level The focus of growth, as small household devices, and the comprehensive coverage of the new however, shifted from capital goods to modernization and extension of the IC Federal German states by setting up consumer goods, and especially to do­ manufacturing facilities in Heilbronn. technical sales offices in Magdeburg, mestic appliances. Business in systems Abroad, investment in fixed assets Erfurt, Rostock and Dresden, as well and equipment for power generation mainly concerned MODICON in the as sales support offices in Halle, and distribution was also encouraging. USA, AEG Austria and TELEFUNKEN Schwerin, Leipzig and Chemnitz, and The demand for electronic components electronic in Austria, and TELE­ by extending the activities of our tech­ did not match the positive develop­ FUNKEN Semiconductors in the nical sales office in Berlin; in 1991, ment in the electrical sector until the Philippines. we intend to reinforce that coverage. second half of the year. Investment in subsidiaries and affili­ At the same time, the historically close Consolidated sales of AEG amounted ates mainly went into the acquisition contact between AEG and the coun­ to DM 13.1 billion (+ 7.4%) in the of MAN GHH Schienenverkehrstechnik tries of Eastern Europe is to be further year under review. The increase was GmbH in Niirnberg and Schorch GmbH developed as the political and eco­ due mainly to the 12 % rise in domes­ in Monchengladbach, and the raising nomic situation allows. The basis for tic sales to DM 7.4 billion, although of our capital stake in Siliconix, Santa this is provided by the branches we new acquisitions in the fields of activ­ Clara/California. have already opened in Poland, Hung­ ity Rail Systems and Electrotechnical Expenditure on research and devel­ ary and Czechoslovakia, together with Systems and Components also contrib­ opment in the year under review the agency agreement concluded with uted. The volume of business abroad amounted to DM 782 million (5.9 % of a Bulgarian partner, which involves rose by 2.4 %. Losses from current consolidated sales of AEG), nearly the entire AEG product range. In business and investments which had matching the previous year's level. We Yugoslavia we are still working to­ to be made in the interest of the group spent DM 112 million on research and gether with a number of foreign repre­ as a whole caused a negative result for development projects related to spe­ sentatives. Despite the great signifi­ the year of DM 205 million. cific orders. cance of the new Federal German Incoming orders for the AEG group In the field of propulsion technology, states and Eastern Europe, have totaled DM 14.2 billion (+ 1.9 %) in new designs for drives with speed and for us, we will in no way neglect ex­ 1990, once again topping the previous position control were investigated. In panding our position in the economic year's high level. This growth came microelectronics we are pursuing the areas of the European Community, the entirely from the domestic market, objective of developing new transistors USA and the Far East. where orders went up by 11 % to DM 7.9 billion, while they declined in the export market by 7.2 %. The encourag­ ing growth in Germany was experi­ enceSystemsComponentscatioyeailargn foreigre dn i n projectiSystems nth,n th Electrotechnicaebusines eRai, s field anbooke.l dDecisivsystem ssOffic owadf activitiesnse l abovanthareaiSystemnde ythepreviouCommuni . RaieMoreal declinsll than­esd e­ Automation 1990 1989 Sales (millions of DM) 2,712 2,529 Foreign share in % 44 42 Employees (12/31) 16,953 17,577

This field of activity comprises In­ dustrial Automation, with the divisions Automation Systems and Products and Industrial Systems, as well as Postal Automation, with the division AEG Electrocom GmbH (AEC). The activities of the systems and software house GEI-Gesellschaft fur Elektronische In- formationsverarbeitung mbH, regis­ tered in Aachen, were transferred to debis Systemhaus GmbH in 1990. Sales of this field of activity in the year under review rose further to DM 2.7 billion. The range of products and services available with the Geamatics automation system was enlarged, and the activities of MODICON Steuerungs- und Regelungstechnik (Control and Regulation Systems) - the core of Gea­ matics - further expanded. The world­ wide market launch of a stored- program small control unit which can be integrated into various different systems is especially noteworthy. Delivery of the new MODCOMP MC 97 real-time computer also started in 1990; more than 100 new systems are for NASA alone. Both in high- performance drives and servo systems, AEG achieved an overproportionate share of the market's growth. In Industrial Systems, too, the rise in sales was above average. One major project involved the equipping of a test rig for 12-cylinder engines at the Stuttgart-Untertiirkheim plant of Mercedes-Benz AG. In the field of pro­ cess and environmental technology, some encouraging orders were re­ ceived, including major projects such as process control systems for large sewage treatment plants in Frankfurt am Main, the control system for regu­ lating and monitoring a drinking water pipeline carrying treated Lake Cons­ tance water to the Stuttgart area, as well as the automation and monitoring equipment for the runway and taxiway lighting, including the power supply equipment, for the Frankfurt am Main Airport. In the raw materials and pro­ cessing industries, modernization pro­ jects predominated. For the Eurotunnel between Great Britain and France, AEG was made main contractor, in cooperation with Daimler-Benz Research, to equip the 50 km service tunnel with a transport system, including the auxiliary sys­ tems. AEG Electrocom (AEC) further glob­ alized its core area of activity, postal automation, and penetrated new mar­ kets in 1990. The first orders were re­ ceived from the new Federal German states and from Eastern Europe. AEC has added logistics consultancy for ef­ ficient, competitive goods distribution to its range of services. In order to strengthen our involvement with li­ cencees in the USA, we have acquired a stake in ElectroCom Automation, Arlington/Texas. We are expecting further growth for the Automation field of activity in 1991.

This field of activity comprises the companies AEG Westinghouse Transport-Systeme GmbH, Berlin, AEG Westinghouse Transportation Systems, Inc., Pittsburgh/Pennsylvania, Magnet- bahn GmbH, Starnberg, and MAN GHH Schienenverkehrstechnik GmbH, Niirnberg. Through the takeover of a part of MAN GHH, with its track-bound vehi­ cle activities, on June 30, 1991 AEG, as a supplier of local and long-distance transport systems, will in future be able to manufacture not only electrical ferring passengers to and from Denver order of magnitude as the previous equipment, but also complete traction Airport; the system is to go into ser­ year's, at DM 1.1 billion. This also ap­ vehicles and rail cars. In addition, the vice in 1993. The People Mover sys­ plies to AEG Olympia Office, in which track-bound vehicle activities of MBB tems at the international airports of a decline in sales in some important were transferred to the Rail Systems Las Vegas and Orlando are being ex­ export markets was balanced out by field of activity at the end of 1990. We tended by the supply of further vehi­ higher domestic income. The improve­ have thereby taken an important step cles and more track sections. After ment in domestic business was partly towards our objective of supplying one-and-a-half years of trials in Berlin, the result of successful marketing of comprehensive rail systems. the main conditions for approving the the personal computer range, the turn­ Compared with the previous year we M-Bahn as a public transport system over in the five new Federal German raised this field of activity's sales con­ in accordance with the legislation on states, and the commissioned manufac­ siderably, from DM 587 to DM 722 passenger transport have been ful­ turing carried out at the factory in million. filled. Wilhelmshaven. The first ICE high-speed trains, for We expect a further increase in Due to the extension of the personal which AEG is supplying the electrical sales during the current financial year. computer range, and the winning over equipment in the power driving units Our intended acquisition of the track- of new software houses and systems and intermediate trailer cars, were bound vehicle sector of Lokomotivbau - centers as business partners, the handed over to the German state rail­ Elektrotechnische Werke Hennigsdorf Office Systems product division suc­ road company (Bundesbahn) in the GmbH should strengthen our position ceeded in greatly increasing PC sales. year under review. MAN GHH Schie- as a supplier of comprehensive sys­ Augmenting the range with compre­ nenverkehrstechnik and the track- tems; at the same time we expect this hensive packages has made it possible bound vehicle sector of MBB are play­ involvement to give us access to the to gain access to the market for larger ing a major part in supplying the in­ markets of Eastern Europe. PC projects. In the typewriter segment, termediate trailer cars of the ICE the Office Equipment product division trains. Further orders have already succeeded in improving its domestic been received. We delivered the first market position and increasing turn­ new standard trains for Berlin's rapid over. Sales of copying machines, for transit system. We also received a which we adopted a standardized follow-up order for 55 suburban multi­ model range for the whole of Europe, ple train sets. also exhibited a positive trend. Sales A water cooling unit was developed revenue from telephone answering for compact and environment-friendly, devices and cordless telephones was modular high-performance rectifiers in slightly higher than in the previous electric traction vehicles. The first of a year. new generation of low-floor streetcars This field of activity comprises AEG AEG Mobile Communication re­ developed by MAN GHH Schienen- Olympia Office GmbH and AEG Mobile turned a highly gratifying performance verkehrstecknik were successfully pre­ Communication GmbH. Effective Octo­ particularly in the sales of terminals; sented in Bremen and Munich. ber 1, 1990, we brought all our mobile in car telephones, growth amounted to AEG Westinghouse received an or­ radio activities into the newly founded over 50 %. In the Radio Systems divi­ der from the New York subway com­ AEG Mobile Communication GmbH. sion, sales were slightly below the pany for three-phase current equip­ Since then, the area of business of comparable figure for the previous ment, to be fitted in a prototype series AEG Olympia Office has been made up year; by contrast, incoming orders in of 10 vehicles. With the delivery of a of the product divisions Office Systems 1990 enjoyed an exceptional increase. series of DUO buses for Seattle, vehi­ and Office Equipment. TELEFUNKEN In view of growing competition and cles fitted as standard with three- Sendertechnik GmbH, Berlin, was due to prices falling at an increasing phase drive technology entered service transferred to Deutsche Aerospace AG rate, AEG Olympia Office is endeavor­ for the first time in the USA. We also effective April 1, 1990. AEG Electro- ing to enter into joint ventures in the received an order for the electrical corn GmbH, Konstanz, was put under office technology sector. equipment of 88 vehicles for the new the control of the Automation field of Taipei Metro. activity in 1990. AEG Westinghouse has been com­ Calculated on a comparable basis, missioned to plan and build a com­ sales by the field of activity in the plete People Mover system for trans­ year under review were of the same Through the acquisition of Schorch GmbH in Monchengladbach, including the motor program of Garbe, Lahmeyer & Co. AG, we rounded off our range of products in the Electrical Machines segment. In the field of special meters we further consolidated our market position. Together with EAW-Automati- sierungstechnik AG, we founded AEG Domestic Appliances EAW Zahler GmbH in Berlin-Treptow, Electrotechnical Systems and in which AEG has a majority interest. 1990 1989 Components We achieved high growth rates in Ger­ Sales (millions of DM) 2,817 2,599 1990 1989 many and the rest of Europe with the Foreign share in % 48 50 Sales (millions of DM) 4,546 4/112 Elfa line of miniature circuit breakers. Demand for the new, energy-saving Employees (12/31) 12,516 11,945 Foreign share in % 38 42 devices was especially high. At the Effective June 1, 1990, we trans­ Employees (12/31) 23,705 22,133 Hanover Industrial Trade Fair 1990 we formed the Domestic Appliances divi­ This field of activity consists of the presented for the first time the Ron- sion into a legally independent com­ divisions Power Transmission and Dis­ dolux exterior lighting system, which pany, AEG Hausgerate AG. This now tribution, Components and AEG KABEL offers variety and a high degree of consists of the divisions Domestic Aktiengesellschaft. flexibility due to various structural Appliances and Power Tools. Sales of the field of activity rose in elements. Due to the lively economic climate the year under review by 11 % to DM AEG KABEL continued the positive in the domestic market, we increased 4.5 billion. In the Power Transmission business trends of the previous years. sales in this field of activity by 8.4 % and Distribution Division, we benefited After adjustment for copper prices, to DM 2.8 billion. Our plants were from the general growth in the market which were lower than in 1989, sales working to full capacity during the and again increased both sales and in­ rose again, particularly in the domestic financial year under review. In many coming orders. In the high-voltage market. The concentration of our areas, it was not possible to satisfy switchgear sector we received some enamelled wire production at Lack- demand. Even so, AEG's domestic impressive major orders from within draht Union GmbH, which we acquired appliances achieved a 12 % growth in Germany and from abroad. We started in 1989, went according to schedule. sales in the domestic market. Exports producing our new series of third- This made it easier to reorganize the rose by 13%, considerably more than generation, high-voltage circuit- production routines of AEG KABEL in the average for the industrial sector. breakers on schedule. The market situ­ the Monchengladbach plant to meet We achieved gratifyingly high sales, ation with regard to medium-voltage the demand of the markets in East and exceeding our expectations, in the switchgear and circuit breakers re­ West as they grow together. former GDR. On the export side, high mains favorable. The new building for With our involvement in the new increases were again noted in Spain the integrated Technology Center for Federal German states and the coun­ and the Netherlands. AEG Hausgerate Medium-Voltage Systems in Regens- tries of Eastern Europe we are in a AG was awarded the German Market­ burg will come into service in 1991. good position to expand our business ing Prize in 1990 for exceptional mar­ In order to build up business in the in this region. keting achievements. new Federal German states and the The Power Tools Division succeeded cities of Eastern Europe, AEG has in considerably raising the volume of acquired Starkstromanlagen Dresden domestic business, achieving powerful GmbH. In Hungary, a joint venture growth. Demand for high-quality power called AEG Union has been founded, tools for professional use was above with AEG as senior partner, in collab­ average. We improved our market po­ oration with VAV Schaltanlagenbau sition in Germany and abroad partic­ and Transelektro AG in Budapest. Our ularly in the segment for rechargeable transformer business has been given a battery-driven tools. Despite this, for­ broader base with the addition of the eign sales revenue declined, since a transformer division of Schorch GmbH, large proportion of the power tools Monchengladbach. business is carried out in countries The continued favorable economic belonging to the dollar zone. climate and a large number of product innovations resulted in a further con­ siderable rise in sales and incoming orders for the Components division in 1990. There was encouraging growth in the volume of business for low- voltage switchgear and switchboards. For the current financial year, we expect sales revenue to increase fur­ ther. The main growth stimulus will once again come from the domestic market, because there is a large re­ quirement for products which form the basic equipment of a modern house­ hold in the new Federal German states. For our business abroad, we expect the depressed export climate which is now becoming apparent to continue. Despite this, AEG's domestic appliances will maintain their position due to their good quality image.

This field of activity comprises TELEFUNKEN electronic GmbH and the Opto- and Vacuum Electronics Division. Effective April 1, 1990, AEG brought its fractional horsepower mo­ tors business into a joint venture with Electrolux. In the year under review, the Micro­ electronics field of activity recorded sales totaling DM 1.1 billion. The slight decline compared with the pre­ vious year can be attributed to the hiv­ ing off of the Fractional Horsepower Motors division; calculated on a com­ parable basis, the volume of business increased significantly. The growth in sales was due in approximately equal measure to TELEFUNKEN electronic and the Opto- and Vacuum Electronics Division. For TELEFUNKEN electronic the sales of electronic components, partic­ ularly for the automotive industry, and of individual semiconductors, were responsible for the increase in the volume of business to an above- average extent. In Nurnberg, we inaugurated a new development center for future systems in automotive electronics. At the Heilbronn plant, modernization of the wafer production facilities for inte­ grated circuits continued. In future, application-oriented integrated circuits (ASIC's), based on 6-inch silicon slices, are to be manufactured here. We raised our holding in Siliconix, Santa Clara/California, from 39 to 80 %. AEG has acquired 50 % of the shares in Matra-MHS in Nantes. The company is active in the field of CMOS semiconductors, specializing in ASIC's and in the production of micro­ controllers under licence from Intel. In the Opto- and Vacuum Electronics Division, displays are gaining in impor­ tance, e.g. large liquid-crystal display boards. These are destined, for in­ stance, for the airports of Orlando, Toronto, Basel-Mulhouse and Munich II; some deliveries of these have been effected. In the Condensers sector, into which the Transducer section was re­ cently incorporated, AEG consolidated its market position and performed well in the fiercely competitive components market. With the increase of our stake in Siliconix and the joint ventures together with Matra-MHS and Remitel electronic (Hungary), we have opened up additional potential for growth. High incoming orders lead us to expect another increase in sales for 1991. corporate division. The internal reorga­ The future course of business activ­ nization of key aspects of work was ities at DASA will depend on how the commenced with the structural con­ procurement programs of public au­ cept for aviation, which is now being thorities at home and abroad develop. implemented. In accordance with the They include the space programs of condition stipulated by the Federal the European Space Agency (ESA). Ex­ Minister for Economic Affairs, imposed change rates will also have a consider­ with the approval for acquisition of a able influence on future developments. majority share in MBB, the specified DASA has introduced comprehensive areas of Marine and Special Systems new projects to consolidate its market of MBB and TST were hived off at the position. Agreements were made with Within the Deutsche Aerospace AG beginning of 1990, and 51 % of them our partners Aerospatiale and Alenia group; Dornier, Messerschmitt-Bolkow- were sold. In accordance with the con­ to further pursue the project for a re­ Blöhm, MTU Motoren- und Turbinen- dition stipulated, in 1991 we shall gional aircraft with 80 to 130 seats, Union and Telefunken Systemtechnik relinquish the remaining shares in with substantial participation by Deu­ have grown together to form an effec­ marine technology activities. tsche Aerospace. Our subsidiary MBB tive union of companies. The group The group sales of Deutsche Aero­ signed a Memorandum of Understand­ has become a viable cooperation part­ space reached DM 12.5 billion in ing with Aerospatiale regarding close ner on an international level, above all 1990, corresponding to the volume of cooperation in the helicopter sector. in its key fields of activity - aerospace, the previous year. Since Marine and This represents the first step towards defence technology and propulsion sys­ Special Systems are no longer in­ uniting the activities of the two com­ tems. Through our systematic policy of cluded, this equates to a rise of 5.0 % panies in a joint entity. collaboration we are taking into ac­ on a comparable basis. Due to the an­ In the field of space flight, the sig­ count the increasingly global trend in nual deficit of Deutsche Airbus GmbH nature of a Memorandum of Under­ these markets. We have made agree­ to be assumed pro rata, DASA shows a standing prepared the foundation of ments to extend our policy on collab­ negative year end result of DM 135 the industrial consortium EuroHer- oration, with European and both Amer­ million. Incoming orders remained, at mespace, in which Aerospatiale, ican and Japanese partners, and these DM 11 billion, below the value of Dassault Aviation and Aeritalia will are currently being applied within the 1989, which was influenced by several participate alongside DASA. The re­ individual business alliances. large orders occurring over a longer sponsibility of this company, residing The continued development of the period. in Toulouse, will be to advance devel­ corporate structure of DASA should be Investments in fixed assets opment of the Hermes orbital glider. seen against this background. In all amounted to DM 938 million (1989: Deutsche Aerospace intends to take the companies business activities were DM 1,068 million). Expenditure on re­ over Luftfahrttechnik Ludwigsfelde in allocated to product divisions which search and development was further the new Federal German states. operate independently and with a high increased and reached 34 % of turn­ degree of market proximity. The prod­ over, at DM 4.2 billion (1989: DM 3.8 uct divisions each collaborate within a billion). At year-end 1990, the com­ panies within the DASA group em­ ployed 61,276 people (1989: 62,959). The drop is mainly due to the fact that the Marine and Special Systems divi­ sions have been hived off.

