Automotive   |   Mercedes-Benz Group AG
®
7
G TRONIC Hybrid  
ESP  
¯
BlueTec 5 Night View  
®
TM  
Stow’n Go  
HEMI  
®
Telligent PRE SAFE DISTRONIC  
¯
ations  
Innovations for our Customers  
Annual Report 2004  
Key Figures  
DaimlerChrysler Group  
2004  
2004  
2003  
2002  
04/03  
Amounts in millions  
US $ 1  
192,319  
64,162  
30,210  
99,187  
86,957  
28,970  
Change in %  
Revenues  
142,059  
47,394  
22,315  
73,266  
64,232  
21,399  
136,437  
48,496  
24,182  
73,477  
64,757  
16,397  
(1,933)  
362,063  
6,614  
147,368  
46,546  
23,121  
87,831  
77,686  
15,206  
(2,215)  
365,571  
7,145  
+42  
European Union  
-2  
of which: Germany  
-8  
NAFTA  
–0  
of which: USA  
–1  
Other markets  
+31  
Discontinued operations  
Employees (at year-end)  
Investments in property, plant and equipment  
Research and development expenditure  
Cash provided by operating activities  
Operating profit  
384,723  
6,386  
5,658  
11,060  
5,754  
2,466  
2.43  
+6  
8,645  
7,660  
14,973  
7,790  
3,338  
3.29  
–3  
5,571  
5,942  
15,909  
6,854  
4,718  
+2  
13,826  
5,686  
448  
–20  
+1  
Net income  
+450  
+452  
±0  
per share (in US $/)  
Total dividend  
0.44  
4.68  
2,057  
1,519  
1,519  
1,519  
Dividend per share (in )  
1.50  
1.50  
1.50  
±0  
1
2
Rate of exchange: 1 = US $1.3538 (based on the noon buying rate on Dec. 31, 2004).  
A 7% increase after adjusting for the effects of currency translation and changes in the consolidated Group.  
A glimpse of the future  
Highlights » » »  
Divisions  
F500 Mind is our research lab on wheels equipped with hybrid  
drive, night-vision system, multi-vision display and many  
more innovations for our customers. DaimlerChrysler research  
engineers use the F500 Mind to test the effectiveness and  
everyday usability of new technical developments under real  
driving conditions. Further information on this innovative  
research vehicle can be found on page 74 of this annual report.  
Divisions  
Mercedes Car Group  
Services  
2004  
2004  
2003  
04/03  
2004  
2004  
2003  
04/03  
Amounts in millions  
Operating profit  
Revenues  
US $  
2,255  
67,189  
Change in %  
Amounts in millions  
Operating profit  
Revenues  
US $  
Change in %  
1,666  
3,126  
–47  
-4  
1,692  
1,250  
1,240  
14,037  
98,199  
+1  
-1  
49,630  
51,446  
18,871  
13,939  
Investments in property,  
plant and equipment  
Contract volume  
138,628 102,399  
+4  
3,172  
3,566  
2,343  
2,634  
2,939  
2,687  
–20  
Investments in property,  
plant and equipment  
Research and  
development expenditure  
123  
91  
76  
+20  
+2  
–2  
+1  
+2  
Employees (Dec. 31)  
11,224  
11,035  
Unit sales  
1,226,773 1,216,938  
Employees (Dec. 31)  
105,857  
104,151  
Chrysler Group  
Other Activities  
2004  
2004  
2003  
04/03  
2004  
2004  
2003  
04/03  
Amounts in millions  
Operating profit (loss)  
Revenues  
US $  
1,932  
67,010  
Change in %  
Amounts in millions  
Operating profit 1  
Revenues 1  
US $  
Change in %  
1,427  
(506)  
617  
456  
1,329  
4,084  
–66  
–46  
49,498  
49,321  
+0  
2,978  
2,200  
Investments in property,  
plant and equipment  
Investments in property,  
plant and equipment  
1
3,584  
2,125  
2,647  
1,570  
2,487  
1,689  
+6  
181  
309  
134  
169  
–21  
Research and  
development expenditure  
Research and  
development expenditure  
1
-7  
+5  
-9  
228  
420  
–46  
+2  
Unit sales  
2,779,895 2,637,867  
Employees (Dec. 31)  
20,636  
20,192  
Employees (Dec. 31)  
84,375  
93,062  
1 2003 figures include discontinued operations (MTU Aero Engines).  
Commercial Vehicles  
2004  
2004  
2003  
04/03  
Amounts in millions  
Operating profit (loss)  
Revenues  
US $  
1,803  
Change in %  
1,332  
811  
+64  
+30  
47,064  
34,764  
26,806  
Investments in property,  
plant and equipment  
1,603  
1,660  
1,184  
958  
+24  
Research and  
development expenditure  
1,226  
712,166  
114,602  
946  
500,981  
88,014  
+30  
+42  
+30  
Unit sales  
Employees (Dec. 31)  
Highlights*  
January 2004  
August 2004  
The Chrysler Group’s product offensive is launched at the  
North American International Auto Show in Detroit.  
The Chrysler Group presents the new Chrysler 300/300C, the  
Dodge Magnum and additional new models and gives a preview  
of the product offensive planned for the year 2004 (see page 57).  
DaimlerChrysler sells 10.5% stake in Hyundai Motor  
Company (HMC). The disposal of the Group’s 10.5%  
shareholding is part of the refocus of the strategic alliance  
between DaimlerChrysler and Hyundai Motor. Shared projects  
such as the development and production of a family of four-  
cylinder gasoline engines (World Engine Project) by  
DaimlerChrysler, HMC and Mitsubishi Motors Corporation (MMC)  
will be continued (see page 20).  
March 2004  
World premiere of new Mercedes-Benz SLK at the Geneva  
Motor Show. Significantly more emphasis on sporty features  
than with the previous model. The SLK is the trendsetter and  
technology leader among the sports cars in its category  
September 2004  
World premiere of new Atego and Axor models at the  
Commercial Vehicles Show in Hanover. Mercedes-Benz  
presents numerous new developments such as the completely  
revised truck series Atego and Axor, the new BlueTec diesel  
technology, hybrid drive for the Sprinter, and the new Setra bus  
S415 GT (see pages 63, 75, 77).  
(see page 52).  
DaimlerChrysler increases its shareholding in Mitsubishi  
Fuso Truck and Bus Corporation (MFTBC) from 43% to 65%.  
MFTBC is a leading manufacturer of commercial vehicles in Japan  
and has a strong position in Southeast Asia (see page 20).  
Chrysler Group continues product offensive with the  
April 2004  
introduction of the new models Jeep Grand Cherokee and  
Dodge Dakota (see page 57).  
®
End of financial support for Mitsubishi Motors. On April 22,  
DaimlerChrysler’s Board of Management and Supervisory Board  
decide not to participate in the capital increase planned by  
Mitsubishi Motors Corporation (MMC) and to cease providing  
further financial support for MMC. Contractually agreed projects  
will be continued (see page 20).  
November 2004  
Contracts signed in China on November 26 for local  
production of Mercedes-Benz passenger cars and vans. A  
key milestone is thus achieved for the establishment of joint  
ventures to produce passenger cars and vans in China (see page 19).  
