People are our future Success is essential to our corporate future. It is achieved through the efforts of our employees. At a time of dramatically intensified international competition, the company that can count on an enthusiastic, motivated staff has the advantage. These are simple truths, but not self-evident, in times of personnel cutbacks and lean structures. For the employees of the Daimler-Benz group, ideals and demands have undergone far-reaching change in recent years. Not spectacular, not coincidental, but a conscious adjustment to totally new conditions. It was and still is the task of corporate management to support this process by visibly and permanently Contents strengthening the premises for initiative and corporate thinking. 2 The Corporate Principles of The presentation of this year's annual report is a welcome Daimler-Benz occasion for us to point this out once again. 3 Daimler-Benz Highlights 4 Letter to the Stockholders and Friends of our Company 6 Board of Management 8 Report of the Board of Management 8 Business Review 14 The Corporate Units at a Glance 16 Operating Activities of the Group 40 Central Corporate Functions 59 The Daimler-Benz Share 61 Discussion and Analysis of the Financial Situation 68 Financial Statements 88 Proposal for the Allocation of Unappropriated Profit 89 Supervisory Board 90 Report of the Supervisory Board 91 Executive Management and Daimler-Benz Group Representation and Liaison Offices 92 Principal Subsidiaries and Affiliated Companies 94 Daimler-Benz in Figures The Corporate Principles of Daimler-Benz Our work at Daimler-Benz serves We aim to learn better and faster Our core businesses include vehicles people and their environment. We than our competitors. To achieve for passenger and freight transportation, aim to offer the world's most advanced this, we need not only flexible organiza­ rail systems, aerospace, propulsion products, systems and services. tional structures but also employees systems, defense systems, automation, This requires a continual commit­ who think entrepreneurially. energy systems technology and inform­ ment to technical, business and social Key to our success are employees ation-technology services. In these innovation as well as a corporate culture with a sense of responsibility, inde­ areas, Daimler-Benz strives to be a characterized not by complacency, but pendence, creativity, drive, teamwork world leader. by creative unrest. and openness to new ideas. We there­ Furthermore, we are active in In a world increasingly complex, with fore promote every employee's personal certain specialized areas, such as promising opportunities - but also risks - development to the best of our abilities. applied microelectronics, selected even minor events can take on conse­ financial services, and countertrading, quences of major proportions. There­ Daimler-Benz does business in all where we aim to be highly competitive. fore, we must carefully weigh our every corners of the globe. We are con­ To a great extent, these activities inter­ action. vinced of the advantages to everyone of link our core business areas. We owe it to future generations to open trade borders throughout the Each of our business areas falls use our natural resources prudently and world. Therefore, we view competition under the responsibility of one of our sparingly. This sense of responsibility as a welcome proving ground. The four corporate units. Thus, Mercedes- must be reflected in all our thoughts and measure of our success is the recog­ Benz, AEG Daimler-Benz Industrie, activities throughout the Group. nition our work receives, and economic Daimler-Benz Aerospace and Daimler- success is an undeniable part of this Benz InterServices (debis) work together Our customers are the focus of our recognition. under the umbrella of Daimler-Benz, the efforts. We must strive not just to Inherent to our philosophy is respect managing holding company of our meet their expectations, but to exceed for other cultures. As an international group. them. Cooperation and the open ex­ company, we reject all forms of dis­ change of know-how throughout all crimination. This principle applies, areas of our companies are central to moreover, to the filling of management Our cooperation aim to: meeting this goal. positions, where we will extend equal Just as we are accountable to our opportunities to every employee Combine know-how and experi­ customers, we are equally responsible regardless of nationality. ence to create new dimensions - to the companies' owners as well as to Responsibly promoting progress the public. This means we must be Daimler-Benz is an integrated for everyone. willing to provide feedback to others and technology group. This means that to assess ourselves openly and honestly. our various business areas are linked by We are proud to continue a distin­ cross cutting technologies and system guished tradition guided by these structures. We place a special emphasis principles. on our know-how and experience in traffic management systems and trans­ portation technologies. The Corporate Principles of Daimler-Benz Letter to the Stockholders and Friends of our Company export-oriented companies cannot be It is not only the foreseeable enorm­ passed on in the form of prices. More­ ous demand for means of transportation over, there are many indications that that defines our company's tremendous despite all efforts, German industry is potential in these countries. Our corp­ already in danger of losing market orate structure, with its wide range of shares in its traditional export markets. products and services, allows us to offer The only effective short-term counter- the comprehensive mobility and infra­ measure that remains is the resolute structure solutions so desperately continuation of cost-cutting programs, lacking there. From airport outfitting in particular rationalization. and modernization to traffic studies for We have also undertaken foreign Singapore, there is a tremendous exchange hedging transactions, with demand in these markets, and equally very long-term effects for some of the great potential, for communications divisions of our company. But this does infrastructures, energy and trans­ not alter the fact that changes of such portation. dramatic dimensions as we saw last At the same time, we are working year, and especially this year, against hard to strengthen our competitive Looking back, 1994 was a satis­ both the U.S. dollar and nearly all other position in the triad markets - our factory year. The strategies we initiated important currencies in international European home market, NAFTA and to update our products, streamline and trade must eventually have a noticeable Japan. For instance, we are constructing rationalize all processes, and broaden impact on earnings. a plant in Tuscaloosa, Alabama, where our international presence have pro­ To overcome these difficulties, we we will produce a new recreational ceeded as planned. The reversal we must become less dependent on such vehicle - the All-Activity Vehicle - be­ achieved in the development of our incalculable, currency-related factors by ginning in 1997. Last December, we earnings was more than remarkable, shifting production activity to other selected a production site for the Micro and not only in comparison to 1993. countries. There clearly is no other Compact Car, a car designed specifically As with other companies, this solution. In addition, the trend in recent for urban areas that we are developing development was of course facilitated years has reconfirmed that economic together with the Swiss company SMH. by the general economic recovery that conditions follow different cycles in In addition to the three major global has since stabilized in the important mature and developing regions. This too markets, however, we must also create regions of the world. However, the sole prompts us to spread out our industrial all the necessary conditions for opening reason why we were able to take ad­ activities and by doing so minimize up new growth markets with new pro­ vantage of the trend to such an extra­ unavoidable risks to the greatest ducts. But if we attempt to enter every ordinary degree is that we created the extent possible. market of our own accord, we run the necessary conditions in terms of cost As it is, the proximity to the re­ risk of wasting our resources. We there­ structures, productivity, and not least spective market - production on site - fore attach the greatest importance to of all in terms of strategy. is becoming an increasingly important expanding our long-term cooperative After all, 1994 was certainly not an factor in competition. Especially the arrangements with partners around easy year. This is especially true in view markets in the Asian-Pacific region and the world. of the persistent weakness of important in Latin and Central America, all regions currencies against the German mark, still characterized by very dynamic above all the U.S. dollar, the drastic growth, demand new, different product undervaluation of which is clearly un­ concepts based on their respective justified by any objective economic requirements. A good example is our factors. From past experience we know Family Car China, a vehicle concept that currency-related burdens on developed specifically for Chinese needs. Letter to the Stockholders and Friends of our Company Despite heightened concern over the business units at AEG Daimler-Benz This year, 1995, will not be easy competitiveness of Germany as a pro­ Industrie, the new management