*) 1989 including MBB. Figures for Marine and Special Systems at MBB and TST, which were hived off on January 1, 1990, are still in­ cluded in 1989. Aviation Further notable accounts were set­ tled for the Columbus, Cluster and Ar- During the year, 15 (1989: 17) iane 5 projects. Within the Columbus Dornier 228 aircraft were delivered. project Dornier is developing the envi­ More than 70 customers throughout the ronmental monitoring and life support world operate 179 Dornier 228's in re­ systems; under the Cluster project we gional air traffic or as special versions are responsible for the development of Exceptional Growth of Sales Volume for maritime, coastal and border patrol four satellites which will investigate as well as for environmental protec­ solar winds. The first central-stage In the reporting year, the Dornier tion. Up until the end of 1990 our In­ bulkheads were furnished for the Group increased its sales by 28 % to dian licensee Hindustan Aeronautics launcher Ariane 5. DM 2.8 billion. With settlements over Ltd., Bangalore, had delivered a total of DM 900 million for the European re­ 22 airplanes of this typ, 9 thereof in mote sensing satellite ERS-1 and the the reporting year. Defense Systems X-ray satellite Rosat, the Space Sys­ Development efforts on the 30-seat tems division made the largest contri­ Dornier 328 turboprop airplane, for In the Defense Systems division Dor­ bution to this growth rate. As ex­ which 39 firm orders and 48 options mer's major activities lay with mobile pected, the volume of incoming orders had been placed by the end of 1990, ground systems and the CL 289 recon­ to the amount of DM 3.1 billion did continued as planned. The maiden naissance system which we are deve­ not reach the level of the previous flight is targeted for 1991; our cus­ loping together with Canadian and year which had been marked by the tomers can expect delivery from 1993 French partners. In the year under re­ contract for the Stinger license produc­ on. Under contract to Deutsche Airbus view the deliveries of workshop equip­ tion program and a surge in orders for GmbH, Dornier participates in the de­ ment for the Roland air defense sys­ the Dornier 328 regional airliner velopment and assembly of various tem again reached a substantial vol­ which is under development. Major or­ components. In addition major develop­ ume. For the Patriot system antenna ders in the reporting year include the ment steps for the technologically so­ mast systems were supplied. development of the JF90/EFA fighter phisticated European Fighter Aircraft The setting up of the production fa­ aircraft and the service life extension JF90/EFA were taken. cilities for the license production of program for the transport helicopter In the aircraft support sector we Stinger in Europe proceeded according Bell UH-1D of the German Armed were awarded the important contract to plan. In addition to the Federal Re­ Forces, which extends over a period of for the service life extension program public of Germany Turkey, Greece and four years. for the Bell UH-1D transport helicop­ the Netherlands are participating in In 1990, expenditure for research ter. As the prime contractor Dornier this project under the leadership of and development rose from DM 925 services Nato's E-3A early warning Dornier. The first units of this short- million to DM 1,287 million. The fleet (Awacs). range air defense missile are sched­ spending on projects performed for uled for delivery in 1992. Dornier is third parties rose to DM 1,022 million also the prime contractor for the anti- (1989: DM 715 million). Efforts were Space Systems radar drone project, for which the defi­ concentrated on the Space System divi­ nition and development work were car­ sion. Spending on in-house projects At the end of May, the X-ray satel­ ried out in the year under review. amounted to DM 265 million (1989: lite Rosat was deployed into orbit; in DM 210 million). Investments in fixed October the Ulysses space probe set assets totaled DM 157 million (1989: off on a trajectory which will take it Medical Sytems DM 201 million) with the emphasis on into orbit around the sun. The launch the expansion of plant facilities and of the European remote sensing satel­ Once Dornier Medizintechnik GmbH the improvement of plant infrastruc­ lite ERS-1 which was scheduled for had been granted approval for the MPL ture. At the end of 1990, the Dornier 1990 is now planned for May 1991. 9000 and the MFL 5000 lithotripters Group numbered 10,931 employees For all three programs Dornier was the in lapan towards the end of 1989, it (1989: 10,247). prime contractor. For the Hubble Space was able to conclude long-term skele­ Telescope, deployed into orbit in April, ton agreements with lapanese dealers. we developed the Faint Object Camera At home and abroad a total of 83 designed to detect extremely faint ob­ lithotripters (1989: 66) were delivered, jects in space. nearly half of these being MPL 9000 units. To expand its product line, Dornier Medizintechnik GmbH increased the stake it had origionally acquired in 1989 in Acoustic Imaging Technologies Corp., Tempe/Arizona to 82 %. The high-quality ultrasonic diagnostic de­ vices of this company are marketed as separate units, but they are also built into Dornier's lithotripers as imaging units.

Special Markets

The main focus of effort in the Spe­ cial Markets division during the year under review was on motor vehicle electronics, with special attention to environmental conservation and traffic safety. Development projects are con­ cerned with tyre pressure control, en­ gine management, radar systems for monitoring traffic to the rear, flat- surface test rigs and driving pilots. Further fields include energy systems, information systems, planning consul­ tancy and materials technology.

Outlook

In the current business year, the sales of the Dornier Group will not achieve the high level of 1990, which was attributable to the settlement of large-scale accounts, even though the major settlement of accounts is ex­ pected in the aircraft division for the programs Dornier 228 and Bell UH-1D. In the Space Systems division, the set­ tlement of large-scale accounts is ex­ pected for the Hermes and Ariane 5 development projects and for ERS-1 launch support. Sales in the Defense Systems division will rise as a result of a higher delivery volume for the CL 289 program. The Medical Systems di­ vision, as well, anticipates growing sales revenues. To complement activities in the com­ munications sector, the takeover of the Data Networks division of AEG Electro- corn GmbH, Konstanz, is envisaged. Aviation completed. Systems development for the ISO European infrared observatory In the Aircraft division, the largest and the Astro-Spas scientific satellite earner was again the Tornado pro­ proceeded according to plan. gram. The consortium under the man­ Production of the second stage and agement of the Panavia Aircraft GmbH the liquid-fuel booster rockets for the had delivered a total of 846 aircraft by European launcher Ariane 4 was at the 1990 1989*) the end of 1990, 44 thereof in the forefront of work in the Orbital Infra­ Sales (millions of DM) 4,610 5,112 year under review. The development structure Strategic Business Unit. This Unit is involved in developing the up­ Foreign share in % 41 32 work for the JF90/EFA fighter aircraft continued. An important landmark in per stage of the new European Employees (12/31) 23,229 24,194 the Aircraft Division was the success­ launcher Ariane 5. Integration of Eu­ Positive trend in the Aircraft Sector ful maiden flight of the German- rope's first free-flying retrievable car­ Due to the transfer of the Marine American experimental aircraft X-31A rier Eureca (European Retrievable Car­ and Special Systems division, busi­ in October 1990. As the prime contrac­ rier) proceeded on target. Within the ness during the financial year de­ tor MBB has been commissioned to framework of ESA's Columbus program clined by 10 % to DM 4.6 billion. modernize of the Phantom II F-4F used MBB prepared a proposal which in the Comparable sales remained at the by the German Airforce. Under our co­ meantime has been submitted to ESA. previous year's level. The Aircraft di­ operation agreement with Deutsche vision accounted for approximately Airbus GmbH to develop and manufac­ one half of total sales. Increases were ture major assemblies and components Defense Systems mainly due to the invoicing of larger for the Airbus family, production of the amounts in the Airbus program and A330 and A340 began in 1990. The Roland program continued to be the BO 105, BK 117 and Tiger The main customers for our BO 105 the main earner in the Defense Systems (PAH-2) helicopter programs. Defense multipurpose helicopter were again the division. Since the Roland weapon sys­ Systems sales were largely accounted police and air rescue services. It is es­ tems program, which was handled by for by the Roland weapon system, as pecially pleasing that the BK 117, de­ the Franco-German marketing com­ well as the Pars 3 and Milan anti­ veloped jointly with Kawasaki Heavy pany Euromissile, was completed in tank weapons. At DM 3.7 billion or­ Industries, turned out to be the best the year under review, sales attributa­ ders received remained below the selling twin engine rescue helicopter ble to this program fell short of the high levels recorded in the previous on the hotly contested US market. The previous year's levels. year. market share amounted to 37.0 %, to­ We continued the development of Expenditure on research and devel­ gether with the BO 105 it came to as the Hot and Milan second-generation opment totaled DM 2.0 billion, much as 59 %. The development work antitank systems and of the Pars 3 amounting to 43 % of sales. Research on the BO 108, which is to succeed MR/LR third-generation anti-tank sys­ and development projects charged to the BO 105, as well as on the Tiger tems for medium and long-range oper­ external customers amounted to DM antitank helicopter (PAH-2/HAC/HAP), ation. In December 1990, the Ameri­ 1.8 billion (1989: DM 1.9 billion); a German and French bilateral pro­ can company Raytheon and DASA company projects totaled DM 213 gram, continued successfully. signed a Joint Venture Agreement for million (1989: DM 191 million). In­ future development, production and lo­ vestments on fixed assets rose to DM gistical support in the operational field 315 million (1989 : DM 264 million). Space Systems of medium and long-range air defense Due to the transfer of the Marine and systems. Special Systems division, the number MBB had a major role in the devel­ Industrialization of the DWS 39 dis­ of employees decreased to 23,229 opment of five communication satel­ penser system for the Swedish Air (1989: 24,194). lites and one research satellite which Force was contractually completed in were deployed in 1990. The third Ger­ 1990. man telecommunications satellite DFS Kopernikus 3 was completed in the year under review. Subsystems work on further flight equipment for the Eu­ ropean Eutelsat II communication sat­ ellite system, the Japanese Superbird and the Chinese DFH-3 are almost Other Activities

Finding new applications for know- how gained in the aerospace and de­ fense sectors has led us to a number of new activities. In the field of energy technology MBB is building large wind farms and developing photovoltaic sys­ tems. The erection of a pilot plant for manufacturing large solar modules is particularly noteworthy here. Among our diversification products, one of the most important is the airbag, for which demand on the part of the automotive industry has increased considerably. There was a further expansion of activ­ ities in the fields of data and control technology, plastics and medical laser systems.

Outlook

An increase in sales is expected for 1991. MBB anticipates a significant in­ crease in the Aircraft Division, in par­ ticular in the Airbus program and the BO 105 helicopter line, even if the Tor­ nado remains our main earner; major parts of the JF90/EFA European Fighter Aircraft program will again be invoiced. We also expect a vigorous rise in sales in the Space Systems di­ vision. In contrast, we expect declining turnover in the Defense Systems divi­ sion. A decisive prerequisite for the scheduled amalgamation under the umbrella of a joint holding company, Paris-based Eurocopter S.A., of the activities conducted by the Helicopter Unit with those of Aerospatiale's Divi­ sion Helicopteres was created by con­ centrating helicopter activities at the Donauworth plant. A Memorandum of Understanding concerning this cooper­ ation was signed by MBB and Aero­ spatiale on December 21, 1990. a division of United Technologies Corp. Diesel Engines (UTC), Hartford/Connecticut; the agree­ ment is to be further underpinned by With diesel engines, which are pro­ each of the companies acquiring duced by MTU Friedrichshafen, busi­ shares in the other. We entered into ness once again focused on engines this business alliance without jeopar­ from the 396 series, mainly for marine 1990 1989 dizing our traditionally good relations application. There was an increased with General Electric (GE); after man­ demand in engines for high-speed Sales (millions of DM) 3,602 3,659 aging amicably to resolve a temporary yachts and high-speed ferries. Partic­ Foreign share in % 65 66 misunderstanding, MTU will continue ularly encouraging was the order to Employees (12/31) 17,524 17,654 in future to engage in its long-standing supply marine engines and engines for the operation of on-board equipment Successful Commencement of and successful cooperation with GE. for 10 frigates of the Australian and Strategic Realignment In view of the fact that the MTU New Zealand navies. Steady progress group is predominantly export- Aero-Engines is being made with the completion of oriented, the trend in the exchange the large-scale order concluded with rate of the dollar has detracted from In the Aero-Engine unit the pro­ the USSR in 1986 for the supply of en­ the otherwise positive situation with grams RB 199 and El 200 for the Tor­ gines for tractors and earthmoving ma­ regard to sales and profits, particularly nado and the fighter aircraft IF90/EFA, chinery. A large number of locomotive as far as engines for commercial air­ respectively, made a substantial contri­ engines were delivered to the Dutch craft and diesel engines are concerned. bution to sales in the year under re­ state-owned railways. Furthermore, the continuing low levels view. The EJ 200 engine is also by far In September 1990, we presented of government spending in important the largest research and development the 595 engine series. These com­ project; toward the end of the year, the export countries had a curbing effect pletely new engines in the power prototype successfully completed its on demand. Sales fell slightly to DM range between 2,000 and 4,400 kW first trial. Major earners were the CF 6 3.6 billion. At 65 %, the share ac­ feature a successful combination of and JT 8D aero-engines; these are used counted for by exports stabilized at the benefits for the user with regard to by the aircraft manufacturers Airbus high level of the previous year. Incom­ power concentration, service life, eco­ Industrie, Boeing and McDonnell ing orders of DM 3.0 billion were be­ nomic efficiency and environmental Douglas. low the level of the previous year. compatibility. The first engine of this DM 509 million (1989: DM 469 mil­ In August 1990, the PW 300 aero­ new series was installed in the ocean­ lion) was spent on research and devel­ engine, which has been developed for going ferry Deutschland. In the follow­ opment with DM 282 million (1989: executive aircraft, received its ap­ ing years, this engine will be used for DM 232 million) relating to projects proval. Within the V 2500 program we field-testing, providing data to supple­ conducted on behalf of third parties. dismantled the engine with the hith­ ment the previous tests conducted on The MTU group invested DM 239 mil­ erto highest number of hours in opera­ the test stand. lion (1989: DM 264 million) in fixed tion for inspection purposes; the result assets, principally buildings and manu­ revealed that the engine was in very facturing facilities. At the end of 1990, good condition. Among other aircraft, Other Activities at 17,524, the number of employees the Airbus A3 20 is fitted with this en­ was slightly below the level of the pre­ gine. The helicopter engine MTR 390 In the year under review, MTU for the German-French anti-tank heli­ vious year (17,654). Maintenance GmbH maintained and re­ copter Tiger (PAH-2) was given ap­ An important step toward ensuring paired aero-engines from our coopera­ proval for flight-testing at the begin­ further success in the field of aero­ tion partners General Electric and ning of November 1990. The first two engines for commercial and executive Pratt & Whitney. The company ex­ prototypes have now been delivered to aircraft was the agreement entered tended its production area and was Eurocopter. Concept and technology into by MTU on extensive future coop­ able fully to utilize its capacity with a development laid the groundwork for, eration with its long-standing Ameri­ further-augmented workforce. inter alia, a propfan engine, hypersonic can partner Pratt & Whitney (P & W), propulsion systems and gas turbines. The sales of fans, compressors and steam turbines developed and pro­ duced by Aktiengesellschaft Kühnle, Kopp und Kausch in Frankenthal al­ most equaled those of the previous year. As a result of the general down­ turn in this European automobile in­ dustry, the number of exhaust-gas tur- bochargers produced for vehicle and industrial engines was below the high figure of the previous year. L'Orange GmbH, Stuttgart, which manufactures high-grade fuel-injection systems for large diesel engines was able further to expand its business.