June 2004  
World premiere of new A-Class. The second generation of  
Mercedes’ bestseller sets standards in terms of design, safety,  
reliability and variability (see page 52).  
DaimlerChrysler Services obtains a provisional permit to  
provide financial services in China (see page 19).  
December 2004  
July 2004  
DaimlerChrysler and General Motors announce cooperation  
on development of hybrid drive. Joint development of  
a comprehensive two-mode hybrid drive system for use in models  
from the Mercedes Car Group, the Chrysler Group and General  
Motors has been initiated (see page 75).  
Agreement reached on “Securing the Future 2012” in  
Germany. Management and employee representatives reach an  
agreement on July 23 enabling the Group to realize annual  
savings of 500 million in the medium-term and making an  
important contribution to securing jobs in Germany  
(
see page 72).  
Toll Collect receives special preliminary operating permit.  
Previously, important tests of the satellite-based toll-collection  
system had been successfully carried out. The electronic toll  
system for trucks above 12 tons started in Germany with no  
problems on January 1, 2005 (see page 69).  
*
This overview shows a selection of events which were particularly significant for  
DaimlerChrysler in the 2004 financial year. It is not intended to be a complete list.  
Innovations for our Customers  
Innovation drives our company and is the key to the  
worldwide success of DaimlerChrysler. We have a long  
tradition in this - because DaimlerChrysler and its prede-  
cessor companies have stood for pioneering automotive  
innovation for more than 100 years. With about 4,700  
patents each year, DaimlerChrysler secures its leading  
technological position and thus its lead in international  
competition. We also intend to set new trends in the  
future with innovations that our customers can experience  
in our products every day.  
Many creative men and women stand behind these  
innovations, working passionately on making good  
products even better and lean processes even more  
efficient. In the photo stories of this Annual Report, we  
would like to introduce to you some of these people and  
their work, representing many others: DaimlerChrysler  
employees who pointed the way to the future with their  
work in the year 2004 – for the benefit of our customers.  
Contents  
Essentials  
Management Report  
Divisions  
Cross-Divisional Activities  
Corporate Governance  
Consolidated Financial  
Statements  
Additional Information  
4
Chairman’s Letter  
0 Board of Management  
2 DaimlerChrysler Shares  
1
1
1
6 Overview  
31 Liquidity and Capital Resources  
34 Financial Position  
36 Factor Input  
38 Events after the End of the 2004  
Financial Year  
38 Risk Report  
18 Business and General Conditions  
23 Profitability  
29 Value-Based Performance Measures  
37 The Workforce  
44 Outlook  
6
7
6 Services  
0 Other Activities  
4
5
6
8 Mercedes Car Group  
4 Chrysler Group  
0 Commercial Vehicles  
7
2 Human Resources  
78 Global Procurement and Supply  
80 DaimlerChrysler’s Social  
Responsibility  
74 Research and Technology  
76 DaimlerChrysler and the Environment  
82 Report of the Supervisory Board  
85 Members of the Supervisory Board  
86 Report of the Audit Committee  
90 Compensation Report  
94 Declaration of Compliance with the  
German Corporate Governance Code  
87 Corporate Governance at  
DaimlerChrysler  
9
6 Overview  
100 Consolidated Statements of Income  
(Loss)  
102 Consolidated Balance Sheets  
103 Consolidated Statements of Changes  
in Stockholders’ Equity  
104 Consolidated Statements of Cash Flows  
106 Consolidated Fixed Assets Schedule  
108 Notes to Consolidated Financial  
Statements  
9
8 Statement by the Board of  
Management  
99 Report of Independent Registered  
Public Accounting Firm  
1
68 DaimlerChrysler Worldwide  
70 Major Subsidiaries  
72 Nine-Year Summary  
174 International Representative Offices  
Addresses/Information  
1
1
Internet Service  
Financial Calendar 2005  
In 2004 your company once again made significant progress in spite of consistently difficult  
circumstances. Specifically:  
At €5.8 billion the Group’s operating profit significantly exceeded last year’s reference figure of  
5.1 billion. And though we achieved our target, we are not entirely satisfied.  
At the same time, the Group’s net income also increased markedly.  
Despite good sales figures the Mercedes Car Group had a difficult year and earnings were  
unsatisfactory. But the problems are being solved.  
Chrysler Group achieved a turnaround and performed very well in relation to its competitors.  
The Commercial Vehicles Division posted record earnings in 2004. The effort of recent months at  
our Japanese subsidiary, Fuso, is continuing and bearing fruit. Fuso has also regained operating  
licenses for nearly all of its models.  
DaimlerChrysler Services maintained the high earnings level of the previous year. And following a  
year of hard work at Toll Collect, the commencement of toll collection operations on January 1,  
2005 went smoothly.  
With regard to our investment in Mitsubishi Motors, we decided not to provide any further financial  
support. However, essential projects will be continued to the benefit of both partners.  
Our balance sheet is sound. We have further increased net liquidity of our industrial operations and  
free cash flow has been positive.  
In comparison with 2003 we have significantly improved Group value added.  
The year 2004 has demonstrated that our strategy for DaimlerChrysler is working – even in our  
challenging competitive environment. At Group level, we were not only successful in compensating for  
the variances created by divisional cycles and regional developments, we were also able to achieve  
growth in earnings. This ability is one of DaimlerChrysler’s key strengths, and one we’ve worked very  
hard to advance over the past few years.  
4
We owe this success principally to the dedication and outstanding performance of our 385,000  
employees around the world. The Board of Management is grateful to each and every one of these  
people.  
Dear shareholders, it is against this background that we will once again recommend for your approval  
at the Annual Meeting in April an attractive dividend of €1.50 per share. This proposal takes into  
account the development of our operative business, as well as the business outlook for the years  
ahead.  
I would now like to provide you with an overview of the individual divisions’ performance in 2004.  
The Mercedes Car Group last year posted an operating profit of €1.7 billion, and Mercedes-Benz  
remains the world’s best-selling premium automotive brand. The E-Class, S-Class, C-Class, SLK and SL  
are all global market leaders in their segments.  
Nonetheless, the level of earnings in the third and fourth quarters of 2004 was unacceptable. The  
substantial decline in these earnings resulted from high startup costs of the second product offensive;  
expenditure flowing from an extensive quality offensive; additional charges at smart; and the distinctly  
negative impact of a stronger euro in relation to the US dollar.  
We have therefore taken wide-ranging measures to restore the Mercedes Car Group to its accustomed  
profitability. The entire Mercedes Car Group value chain is being improved with a strong emphasis on  
top quality, optimized costs and increased revenues.  
Of course the subject of quality is of particular importance to us. The vehicles currently rolling off our  
assembly lines reveal the highest level of quality ever achieved by Mercedes-Benz. We have worked  
hard over the past few years to ensure that this would happen. With regard to vehicles in the market  
that do not meet our quality standards, we have implemented measures with a clear target: everything  
must be done at benchmark levels. The ultimate goal is clear: to consolidate Mercedes-Benz’s number  
one position, and also achieve this in terms of quality. This will cost money in the short-term, but the  
investment will be worthwhile.  
smart’s products are good, and the brand has already attained a degree of cult status among many  
customers and admirers. smart has a strong foundation, but its current financial performance is  
inadequate. That is why we are striving to develop a sustainable long-term business model.  
