Innovation for Sustainable Mobility Annual Report 2008 Key Figures Daimler Group 2008 20072006 08/07 Amounts in millions of € Change in % Revenue 95,873 99,399 99,222 -41 Western Europe 45,916 49,289 46,999 -7 thereof Germany 21,817 22,582 21,652 -3 NAFTA 21,139 23,499 27,857 -10 thereof United States 17,922 20,270 24,943 -12 Other markets 28,818 26,611 24,366 +8 Employees (Dec. 31) 273,216 272,382 274,024 +0 Investment in property, plant and equipment 3,559 2,927 3,005 +22 Research and development expenditure 4,442 4,148 3,733 +7 thereof capitalized 1,387 990 715 +40 Cash provided by operating activities (including discontinued operations) 3,205 13,088 14,337 -76 EBIT 2,730 8,710 4,992 -69 Value added (including discontinued operations) (1,147) 1,380 631 . Net profit 1,414 3,985 3,783 -65 Net profit from continuing operations 1,704 4,855 3,166 -65 Earnings per share (in €) 1.41 3.83 3.66 -63 Earnings per share, continuing operations (in €) 1.71 4.67 3.06 -63 Total dividend 556 1,928 1,542 -71 Dividend per share (in €) 0.60 2.00 1.50 -70 1 Adjusted for the effects of currency translation and changes in the consolidated group, decrease in revenue of 1%. Cover: Mercedes-Benz showed the way ahead in environmentally responsible electro-mobility in January 2009 by presenting its near-series Concept BlueZERO at the North American International Auto Show in Detroit. Based on a single vehicle architecture, this intelligent, modular concept allows three models with different drive configurations, all of which are able to meet customer requirements in terms of sustainable mobility: the BlueZERO E-CELL with battery-electric drive, the BlueZERO F-CELL with fuel cell, the BlueZERO E-CELL PLUS with electric drive and additional internal combustion engine as power generator. Daimler Divisions > Daimler at a glance > Divisions 2008 2007 2006 08/07 Amounts in millions of € % change Mercedes-Benz Cars EBIT 2,117 4,753 1,783 -55 Revenue 47,772 52,430 51,410 -9 Return on sales 4.4% 9.1% 3.5% . Investment in property, plant and equipment 2,246 1,910 1,698 +18 Research and development expenditure 2,994 2,733 2,274 +10 thereof capitalized 1,060 705 496 +50 Unit sales 1,273,013 1,293,184 1,251,797 -2 Employees (Dec. 31) 97,303 97,526 99,343 -0 Daimler Trucks EBIT 1,607 2,121 1,851 -24 Revenue 28,572 28,466 31,789 +0 Return on sales 5.6% 7.5% 5.8% . Investment in property, plant and equipment 991 766 912 +29 Research and development expenditure 1,056 1,047 1,038 +1 thereof capitalized 326 283 211 +15 Unit sales 472,074 467,667 516,087 +1 Employees (Dec. 31) 79,415 80,067 83,237 -1 Daimler Financial Services EBIT 677 630 807 +7 Revenue 9,282 8,711 8,106 +7 New business 29,514 27,611 27,754 +7 Contract volume 63,353 59,143 57,030 +7 Investment in property, plant and equipment 41 29 17 +41 Employees (Dec. 31) 7,116 6,743 6,813 +6 Vans, Buses, Other EBIT (1,239) 1,956 1,327 . Revenue 14,970 14,123 13,151 +6 Investment in property, plant and equipment 270 241 378 +12 Research and development expenditure 392 368 421 +7 thereof capitalized 1 2 8 -50 Unit sales 327,789 328,122 305,001 -0 Employees (Dec. 31) 40,255 39,968 37,679 +1 Daimler at a Glance. Fiscal Year 2008. We invented the automobile – now we are passionately shaping its future. As a pioneer of automotive engineering, we feel inspired and obliged to continue this proud tradition with groundbreaking technologies and high-quality products. Our philosophy is clear: we give of our best for customers who expect the best – and we live a culture of excellence that is based on shared values. Our corporate history is full of innovations and pioneering achievements; they are the foundation and ongoing stimulus for our claim to leadership in the automotive industry. The principle of sustainable mobility underlies all of our thoughts and actions. Our goal is to successfully meet the demands of future mobility. And in doing so, we intend to create lasting value – for our shareholders, customers and workforce, and for society in general. Dieter ZetscheGünther Fleig Rüdiger Grube Andreas Renschler Bodo Uebber Thomas Weber With this Annual Report 2008, we would like to give you an insight into our various activities designed to secure sustainable mobility for the future. We have arranged the contents of the report in seven sections. The first section provides basic information and some examples from the Daimler world, while the report’s title subject is attractively presented in a series of pictures on pages 10 to 33. The Management Report includes a description and analysis of the Group’s financial position, liquidity and capital resources, and profitability. Other sections