Outlook

In order to safeguard its competitive position in the market place, MTU will increase its efforts to promote the de­ velopment of new products and to im­ prove existing successful products. By means of even more intensive collab­ oration with international partners and new cooperation projects, MTU will se­ ize the opportunities available on the world market and will further consoli­ date its market position. The large number of aero-engines on order and the introduction of new diesel engines suggest that, overall, 1991 will see a slight rise in sales together with a sat­ isfactory level of utilization of existing capacity. However, it is not possible at present to estimate the impact that the tightening of export regulations for all dual-use exports will have. As far as aero-engines are con­ cerned, it can be expected that the principal area of activity will be en­ gines for civilian aircraft, the Tornado and the JF90/EFA fighter aircraft. As regards diesel engines, attention will be focused on the 396 series. Radar, Radio and Sensor Systems In export business, TST secured a large order for spares for the mobile In the year under review, further radio reconnaissance system supplied TRM-S 3D air space surveillance radar to the Spanish Army in the preceeding systems were delivered to the German year. In addition the Spanish broad­ Armed Forces for deployment in the casting company ordered a large-scale 1990 1989 Army anti aircraft system. Further Ro­ transmitter system. We also received land air defense command stations of an order for the installation of TV Sales (millions of DM) 1,688 1,961 the German Air Force were equipped transmitters in the new Federal Ger­ Foreign share in % 22 19 with TRM-L 2D radar systems. man states; the first transmitters went Employees (12/31) 9,372 10,779 Deliveries were continued to sched­ into service during the year under re­ Comparable Sales Increased ule of forward-looking nose radars for view. In response to an order from the At the beginning of the year under the Tornado. Production has started as Central Telecommunications Bureau review, the Marine and Special Sys­ planned of the airborne radar APG-65 (FTZ) in Darmstadt, TST supplied a tems division was separated from Tele­ for Phantom aircraft so that deliveries large number of recently developed funken Systemtechnik GmbH; at the can commence during 1991. Tele­ digital analysis receivers, which are same time the company took over funken Systemtechnik is contributing used for high-quality receiving and Telefunken Sendertechnik GmbH from substantially to the development of the measurement purposes. AEG. In consequence, sales at DM 1.7 airborne radar for the fighter aircraft billion remained slightly below the JF90/EFA. previous year's level; if adjustment is In the field of electronic warfare Electrical Energy Systems made for these structural changes (EW), development of self-protection sales increased by 3.0 % results. At systems for the Tornado was contin­ In the field of power supply, electri­ DM 1.7 billion, orders received were ued. Orders for shipborne EW systems cal engineering and electronics, the below last year's figure, which was as well as for computer-controlled percentage of civilian orders was fur­ substantially influenced by a large or­ communication systems were received ther increased in the year under re­ der for the modernization of the Phan­ from the German Navy. From the Ger­ view. The most important current pro­ tom aircraft. man Army we received an extensive ject is the large contract for the new Research and development work for order for HF/DF equipment sets for airport Munich 2, for runway lighting, the civilian sector increased again; ac­ data transmission in the Army EW for which we are project leader. In ad­ cordingly comparable expenditure in­ system. Under contract to the Ameri­ dition, orders were executed for var­ creased by 13 % to DM 373 million. In­ can company Raytheon, Telefunken ious civilian and military airports. The vestment in fixed assets amounting to Systemtechnik is participating in the mature technology of TST in traffic DM 126 million (1989: DM 147 mil­ further development of the seeker control systems contributed decisively lion) were related mainly to construc­ head of the Patriot system; the pro­ towards the Northern Bavaria motor­ tion, modernization and rationalization gram will decisively improve defensive ways authority placing an order with measures initiated in 1987 which will capability against ballistic missiles. us for the expansion of its traffic data be completed in 1991. At year end, In view of declining defense bud­ acquisition and traffic control systems. Telefunken Systemtechnik employed a gets, our civilian activities are being Among future civilian applications, we staff of 9,372. steadily expanded. In radar systems view the development of the VSCF the emphasis was on control and sur­ power generation system for the JF90/ veillance of vessel traffic. During the EFA fighter plane as particulary impor­ year under review, orders were exe­ tant. cuted inter alia for the replacement of For the Hubble space telescope TST the radar systems along the river Elbe developed the flexible, reeled high- and in Hamburg. power solar generator and for the From the Federal German Railways X-ray satellite Rosat a rigid solar gen­ we received a consultancy contract for erator. TST has sofar equipped more the transport system TS 90. TST than 120 spacecraft and satellites with opened up a new field of activity in power supply systems. For the solar- the area of short-wave communication driven automobile Spirit of Biel II, with the successful completion of an HF communication system, for which a total of 850 field sets were delivered. which won a competition in Australia, TST supplied the most powerful terres­ trial solar generator ever manufac­ tured. The Federal German Ministry of Research and Technology is sponsoring this new development. In the field of regenerative power, we received an order for the hybrid in­ stallation to exploit both solar and wind energy on the North Sea island of Pellworm. For this installation, the largest of its type so far, the company undertook system responsibility in co­ operation with Schleswag AG.

Logistics and Training

In the field of system support TST expanded its range of services by se­ curing the maintenance contract for the training simulator Asim of the Fed­ eral German Airtraffic Control Author­ ity. In the new Federal German states we have become main contractor for the vocational advancement service. Particularly noteworhty in the field of systems technology were orders to supply analysis stations for a radio re­ connaissance system and also logistics services for German coastal radar op­ erations in the Baltic.

Outlook

The company's wide-ranging exper­ tise in diverse fields of high- technology areas constitute a good premise for growing engagement in ci­ vilian projects. With targeted research and development, TST will exploit its chances in the civilian sector and con­ tinue to expand its market presence in the fields of orbital and terrestrial so­ lar technology, traffic control technol­ ogy, electronics and electronic testing technologies. Supported by a high vol­ ume of orders on hand, which will en sure capacity working for about eighteen months, TST will continue to increase sales in the current financial year. At year-end 1990, debis had 4,879 The network will also be offered to employees worldwide, 4,148 located in external customers. With the majority Germany, and 731 abroad. The number takeover of Metallgesellschaft Informa­ of trainees and apprentices in the total tionsverarbeitung GmbH, together was 82. with the computer center of Indu- Investment in fixed assets (mainly strieanlagen Betriebsgesellschaft mbH data processing equipment) amounted (IABG), we are taking into account the to DM 333 million, and in rented as­ growing trend among major users of sets DM 4,174 million. Vehicle leasing increasingly transferring data process­ represents approximately 94 % of total ing tasks to external specialists. assets. Additions to financial assets The combination of various hard­ were DM 13 million. In the year under ware with effective local networks is review, majority holdings in System­ becoming increasingly important in After extensive examinations, it was haus Curadata GmbH, Hamburg, and data processing. With this in mind, we decided at the end of 1989 to concen­ Metallgesellschaft Informationsverar- have founded the software company trate the service activities of the beitung GmbH, Frankfurt am Main DisCom - Distributed Computing Daimler-Benz group in a fourth corpo­ were acquired. Like the newly founded GmbH. rate unit. Daimler-Benz InterServices Mercedes-Benz Finance Ltd. in the In June 1990 the first important (debis) AG, which is structured into United Kingdom and the sfi System­ step was made for entering the mar­ the five divisions Software House, haus fur Informationsverarbeitung kets of the new Federal German states Financial Services, Insurance, Trading GmbH, Berlin, these have also been in­ and Eastern Europe with the founda­ and Marketing Services, commenced corporated into the group. In addition, tion of the software company sfi Sys­ its activities at the beginning of 1990. there was the takeover from AEG of temhaus fur Informationsverarbeitung The company was legally founded on the Systemhaus GEI - Gesellschaft fur GmbH, in Berlin, in which Hewlett- July 1, 1990. Elektronische Informationsverarbeitung Packard has a minority holding of The aim of Daimler-Benz InterSer­ mbH, Aachen. 25.1 %. vices is to offer sophisticated services In the Commercial Systems and Pro­ and to meet the customer's require­ jects subdivision, activities are concen­ ments quickly, at a competitive price Software House trated on developing software for the and with a high level of quality. It pro­ group. In order to extend our business vides its services to the companies of Major parts of the information pro­ with customers outside the Daimler- the Daimler-Benz group and to exter­ cessing activities of the German com­ Benz group, we acquired the software nal customers. After a short transition panies in the Daimler-Benz group have companies Systemhaus Curadata period, all group companies can decide been joined together in debis System­ GmbH and ORGA-SOFT Organisation whether they wish to use the services haus GmbH, which was founded on und Software GmbH in 1990. Curadata of debis or of other companies. This January 1, 1990, as an independent provides products for tax advisors, means that debis is exposed to inter­ division. accountants and tax departments in national competition from the outset. The debis software house, which large companies. ORGA-SOFT markets The first financial year for Daimler- produced a total revenue of DM 657 services for logistics and trade. Both Benz InterServices, 1990, was alto­ million in the reporting year, com­ companies were successful in 1990 gether favorable, despite considerable prises five subdivisions. in the new Federal German states. initial outlay and more intense inter­ The Computer and Communication The Industrial Systems and Projects national competition. Debis achieved a Services area took over the majority of subdivision develops comprehensive total revenue of DM 4.0 billion world­ the computer centers in the Daimler- systems for individual customers, mar­ wide. This includes sales revenue of Benz group in 1990. This process will kets standard products and services DM 3.7 billion and interest received be completed in 1991. At the same and advises design and manufacture from sales financing. The year-end time, the existing computer centers divisions of industrial users. System­ result reached DM 50 million. will be concentrated into a few large haus Industrie GmbH develops and Of the total ouput, 48 % is accounted computer centers within the frame­ sells user software systems for produc­ for by the domestic market, 11 % by work of a regionalization concept. The tion planning and control, quality as­ other EC countries and 37 % by the US planned formation and expansion of a surance and servicing. market. A volume of DM 974 million functional group-wide network has Systemhaus GEI-Gesellschaft fur resulted from companies in the begun and shall be completed in 1991. Elektronische Informationsverarbeitung Daimler-Benz group. mbH, was transferred during 1990 from AEG to the debis software house. The company has over 20 years' expe­ rience in production automation, infor­ mation and communication systems, information technology security and in the field of CASE (Computer Aided Software Engineering). The Training subdivision, which is being established, provides training for the software house's own products, current subjects of information tech­ nology such as project management, software engineering and programming languages, as well as operating sys­ tems. The market for computer center and network services as well as complex software developments is subject to strong growth stimuli due to the changing framework conditions in the single European market and the in­ creasing liberalization of the telecom­ munication sector. This will result in a considerable expansion of business volume at the software house in the next few years.

Financial Services

The debis Financial Services division offers complex leasing and finance programs tailored to customers' re­ quirements. In addition to pure financ­ ing, service components desired by the customer are also included, which are offered within the framework of full service leasing contracts. They encom­ pass, for example, the handling of re­ pair and maintenance work, tyre re­ placement, vehicle tax, replacement vehicles, insurance and service cards. The group's own leasing and financ­ ing companies now operate in all the important sales markets of Mercedes- Benz AG, and thus Germany, the USA, France, Italy, the United Kingdom, Switzerland, the Netherlands, Belgium, Spain and Canada. With the foundation of Daimler-Benz InterServices (debis) AG, and the transfer of these com­ panies to debis, financial services are available both for Mercedes-Benz vehi­ cles and the products of the corporate units AEG and DASA. Through combined efforts and close collaboration between leasing and fi­ nance companies and the sales organi­ zation of Mercedes-Benz AG, success was achieved in 1990 too in gaining many new customers despite difficult market conditions, and in continuing the growth of the last few years. Newly acquired business rose by 23 % to 122,000 vehicles. Around 70 % of new contracts applied to passenger cars. The proportion of new vehicles financed and leased via the debis leasing and finance companies was on average 17 % in the markets in which this type of company is estab­ lished. The number of contracts in­ creased by 26 % to 282,000. This cor­ responds to a value of DM 12.2 billion. In the USA the Mercedes-Benz Credit Corporation, the largest leasing and finance company of debis, increased the number of contracts by 32 % to 112,000. In Canada, Mercedes-Benz Credit of Canada concluded 47 % more new contracts than in the previous year. The European leasing and finance companies also continue to enjoy steady growth. Mercedes-Benz Finanz GmbH and Mercedes-Benz Leasing GmbH, which operate in Germany as Mercedes-Benz Lease Finanz, extended their business volume by 37 % to DM 2.9 billion. An important aspect was the strong demand from the new Federal German states. In Spain we acquired a capital share of 40 % from our partner the Banco Hispano Americano, so that our hold­ ing now totals 90 %. The most recently created company, Mercedes-Benz Fi­ nance Ltd, founded in February 1990 in the United Kingdom, has so far been extremely successful in the highly competitive British market, achieving a business volume of approximately DM 420 million. The leasing and finance companies will meet the challenges arising from changing requirements with new ser­ vices that go beyond what is currently available. Insurance Trading The field of Marketing Consulting comprises customer-specific market The lack of restrictions on services Existing know-how in the field of research and conventional marketing within the EC will accelerate the coop­ barter is concentrated in the debis advice. The points of emphasis are eration and concentration processes Trading division in order to open up capital goods and service marketing. among insurance companies and bro­ the markets in countries short of for­ In the year under review, orders kers. This was the reason why we eign currency to exports from the were carried out in the market seg­ joined together all of the insurance Daimler-Benz group and external cus­ ments of passenger car fleet business, activities of the Daimler-Benz group tomers. The amount made available for traffic guidance technology, photo- within Daimler-Benz InterServices. The barter purposes was approximately DM voltaics, added value services, elec­ newly founded Insurance division of 110 million. tronic displays and various other capi­ debis (debis Assekuranz) is to handle Daimler-Benz InterServices has 50 % tal goods. the insurance requirements of the of shares in Industriehandel Handels- In 1990, the media budgets of the Daimler-Benz group, including its sub­ und Industrieausrustungsgesellschaft Passenger Car Division of Mercedes- sidiaries, with comprehensive, favora­ mbH, Stuttgart, a joint enterprise with Benz AG, of AEG and Deutsche Aero­ bly priced risk management. The Metallgesellschaft AG, Frankfurt am space were transferred to the largest grouping of insurance activities was Main. In November 1990 debis, to­ marketing division, Communication & implemented in part in 1990. Daimler- gether with Intrac Handelsgesellschaft Media. Due to existing contractual Benz Versicherungsdienst GmbH was mbH, Berlin, founded debis Interna­ links, the other budgets in the group taken over from the point at which tional Trading GmbH with its regis­ will be transferred to debis Marketing Daimler-Benz InterServices was foun­ tered office in Berlin; debis holds 75 % Services in the course of 1991. The ded, and was renamed debis As­ of the stock. This company debis Inter­ Sales Promotion Services subdivision sekuranz Vermittlungs GmbH. To date national Trading is to operate in the comprises trade marketing, sponsoring the debis Insurance division has cov­ countries of Asia, Latin America, East­ advice, event marketing (marketing ered the insurance requirements of ern Europe and in the Soviet Union. and setting up of events) together with Daimler-Benz AG and Mercedes-Benz The Trading division provides solutions services in the sphere of advertising AG, and carried out risk management to complex problems regarding barter, media (advice, selection, purchase and for these companies. by identifying exportable goods in the dispatch). Since the beginning of 1991, the di­ relevant targetted markets, finding The Fairs & Exhibitions subdivision vision has also taken over the shares marketing routes and partners. handled over 200 trade fairs and exhi­ of EAS Assekuranz Vermittlungs- In the face of the debt crisis of the bitions, worldwide, in 1990. The larg­ GmbH previously held by AEG. Prepa­ countries of the Third World and the est customers were AEG, Daimler-Benz rations are being made to incorporate economic changes in Eastern Europe, and Deutsche Aerospace. Due to the the other insurance services of the the Trading division anticipates a con­ high growth potential and varied inter­ group. siderable rise in sales volume. ests of customers from Asia, debis The brokerage services of debis As­ Marketing Services Asia and Pacific sekuranz will increasingly be offered Pty. Ltd. was founded in July 1990 in to third party industrial clients, and Marketing Services Singapore. the availability to employees of the Marketing Services anticipates a Daimler-Benz group will be expanded. debis Marketing Services GmbH was considerable increase in the volume of All in all, we expect debis Insurance founded through renaming the former business in all fields of activity. to increase its total premium income AEG subsidiary, Werbeagentur Dr. in 1991. Kuhl GmbH (WAK) on June 13, 1990. Furthermore, important parts of AEG's central marketing (marketing consul­ tancy, trade fairs and exhibitions, parts of central advertising) have been incor­ porated in the Marketing Services divi­ sion. In the abbreviated financial year of 1990, debis Marketing Services GmbH which is divided into four sub­ divisions, achieved a total output of DM 109 million. Research Geared Mercedes-Benz Research buildings and a "cafeteria" should be to Corporate Units Institute Organized completed; the cafeteria building will also contain seminar and lecture facili­ In the integrated technology group The "Mercedes-Benz Research Insti­ ties, and will serve as a communica­ of Daimler-Benz, research is a task tute," which belongs to the Daimler- tion center. which goes beyond the confines of in­ Benz holding company in terms of cor­ The Research Center will function as dividual companies, so it is carried out porate structure, took clear shape in a knowledge center not just for the under the auspices of the executive 1990. Its brief is two-pronged: firstly, Daimler-Benz group. It will also be­ holding company. The activities are the acquisition of basic knowledge in come an integral part of Ulm as a city geared to the requirements of the cor­ fields such as alternative propulsion of science, which already includes the porate units and their fields of busi­ systems which are of particular strate­ Ulm universities, related institutes and ness. In order for the different devel­ gic importance to Mercedes-Benz AG. a science park. Close contact is planned opment departments to utilize the Secondly, its task is to work closely between these bodies to promote the results of that research quickly and with the development departments of extensive exchange of findings by uni­ efficiently, we further modified the Mercedes-Benz itself and to conduct versity and industrial research. Work structure of the research sector in 1990. research geared to the medium and has already begun with the formation In doing so, our objective was to com­ long-term aims of those departments. of working teams to deal with mate­ bine the advantages of centrally orga­ The Mercedes-Benz Research Insti­ rials and production research, informa­ nized research with those of decentral­ tute is divided into three Centers of tion technology and energy research; ized research, in accordance with the Competence. These deal with: basic these teams are initially based in the principle "as centralized as necessary, questions of physics and chemistry; first-phase buildings, in Ulm-B6fingen as decentralized as possible." thermo- and aerodynamics; as well as and in Esslingen. Before they can be We therefore devised research cybernetics and simulation. Then there expanded, however, priority is being institutes which belong to the central are four Product-Oriented Centers: given to precise definition of the main "Research and Technology" division but electronics, vehicles, vehicle compo­ work focus and to qualifying the new which are directly tailored to the needs nents and vehicle information technol­ employees. of the individual corporate units and ogy. Further improvements to quality their fields of business. Basic topics and efficiency are to be achieved by affecting several corporate units simul­ combining various fields of scientific Environmentally Compatible taneously, on the other hand, are dealt work, reducing the number of hier­ Production Research with as central "Joint Research Fields." archical levels and streamlining pro­ In this way, we can achieve the essen­ ject structures. The directorate respon­ The move to Ulm by the production tial integration of the individual re­ sible for the Mercedes-Benz Institute is research team has paved the way for search institutes. also in charge of the Joint Research the smooth expansion of this sector. In Under the designation "Technology", Fields of materials and transport tech­ 1990 the main task here was to define we have concentrated all the instru­ nology. This new concept is intended what had to be researched and detail ments of knowledge and technology to serve as an example for the other the approaches to be adopted. transfer to ensure the rapid and effec­ research institutes. Environmental compatibility is a tive exchange of information within central theme of industrial production, Research and with the development and will become more and more im­ sectors. Joint Research Fields portant in the future. For this reason, at the Ulm Research Center the focal points of production research are, on the one hand, those aspects of For the Joint Research Fields within manufacturing processes which affect the Research and Technology division, the environment and, on the other, the Ulm Research Center will play a those areas of technology concerned major role. The buildings erected in with reprocessing and recycling. With the first phase of construction, at Ob- regard to this, the factory must not be erer Eselsberg, were inaugurated on viewed in isolation, but must be inves­ June 1, 1990, also the foundations for tigated in all the ways it relates to the the second phase were laid. By the environment. end of 1992, two more laboratory Lower Pollutant Levels due to Improved Propulsion Technology