5
Chrysler Group has undergone an all-encompassing transformation over the past five years. It has  
raised productivity by 20 percent while increasing quality considerably. It has also launched an  
extensive product offensive. As a result, Chrysler Group is now marketing the youngest model range  
of all North American automakers.  
We are presently reaping the fruits of our hard work as well as a comprehensive implementation of  
our strategy. Chrysler Group posted a sound operating profit of €1.4 billion in 2004. The increase in  
operating profit was €1.9 billion.  
In addition to this Chrysler Group was the only US automaker to increase its market share last year.  
This feat was due in no small measure to top-sellers such as the Chrysler 300, the most honored  
American vehicle of all time – and the innovative Stow’n Go™ concept for our minivans, which allows  
second and third-row seats to fold flat into the floor.  
Our Commercial Vehicles Division is also performing very well and achieved a record operating profit  
of €1.3 billion last year. Significantly, it did so in spite of costs associated with quality problems at  
Fuso that predate our involvement with that company. Our truck business in Europe and Latin America  
is operating outstandingly. So are our van and bus enterprises – and Freightliner.  
Because quality problems at Fuso were caused prior to our own involvement we were successful  
in our claim against Mitsubishi Motors, the former majority shareholder. As a result, in addition to  
a compensatory payment, we will acquire for no charge a further 20 percent stake in Fuso.  
Our financial services business also had a very good year. Margins were maintained at their already-  
high levels, and internal processes were further improved. In spite of charges attached to Toll Collect,  
DaimlerChrysler Services posted an operating profit of €1.25 billion, equaling 2003’s success. Without  
the startup difficulties at Toll Collect, profits would have been considerably higher.  
I would like to use the opportunity afforded by this year’s launch of the Airbus A380 to remark on our  
involvement in the aerospace industry. EADS is a resounding success. Airbus has surpassed Boeing,  
and its contribution to DaimlerChrysler profits is significantly higher than in 2003.  
Who, in the early 1990s, would have predicted such a success story? At that time, Dasa was on the  
ropes. But we placed it back on track through a rigorous restructuring program. And we followed this  
up by working energetically to create a European aerospace group. Without DaimlerChrysler, neither  
EADS nor the A380 would exist today. If we sum up the results of all our business activities in the  
aerospace sector – with all their vicissitudes – it is clear that we have created value in an amount of  
over €1 billion.  
6
How can we best assess DaimlerChrysler’s present status and future outlook?  
The greatest catalyst for additional improvement of our mid-term earnings is the package of  
measures launched at the Mercedes Car Group.  
Furthermore, our Commercial Vehicles Division, Chrysler Group and our financial services are firmly  
on course for a successful future.  
Under the leadership of the Executive Automotive Committee, DaimlerChrysler Group has become –  
from top to bottom – a fully integrated organization. Group-wide cooperation is outstanding, and we  
can already see concrete results from vehicle models presently on the road.  
We are systematically tackling present-day challenges. Of course, our current focus is on the parcel  
of measures being implemented at Mercedes Car Group. Historically, we have demonstrated repeatedly  
that we are able to master challenges such as these. It also goes without saying that we will deal  
with them very quickly indeed. That is to be expected bearing in mind the strength of this outstanding  
automotive brand.  
The Mercedes Car Group aims to improve performance by more than €3 billion. As a result it expects  
to once again achieve a return on sales of 7% in 2007.  
Furthermore, with several new product launches scheduled for the near future, our business expects  
a significant boost this year.  
The M-Class, which in January enjoyed an outstanding debut at the North American International  
Auto Show in Detroit, will be marketed from Spring.  
With this year’s launch of our B-Class and R-Class cars we will create a brand-new segment – the  
premium sports tourer.  
And starting this fall the new S-Class, like its predecessors, will set fresh benchmarks in terms of  
innovation.  
Chrysler Group will also further strengthen its competitive position in the market. It will do this  
not only through ongoing programs to enhance quality and efficiency, but also by launching additional  
spectacular products. Further potential also exists at Commercial Vehicles. In particular, we will  
continue exploiting those economies of scale we enjoy as undisputed global market leader in this area.  
After weaker first and second quarters, for full-year 2005 DaimlerChrysler expects a slightly higher  
operating profit than last year. Significant earnings improvements are to be expected for the years  
2
006 and 2007 when the Mercedes Car Group’s product offensive takes full effect and additional new  
models become available from the Chrysler Group.  
7
In view of these positive prospects, we also see growth potential for our share price. It goes without  
saying that our present share price is less than satisfactory.  
A fundamental condition for the targeted increase in earnings is a generally stable economic and  
political environment as well as the further moderate upturn in worldwide demand for automobiles that  
is expected for the period 2005 to 2007. Challenges may arise, however, from a continuation of the  
weak US dollar and high raw-material prices.  
Dear shareholders, we are convinced we have what it takes in terms of experience, employee  
dedication and other resources to lead your company successfully into the future. The rating agencies  
clearly share this view otherwise they would not have upgraded their outlook on our rating last year.  
There is, however, one thing I would like to emphasize. For us, business success and social  
responsibility belong together. In addition to business considerations, the social dimensions of our  
corporate activities play an increasingly important role in overall assessments of our company.  
That is why as you read through this annual report you will find summaries of initiatives designed  
to protect the environment – and a pen-picture of our extensive involvement in social issues.  
Corporate value creation cannot take place in isolation from the values of those societies we serve.  
Indeed, business activities can only yield sustainable fruits if a company’s sense of social responsibility  
embraces more than simple sponsorship activities and forms an integral part of its overall strategy.  
Only those companies that take social values seriously will remain successful over the long term.  
We reap financial success for ourselves and our shareholders, not through disregard for those  
societies in which we operate but because of the trust we have earned from them. This trust has been  
built through our dialogue with politicians as well as society-at-large – and in particular with our  
customers, suppliers and employees.  
Because of this approach, we have created many skilled jobs and apprentice positions around the  
world. Last year we provided a total of 8,400 jobs. And this year we will have enabled more than 2,500  
young people in Germany alone to start professional careers at DaimlerChrysler.  
As far as we are concerned, cost reduction and job security are not mutually exclusive. On the  
contrary, last summer we reached an agreement aimed at achieving cost savings of €500 million a  
year following tough negotiations with our works council. That agreement not only safeguards the  
future of our passenger car and commercial vehicle production plants in Germany but also protects  
related jobs in those plants. It has shown Germany the way forward.  
8
Many of our projects create new islands of stability – some in the most adverse environments.  
The Poema project, which harnesses the properties of natural fibers from Brazil’s rain forest, has  
evolved into a global association for sustainable production. In India we are producing biodiesel from  
the jatropha plant. In the Philippines we are producing another type of natural fiber that is being  
incorporated into our new A- and B-Class vehicles as a substitute for fiberglass. And in Freiberg,  
Germany, we are striving to produce synthetic diesel fuel from biomass.  