provide information on our divisions, the issue of sustainability and corporate governance, as well as the detailed financial statements. Contents 2 - 39 102 - 113 Overview of the Group Sustainability 4 Chairman’s Letter 104 Sustainability at Daimler 8 Board of Management 106 Innovation, Safety and the Environment 10 Innovation for Sustainable Mobility 110 Human Resources 34 Important Events in 2008 112 Social Responsibility 36 Daimler Shares 114 - 139 40 - 87 Corporate Governance Management Report 116 Corporate Governance Report 42 Business and Strategy 120 Compliance 53 Profitability 122 Remuneration Report 66 Liquidity and Capital Resources 128 Declaration of Compliance with the 72 Financial Position German Corporate Governance Code 74 Overall Assessment of the Economic Situation 130 Members of the Supervisory Board 75 Events after the End of the 2008 Financial Year 134 Report of the Supervisory Board 75 Risk Report 138 Report of the Audit Committee 82 Outlook 140 - 215 88 - 101 Consolidated Financial Statements Divisions 142 Responsibility Statement 90 Mercedes-Benz Cars 143 Independent Auditors’ Report 94 Daimler Trucks 144 Consolidated Financial Statements 98 Daimler Financial Services 100 Vans, Buses, Other 216 - 220 Additional Information 216 Ten-Year Summary 218 Glossary 219 Index 220 International Representative Offices Internet | Information | Addresses Daimler Worldwide Financial Calendar 2009 Annual Report 2008 | Contents | 3 2008 was a year with two very different stories for Daimler. Our first-half results were very good. We achieved record unit sales of automobiles, vans and buses. That demonstrates your company’s capabilities under “normal circumstances.” In the second half of the year, circumstances were anything but normal. The automotive industry around the world was hit hard by the financial crisis – which quickly became a global recession. We felt its effects on our unit sales, revenue and earnings in the third and fourth quarters, especially at our car division. In all of our businesses, we achieved a net profit of €1.4 billion in 2008. EBIT from ongoing operations (excluding Chrysler LLC) amounted to €6.2 billion. What were the most important developments in our divisions? Mercedes-Benz Cars performed extremely well in the first two quarters. No other premium brand grew as fast during that period as the brand with the star. In the second half of the year, unit sales slumped as a result of the worldwide collapse of car markets. For the year as a whole, however, we gained market share in key markets. The Mercedes-Benz S-Class defended its worldwide leadership in the luxury segment. And for smart, 2008 was the best year ever. Daimler Trucks achieved modest increases in unit sales and revenue. In 2008 it was, once again, the world’s biggest producer of heavy- and medium-duty trucks. In Europe and Latin America, Mercedes-Benz Trucks even set new records for unit sales. With the newly launched Actros, we also set new standards for economy, environmental compatibility and safety. In North America, we realigned our busi- ness operations to adapt to the market reality of the region. Trucks Asia surpassed its prior-year unit sales despite difficult conditions. And we expanded our presence in major growth regions – especially in Russia and India. Overview of the Group | Chairman’s Letter | 5 Mercedes-Benz Vans sold more vehicles than ever before in the first half of last year. At times, its plants were operating at capacity limits. Although the impact of the financial crisis significantly dampened market growth in the second half of the year, our vans still achieved the second-highest annual unit sales in their history. Daimler Buses set a new unit-sales record in 2008. Once again, we maintained our worldwide leadership in the bus segment over eight tons. And our joint venture with Sutlej Motors Ltd. in India marks our entry into yet another important growth market. Daimler Financial Services achieved a small increase in contract volume despite the economic crisis. Its focus was on efficiency improvements and the new organization of our activities in North and South America. We took effective countermeasures early on in order to minimize the risk of credit default. All of this shows that our foundation is solid and that we are well positioned. But it is also true that the world economic crisis is not over. A deep recession seems likely in 2009. The best remedy in these hard times is strong products and pioneering techno- logies. We have both. The new E-Class is a leader in safety. Its innovative gasoline and diesel engines raise the bar for fuel efficiency and emissions.