Conserving the environment is also a central issue when it comes to im­ proving propulsion technology. With new concepts, we are trying to further reduce the levels of pollutants gener­ ated by the combustion of gasoline or diesel fuel in the engine. This primar­ ily means nitrogen oxides, unburnt hy­ drocarbons and particulates. Our basic research is aimed at finding out how these substances form and how they can be avoided. Special experimental engines with optical windows make it possible to see inside the combustion chamber. The individual combustion cycles are analysed with the aid of multi-dimensional lasers. In parallel to this, we conduct computer simulations of the physical and chemical processes involved, so as to back up practical ob­ servation with theoretical understand­ ing. Only in this way is it possible to improve combustion chamber design and to optimize fuel injection even fur­ ther. With the "thermal induction control" for the four-stroke engine, there is no throttle valve for regulating the load. This means the engine consumes less fuel in the part-load range, thereby producing lower quantities of pollutant and less carbon dioxide. More fuel is also saved by having pistons with vari­ able compression; these are already being tested in eight-cylinder engines. What is known as ARD technology (ad­ sorption, reduction, desorption) has proved in principle suitable for the post-combustion treatment of nitrogen oxides in an oxidizing environment. In a first step, the nitrogen oxides stick (adsorb) to the surface of catalysts. Through the addition of special reduc­ ing agents in a second step, they sepa­ rate into nitrogen and oxygen, after which they are released (or desorb) from the catalyst's surface. These pro­ cesses alternate during driving. The catalysts are arranged on a disk which turns slowly in the exhaust gas stream. Alternatives to Gasoline and Diesel Fuels

For over 20 years now, research has been investigating possible alternatives to gasoline and diesel engines, and try­ ing to find viable propulsion systems which do not require fossil fuels. The first electro-hybrid bus from Mercedes- Benz, using combined diesel and elec­ tric drive, took to the road as early as 1970. In 1975 a Mercedes-Benz van became the first vehicle in the world to derive its energy from a hydrogen hydride storage medium. The latest legislation in California has made research in these areas more topical than ever. The law stipulates that, from the year 2003, a manufacturer like Mercedes-Benz has to equip 10% of the vehicles it sells there as "zero- emission vehicles." At present, the only vehicles to meet this demand are electrically powered ones - provided their electricity comes from non-fossil energy sources. The main problem with both electric and hydrogen drive is how to store the "fuel." Even the most efficient high- temperature batteries are many times heavier and bulkier than a gasoline or diesel tank. It is a similar story with the storage of hydrogen. Neither pres­ surized gas nor liquid hydrogen nor hydride storage gives vehicles the per­ formance or transport efficiency to match modern vehicles with gasoline or diesel engines. For this reason, al­ ternative propulsion systems are ini­ tially limited to applications in which shorter range and lower performance do not matter. Daimler-Benz as a technology group has the opportunity to go beyond the motor vehicle and work on basic solu­ tions to energy and environmental problems. For instance, within the framework of project "HYPASSE" (Hydrogen lowered Automobiles using Seasonal and Weekly Surplus of Electricity), sponsored by the Federal German Ministry for Research and Technology, we are developing a proto- type city bus. This is to be fueled by In the goods transportation sector group with regard to traffic and trans­ hydrogen which is produced using the we are developing fleet management port systems in a unified Berlin, and excess energy generated at certain systems which cover the entire infor­ was handed over to the authorities in times of the week and during certain mation chain from logistics and fleet the eastern and western parts of the seasons of the year by Swiss hydro­ scheduling up to actual vehicle sys­ city in October of 1990. electric power stations. tems. An essential prerequisite for use We concluded a further strategic throughout Europe is the laying down study, the "Development of Road Trans­ of standards for communication sys­ port in the People's Republic of China," High-Capacity Battery tems between individual vehicles and at the end of 1990. The results of this the fleet headquarters. joint project between Daimler-Benz AG One of the key elements in the utili­ A digital road map of Europe is de­ and the Chinese government are being zation of environment-friendly energy signed as the basis for fleet manage­ phased into China's next Five-Year technology is the battery, as the stor­ ment and traffic guidance systems. Plan and are to form the basis for fur­ age unit for electricity. Batteries avail­ Here, too, there is a need for stand­ ther cooperative ventures with the able today are far too heavy; moreover, ardizing processes and formats in or­ People's Republic. they do not have have the necessary der to record the enormous quantity of durability and are also too expensive. data involved, keep it up to date and As part of a joint venture, AEG is make it accessible to users. In the New Research Results for helping to develop the sodium/nickel- Greater Stuttgart area, a traffic project More Active Safety chloride battery for industrial use; its called "STORM" (Stuttgart Transport storage capacity, at equal weight, is Operation by Regional Management) Active safety systems help the three to four times as high as that of a has been started up in collaboration driver to retain control of the vehicle conventional lead/acid battery. The re­ with the city authorities and the gov­ even in potentially critical situations. search team is concerned with the ma­ ernment of Baden-Wuerttemberg. This Rear axle steering, for instance, can terial, the cell configuration and the forms the basis of a long-term, com­ compensate for negative influences production process, with a view to im­ prehensive research project. The idea from road surfaces, wind or from proving the efficiency and durability of is to extend the regions' transport in­ trailers. this type of battery even further. frastructure, integrating it in an overall In this context, our road testing is system to provide an optimum network augmented by our driving simulator in which makes use of road, rail and air Berlin. This makes it possible to inves­ Comprehensive Solutions transport. The first step is a feasibility tigate critical situations - such as the to Traffic Problems study as part of the European cities failure of a major component - without initiative POLIS. any danger. It is thus also possible to One of the ways our research sector systematically study the behavior of is dealing with energy and environ­ less experienced drivers. It is espe­ mental problems is through new ap­ Studies on the Transport of the Future cially these drivers who could be parti­ proaches to traffic technology. Within cularly at risk in a car which remained the European traffic projects PROM­ Investigations into the economic and stable right up to the physical limits, if ETHEUS and DRIVE we are working, social context of transport and technol­ they were not warned in time that together with partners in the automo­ ogy have acquired new emphasis with those limits were about to be reached. tive and electronics industries, on traf­ the reunification of Germany. Our We are therefore concerning ourselves fic guidance systems and information study on "The Transport Environment with appropriate alarm systems, as technology. The objective is to devise and Transport Structures of the GDR" well as with systems which intervene and build up a system which uses au­ has therefore met with great interest. actively in the accelerator, brake and tonomous vehicle-borne elements on In cooperation with a large number of steering mechanisms in such cases. the open road, and in urban areas re­ external partners from various Berlin These systems are capable not only of ceives information via traffic lights or research facilities, conceptual plans for improving safety, but also of relieving other sources from a central control an inter-disciplinary research project the driver of routine functions. The station. Examples of this include rec­ "The City as a Living Environment" automatic distance retaining system is ommended detours or up-to-the-minute were detailed and submitted for deci­ one example, which we have already information on traffic routes, sion. A further focus of effort was our tested in experimental vehicles, with participation in the study "Berlin - the help of radar and infrared monitor­ City in a State of Change." This pre­ ing equipment. sented the ideas of the Daimler-Benz In this context we are also working Adapting technology to human be­ The automatic reading of addresses on "computer vision," by which pic­ ings is also an important field for our and entire documents requires very tures from a camera directed at the Berlin research group dealing with many analytical steps. To keep pro­ road are interpreted automatically. On "The Environment of Technology." cessing times low despite this, several empty sections of motorway, an exper­ Work here concentrates on optimizing characters have to be analyzed in par­ imental vehicle equipped with such a vehicles and domestic appliances. In allel by different processors. We have system has already proved it can work the year under review, this mainly already developed the foundations for at speeds of up to 100 km/h. This consisted of dealing with details relat­ such a parallel text recognition sys­ helps to provide the conditions under ing to the new S-class, and a control tem. which vehicles can - in extreme cases simulator for AEG domestic appliances In the field of multiple parallel sys­ - be driven automatically, and at least tems, we are investigating the suit­ stay in the correct lane or for instance ability of neuronal networks for special move along safely in a traffic jam. Extra-High-Frequency Chips tasks in signal processing. This tech­ nology uses a very large number of Extra-high frequencies, e.g. for satel­ simple processing units which are Technology in the Service of Man lite communications or distance warn­ linked together in a tight network and ing radar for vehicles, require excep­ all operate in parallel. They are not The interaction between the driver tionally high processing speeds on the programmed but "learn" independently and the vehicle is to a large extent de­ part of the electronic components in­ to perform their respective jobs by termined by the instruments and con­ volved. Since such frequencies cannot adapting the links between the units trols. As part of the the "F 100" exper­ be achieved using conventional silicon to prescribed solutions. imental vehicle, we developed some chips, new solutions are necessary. completely new concepts. Since the With what is called hetero technology, driver needs to be informed as com­ extremely thin layers of varying com­ High-Grade Flat Monitor Screens prehensively as possible, while at the position but a uniform crystalline for Information Systems same time concentrating on essentials, structure are built up. Using this tech­ important information is presented nique, we have already attained ex­ While conventional microelectronics centrally and in a large display in this tremely high cutoff frequencies of uses single-crystal silicon slices as a vehicle. Only faults etc. which require about 100 Megahertz. base for integrated circuits a few immediate action are indicated while The basic technology for manufactur­ square centimeters in size, large-area the vehicle is being driven. ing discrete hetero-transistors has electronics employs glass and other The outer edges of the instrument been transferred to TELEFUNKEN Elec­ substrate materials. The semiconduct­ panel relate the vehicle to its environ­ tronic. The first microwave circuits for ing poly-crystalline silicon structures ment. If an object approaches in a low-noise, broad-band amplifier sys­ are applied by means of large-area threatening manner, the display tems have been developed. thin-film deposition processes. NMOS alarms the driver by means of colored and CMOS thin-film circuitry for clock markings in the sector concerned; at pulse rates of up to 10 MHz are under the same time, a warning signal Pattern Recognition - development. sounds. The controls of the F 100 are Reading Handwritten Texts One example of a highly promising grouped together according to their application is in high-definition, color- functions and arranged around the The aims of pattern recognition are capable flat screens, known as active- steering wheel in such a way that the to read writing and analyze docu­ matrix liquid crystal displays. The acti­ driver intuitively uses the right one. ments. For AEG Electrocom, which is vating elements for the individual ma­ Functions which are not important one of the leaders in the market for trix dots can be integrated with the with regard to safety could be con­ letter distribution and mail system au­ drive electronics on one and the same trolled by voice; to this end, we have tomation, we are working on methods glass substrate, which cuts costs. initiated the project "VESPRA." The of automatically interpreting handwrit­ Using this technology, a compact flat cassette/radio, climate control, window ten and incomplete letter addresses. screen which would be suitable for mechanisms, seat adjustment and tele­ This is an important prerequisite for vehicle-borne driver information sys­ phone can be activated by vocal com­ future success in the international tems is being developed. mands. The system is designed to market. adapt to the user's familiarity with it, and not to require the studying of a long operator's manual. Synergy Project "Energy Systems"