In Russia we have established a training academy for the advancement of young people.  
And in crisis-ridden regions such as Afghanistan and the Middle East we are helping to establish and  
operate training centers that will provide a better future for their young people.  
We are systematically expanding our struggle against HIV/AIDS and aim to extend the campaign to  
all of our worldwide business locations.  
Finally, our relief efforts in response to the devastating tsunami in Asia have clearly demonstrated just  
how much good corporate citizenship can accomplish. Together with many in Europe and the rest  
of the world we reacted immediately to calls for help by providing significant financial aid as well as  
transport vehicles where they were most needed. Our employees also donated additional funds  
with impressive generosity.  
I believe that you too, as shareholders, appreciate being part of a company that has both heart and  
sound business sense.  
Dear shareholders, my colleagues and I will continue on this course to the best of our ability in order  
to further improve your company’s performance and prospects.  
We hope we can count on your continued support as we move forward together.  
Sincerely,  
9
Board of Management  
Günther Fleig (56)  
Human Resources &  
Labor Relations Director,  
Appointed until 09/2009  
Manfred Gentz (63)  
Finance & Controlling,  
Retired from the Board of Management  
on December 15, 2004  
Thomas Weber (50)  
Research & Technology,  
Appointed until 12/2010  
Andreas Renschler (46)  
Eckhard Cordes (54)  
Commercial Vehicles,  
Mercedes Car Group,  
Appointed until 09/2007  
Appointed until 12/2008  
1
0
Jürgen Hubbert (65)  
Executive Automotive  
Committee (EAC),  
Rüdiger Grube (53)  
Corporate Development/China  
Appointed until 09/2007  
Thomas W. Sidlik (55)  
Global Procurement & Supply,  
Appointed until 12/2008  
Thomas W. LaSorda (50)  
Chief Operating Officer (COO)  
Chrysler Group, Deputy Member  
of the Board of Management,  
Appointed until 04/2007  
Appointed until 04/2005  
Jürgen E. Schrempp (60)  
Dieter Zetsche (51)  
Bodo Uebber (45)  
Chairman of the Board of Management,  
Appointed until 04/2008  
Chrysler Group,  
Appointed until 12/2008  
Finance & Controlling/  
Financial Services  
Appointed until 12/2006  
1
1
DaimlerChrysler Shares  
High raw-material prices dampen recovery of stock markets | Additional burden on  
automobile stocks due to tough competitive situation in the United States |  
DaimlerChrysler shares in a difficult environment slightly below previous year’s level |  
50,000 shareholders make use of Personal Internet Service  
International stock markets in 2004. Following the very positive  
Development of Important Indices  
development of equity prices in 2003, which ended a three-year  
bear market, the world’s major stock markets remained fairly flat  
over the whole of 2004. It was only a rise in demand for shares  
at the end of the year that caused the DAX, the Euro Stoxx 50, the  
S&P 500, the Nikkei and the Dow Jones Industrial to close at a  
higher level than at the start of the year.  
Status  
End of 2004  
Status  
End of 2003  
% Change  
Dow Jones Industrial Average  
Nasdaq 100  
10,783  
1,621  
4,814  
11,489  
2,951  
4,256  
193  
10,454  
1,468  
4,477  
10,677  
2,761  
3,965  
190  
+3  
+10  
+8  
FTSE 100  
Nikkei  
+8  
Dow Jones Euro Stoxx 50  
DAX 30  
+7  
The fact that investors were generally reticent despite the upturn  
in the world economy was primarily due to substantial increases  
in raw-material prices, especially the sharp rise in the price of oil,  
as well as the strong gains of the euro against the US dollar. The  
share prices of export-oriented European companies were partic-  
ularly impacted by the sustained strength of the euro.  
+7  
Dow Jones Stoxx Auto Index  
S&P Automobiles Industry Index  
+1  
159  
173  
- 8  
In comparison:  
DaimlerChrysler’s shares (in )  
35.26  
37.00  
-5  
Rising raw-material prices mainly affected global automobile  
manufacturers, and those companies active in the United States  
were additionally affected by the increasingly tough competition  
in that vehicle market. The automotive industry became less  
attractive, compared with some other sectors due to expectations  
of higher interest rates and their impact on the automotive and  
financial services business.  
Whereas the US auto index weakened considerably, the European  
auto index closed slightly higher than its prior-year level,  
but it was the weakest European industry index in the year 2004.  
1
2
Share Price Index  
DaimlerChrysler Share Price (high/low) in €  
3
1
20  
10  
00  
40  
1
1
38  
36  
34  
32  
30  
9
8
7
0
0
0
Dec. 30  
Feb.  
27  
April  
30  
June  
30  
Aug.  
31  
Oct.  
29  
Dec.  
30  
Jan.  
’04  
Feb. March April May June  
’04 ’04 ’04  
’04 ’04  
July  
’04  
Aug. Sept. Oct.  
’04 ’04  
’04  
Nov. Dec.  
’04  
’04  
0
3
DaimlerChrysler  
Dow Jones STOXX Auto Index  
DAX  
DaimlerChrysler share price developments. DaimlerChrysler  
shares were not exempt from the general market trend in 2004.  
However, the share price remained relatively strong in this difficult  
market environment. DaimlerChrysler was the strongest auto-  
mobile stock in the DAX in 2004, also performing significantly  
better than the US automobile manufacturers.  
Following another temporarily weak phase, by the end of June  
the share price was again around 38. With a dramatic increase  
in the oil price by the end of October and the significant climb  
of the euro against the US dollar from nearly US $1.20 to US  
$1.35, prices at stock exchanges worldwide came under pressure  
again in the second half of the year. During this phase, the  
development of automotive stocks was weaker than that of the  
overall market. DaimlerChrysler shares were again not immune  
to this trend and fell to their low for the year of 31.63 at the end  
of October.  
At the beginning of the year, the DaimlerChrysler share price at  
first continued the upward trend that had started in the fall of  
2003. Our equity benefited from the confidence that the economic  
recovery in the United States would continue and that the  
Chrysler Group could profit over the long term from the product  
offensive that was just beginning. By the end of January, the  
share price was just below 40. Due to profit-taking by some  
institutional investors, however, the share price fell again.  
When the third-quarter results were presented, it was announced  
that the Mercedes Car Group would attain lower earnings in  
full-year 2004 than in the prior year. Although several analysts  
subsequently reduced their earnings forecasts, share-price  
targets and investment recommendations, our stock rose again  
substantially until the end of the year. In November and De-  
cember, the price rose by 9%, and thus performed significantly  
better than the DAX and the Dow Jones Auto Index. However,  
DaimlerChrysler shares did not quite reach the level of a year earli-  
er, and closed 2004 at 35.26, which was 5% lower than at the  
end of 2003.  
As a result of the bomb attack in Madrid and a generally weaker  
stock-market environment, this pressure to sell continued until  
well into April. Our stock fell to around 34 during this phase.  
At this level, purchasing increased again significantly. Due to better  
results than had been expected for the first quarter and the  
announcement that DaimlerChrysler would not participate in the  
capital increase at Mitsubishi Motors, the price returned to 39  
by the end of April.  
At the beginning of the year 2005, DaimlerChrysler’s shares were  
unable to continue their steep climb of the end of 2004, al-  
though the capital market reacted positively to the new models  
presented at the Detroit Motor Show. Investors were reticent  
in particular due to the renewed significant rise in the oil price  
and the ongoing weakness of the US dollar.  
1
3
Broad shareholder base. DaimlerChrysler has a broad share-  
holder base of more than 1.7 million shareholders. Institutional  
investors hold 56.8% of our capital stock. Retail investors  
account for 25.6%. European investors by the end of 2004 held  
around 75% of our equity and US investors held about 17%.  
Statistics  
2
004  
2004  
2003  
December 31  
US $  
Capital stock (in millions)  
Number of shares (in millions)  
Market capitalization (in billions)  
Number of shareholders (in millions)  
Weighting in share indices  
DAX 30  
3,565  
2,633  
1,012.8  
35.7  
2,633  
1,012.8  
37.5  
48.7  
Deutsche Bank reduced its shareholding during 2004 from 11.8%  
to 10.4%. Compared with the prior year, the free float therefore  
increased by 1.4 percentage points to 82.4%.  
1.7  
1.8  
6.4%  
1.2%  
7.2%  
1.3%  
Dow Jones Euro Stoxx 50  
Credit rating, long-term  
Standard & Poor’s  
At the end of January 2005, the Emirate of Dubai announced  
that Dubai International Capital had acquired a shareholding of  
about 2% in DaimlerChrysler.  
BBB  
A3  
BBB  
A3  
Moody’s  
Fitch  
BBB+  
A-  
BBB+  
A-  
In the German DAX 30 index, DaimlerChrysler’s shares were  
ranked in sixth position at the end of the year with a weighting  
of 6.4%. In the Dow Jones Euro Stoxx 50, our shares were  
represented with a weighting of 1.2%. Global trading volume in  
DaimlerChrysler shares in 2004 amounted to around 1.5 billion  
shares (2003: 1.7 billion), of which about 123 million were traded  
in the United States (2003: 153 million) and 1,336 million in  
Germany (2003: 1,561 million).  
Dominion Bond  
Statistics per Share  
2
004  
2004  
2003  
US $  
3.29  
3.29  
Net income (basic)  
Net income (diluted)  
Dividend  
2.43  
2.43  
1.50  
0.44  
0.44  
1.50  
Investor Relations activities. As in previous years, our activities  
were primarily focused on providing information on the Group  
to analysts, institutional investors, rating agencies and private  
shareholders – in a timely and reliable manner. Two of the key  
instruments used to inform our retail shareholders about the  
Group’s strategy and business developments were the Annual  
Meeting in Berlin with approximately 10,000 participants and the  
Investor Relations section of DaimlerChrysler’s website.  
Stockholders’ equity (Dec. 31)  
Share price: year-end  
high  
44.84  
48.05 2  
49.26 2  
40.20 2  
33.12  
35.26 1  
39.41 1  
31.63 1  
34.05  
37.00 1  
37.34 1  
23.94 1  
low  
1
2
Frankfurt Stock Exchange.  
New York Stock Exchange.  
1
4
Shareholder Structure as of Dec. 31, 2004  
By type of shareholder  
By region  
Deutsche Bank  
10.4%  
7.2%  
Germany  
51.5%  
23.7%  
17.1%  
7.7%  
Kuwait Investment Authority  
Institutional investors  
Retail investors  
Europe excluding Germany  
USA  
56.8%  
25.6%  
Rest of the world  
Our communication activities for institutional investors and  
analysts included roadshows in the major financial centers of  
Europe, North America and Asia, as well as more than 100  
discussions held in Stuttgart, New York and Auburn Hills.  
The Personal Internet Service is available to shareholders with  
additional functions throughout the year, and has thus become a  
new platform for targeted electronic communication by Investor  
Relations. New functions include the possibility to view and  
process personal data online in the share register. In addition  
shareholders can gain information on the company in electronic  
form.  
We carried out presentations of the company at important inter-  
national analyst and investor conferences. In addition, we  
organized special events, so-called division days, which allowed  
a closer insight into the Mercedes Car Group, the Chrysler  
Group and the Commercial Vehicles Division. We also provided  
information to the investment community on our quarterly  
results and various important events by means of conference  
calls, which were simultaneously transmitted on the Internet.  
The new service had a very successful start with some 50,000  
users in the year 2004. Access to the Personal Internet Service  
and further information on it can be found  
at https://register.daimlerchrysler.com.  
Direct electronic shareholder communication. With the  
new Personal Internet Service, DaimlerChrysler shareholders now  
have the option of receiving their invitations to our Annual  
Meeting by e-mail. As a part of our comprehensive approach,  
the Personal Internet Service now supports shareholders  
from the invitation, to the authorization and instruction of voting  
proxies, if shareholders are unable to attend the Annual Meeting  
in person. In this way, we make it easier for shareholders to  
exercise their rights, cut costs and protect the environment  
by reducing the use of paper.  
1
5
Management Report  
Overview  
– The Board of Management and the Supervisory Board will  
propose to the shareholders at the Annual Meeting that a  
dividend of 1.50 per share should be distributed (2003:  
1.50). This proposal reflects both the business developments  
of the year 2004 and the prospects for the coming years  
(see page 29).  
The development of global automobile markets was generally  
positive in 2004. The commercial vehicles sector benefited  
in particular from lively investment activity in important markets.  
However, there was only slight growth in the major passenger-  
car markets of North America, Western Europe and Japan  
(
see page 21).  
– Cash provided by operating activities of 11.1 billion was below  
the prior-year level (13.8 billion). This development was  
caused by, among other factors, increased cash tied up due to  
the higher production and sales volumes. There was a negative  
effect from the weaker US dollar, causing the cash inflow  
from the American companies translated into euros to fall  
compared with the prior year (see page 31).  
DaimlerChrysler sold a total of 4.7 million vehicles in 2004,  
surpassing the level of the prior year by 8% (see page 21).  
The DaimlerChrysler Group’s revenues increased by 4%  
to 142.1 billion in 2004. Adjusted for currency-translation  
effects and changes in the consolidated Group, revenues  
were actually 7% higher than in the prior year (see page 22).  
– The credit rating agencies Standard & Poor’s, Moody’s and Fitch  
lifted the outlook for their respective DaimlerChrysler credit  
ratings, in particular as a reflection of more positive develop-  
ments in the operative business (see page 33).  
Group operating profit of 5.8 billion was significantly higher  
than the target of €5.1 billion (operating profit of the previous  
year excluding restructuring expenditures at Chrysler Group  
and the gain realized on the sale of MTU Aero Engines). This  
increase was primarily due to the significant improvement in  
earnings posted by the Chrysler Group and the Commercial  
Vehicles Division. On the other hand, the contribution to Group  
operating profit from the Mercedes Car Group decreased  
substantially, while the Services division delivered a contribu-  
tion at the same level as in the previous year (see page 23).  
– Total assets increased compared with December 31, 2003 by  
4.4 billion to 182.7 billion. This increase was mainly a result  
of the full consolidation of Mitsubishi Fuso Truck and Bus  
Corporation (MFTBC). An additional factor was the positive  
development of the financial services business (see page 34).  