The rapid translation of research findings into development and into plans for new products and areas of business is just as important as ac­ quiring the research findings in the first place. The aim of the synergy pro­ jects undertaken by the Central Re­ search and Technology division is to act as a catalyst to that effect. One such synergy project concerns itself with energy technology. Problems relating to the environ­ ment and to natural resources necessi­ tate new answers. Our entire group, with all its activities, itself depends on the commercial availability and degree of acceptance of energy media. It is therefore advantageous for Daimler- Benz, as an integrated technology group, to have a broad technological base and the necessary comprehensive capacity within the group. As part of a DASA diversification project, for example, a study was made as to whether the technical and eco­ nomic resources sufficed to set up a group-wide "Energy Systems" sector. The main areas of emphasis were: • utilization of regenerative energy sources such as solar cells and wind-generated power • efficient utilization of energy by means of combined power and heat generation, using gas engines and gas turbines, and later "fuel cells" • electro-chemical energy storage using high-temperature batteries and hydrogen generated from water by means of electrolysis. As they near completion, the investi­ gations are revealing some interesting possibilities and commercial potential for a sector which could be designated "Decentralized Energy Supply Sys­ tems." At the same time, the investiga­ tions show that putting such projects into practice will require considerable investment. New Responsibilities for the The employment situation for 1990 Personnel Department at AEG was well-balanced overall; the domestic production plants were well The increasing pressure of competi­ utilized for the most part. The fact that tion and costs, the dynamic develop­ the number of employees within Ger­ ment of the markets and the objective many fell by 2.3 % (1,300 employees) of securing the future success of the was above all due to the transfer of ac­ group place high demands on our tivities to other corporate units of the managerial staff and employees. Daimler-Benz group and the hiving off It is the responsibility of the person­ of individual sectors. nel department to provide the neces­ The reduction in DASA's workforce Daimler-Benz 2,689 18 2,707 sary personnel policy framework for by 1,700 as against 1989 was largely Mercedes-Benz 179,120 51,854 230,974 this environment, which is undergoing accounted for by the hiving off of the AEG 57,173 19,776 76,949 a process of transition. Moreover, the marine technology activities. DASA 60,274 1,002 61,276 personnel sector is searching for new The employees of the newly estab­ debis 4,148 731 4,879 ways of matching the group's require­ lished Daimler-Benz InterServices orig­ Daimler-Benz ments and those of its employees. group 303,404 73,381 376,785 inate largely from the group's subsid­ Efforts concentrated especially on the At Mercedes-Benz, full capacity utili­ iaries which were transferred to debis, continuing development of personnel zation was achieved at all domestic but also from companies newly ac­ exchange, a group-wide managerial plants throughout the year under re­ quired during the year under review. staff development and planning pro­ view; the number of employees in­ At the end of 1990, the group em­ gram, and intensified basic and ad­ creased by more than 5,300. The in­ ployed 13,257 severely handicapped vanced training programs. creased personnel requirements due to people domestically. The legally pre­ higher production volumes at the pas­ scribed employment quota of 6 % was senger car plants were met largely by not reached; as in previous years, how­ Employment Developments means of indefinite contracts. ever, a considerable number of orders and Structure were awarded to outside workshops for the handicapped. At the end of 1990, the Daimler- Benz group employed a staff of 376,785 (1989: 368,226) in all, includ­ Collective Agreements for 1990 ing 303,404 (1989: 298,199) at the do­ mestic plants alone. The employment The collective bargaining round in situation in Germany was encouraging 1990 brought about a 6 % increase in overall. On the other hand, some of standard wages and salaries for the our foreign production and assembly employees of the metal-working indus­ subsidiaries had to contend with diffi­ try effective on April 1, 1990 and new cult political and economic conditions, collective agreements relating to a re­ which in some cases had considerable duction in working hours. effects on employment figures. Negotiations resulted in a standard working week of 36 hours from 1993 and 35 hours from 1995. As a depar­ ture from the 37-hour week which came into effect April 1, 1989, individ­ ual working hours of up to 40 hours per week were negotiated for 18 % of a company's employees in North Wiirt- temberg/North Baden, Lower Saxony and North-Rhine Westphalia. In other regions, the quota was 13 %. The do­ mestic group companies are making use of this opportunity. Personnel Expenditure

The group's personnel expenditure rose by 16 % to DM 26.9 billion. In the domestic works of our Corporate divi­ sions, rises in standard wages, salaries and social welfare contributions were due to an increase in the number of employees, particularly through the in­ clusion of MBB.

Company Pensions

As before, company pensions consti­ tute the nucleus of social benefits in all corporate units of the Daimler-Benz group. Together with state pensions and individual personal savings, they help assure financial security for our retired employees. Within the Daimler- Benz group in Germany, a total of DM 1.3 billion in company pensions was paid. The same pension benefit rules, as established in 1987, continued to be in effect for both Daimler-Benz AG and Mercedes-Benz AG even after the regrouping of the vehicle business. The Daimler-Benz AG and Mercedes- Benz AG paid a total of DM 274 mil­ lion to 45,600 pensioners, widows and children in the year under review. As per the Company Pension Law, pay­ ments of DM 6.6 million were made to approximately 21,500 pensioners and widows, that received assistance till 1974 as well as for the first time in the years 1975, 1978, 1981, 1984 and 1987. One off assistance payments were made to approximately 6,500 em­ ployees. Three years after the introduc­ tion of the Pension regulations, with effect from the 1st of January 1990, the Pension tables were increased by 5.6 %. In order to cover future payments, an amount totaling DM 1.0 billion was allocated to pension provisions at Daimler-Benz AG and Mercedes-Benz AG. Of this amount DM 28 million per­ tained to Daimler-Benz AG and DM 986 million to Mercedes-Benz AG. Of the latter figure, Daimler-Benz AG, in accordance with the contractual agreement at the time of the reassign­ ment of the vehicles business, bore DM 184 million. AEG disbursed DM 133 million to 42,000 pensioners, widows and or­ phans during the year under review. Corresponding payments made by the companies of Deutsche Aerospace amounted to DM 72 million.

Special Remuneration

The special remuneration awarded domestically amounted to more than DM 1 billion in all. These payments are broken down between the individ­ ual corporate units as follows:

At Daimler-Benz AG and Mercedes- Benz AG, the basic Christmas bonus was increased by DM 100, with an ad­ ditional DM 10 increase for every three years spent at the company. Assistance in the Formation Family and Career Vocational Training of Private Capital An important responsibility in the At the end of 1990, 14,630 young In accordance with the 5th Capital personnel policy of all corporate units people were undergoing vocational Formation Law, all the employees in of Daimler-Benz is enabling our em­ training within the Daimler-Benz Germany were given the opportunity, ployees to plan a working career com­ group. In the year under review, 4,440 for the first time, of purchasing shares patible with family life. At Daimler- young men and women began their in Daimler-Benz AG for a preferential Benz AG, Mercedes-Benz AG, AEG Ak­ training courses, including 3,550 in price and at a reduced tax rate. Em­ tiengesellschaft and Messerschmitt- the technical trades and 890 in busi­ ployees of Daimler-Benz AG, Mercedes- Bölkow-Blohm GmbH, labor agree­ ness professions. Of those who com­ Benz AG and Daimler-Benz InterSer- ments were reached which for example pleted their courses, 85 % commenced vices AG were alternatively offered provide a "family break" for a maxi­ work for the various corporate units. Mercedes Aktiengesellschaft Holding mum of ten years as a continuation of As a result of general trends in popu­ shares. Such an offer was introduced the legally prescribed maternity/ lation growth, the number of appli­ as a regular feature of Daimler-Benz paternity leave, after which employees cants for vocational training courses AG's capital formation policy in 1973, are entitled to resume working in a continued to decline. Within the frame­ and this social institution has now also comparable job. At the end of 1990, work of intensified information and ad­ proved very popular with employees of this provision had been made use of vertising programs, young women in the other corporate units. This offer by a total of 600 female and some particular were informed of the oppor­ has been taken up by 154,877 em­ male employees. tunities available to them in technical ployees in all. Each employee of training courses. Daimler-Benz AG and Mercedes-Benz In 1990, too, there was great de­ AG was also given the opportunity of Managerial Planning mand for special programs for school putting DM 312 in company debt cer­ and Development leavers and for courses of study at col­ tificates with an interest rate of 10 %. leges of advanced vocational studies. This option was made use of by In the implementation of our corpo­ Within our qualification scheme for 30,835 employees. rate strategies, the recognition, quali­ young specialist personnel, we have fication and specific use of the man­ assisted a large number of students agement potential already at our dis­ and intensified our program for their Residential Property posal is of decisive importance. Now care and counseling by means of Subsidies that the development and disposition training placements, opportunities for of managerial staff has been imple­ writing theses and seminars to supple­ Many of the group's member com­ mented in a comparable manner ment their courses of study. panies supported their employees once throughout all corporate units, we have Considerable investments in modern more in the building and acquisition of started to extend promotion programs equipment have been made in order to apartments and houses. Interest-free for up-and-coming managerial staff to meet the increasing demands in tech­ and reduced-interest loans totaling the entire group and have established nology training. The training staff have more than DM 78 million were granted a broadly based group-wide scheme for received appropriate further qualifica­ for 3,315 houses and apartments. the placement of top managerial staff. tion with regard to both teaching meth­ We have thus further improved the ods and content, in order to deal with systematic development and the spe­ the introduction of new technologies. cific utilization of managerial potential. Advanced Training places modified requirements on em­ The Incorporation of Employees ployees and managerial staff; the per­ in Problem-Solving The group's training scheme for se­ sonnel and training departments have nior managerial staff from all corporate prepared themselves for this with in­ In 1990, the workshop and produc­ units has now become a firm constitu­ tensified activities for development in tion quality circles continued to prove ent of our training program. This pro­ all areas of the company. their worth as the expression of the vides an effective contribution towards reinforced identification of our em­ a common understanding for the devel­ ployees with the respective depart­ opment of the group and towards per­ Preventive Health Care ments' objectives and their more effi­ sonal dialog amongst the responsible and Safety at Work cient fulfillment. managerial staff. With more than 34,000 suggestions Our in-company and external ad­ The medical services of the various for improvement submitted, the em­ vanced training programs are continu­ corporate units employed a staff of ployees of all corporate units contin­ ing to prove very popular. A total of 276 in all, including 57 company doc­ ued to show great interest in their 171,000 employees participated in tors. Particularly at small locations, work. The employees' suggestions these courses during working hours. this staff was supported by a large were rewarded with premiums The education program for our staff number of part-time company doctors amounting to about DM 11 million. in the area of new technologies and in­ and contracted doctors. Their work formation processing, in particular, was mainly concerned with rendering was extended. We have also further in­ first aid, carrying out preventive check­ Activities in the tensified advanced training measures ups, offering advice and giving courses New Federal German States for our workers. The costs due to ad­ on topics such as nutrition and addic­ vanced training rose during the year tive and dangerous substances; a fur­ By offering basic and advanced under review to DM 750 million. ther significant activity was collabora­ training programs and trainee posts to tion in workplace design. employees of former GDR concerns for The number of industrial accidents qualification in west German concerns New Forms of occurring in the various corporate and by providing experienced staff, the Work Organization units was either reduced or main­ personnel and training departments of tained at an already low level. This all corporate units contributed to the In view of the increasing proportion pleasing result was particularly due to economic growth of the new Federal of work procedures which are auto­ the commitment of managerial staff German states in 1990. mated and incorporated into informa­ and their employees, the advanced tion processing networks, along with training of safety experts and the care­ the higher qualifications of our em­ ful planning of hazard analysis pro­ ployees and their changing attitudes to grams. The increased attention given work, the distribution of labor is grad­ to safety at work and ergonomics right ually having to make way for new at the planning stage of work systems forms of work organization to be im­ has also helped reduce hazards. plemented in production. Group-based In-company social consultancy, prac­ work unites corporate and employee tised above all by Mercedes-Benz AG, aims in an exemplary manner. This in­ has been very successful. This service creases work satisfaction and uncovers offers counseling for employees in dan­ previously unrealised potential. Espe­ ger of addiction and for those with cially Mercedes-Benz AG is putting psychological problems or in personal comprehensive pilot projects on group- crisis situations. In cooperation with based work to the test. This future- doctors and other advisory services, oriented form of work organization it also refers employees to sources of assistance within and outside the com­ pany. Thanks to Our Workforce

We would like to express our grati­ tude to all our employees for their commitment and hard work throughout a difficult year, which was marked by far-reaching transformations in the po­ litical and economic spheres and by the continuation of the restructuring of our group. Our thanks are also due to the representatives on the various labor councils and committees at all levels of our group for their confident cooperation. New Valuation Methods in Group Net Income of 1.8 billion has Same showed an above-average rise of 12 %; Financial Statements Prove Beneficial Magnitude as Comparably Computed its share of total output now amounts Net Income of Last Year to 50.4 % (49.1 % last year). Consider­ The change in the valuation methods ing the fact that general price levels in the 1989 consolidated financial In 1990, sales revenues of the rose only moderately, our purchases of statements, where we have more Daimler-Benz group rose 5.2 %, to DM goods and services increased, in spite closely adapted our accounting policies 85.5 billion, in comparison to the pre­ of sales losses due to low exchange to internationally accepted accounting vious year. To facilitate comparision, rates for the U.S. dollar and yen. The practices, was positively received both we added the sales of MBB to last disproportionate increase in personnel at home and abroad. For the purpose year's figures. Total output, as a result expenses, a 16 % increase to DM 26.9 of analyzing companies and industries, of higher inventories and other cap­ billion, was the result of new hiring at the data can now be directly taken italized in-house-output, jumped 11 %, Mercedes-Benz AG, and the collective from the Daimler-Benz consolidated fi­ to DM 88.3 billion; apart from the bargaining wage and salary increases nancial statements. Improved compara­ first-time inclusion of MBB, the expan­ effective April 1st, 1990. Furthermore, bility of our group financials with sion of the vehicle leasing business is additional unscheduled pension provi­ other large industrial enterprises oper­ also reflected in these figures. Com­ sions totaling DM 250 million were ating worldwide has made it easier pared to the increase of total output, made, DM 100 million alone on ac­ during the reporting year to list the purchases of goods and services count of the Rent Reform Act of 1992. Daimler-Benz shares on important stock exchanges such as London and Tokyo. In each instance, we were able to rely solely on the published annual financials and we were not required to submit additional computations for im­ portant key figures such as net income for the year and net equity. The new valuation of pension provi­ sions and inventories in the 1989 group financials had not only impacted the balance sheet but also the state­ ment of income. For this reason, some basic figures in last year's income statements are not comparable with those of 1990. Moreover, we have, for the first time, included the accounts of MBB in the earnings statements. In or­ der to illustrate the actual develop­ ment, we are therefore partly deviating in the following analysis from the offi­ cial presentation of our accounts. Because of the noticably higher vol­ Balanced Group Balance Sheet Ratios to retained earnings. Fixed asset addi­ ume of investment activities of prior tions of DM 5.7 billion were offset by years, depreciation of fixed assets, in­ The balance sheet total of the disposals and depreciation totaling DM cluding leasing vehicles, write- downs Daimler-Benz group rose further, by 4.1 billion. The DM 0.2 billion increase and amortization of marketable securi­ DM 4.6 billion to DM 67.3 billion, on in financial assets, to DM 1.6 billion, ties and intangible assets respectively, account of the larger business volume. pertains to new equity investments in climbed further, i.e., by 17 % to DM Capital assets, including leasing items, the corporate divisions of AEG, DASA 5.3 billion. Other operating income is rose from DM 20.1 billion to DM 23.4 and debis. The balance sheet amount shown at DM 4.0 billion. Last year, billion. Intangible assets included of leasing items - largely cars and this income item included to a larger goodwill of DM 124 million. Such commercial vehicles of Mercedes-Benz extent credits resulting from the goodwill originated subsequent to the - has continued to increase strongly, change in valuation methods. Other op­ restructuring of the Daimler-Benz from DM 5.0 billion to DM 6.5 billion; erating expenses continued at a high group, and was written off system­ this represents about 10 % of total as­ level even though last year's figure atically. The goodwill resulting mainly sets meanwhile and nearly 30 % of was likewise influenced by non­ from the acquisition of additional capital assets. Excluding leasing vehi­ recurring expenses. shares in MBB in the amount of DM cles, the ratio of capital to total assets In the non-operating sector, with 591 million was, in contrast, charged amounted to 25.1 % (24.0 % last year). lower annual average liquidity, net in­ Inventories at DM 18.9 billion, almost terest income declined DM 132 million to DM 989 million. As in prior years, we have reduced the interest income earned in the high-inflation countries of Argentina and Brazil by the inflation portion. The results from ordinary business activities dropped to DM 4.2 billion (DM 10.1 billion last year); comparably computed, it was 10 % be­ low the previous year. Due considera­ tion must also be given here to the fact that last year's income taxes were DM 0.4 billion higher due to the new method of valuing inventories. Al­ though the net income amount of DM 1.8 billion shows a slight increase as compared to last year's comparably computed amount of DM 1.7 billion, much of it is due to lower income taxes, particularly at some foreign sub­ sidiaries. unchanged from last year, were fi­ nanced by advance payments from customers to the tune of almost 33 %; the ratio of net inventories in relation to total assets declined slightly from 19.7 % to 19.5 %. Liquid assets also de­ clined, i.e., from DM 14.6 billion to DM 13.7 billion. This amounted to 20.3 % of total group assets (23.3 % last year). On the liability side of the balance sheet, shareholders' equity - excluding the amount set aside for dividend pay­ ments (unappropriated profit) - rose DM 0.9 billion to DM 17.3 billion. A total of DM 1.1 billion of the consoli­ dated net income was allocated to re­ tained earnings; goodwill amounts written off here had opposite effects. The ratio of equity capital, amounting to 25.6 %, was slightly lower than last year's figure of 26.2 %. With the simul­ taneous increase of the capital asset ratio, capital assets covered by equity capital also decreased slightly, from 109 % to 102 %. Leasing vehicles were not considered here because they are basically financed through borrowed capital apart from depreciation and proceeds from disposals. Our financial liabilities for the leasing and financing business amounted to DM 6.2 billion. Even though provisions rose further, by DM 0.7 billion to DM 27.4 billion, their share in terms of the balance sheet total declined from 42.6 % to 40.6 %. Both capital assets and net in­ ventories but also part of the remain­ ing current assets are covered by eq­ uity capital and long- and medium- term provisions. Investment in Fixed and Financial Activities of the Group Treasury For the purpose of refinancing our Assets Again Fully Financed By Cash activities, especially the leasing and Flow The concept of centralized financial retail financing business, we take ad­ management, which was adopted in vantage of all opportunities which in­ Additions to fixed assets, intangible connection with the restructuring of ternational money and capital markets assets as well as net additions to fi­ the Daimler-Benz group of companies, had to offer. Thus, lire 150 billion, A $ nancial investments, totaling DM 6.3 has resolutely been pursued during the 100 million and DM 200 million as billion, were fully financed in the re­ reporting year. With this concept, stra­ Fixed-Reverse-Floaters were raised porting year by internally generated tegic financial decisions in the group through the issuance of Eurobonds via cash-flow which amounted to DM 6.7 are made centrally. Operative finance Daimler-Benz International Finance B. V. billion. Additional funds were derived and liquidity management is also car­ In addition, we, as the first German from the increase in liabilities, partic­ ried out in the central finance depart­ company to do so, have initiated a ularly in connection with the refinanc­ ment. From time to time, the handling D-mark based Commercial-Paper- ing of our rapidly growing leasing of individual finance measures can Program which will primarily serve business worldwide. also be organized decentrally. our short-term refinancing needs. In the application of funds, the con­ With the inclusion of MBB this year, In the central foreign exchange tinued vigorous investment activities we essentially concluded the transfer management department, we evaluate of the Daimler-Benz group become evi­- of liquid funds and marketable securi­ the extensive currency risk of the dent, with which we wish to enhance ties from the domestic companies to group companies, develop in coopera­ the productivity and competitiveness Daimler-Benz AG. This transfer was tion with the corporate divisions indi­ of our products. started last year with the introduction vidually designed hedging strategies, of our Cash Concentration Program. and direct their implementation. It is The entire liquidity, which at year's the objective of the foreign exchange end amounted to DM 13.7 billion, is management department, depending being invested in such a way that all on the anticipated exchange rate de­ financial requirements derived from velopment in risk-prone currencies, to the business purposes of the company protect through continuing hedging can be met on a short-term basis. The measures a proportion of the delivery investment in marketable securities is volume - varying from country to in harmony with the figures in the country - and thus limit and amelio­ medium-term investment plan and also rate the currency risk. takes into account the prospective in­ terest trend. The portfolio is composed of fixed-interest securities of first-class issuers. We use new investment in­ struments if they fit our general in­ vestment strategies.