– Assuming a moderate increase in the worldwide demand for  
automobiles, we expect total unit sales by the DaimlerChrysler  
Group to increase again in 2005 and the following years  
(see page 46).  
Net income rose from 0.4 billion to 2.5 billion. Earnings  
per share of 2.43 were also significantly higher than in the prior  
year (see page 28).  
After a weaker first and second quarter, for the full-year 2005  
we expect a slightly higher operating profit than in the previous  
year. Significant improvements in earnings should be possible  
from the year 2006 onwards, when the Mercedes Car Group’s  
model offensive will take full effect and additional new models  
will be available from the Chrysler Group. Challenges may  
arise, however, from the weak US dollar and high raw-material  
prices (see page 46).  
Note:  
The US dollar values in the tables are not subject to mandatory disclosure and have not been  
audited. Currency translation was carried out at the rate of €1 = US $1.3538 (noon buying rate of  
the Federal Reserve Bank of New York on December 31, 2004).  
1
6
18 Business and General Conditions  
36 Factor Input  
1
8 The company  
0 The economic situation  
1 Business developments  
36 Capital expenditure  
36 Research and development  
37 Procurement  
2
2
23 Profitability  
37 The Workforce  
2
2
3 Operating profit  
6 Reconciliation of operating profit to  
income before financial income  
8 Financial income  
8 Income taxes  
8 Net income  
9 Dividend  
38 Events after the End of the 2004 Financial Year  
2
2
2
2
38 Risk Report  
38 Risk management  
39 Economic risks  
40 Industry- and company-specific risks  
2
9 Value-Based Performance Measures  
41 Foreign exchange rate, interest rate, equity price  
and commodity price risk  
43 Legal risks  
2
3
9 Management and control tools  
0 Development of return on net assets  
43 Overall risk  
31 Liquidity and Capital Resources  
44 Outlook  
31 Cash flow  
44 The world economy  
3
3
2 Refinancing  
3 Rating  
44 Automobile markets  
44 DaimlerChrysler’s divisions  
4
6 The DaimlerChrysler Group  
6 Capital expenditure  
4
34 Financial Position  
47 Research and development  
7 The workforce  
4
3
3
4 Consolidated balance sheet  
5 Financing of pensions and similar obligations  
1
7
Consolidated Revenues by Division  
In %  
Business and  
General Conditions  
Mercedes Car Group  
Chrysler Group  
Commercial Vehicles  
Services  
33%  
35%  
23%  
8%  
Other Activities  
1%  
The company  
The Chrysler Group develops, produces and distributes passen-  
ger cars, minivans, sport-utility vehicles and light trucks of the  
DaimlerChrysler AG was formed in November 1998 as a result of  
the merger between Daimler-Benz AG and Chrysler Corporation.  
The Group can look back on a tradition of more than one hundred  
years, featuring pioneering achievements in automotive engineering  
by both of its predecessor companies. Today, DaimlerChrysler is  
a leading supplier of superior passenger cars, sport-utility vehicles,  
minivans and pickups, and the world’s largest manufacturer of  
commercial vehicles. In addition, DaimlerChrysler holds a 33%  
interest in the European Aeronautic Defence and Space Company  
brands Chrysler, Jeep and Dodge. In addition, the Chrysler Group  
®
manufactures and markets spare parts and accessories of the  
MOPAR brand. Its production facilities are in the United States,  
Canada and Mexico. In 2004, 82% of its vehicles were sold in the  
United States, 8% in Canada and 4% in Mexico. 6% of the vehicles  
were exported to markets outside the NAFTA region.  
Within a worldwide network, DaimlerChrysler’s Commercial  
Vehicles Division develops and produces trucks, vans and bus-  
es under the brands Mercedes-Benz, Freightliner, Sterling,  
Western Star, Setra, Thomas Built Buses, American LaFrance,  
Orion and Mitsubishi Fuso. The product range covers small vans,  
medium and heavy-duty trucks for local and long-distance  
deliveries and for construction sites, as well as tourist, urban  
and overland buses. It also supplies special-purpose vehicles, for  
fire services for example, as well as the Unimog multi-function  
vehicle. DaimlerChrysler offers its customers worldwide the right  
commercial vehicle for every requirement. The division’s most  
important sales markets are North America with 25% of unit sales  
in 2004, Germany with 16%, the other markets of Western  
Europe with 23%, Asia with 18%, and South America with 8%.  
(
EADS), one of the world’s leading companies in the field of  
aerospace and defense technology.  
With its strong brands and a comprehensive portfolio of automo-  
biles ranging from small cars to heavy-duty trucks, supplemented  
by tailored services along the automotive value chain, Daimler-  
Chrysler is active in nearly all countries in the world. The Group  
has production facilities in a total of 20 countries. The worldwide  
networking of research and development activities and of its pro-  
duction and sales locations gives the Group considerable potential  
to enhance efficiency and gain advantages in an internationally  
competitive environment.  
Of DaimlerChrysler’s total revenues of 142.1 billion in 2004,  
The Services division supports the sales of the DaimlerChrysler  
Group’s automotive brands in 39 countries. Its product portfolio  
mainly comprises tailored financing and leasing packages for  
dealers and customers, but it also provides services such as  
insurance and fleet management. The focus of Services’ activities  
is in North America and Western Europe. In Germany, in addition  
to automotive financial services, the division also offers investment  
products and credit-card services. DaimlerChrysler Services  
also holds a 45% interest in the Toll Collect consortium, which on  
January 1, 2005, launched a new electronic toll system for  
trucks over 12 metric tons in Germany.  
3
3% was generated by the Mercedes Car Group, 35% by the  
Chrysler Group, 23% by Commercial Vehicles, 8% by the Services  
division and 1% by the Other Activities segment.  
The products supplied by the Mercedes Car Group range from  
the high-quality small cars of the smart brand to the premium  
vehicles of the brands Mercedes-Benz, Mercedes-Benz AMG and  
Mercedes-Benz McLaren, and the Maybach luxury sedans.  
Most of these vehicles are produced in Germany, but the division  
also has production facilities in the United States, France,  
South Africa, Brazil, India, Malaysia, Thailand, Vietnam and in  
the future also China. Its most important markets in 2004 were  
Germany with 32% of unit sales, the other markets of Western  
Europe (35%), the United States (18%) and Japan (3%).  
1
8
DaimlerChrysler Business Portfolio  
Mercedes  
Car Group  
Chrysler  
Group  
Commercial  
Vehicles  
Services  
Other  
Activities  
Mercedes-  
Benz  
Passenger  
Cars  
Chrysler  
Jeep®  
Trucks  
Vans  
Financial  
Services  
Off-Highway  
EADS (33%)  
Non-  
Automotive  
Business  
smart  
Dodge  
Buses &  
Coaches  
Maybach  
The Other Activities segment includes our 33% shareholding  
in the European Aeronautic Defence and Space Company (EADS)  
as well as the DaimlerChrysler Off-Highway business unit.  
DaimlerChrysler Off-Highway produces and markets ship and  
train engines as well as local electricity generators.  
Within the context of our various activities in China, we concluded  
some pioneering agreements in 2004:  
On November 26, 2004, a joint-venture agreement was signed  
between DaimlerChrysler AG and Beijing Automotive Industry  
Holding Company Ltd. (BAIC) covering the production of C-Class  
and E-Class sedans by Mercedes-Benz in China. In the medium  
term, this joint venture for passenger cars with our long-standing  
partner BAIC in the form of the newly established Beijing Benz-  
DaimlerChrysler Automotive Co. Ltd. will produce up to 25,000  
C-Class and E-Class sedans per annum at a new plant in Beijing.  
The first of these vehicles are scheduled to come off the assembly  
line in the fall of 2005. Beijing Benz-DaimlerChrysler Automotive  
Co. Ltd. will also produce vehicles from the brand portfolio of  
the Chrysler Group as well as models from Mitsubishi Motors.  
Executive Automotive Committee. The Executive Automotive  
Committee (EAC) serves as a platform for the discussion and  
implementation of cross-divisional issues, and concentrates on  
the following areas:  
realization of cross-divisional synergy potential by standardizing  
processes and systems and developing modular concepts for  
vehicle components,  
coordination of product concepts and production capacities  
affecting more than one brand,  
Group-wide planning for the application of new technologies,  
coordination of worldwide sales and marketing activities, and  
protection and further strengthening the identity of all of  
the Group’s passenger car brands.  
In addition, DaimlerChrysler, the Fujian Motor Industry Group and  
the China Motor Corporation have signed an agreement for the  
“DaimlerChrysler Vans (China) Ltd.” joint venture, which will pro-  
duce the new Mercedes-Benz Sprinter and the Viano/Vito van  
family in a new plant in Fuzhou in the province of Fujian. This  
plant is designed for an annual capacity of around 40,000 units  
and will start production in the year 2006.  
Activities in China. In view of the growing importance of the  
Chinese market, DaimlerChrysler’s business organization  
was further developed in the year 2004. In October 2004, we  
concentrated the responsibility for the China activities of all  
divisions in the Corporate Development department. In this way,  
we ensure that the Group has a uniform approach to the market  
and can better coordinate the divisions’ efforts.  
To secure the future of our business activities in the field of trucks  
and buses, we have initiated a framework agreement covering  
cooperation between DaimlerChrysler and the company Beiqi  
Foton Motor Corporation Ltd. It is planned to produce medium  
and heavy-duty trucks, engines and components at Beiqi Foton’s  
plant in Beijing. BAIC is the biggest shareholder in this company.  
We are training new employees in preparation for this expanded  
production capacity to ensure that the new plants also achieve  
the Group’s high quality level. In addition, the required local  
supplier industry is also being expanded continuously.  
DaimlerChrysler Services will also be active in China, and will  
support the sales of the Group’s brands in China with its own  
financial services company. A provisional permit to establish these  
business activities was granted in November 2004.  
1
9
Economic Growth  
Global Automotive Markets  
Unit sales growth rate 2004/2003  
Gross national product, growth rate in %  
2
2
004  
003  
10  
8
Passenger cars 40  
Commercial  
30  
vehicles  
6
20  
10  
4
2
-10  
NAFTA Western Europe Japan  
Asia  
Other  
excl. Japan  
markets  
-20  
Western Europe Japan1  
USA  
South America  
China  
Source: Global Insight  
Source: German Association of the Automotive Industry (VDA)  
Rate of change for passenger cars distorted due to new market segmentation  
1
Portfolio changes. In March 2004, DaimlerChrysler increased  
its shareholding in Mitsubishi Fuso Truck and Bus Corporation  
On August 16, 2004, DaimlerChrysler sold its 10.5% shareholding  
in HMC for 737 million. Due to our majority stake in MFTBC  
and the progress made in China, cooperation with Hyundai in  
the field of commercial vehicles had lost strategic importance for  
DaimlerChrysler. The World Engine Project by DaimlerChrysler,  
HMC and MMC, and various other shared projects will be contin-  
ued, however.  
(
MFTBC) from 43% to 65%. MFTBC is a leading supplier of com-  
mercial vehicles in Japan and has a strong market position in  
Southeast Asia.  
On April 22, 2004, the Board of Management and the Supervisory  
Board of DaimlerChrysler decided not to participate in a capital  
increase planned by Mitsubishi Motors Corporation (MMC), and  
thus to cease providing MMC with financial support.  
The economic situation  
As DaimlerChrysler did not participate in the capital increase,  
at the end of December 2004 our interest in MMC had decreased  
to 19.7%. This shareholding may decrease further following the  
conversion into voting shares of preferred stock issued by MMC.  
As a result of its reduced shareholding, DaimlerChrysler can  
no longer exercise a significant influence over MMC’s business  
and financial policies. Therefore, since June 30, 2004, our  
shareholding in MMC is no longer accounted for in the consoli-  
dated financial statements using the equity method, but as an  
investment shown at fair value. DaimlerChrysler and MMC have  
agreed to continue with shared projects which have been con-  
tractually agreed upon. These include:  
World economy. 2004 was one of the years with the strongest  
growth for the world economy since 1980, despite the significant  
increase in raw-material prices. This was mainly caused by the  
dynamic economic developments in the United States, China and  
Japan. However, the economies in the emerging markets of Asia,  
Eastern Europe and South America also revived significantly.  
On the other hand, rates of expansion in large parts of Western  
Europe were disappointing, especially in Germany, where domestic  
demand did not yield any perceptible impetus. However, the peak  
of the worldwide upswing was passed by the middle of the year.  
Since then, most indicators have pointed toward lower growth  
rates for the world economy. The rather weaker expansion of both  
the United States and China have contributed to this development.  
High raw-material prices have also had a dampening effect on  
growth via the cost burden for companies and the reduction in  
purchasing power for private households. However, weighted  
for each country’s share of the Group’s revenues, the economic  
expansion of DaimlerChrysler’s sales markets of 3.7% was  
well above the prior year’s growth of 2.3%, and also significantly  
higher than the long-term trend of about 3%.  
the development and production of a four-cylinder in-line engine,  
the so-called “World Engine Project”, by DaimlerChrysler,  
MMC and Hyundai Motor Company (HMC),  
the production of gasoline engines for smart and Mitsubishi  
in Kölleda, Germany,  
the production of the smart forfour and the Mitsubishi Colt  
in Born, the Netherlands, and  
the development of a platform for medium-sized passenger  
cars for MMC and the Chrysler Group.  
During the course of the year, the euro appreciated in value  
against the US dollar by about 7%; compared with British pound  
and the Japanese yen there were only small movements.  
2
0
Percentage of Sales Structure  
Mercedes Car Group  
Chrysler Group  
Commercial Vehicles  
S-Class/SL/Maybach  
E-Class/CLS  
7%  
24%  
39%  
12%  
6%  
Passenger cars  
Light trucks  
Sports tourers  
Minivans  
22%  
24%  
10%  
18%  
26%  
Trucks  
Vans  
57%  
38%  
5%  
C-Class/CLK/SLK/Sport Coupe  
A-Class  
Buses  
M-Class/G-Class  
smart  
SUVs  
12%  
Automobile markets. In general, global automobile markets  
developed positively in 2004. The commercial vehicles sector in  
particular benefited from lively investment activity in important  
markets. But the major passenger car markets of North America,  
Western Europe and Japan recorded little growth. High raw-  
material prices, the related loss in purchasing power and uncer-  
tainty among consumers all acted to reduce demand.  