Financing of Sales and Projects

The indebtedness problems of deve­ loping and under-developed countries, and the huge needs of the new federal states and of eastern Europe have led to a strong demand for funds. Taylor- made programs increasingly gain in importance here; this is particularly true for large infrastructure projects in which our group companies are partici­ pating. Looking at the difficult economic conditions in the countries of eastern Europe and the Third World, commer­ cial banks are quite reluctant to ex­ tend credit. It is for this reason that governmental development funds, within the scope of bilateral and multi­ lateral cooperation, are becoming more and more important. Funds which are thus made available are also of grow­ ing importance to our business. In the export business it was also our goal during the reporting period to ascertain all conceivable risks and to provide sufficient protection. In this re­ gard, we have fully utilized the tradi­ tional instruments of protection.

*

Our business policy at home and abroad in 1990, again conformed with the "OECD-Guidelines for Multinational Companies."

*) Including carry-forward amounts of companies consolidated for the first time.

The consolidated financial state­ The acquisition costs/self-construc­ Leasing equipment is valued at cost, ments have been prepared in accor­ tion costs for fixed assets are reduced and is depreciated using the declining- dance with regulations set forth in the by scheduled depreciation charges. The balance method. Accounting Standards Act; the opportunities for special tax-deductible Raw materials, manufacturing sup­ amounts are shown in millions of depreciation allowances were fully uti­ plies and goods purchased for resale are D-marks. The summarized balance lized, i.e. in connection with Section valued at the lower of cost or market sheet and statement of income items 7d of the Income Tax Act and Section value. Manufactured products are val­ are separately shown in the notes, 82d of the Income Tax Regulations ued at production costs which com­ and, where necessary, explained. (environmental protection, and re­ prise, apart from direct materials and search and development investments), direct labor, applicable manufacturing Section 14 of the Berlin Development overheads including depreciation Accounting Principles and Valuation Law, Section 3 of the Zone Border charges. To the extent that inventory Methods Area Development Law Section 6b of risks are determinable, i.e. for reduced the Income Tax Act and Subsection 35 usability after prolonged storage or af­ Accounting principles and valuation of the Income Tax Guidelines. ter design changes, reasonable deduc­ methods were unchanged, after having Scheduled fixed asset depreciation tions are made, which for manufac­ been more closely brought in line with allowances are calculated generally tured goods must not result in a loss internationally accepted accounting using the following useful lives: 17 to upon sale. practice last year. Since the pension 40 years for buildings, 8 to 20 years Receivables and other assets - if non- provisions, in this regard, have been for site improvements, 3 to 20 years interest bearing - are reduced to their calculated at the tax-allowable interest for technical facilities and machinery, present value at the balance sheet rate of 6 %, there exists a variance and 2 to 10 years for other facilities date, and are valued taking into ac­ against the account of the parent com­ and factory and office equipment. Fa­ count all known risks. A lump-sum al­ pany which based its provision com­ cilities used for multishift operations lowance for doubtful accounts on a putation on an interest rate of 3.5 %. are depreciated using correspondingly country-specific scale is deducted from Assets and liabilities presented in the lower useful lives. Buildings are depre­ the receivables in recognition of the consolidated balance sheet - in identi­ ciated using straightline depreciation general credit risk inherent in receiv­ cal group circumstances - are uni­ rates - and where allowable under the ables. formly valued. In 1990 as in previous Tax Code - declining rates. Movable Treasury stock and other marketable years, provisions for approved conver­ property is depreciated using the securities valued at the lower of cost or sion, reconstruction, maintenance and declining-balance-method. For movable market value at the balance sheet development projects have been set up property, we change from the date. or have been systematically continued. declining-balance method to the Provisions for old-age pensions and Intangible assets are valued at acqui­ straightline method of calculating de­ similar obligations are actuarially deter­ sition costs. Beginning with additions preciation allowances when the equal mined on the basis of an assumed in­ in 1990, goodwill resulting from the distribution of the remaining net book terest rate of 6 % using the Entry Age capital consolidation is being amor­ value over the remaining useful life Actuarial Cost Method. The regulations tized over five years, which includes leads to higher depreciation amounts. of the 1992 Pension Reform Act have, the year of acquisition. Goodwill ac­ Depreciation allowances on additions for the first time, been taken into ac­ quired in 1990 totaling DM 591 mil­ during the first and second half of the count in calculating the provision lion, which was still in connection year are calculated using the full year amounts. with the restructuring to an integrated or half-year rates, respectively, in con­ Provisions for taxes and other provi­ technology concern, was charged to formity with the Tax Simplification sions are determined on the basis of retained earnings as in prior years. Rules. Assets of little value are ex­ fair and reasonable business judge­ Fixed assets are valued at acquisition pensed in the year of acquisition. ments. The obligations in the person­ or self-construction costs. The self- Investments in related companies, nel and social area are reflected in the constructed facilities comprise direct and in other long-term financial assets financial statements at non-discounted labor direct materials and applicable are valued at the lower of cost or mar­ values expected to be paid in the fu­ manufacturing overhead including ket; non-interest bearing or low- ture as benefits are vested. depreciation. interest bearing long-term receivables Liabilities are shown at their repay­ are shown at their present value. Major ment amount. investments in associated companies are valued according to the equity method. Companies Included in Consolidation One subsidiary, in which we ac­ Principles of Consolidation quired a majority interest at the end of The companies included in consol­ 1990, was not included in consolida­ Capital consolidation was effected ac­ idation encompass, apart from tion because common management did cording to the book value method Daimler-Benz AG, 269 domestic and not exist and the majority of the vot­ where the parent's acquisition costs foreign subsidiaries. ing rights could not be unrestrictedly are eliminated against the relevant During the reporting year, 27 com­ excercised. The company was, there­ share capital and retained earnings at panies were added to and 23 com­ fore, valued according to the equity the time of acquisition or first-time in­ panies deleted from consolidation. method. clusion in consolidation. Comparability of financial data with In connection with the restructuring The differences resulting from the the previous year has not thereby been of the Daimler-Benz-group, Daimler- capital consolidation are, as far as pos­ impaired. Benz InterServices (debis) AG was sible, allocated to the relevant balance Not included are 182 subsidiaries founded during the middle of 1990. sheet items. For the treatment of the whose effect on the consolidated finan­ The restructuring had no material ef­ remaining difference (goodwill) result­ cial statements is not material (their fect on the Daimler-Benz consolidated ing from additions in 1990, see expla­ total sales volume is less than 1 % of financial statements because the com­ nation given in the caption "Account­ consolidated sales) and 12 companies panies which were assigned to debis ing Principles and Valuation Methods". administering pension funds whose as­ came to a large extent from other cor­ The hidden reserves have been made sets are solely used for pension pur­ porate units, and thus were already in­ active and will be written off over poses and are subject to restrictions. cluded in the 1989 consolidation. their useful lives in an effective man­ In accordance with Section 296, During the reporting year, the state­ ner. Subsection 1, No. 1, of the Commer­ ments of income of Messerschmitt- Profits earned by subsidiaries after cial Code, Deutsche Airbus GmbH is Bölkow-Blohm GmbH and its subsid­ the date of acquisition are added to not consolidated because iaries were included in the consolida­ consolidated retained earnings. The un­ Messerschmitt-Bolkow-Blohm GmbH, tion for the first time. In the previous appropriated profit, as shown both in with regard to this company, on ac­ year, merely the balance sheets were the separate financial statements of count of agreements with the Federal consolidated because Deutsche Aero­ Daimler-Benz AG and in the consoli­ Republic of Germany and of rules in space AG did not acquire a majority dated financial statements, is thus the the bylaws with respect to resolutions, interest in Messerschmitt-Bolkow- same. In this connection we have is restricted in exercising its rights. Blohm GmbH until December of 1989. charged the income-affecting consolida­ tion measures and the profits/losses earned by the subsidiaries to consoli­ dated retained earnings. In the consolidated financial state­ ments we have included 108 associated companies. Eleven associated companies as well as our subsidiaries Deutsche Airbus GmbH, Hamburg, and Siliconix Inc., Santa Clara/U.S.A., have been included in our consolidated financial state­ ments according to the book value method at equity. Goodwill resulting from additions in 1990 was capitalized and is being written off pro rata. The remaining associated companies Currency Translation The adjustments made in the in­ are shown under investments in affili­ come statements by our subsidiaries in ated companies at cost of acquisition Foreign currency receivables are Brazil for monetary devaluations have and in some instances less write­ translated in the individual financial been retained in the consolidated downs as they are not material to the statements at the bid price on the day statement of income without change, consolidated balance sheet, financial they are recorded or at the spot rate effectively preventing reflection of in­ condition and results of operations. on the balance sheet date, if lower. flationary profits. Intercompany receivables and pay­ Foreign currency payables are trans­ The income taxes, which were al­ ables have been eliminated; the differ­ lated at the asked price on the day ready geared to the balance sheet date ences resulting from debt consolidation they are recorded or the spot rate on in the national financial statements, have been charged or credited to in­ the balance sheet date if higher. have been translated at year-end rates. come. The accounts of all foreign subsid­ Items from inflation-adjusted income All material intercompany profits iaries are translated to D-marks on the statements of our Argentinian com­ resulting from intercompany sales of basis of historical exchange rates for panies are translated at year-end ex­ goods and services have been elimi­ non-current assets, and at year-end ex­ change rates. Fictitious profits/losses nated, except items of minor impor­ change rates for current assets, bor­ resulting from the divergence between tance. The same holds true for sales of rowed capital and unappropriated the inflationary trend and the changes goods and services by associated com­ profit. Stockholders' equity in D-marks in the currency's value have been panies to companies included in con­ is the remaining difference between eliminated. solidation. translated assets less translated lia- Intercompany sales and other inter­ bilites and unappropriated profit. The company earnings have been elimi­ difference resulting from the transla­ nated against the relevant costs, or re­ tion of balance sheet items is recorded classified to "capitalized in-house out­ in consolidated retained earnings. put" or to "increase in inventories", Expense and income items are es­ respectively. sentially translated at average annual Deferred taxes (assets side) shown in exchange rates. To the extent that they the consolidated balance sheet result relate to fixed assets (fixed asset de­ from income-affecting consolidation ad­ preciations, profit or loss from disposal justments. of fixed assets), they are translated at historical costs. Net income, additions to retained earnings, and the unap­ propriated profit are translated at year- end rates. The differences resulting from the translation at average rates in effect during the year and the ex­ change rates at the balance sheet date are reflected in other operating ex­ penses. (1) Intangible Assets Intangible assets, amounting to DM 304 million (1989: DM 130 million) comprise mostly acquired EDP Software, patents, and goodwill acquired for valuable consideration. Moreover, net book value of goodwill aris­ ing from the capital consolidation is being shown under this caption. To a minor degree, this caption also com­ prises advance payments made.

(2) Fixed Assets AEG and Deutsche Aerospace account for nearly 50 % The increase in property, plant and equipment by DM of the consolidated inventory total. 1,549 million to DM 15,057 million is derived from in­ vestments of DM 5,667 millions and reclassifications of (6) Advance Payments Received DM 19 million reduced by disposals of DM 579 million and depreciation of DM 3,558 million. Advance payments received amounting to DM 5,727 Special tax-deductible depreciation allowances amount million (1989: DM 6,390 million) were received from to DM 95 million (1989: DM 187 million); depreciation customers almost exclusively for projects and long-term in excess of scheduled depreciation amount to DM 2 contracts at AEG, Dornier, MTU and MBB; they were de­ million (1989: DM 60 million). ducted from inventories.

(3) Financial Assets A complete listing of our stock ownership will be filed with the commercial registry office at the county court house in Stuttgart (Dept. B No. 173). Investments in long-term securities totaling DM 208 million (1989: DM 233 million) are mostly accounted for by Daimler-Benz AG. Unscheduled write-downs of investments in affil­ iated companies, of investments in related companies and of other long-term receivables, totaling DM 110 mil­ lion (1989: DM 80 million), had to be made. Because of increased market values, investments in long-term securities should have been written up by DM 24 million (1989: DM 49 million) in accordance with the value appreciation doctrine (Section 280, of the Com­ mercial Law). However, such a write-up was not made for reasons of tax law.

(4) Leased Equipment The increase in leased equipment - almost exclu­ sively vehicles - by DM 1,475 million to DM 6,518 mil­ lion pertains largely to Mercedes-Benz Credit Corpora­ Approx. DM 0.9 billion (1989: DM 1.1 billion) of the tion, Norwalk, U.S.A., and to Mercedes-Benz Leasing receivables from related companies pertain to credit bal­ GmbH, Stuttgart. About 88 % of this balance sheet item ances at financial institutions, marketable securities and pertains to these two companies. fixed-interest debt instruments. Other assets include in­ vestments of liquid funds in debt instruments not traded on stock exchanges. They amount to DM 3,866 million (1989: DM 4,671 million). Also shown here are receiv­ ables derived from the business activities of finance and leasing companies. (13) Capital Stock and Paid-in Capital Capital stock and paid-in capital pertain to Daimler- Benz AG.

(14) Retained Earnings Retained earnings comprise retained earnings allo­ In October of 1990 we sold 205,016 shares to our em­ cated under statute of DM 160 million, retained earn­ ployees (par value DM 10 million = 0.4 % of total out­ ings allocated for treasury stock of DM 61 million standing share capital) at a preferential price of DM 346 and other retained earnings of Daimler-Benz AG of for each share (in the event one share was purchased) DM 7,841 million. Also reflected here are the com­ or DM 392 for each share (in the event two shares were pany's share in the retained earnings and results of purchased). On the balance sheet date, we held 111,063 operations of consolidated subsidiaries, insofar as shares of treasury stock (par value DM 6 million = 0.2 % they have been earned since belonging to the group. of total outstanding capital stock), 108,563 shares of Additionally, this caption takes into account the cu­ which were purchased in 1988. In August of 1990, a mulative results from the elimination of intercompany further 2,500 shares were purchased at an average earnings and from the debt consolidation, as well as price of DM 643 a share. the difference arising from currency translations. The Other securities largely pertain to fixed-interest- amount allocated from consolidated net income to re­ bearing debt instruments. Pursuant to the value appre­ tained earnings amount to DM 1,230 million. ciation doctrine, they should have been written up by DM 7 million but such a write-up was not recorded for (15) Minority Interests reasons of tax law. The stock ownership of outside third parties in the (10) Cash subsidiaries included in consolidation pertain mostly to MBB, AEG, Mercedes-Benz of South Africa, Dornier Cash amounting to DM 3,786 million (1989: DM and to MTU. 2,985 million) consists of deposits in banking institu­ tions, cash on hand, deposit at the Bundesbank (German (16) Provisions for Old-Age Pensions and Similar Federal Bank), in post office accounts, and checks on Obligations hand. When the assets of the provident funds are added (11) Prepaid Expenses and Deferred Taxes to the provisions for old-age pensions, the company's pension obligations are fully covered. Deferred taxes on income-affecting elimination entries amount to DM 1,363 million (1989: DM 992 million). (17) Other Provisions Deferred taxes - a debit amount overall - as shown in the individual balance sheets of consolidated companies, are not included.

(12) Stockholders'Equity The changes in stockholders' equity are as follows: The provisions for taxes include DM 1,139 million (1989: 1,589 million) which pertain, to a large extent, to Daimler-Benz AG for open years pending final assess­ ment. Apart from existing worldwide warranty obligations, other provisions take into account, above all, obligations in the personnel and social area, risks for losses inher­ ent in pending business transactions, risks arising from contractual liabilities and pending litigations as well as devaluation risks in high-inflation countries. Additional provisions exist for expenditures which are based on approved change-over, alteration and some de­ velopment projects, for possible additional costs in con­ nection with completed contracts, and for maintenance which had been planned for the year under review but had to be deferred until the following year.

Financial liabilities include approx. DM 6.2 billion in connection with the refinancing of the strongly expand­ ing leasing and sales financing activities for cars and commercial vehicles. The liabilities to related companies mostly pertain to obligations recorded at MBB in favor of joint venture companies. Miscellaneous liabilities largely comprise December accruals for wages and salaries as well as tax liabilities. Minimum dividend guarantees in favor of co-owners Liabilities to financial institutions, notes payable, lia­ of three subsidiaries, as well as contractual performance bilities to related companies, miscellaneous liabilities, guarantees could not reasonably be estimated. and advance payments received from customers (di­ rectly deducted from inventories) are mainly secured Other Financial Commitments through mortgage conveyance or through assignment of Financial commitments arising from rental, lease and receivables in the total amount of DM 1,223 million leasing contracts average approx. DM 557 million annu­ (1989: DM 1,228 million). ally; the average contract duration is nine years. * For companies not included in consolidation, we have financial commitments amounting to DM 156 million. The other financial commitments, particularly pur­ chase order commitments for capital investments, are within the scope of normal business activities. The obligation arising from stock subscriptions and from capital subscriptions in close corporations pursuant to Section 24 of the GmbH Act, amount to DM 9 million. We are jointly and severally liable for certain non- incorporated companies, partnerships and joint venture work groups. In addition, there exist performance con­ tracts and miscellaneous guarantees in connection with ongoing business transactions. When measured against total output of DM 88,340 million (1989: DM 80,552 million), the ratio of expendi­ ture for goods and services amounts to 50% (1989: 49 %).

(24) Personnel Expenses/Employment In millions of DM Wages and salaries Social levies and expenses for old-age pensions

Both the increased number of employees and the col­ lective bargaining wage and salary increases were the In comparison to the reporting year, last year's rela­ main reason for the higher personnel expenses. tively large increase in inventories was due to the change in the valuation method of products in 1989. (25) Amortization of Intangible Assets, Depreciation of Fixed Assets and of Leased Equipment (22) Other Operating Income The income amount included in this caption for the dissolution of provisions total DM 792 million. Addi­ tional income is derived from exchange profits in con­ nection with ongoing purchase and payment transac­ tions, mostly earned abroad, from costs charged to third parties, from tax refunds, from security sales, and from The depreciation of fixed assets pertains with more rentals and leases. The reduction of the lump-sum al­ than 50 % to Mercedes-Benz AG. The increase in depre­ lowance for doubtful accounts contributes DM 23 mil­ ciation of leasing equipment results from the growth of lion. Profits from the sale of capital assets amount to the leasing business of our domestic and foreign financ­ DM 58 million. ing companies. DM 1,412 million of other operating income is attribu­ The rise in amortization of intangible assets of DM 56 table to prior years. Last year, this caption comprised an million over last year to DM 112 million is largely due amount of DM 5.5 billion from dissolution of provisions, to the amortization of capitalized goodwill from the capi­ of which DM 5.2 billion was derived from a change in tal consolidation. the method of computing pension obligations in 1989 in compliance with tax regulations. (26) Other Operating Expenses This caption comprises additions to provisions, main­ tenance expenses, administrative and selling expenses including sales commissions, rental and lease expenses, exchange rate losses incurred in the normal course of business, freight-out, packaging, and the difference re­ sulting from the currency translation of income state­ The decline in taxes is due to the reduction of the ments of foreign subsidiaries. Losses from valuation ad­ German corporate income tax rate from 56 to 50 % in justments and losses from disposal of fixed and current the reporting period and to the decrease of the taxable assets amounts to DM 644 million. Other operating income of several foreign subsidiaries. In comparison expenses amount to DM 12,016 million (1989: DM 12,292 with the prior year the deferred tax liability set up in million). Last year, this caption included DM 1.4 billion connection with the charge in the valuation method of in expenses which were caused by special factors in inventories in 1989 resulted in a non-recuring expense connection with the restructuring; in 1990, MBB is of DM 0.4 billion in the prior year. included for the first time with expenses amounting to about DM 1 billion. (31) Net Income Overall, DM 162 million is applicable to prior years. Consolidated net income of DM 1,795 million has pre- (27) Net Income from Affiliated, Associated and Re­ dominantely been earned by the Mercedes-Benz corpo­ lated Companies rate unit. The 1989 net income, comparably adjusted, amounted to DM 1.7 billion. Special tax depreciation of fixed assets and tax-allowable write-downs of current as­ sets have reduced net income only slightly. Also, future charges in connection with such write-offs will not be material.

Other Information/Boards Under the assumption that the proposed dividend is ratified by shareholders at the Annual General Meeting on June 26, 1991, the remunerations paid by the Group companies to the members of the Board of Management and to the Supervisory Board of Daimler-Benz AG amount to DM 13,750,618 and DM 1,990,115 respec­ tively. Disbursements to former members of the Man­ agement Board of Daimler-Benz AG and their survivors amount to DM 12,448,571. An amount of DM 91,601,693 was recorded on the books 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, 1990, advances and loans to members of the Board of Management of Daimler- Benz AG amount to DM 90,297. Home loans included herein are not subject to interest; other loans and ad­ vances bear interest at 5.5 %. During the year, DM 122,822 was repaid. The stipulated maturities are ten years for home loans, and one year for other loans and advances. The accounting records and the consolidated accounts, which have been audited in accordance with professional standards, comply with the legal provisions. With due regard to the generally accepted accounting principles, the consoli­ dated accounts give a true and fair view of the assets, liabilities, financial posi­ tions and profit and loss 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 accounts of Daimler-Benz Aktien­ gesellschaft and the consolidated accounts.

Frankfurt am Main, April 10, 1991

KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Zielke Dr. Koschinsky Wirtschaftsprüfer Wirtschaftsprüfer (Certified Public Accountant) (Certified Public Accountant)

The financial statements of Daimler- Buildings are depreciated using of both companies retiring on or after Benz AG have been prepared in accor­ straight-line depreciation rates - and July 1, 1989. The obligations for old- dance with regulations set forth in the where allowable under the Tax Code - age pension benefits are actuarially Accounting Standards Act. The summa­ declining rates. Movable property with determined using the Entry Age Actu­ rized balance sheet and statement of a useful life of four years and more is arial Cost Method on the basis of an income items are separately shown in depreciated using the declining- assumed interest rate of 3.5 %. In com­ the supplement. The figures are shown balance-method. We change from the puting the provision for old-age bene­ in millions of D-marks and have been declining-balance-method to the fits, we have included all eligible em­ prepared allowing for the appropriation straight-line method of calculating de­ ployees, taking into account company- of net income. preciation allowances when the equal specific fluctuation probabilities. Pen­ distribution of the remaining net book sion accrual starts with entry age and value over remaining useful life leads ends with the earliest possible age of Accounting Principles and Valuation to higher depreciation amounts. retirement as defined in the Pension Methods With reference to the Tax Simplifica­ Reform Act 1992. tion Rules, depreciation allowances on Provisions for taxes and other provi­ During the reporting year, Daimler- fixed assets additions during the first sions are determined on the basis of Benz AG continued with the same ac­ and second half of the year are calcu­ reasonable business judgement. counting principles and valuation lated using the full year or half-year Liabilities are shown at their repay­ methods from last year. rates, respectively. Assets of little ment amounts. Intangible assets and fixed assets are value are expensed in the year of valued at acquisition costs which are acquisition. reduced by scheduled depreciation al­ Investments in affiliated companies, Currency Translation lowances. The opportunities for special in related companies and in other long- tax-deductible depreciation allowances term financial assets are valued at the Foreign currency receivables are were fully utilized i.e., in connection lower of cost or market value; non- translated in the financial statements with Section 7d of the Income Tax Act interest bearing or low-interest bearing at the bid price on the day they are (environmental protection investments) long-term receivables are valued at recorded or at the spot rate on the and Section 6b of the Income Tax Act. their present value. balance sheet date if lower; foreign Scheduled fixed asset depreciation Receivables - if non-interest bearing currency payables are translated at allowances are calculated generally - are reduced to their present value at the asked price on the day they are using the following useful lives: 20 to the balance sheet date, taking into ac­ recorded or at the spot rate on 40 years for buildings, 10 to 20 years count all known risks. An allowance the balance sheet date if higher. for site improvements, 3 to 10 years for doubtful accounts on a country- for technical facilities and machinery, group basis is deducted from the re­ other facilities as well as factory and ceivables in recognition of the general office equipment. credit risks inherent in receivables. Treasury stock and other marketable securities are valued at the lower of cost or market value. Provisions for old-age pensions and similar obligations have, in accordance with the drop-down and capital con- tribition agreements between Daimler- Benz AG and Mercedes-Benz AG, been made for pension claims of eligible vested employees and for pensioners (1) Intangible Assets Intangible assets amounting to DM 7 million (1989: DM 6 million) comprise mostly acquired EDP software.

(2) Fixed Assets Fixed assets totaling DM 811 million (1989: DM 725 million) pertain largely to the research centers in Ulm and Frankfurt am Main, the Daimler-Benz head office building in Stuttgart-Mohringen, the parcel of land on the Potsdamer Platz in Berlin and the Lammerbuckel training center situated in the hills of the Schwabische Alb. Scheduled depreciation and special tax depreciation amount to DM 134 million and DM 6 million, respec­ tively. Receivables from affiliated companies mostly pertain (3) Financial Assets to loans extended to domestic and foreign subsidiaries. The investments in affiliated and related companies DM 513 million of the receivables from related com­ amount to DM 15,604 million. Additions of DM 1,106 panies pertain to credit balances at financial institutions, million pertain most of all to capital stock increases at and DM 211 million to marketable securities and fixed Daimler-Benz North America Corporation and to the income debt instruments. newly-founded Daimler-Benz InterServices (debis) AG. Other assets include investments of liquid funds in The listing of the shareholdings of Daimler-Benz AG debt instruments not traded on stock exchanges; they will be filed with the registry office at the county court amount to DM 3,064 million. Also shown here are inter­ house in Stuttgart. est receivables and tax refund claims. Because of increased market values, investments in Together with marketable securities (item 6) and cash securities should have been written up by DM 5 million (item 7), Daimler-Benz AG's liquidity amounts to DM in accordance with the value appreciation doctrine (Sec­ 8,967 million (1989: DM 9,857 million). tion 280 of the Commercial Code), but was not done for reasons of tax law. Unscheduled write-downs of financial assets, amount­ ing to DM 9 million, pertain to write-downs of DM 5 million for investments in affiliated respectively related companies, and of DM 4 million for investments in secu­ rities and receivables. (9) Paid-in Capital Paid-in Capital includes the "agio" (net proceeds in excess of par value) from previous capital stock in­ creases and from rights issues not taken up by share­ holders. In the year under review DM 3 million have been appropriated. In October of 1990 we sold 205,016 shares to our em­ ployees (par value DM 10 million = 0.4 % of total out­ (10) Retained Earnings standing share capital) at a preferential price of DM 346 In millions of DM for each share (in the event one share was purchased) Allocated under statute or DM 392 for each share (in the event two shares were Balance 12/31/90 purchased). On the balance sheet date, we held 111,063 unchanged from balance 12/31/89 160 common shares (par value DM 6 million = 0.2 % of total Allocated for treasury stock outstanding capital stock), 108,563 shares of which Balance 12/31/89 116 Transfer to unallocated were purchased in 1988. In August of 1990, a further 2,500 shares were purchased at an average price of DM 643 a share. Other marketable securities largely pertain to fixed- interest-bearing debt instruments. Because of increased market values they should have been written up by DM 7 million in accordance with the value appreciation doc­ trine but was not recorded for reasons of tax law.

(7) Cash Cash amounting to DM 1,714 million (1989: DM (11) Provisions for Old-Age Pensions 1,164 million) consists almost exclusively of deposits in and Similar Obligations banking institutions; in addition, we held small amounts The direct and indirect pension obligations of Daimler- of cash on hand, deposits at the Bundesbank (German Benz AG and of Mercedes-Benz AG are actuarially com­ Federal Bank) and in post office accounts. puted on the basis of the pension rules valid since Janu­ ary 1, 1987. The pension provisions of both companies rose to DM 9.3 billion (1989: DM 8.5 billion). The assets of the Daimler-Benz Unterstiitzungskasse GmbH (Provi­ dent Fund) amount to DM 3.1 billion (1989: DM 3 bil­ lion). The pension obligations of Daimler-Benz AG and of Mercedes-Benz AG are thus fully covered.

(12) Other Provisions

The capital stock is unchanged from last year. Of the authorized share capital totaling DM 500 mil­ lion as approved by the shareholders at their meeting on July 2, 1986, DM 112 million still is available until June 30, 1991, after having used partial amounts of DM 176 million and DM 212 million at the end of 1986 and The provisions for taxes pertain largely to open years at the end of 1989, respectively. pending final assessment, to the tax portion with re­ According to the information received by us under spect to the special equity reserve reclassified in 1987, Section 20, Sub-Section 1, of the Company Act "Deutsche and to the obligations for employee jubilee payments Bank Aktiengesellschaft", Frankfurt am Main, and "Mer­ only temporarily tax deductible. cedes Aktiengesellschaft Holding", Frankfurt am Main, each own more than 25 % of our capital stock. The other provisions take into account, above all, The liabilities from purchases of goods and services risks arising from equity investments, from contractual declined largely as a result of continuing progress pay­ liabilities and pending litigation, and from obligations in ments for the new administration building in Stuttgart- the personnel and social benefits areas. In addition, pro­ Mohringen. visions were made for maintenance expenditures The slightly lower miscellaneous liabilities include - planned for the reporting year, but which cannot be car­ apart from obligations arising from amounts withheld ried out until the following year, as well as for expendi­ from employees for income taxes and social security tures for approved change-over, alteration and mainte­ payments - mostly loans extended by employees to the nance projects. company in connection with the capital formation pro­ gram, and obligations arising from property transactions. (13) Liabilities Payable to Affiliated Companies (14) Other Liabilities

A minimum dividend guarantee for 1991 and later, exists in favor of co-owners of Dornier GmbH that can­ not reasonably be estimated. A non-estimative dividend guarantee was assumed in favor of outside shareholders of AEG Aktiengesellschaft and of Deutsche Aerospace AG.

Other Financial Commitments The liabilities to affiliated companies pertain largely to the corporate units Deutsche Aerospace, Mercedes- These commitments total DM 929 million; those to af­ Benz, AEG and Daimler-Benz InterServices. They are filiated companies amount to DM 194 million. largely due to liquidity transfers and intercompany The purchase order commitments for capital invest­ transactions, within the framework of centralized fi­ ments are within the scope of normal business activ­ nance and liquidity management. ities. Liabilities to financial institutions declined to DM 21 We are jointly and serve rally liable for two non- million through scheduled repayments. In 1991, repay­ incorporated companies which have profit and loss pool­ ments will amount to DM 4 million. ing agreements with controlling entities, and for one partnership by reason of an ownership interest therein. Interest expenses comprise credits to domestic sub­ sidiaries in the amount of DM 730 million, particularly for their liquidity transfers to Daimler-Benz AG within the framework of centralized finance and liquidity man­ agement at the holding company.

(17) Other Operating Income This summary caption comprises, above all, income from charges for intercompany services and for com­ pleted research and development work. Also included herein is income from the dissolution of provisions (DM 176 million) and profits from the sale of securities. Altogether DM 334 million is attributable to prior years.

(18) Personnel Expenses/Employment

The losses from pooling agreements pertain with DM 214 million to AEG Aktiengesellschaft; included herein is a provision in the amount of DM 9 million for outside AEG shareholders who have been given a dividend guar­ antee by Daimler-Benz AG in the amount of 20 % of their own rate of dividend. The income transfer of DASA AG amounts to DM 58 million; a provision of DM 6 mil­ lion for compensatory payments to outside shareholders has been deducted therefrom.

The 1990 personnel expenses reflect, on the one hand, the transfer of Daimler-Benz AG employees to the newly-founded corporate unit Daimler-Benz InterSer- vices, and on the other hand, the 6% union-negotiated wage and salary increase and the new increase in the taxable wage base for social security contributions. Ex­ penses for old-age pensions for 1990, together with the amount of DM 986 million shown at Mercedes-Benz AG, total DM 1,014 million.

(19) Amortization of Intangible Assets and Depreciation of Fixed Assets Depreciation allowances of DM 142 million (1989: DM 170 million) pertain with DM 59 million to fixed asset additions at the research centers and the new adminis­ trative building.

(20) Write-Downs of Financial Assets and of Marketable Securities The write-down amount of DM 30 million (1989: DM 138 million) is largely due to falling securities prices. (21) Other Operating Expenses Other Information/Boards This summary caption comprises, above all, adminis­ Under the assumption that the proposed dividend is trative and maintenance expenses, as well as office sup­ ratified by the shareholders at the annual meeting on plies, and light and power. Furthermore, this caption June 26, 1991, the remunerations paid to the Board of comprises additions to other provisions, and the interest Management and the Supervisory Board amount to DM portion from the allocation of pension expenses to 6,324,508 and DM 1,459,126, respectively. Disburse­ Mercedes-Benz AG, for which pension provisions are ments to former members of the Board of Management maintained at Daimler-Benz AG. and their survivors total DM 12,448,571. For pension Altogether DM 60 million is attributable to prior obligations to former members of the Board of Manage­ years. ment and their survivors an amount of DM 91,601,693 has been provided for i.e., - in accordance with the (22) Taxes drop-down and capital contribution agreement - largely at Mercedes-Benz AG. Daimler-Benz AG, as the controlling entity, is also lia­ The names of the members of the Supervisory Board ble for taxes of its affiliated companies with whom it and the Board of Management are listed on pages 2 has management and profit and loss sharing agree­ and 3. ments. These are mainly Mercedes-Benz AG, Deutsche Aerospace AG and Daimler-Benz InterServices (debis) AG. Beginning in 1989, there exists an interlocking relation­ ship with AEG Aktiengesellschaft with respect to munic­ ipal business taxes while the interlocking relationship with respect to corporate income taxes will not become effective until 1992. The decline in income tax expenses to DM 1,937 million (1989: DM 2,148 million) is largely due to the lowering of the corporation tax rate from 56 to 50 °/o.

(23) Net income Net income for 1990 of DM 1,120 million is distrib­ uted one half each to retained earnings and unappropri­ ated profit respectively. We will propose, at the Annual General Meeting, to pay out, from the DM 565 million unappropriated profit (including DM 5 million profit car­ ried forward), an amount of DM 557 to shareholders and to carry-forward DM 8 million to 1991. Tax allowable depreciation of fixed assets does not materially affect net income. Future negative effects on net income will not be material. *

The accounting records, which have been audited in accordance with professio­ nal standards, comply with the legal provisions. With due regard to the gener­ ally accepted accounting principles, the financial statements give a true and fair view of the assets, liabilities, financial position and profit and loss of Daimler-Benz Aktiengesellschaft. The business review report, which summa­ rizes the state of affairs of Daimler-Benz Aktiengesellschaft and that of the Group, is consistent with the financial statements of Daimler-Benz Ak­ tiengesellschaft and the consolidated accounts.

Frankfurt am Main, April 10, 1991

KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Dr. Müller Dr. Koschinsky Wirtschaftsprüfer Wirtschaftsprufer (Certified Public Accountant) (Certified Public Accountant) In the five Supervisory Board meet­ We have examined the financial ings held last year and by means of statements and the business review re­ written and verbal reports, we have port, which was combined for Daimler- been informed in detail, and have con­ Benz AG and the group, together with sulted with the Board of Management the recommendations for the payment on the state of the corporation and on of dividends. The financial statements principal matters of corporate policy. of Daimler-Benz AG and of the group In particular these discussions cen­ as of December 31, 1990, including tered on questions in connection with the business review report and the ac­ the continuing development of the counting principles used, were verified company into an integrated technology by KPMG Deutsche Treuhand-Gesell- concern. Moreover, we dealt with em­ schaft AG, Wirtschaftsprufungsgesell- ployment trends, results of operations schaft, Frankfurt am Main, and have and medium- and long-term corporate been found to be in accordance with planning including capital spending the books and with the pertinent legal policy. Furthermore, we discussed im­ requirements. The Supervisory Board, portant individual business transac­ in a joint meeting with the Board of tions and made business decisions Management on April 22, 1991, noted which, by law or bylaws, had to be the result of the audit with approval. submitted to us for approval. The result of the examinations made by the Supervisory Board and the audi­ tors has shown no cause for question­ ing. We have approved the financial statements of Daimler-Benz AG as pre­ pared by the Board of Management; they are hereby ratified. We concur with the recommendations of the Board of Management regarding the application of the unappropriated profit. The financial statements, the business review report and the exter­ nal auditors' report had been available to the Supervisory Board.

With the conclusion of the Annual General Meeting on July 4, 1990, Prof. Dr. Gerhard Tremer resigned from the Supervisory Board of Daimler-Benz AG to which he had belonged since July of 1986. During this time, important deci­ sions, such as the organizational re­ structuring of the concern, the invest­ ment in Messerschmitt-Bölkow-Blohm GmbH and the founding of the fourth corporate division, were made. His ex­ perience and perspicacious advice has been very valuable to us. We would like to take this opportunity to express our gratitude to Prof. Dr. Tremer.

In his place, the shareholders in their meeting on July 4, 1990, elected Dr. Gerd Binning, Munich, as member of the Supervisory Board of our com­ pany. On September 2, 1990, Maria- In place of the two departing gentle­ Mr. Heinz Dürr, member of the Christine Princess von Urach passed men and at the request of the Daimler- Board of Management of Daimler-Benz away. As a qualified engineer, she had Benz Corporate Labor Council, Messrs. AG, asked the Supervisory Board to been working in the design depart­ Siegfried Sauter, deputy chairman of approve his resignation from the Board ment of Daimler-Benz since 1959, and the Corporate Labor Council of effective December 31, 1990. He ac­ since 1973 was in charge of organiza­ Daimler-Benz AG and chairman of the cepted the request of the Federal gov­ tion and data processing at our Unter- Joint Labor Council of AEG, and Peter ernment to become chairman of the türkheim plant. She was a member of Schonfelder, member of the Labor Board of Management of the Deutsche the Supervisory Board of Daimler-Benz Council of Messerschmitt-Bölkow- Bundesbahn (German railway). The Su­ AG since 1978, representing manage­ Blohm GmbH, were appointed mem­ pervisory Board has, with due respect, ment staff. Her commitment and valu­ bers of the Supervisory Board by the taken notice and accepted his request. able advice over three decades have Administrative Court of Stuttgart. Mr. Dürr had belonged to the Board of earned Mrs. von Urach acclaim and Management of Daimler-Benz AG since appreciation, also outside the company. Dr. Ing. Rudolf Hörnig resigned 1986. As chairman of the Board of She was a person who earned a great from the Board of Management of Management of AEG Aktiengesell- deal of respect, and we shall remem­ Daimler-Benz AG at his own request schaft, he had made a major contribu­ ber her with gratitude. In Mrs. von effective at the end of April 1990. He tion during a very difficult phase of Urach's place, Mr. Richard Bollmann, was responsible for "Research and De­ this company's development, which head of Production in the bus sector of velopment". Dr. Hörnig joined the com­ made AEG into a significant corporate the Mannheim plant, was appointed to pany in 1956, as a test engineer, and division of the Daimler-Benz group of the Supervisory Board of Daimler-Benz in 1984 was appointed member of the companies. We wish to express our AG as representative of management Board of Management in charge of the special thanks to Mr. Dürr for his dedi­ employees, effective September 2, 1990. Research and Development Division. cated service and achievements. Dr. Hörnig started establishing the Re­ Messrs. Richard Helken and Willi search and Technology Division, so Effective January 1, 1991, the Super­ Böhm, representatives of employees on crucial for our integrated technology visory Board has appointed Mr. Ernst the Supervisory Board of Daimler-Benz group, with great commitment. We Georg Stöckl as deputy member of the AG resigned their positions effective would like to express our gratitude for Board of Management of Daimler-Benz October 1, 1990. They thus made it Dr. Hörnig's many years of successful AG. He is now responsible for the cor­ possible to have a stronger representa­ activity at Daimler-Benz. porate division AEG. Concurrently, the tion of employees on the Supervisory Supervisory Board of AEG also appoin­ Board who are working in other areas The Supervisory Board has appoin­ ted Mr. Stöckl chairman of the Board than the automobile sector. Mr. Helken ted Prof. Dr.-Ing. Hartmut Weule of Management of this corporation. Mr. and Mr. Böhm had belonged to the deputy member of the Board of Man­ Stöckl has belonged to Daimler-Benz Board since 1983 and 1973 respec­ agement effective September 1, 1990. since 1971. His last position was that tively. Both gentlemen had distin­ He took over the functional division of chairman of Freightliner Corpora­ guished themselves through their dedi­ "Research and Technology" from Prof. tion, our American subsidiary. cated service and their open-minded Dr. Dr. Niefer who had managed this cooperation on the Supervisory Board. division on an interim basis since Stuttgart-Möhringen We would like to take this opportunity Dr. Hörning's departure. Subsequently April 1991 to express our acknowledgement and thereto and until his admission to the gratitude to Mr. Helken and Mr. Böhm. Board of Management, he had been chairman and director of the Institute for Tooling Machines and Industrial Technology at the Karlsruhe University of Engineering.

March, 1990 reached its high for the year at 1,969 points, dropped at the end of September to low for the year of 1,335. The Daimler-Benz share by and large moved in parallel with the overall market, although the weakness of both the U.S. dollar and the yen had already adversely affected the perfor­ mance of the share during the spring rally. Lively Turnover of Daimler-Benz In 1990, the Daimler-Benz AG share Dividend remains at DM 12 Shares was again among the most frequently traded German blue chips. On the Ger­ For the business year 1990, a divi­ The favorable trend on the German man stock exchanges alone more than dend unchanged from last year of DM stock exchange, which began in the 158 million Daimler-Benz shares, with 12 for each eligible share of DM 50 autumn of 1989 with the collapse of a market value of over DM 120 billion, per value will be proposed to the An­ the Berlin wall, continued until the were traded; representing 7.5 % of all nual General Meeting taking place on summer of 1990. Because of the crisis domestic stock trades. On the new June 26, 1991; for shareholders sub­ in the Persian Gulf, the situation dete­ German options exchange, Daimler- ject to income taxes in Germany, the riorated dramatically as from the be­ Benz share also belonged to the most dividend thus amounts to DM 18.75 ginning of August. The German Stock actively traded issues. gross. The total payment amount has Index (DAX), which at the end of slightly increased over that of last Stable Shareholder Structure sures that no single shareholder is year, from DM 555 million to DM 557 able to dominate the MAH. million, on account of lower treasury With three large shareholders, which The third largest shareholder is the stock holdings. We continue to proceed together hold more than two-thirds of government of Kuwait, whose equity according to the principle that share­ our capital stock, Daimler-Benz AG has stake amounts to about 14 %. After the holders should participate in the suc­ a reliable and manageable shareholder end of the Gulf war, it has again been cess of our company in an appropriate structure. This assures our indepen­ speculated that Kuwait would have to manner, and to gear the dividend pay­ dence and prevents any takeover at­ sell substantial portions of its large- ment to the earnings results; that is, tempts; at the same time, it enables us scale shareholdings for the purpose of to the longer-term trend in earnings. to carry out those capital related meas­ financing the continuing burden of re­ ures which appear reasonable in the construction. The Kuwait Investment interest of our entrepreneurial flex­ Office, which is domiciled in London Daimler-Benz Shares are a Good ibility. and which also is administering the Long-term Investment Deutsche Bank, which holds 28 % of Daimler-Benz package, has let us know our share capital, has been a large that a sale of Daimler-Benz shares is All investments in marketable secu­ shareholder of Daimler-Benz since the not being contemplated. rities must take into account possible late twenties. The Mercedes-Benz Ak- The remaining 33 % of our share price declines against the purchase tiengesellschaft Holding (MAH), Frank­ capital is widely held by about price. A common share cannot deny its furt am Main, has held a 25.23 % stake 300,000 investors both at home and characteristics as a risk instrument since it was founded in 1975. Stern abroad. If the scattered ownership of over the longer term, however, it is Autombil-Beteiligungsgesellschaft und MAH is taken into account as well, paritcularly this kind of instrument Stella Automobil-Beteiligungsgesell- about 45 % of our share capital is then, which offers total return opportunities schaft each hold a 25 % stake in MAH. directly or indirectly, broadly distrib­ which cannot be achieved with fixed- Stern and Stella enjoy an institu­ uted. income securities. An investment tional following who consider their in­ made in Daimler-Benz shares 12 years vestments on a long-term basis. The ago has thus achieved, despite market remaining 50 % of the MAH shares are declines during the last four years, a broadly distributed and belong to total return of 11.9 % annually. We about 50,000 shareholders. This en- have hereby assumed that the amounts realized from the sale of sub­ scription rights and the cash dividends received (without tax credit) were rein­ vested in Daimler-Benz shares without having to make additional cash pay­ ments. Presence on Foreign Stock Exchanges On the seventh of December 1990, International Shareholders' Fair in the Daimler-Benz share was officially Dusseldorf Apart from the German stock ex­ listed on the International Stock Ex­ changes, the Daimler-Benz share has change in London, even before this For the first time, the International been listed on the Swiss stock ex­ Daimler-Benz was actively traded elec­ Shareholders' Fair (ISF) took place changes in Basel, Geneva and Zurich tronically (SEAQ). Already in the first from August 30, to September 1, 1990 since 1976. two months after introduction, about in Dusseldorf. More than 18,000 visi­ We shall pay even more attention in 1,4 million Daimler-Benz shares were tors informed themselves about shares the future to increasing market global­ traded on the International Stock Ex­ as an investment alternative. The spe­ ization, also in the procurement of change in London. The listing on the cial lure was the combination of both funds, and will introduce Daimler-Benz Viennese Stock Exchange took place fair and convention. Daimler-Benz used shares to the world's import stock ex­ on February 25, 1991. this opportunity to introduce itself to a changes. With the official introduction broad public. At our stand, we gave of our shares in Tokyo, London and potential shareholders support for an Vienna, we have already made consid­ Investor Relations Activities Inten­ investment decision in Daimler-Benz erable headway in this regard. sified shares. Our "Fair Quiz", in which more Since the listing in Tokyo in Sep­ than 10,000 visitors participated, met tember 1990, average monthly trades Both the development from an auto­ with a lively response. totaled 150,000 Daimler-Benz shares. mobile company to an integrated tech­ The International Shareholders' Fair Our share thus enjoys a top position nology conglomerate and the increas­ was also the forum for our meeting among foreign shares traded on the ing presence on foreign stock ex­ with analysts from the German Asso­ Tokyo exchange. At the end of Febru­ changes have led to a growing interest ciation for Financial Analysis and In­ ary, nearly 600,000 Daimler-Benz in Daimler-Benz. We are meeting the vestment Advice (DVFA). About 90 an­ shares had been registered with the growing need for information con­ alysts, bankers and investment adiv- Japanese Securities Clearing Corpora­ nected therewith by expanding our in­ sors took advantage of the opportunity tion (JSCC); proof of the lively interest vestor relations activities. In addition to inform themselves about the current in our share. to the information media such as business situation of the Daimler-Benz shareholders' meetings, annual reports group. and regular interim reports, through which we address all our shareholders, we make increasing use of company presentations for financial analysts and institutional investors in all major fi­ nancial centers. Last year, we made such presentations in Zurich, Madrid, Boston and New York but also on the occasion of the stock exchange listings in Tokyo, London and Edinburgh. In February of this year, we presented our company to financial analysts and professional investors in Vienna, Aus­ tria.