Business developments  
Unit sales. DaimlerChrysler sold a total of 4.7 million vehicles in  
2004, surpassing the prior-year result by 8%.  
Unit sales by the Mercedes Car Group of 1.2 million vehicles were  
slightly higher than the figure for the prior year. Due in particular  
to the fact that several new models were not fully available until the  
end of the year, worldwide unit sales of the Mercedes-Benz brand  
decreased to 1,074,600 vehicles (2003: 1,092,200). However,  
with the new vehicles from its product and marketing offensive,  
the Mercedes-Benz brand gained a much more attractive model  
range and defended its position as the world’s most successful  
premium brand. The smart brand increased its unit sales by 22%  
to 152,100 vehicles in the year 2004. This was due to the launch  
of the smart forfour, the brand’s first car with four seats (see  
pages 50 ff).  
The US market for passenger cars and light trucks, in which com-  
petition was extremely tough, expanded slightly to 16.9 million  
vehicles (2003: 16.6 million). The markets of Western Europe also  
grew slightly to 14.5 million passenger cars (2003: 14.2 million).  
However, there was still no upturn in the major markets of Germany  
and France, and the Japanese market has not yet benefited from  
the country’s strong economic growth. The process of recovery  
continued in the emerging markets of South America and demand  
also increased overall in the countries of Central and Eastern  
Europe. Although the demand boom in China weakened percepti-  
bly during the second half of the year, the emerging markets of  
Asia once again maintained their position as the engine of global  
automotive expansion.  
In the context of its product offensive, the Chrysler Group launched  
nine new models last year. Due to the market success of the  
new products, unit sales increased by 5% to 2.8 million vehicles  
of the Chrysler, Jeep and Dodge brands. Due to the success of  
®
With the exception of Japan, the world’s major international mar-  
kets for commercial vehicles showed strong growth. In North  
America, the exceptionally positive market development for medi-  
um and heavy-duty trucks continued, so that total unit sales sur-  
passed the prior-year level by 31% . New registrations of commer-  
cial vehicles also increased significantly in Western Europe. This  
was primarily due to replacement purchases and the increased  
need for transport as a result of growing business relations with  
the countries of Eastern Europe. On the other hand, the Japanese  
market declined significantly, reflecting the fact that a large  
number of purchases had been brought forward to 2003 because  
of new emission regulations.  
several new products, the Chrysler Group increased its market  
share in the US to 12.8 % (2003: 12.5%). The Chrysler Group rein-  
forced its market position, particularly in the passenger car, mini-  
van and sports-utility vehicle segments. In the US, the Chrysler  
300/300C set segment records with 107,200 vehicles sold in  
2004 since the launch in April. The Dodge Magnum sold 39,200  
in just eight months of sales, and the new Chrysler and Dodge  
minivans sold 386,700 vehicles (+3%), due to the market success  
TM  
of the innovative Stow’n Go seating and storage system (see  
pages 56 ff).  
2
1
Consolidated Revenues  
In billions of €  
Other markets  
USA  
175  
150  
125  
European Union  
1
00  
75  
50  
25  
2
001  
2002  
2003  
2004  
The Commercial Vehicles Division increased its unit sales by  
2% to 712,200 trucks, vans and buses. Excluding Mitsubishi  
Revenues. DaimlerChrysler’s total revenues increased by 4%  
to €142.1 billion in 2004. Adjusted for currency-translation  
effects and changes in the consolidated Group, revenues were  
actually 7% higher than in the prior year. The revenues of  
€49.6 billion generated by the Mercedes Car Group did not  
quite equal the level of the prior year, primarily due to a lifecycle-  
related less favorable model mix. The Chrysler Group’s revenues  
of €49.5 billion were at the same level as in the prior year; ad-  
justed for currency-translation effects, the increase actually  
amounted to 10%. The Commercial Vehicles Division increased  
its revenues by 30% to €34.8 billion, assisted by the full consoli-  
dation of MFTBC since March 31, 2004, but adjusted for this  
effect there was still an increase of 16%. Due to the weaker US  
dollar, the revenues generated by the Services division were  
slightly lower than in the prior year at €13.9 billion. In regional  
terms, DaimlerChrysler’s revenues in the NAFTA region were  
similar to the prior-year level at €73.3 billion, while in the  
European Union revenues were 2% lower than in 2003 at €47.4  
billion. In the rest of the world we expanded our business  
volume by 31% to €21.4 billion.  
4
Fuso Truck and Bus Corporation (MFTBC), which has been fully  
consolidated in the division since March 31, 2004 with a one-  
month time lag, and which is included in the division’s unit sales  
with 118,100 vehicles, there would have been a 19% increase  
to a new record level. This was assisted by favorable market con-  
ditions and above all an attractive product range. Growth was  
particularly strong in the business units Trucks Europe/Latin  
America (+24% to 137,400 vehicles) and Trucks NAFTA (+28% to  
152,400 vehicles). However, the Vans business unit (+13%  
to 260,700 vehicles) and Buses (+16% to 32,800 vehicles) also  
increased their unit sales by considerable margins. (see pages  
6
2 ff).  
Revenues  
2
004  
2004  
2003  
In millions  
US $  
DaimlerChrysler Group  
Mercedes Car Group  
Chrysler Group  
192,319  
67,189  
67,010  
47,064  
18,871  
2,978  
142,059  
49,630  
49,498  
34,764  
13,939  
2,200  
136,437  
51,446  
49,321  
26,806  
14,037  
4,084  
Commercial Vehicles  
Services  
Other Activities 1  
1
2003 figures include discontinued operations (MTU Aero Engines).  
2
2
Profitability  
Operating profit  
the start of the system. In the Other Activities segment, the  
agreement reached with Bombardier in September 2004 to settle  
all disputes connected with the sale of DaimlerChrysler Rail  
Systems GmbH (Adtranz) led to a gain of 120 million. The prior  
year’s result was positively affected by income of 1,031 million  
from the sale of the MTU Aero Engines business unit. If these  
exceptional items are excluded, Other Activities actually improved  
its operating profit compared with 2003, primarily due to the  
increased contribution from EADS.  
Operating Profit (Loss) by Segments  
2
004  
2004  
2003  
In millions  
US $  
2,255  
1,932  
1,803  
1,692  
617  
Mercedes Car Group  
Chrysler Group  
1,666  
1,427  
1,332  
1,250  
456  
3,126  
(506)  
811  
Commercial Vehicles  
Services  
1,240  
1,329  
(314)  
5,686  
Other Activities 1  
Eliminations  
(509)  
7,790  
(377)  
5,754  
DaimlerChrysler Group  
The Mercedes Car Group’s operating profit of 1,666 million in  
1
2003 figures include discontinued operations (MTU Aero Engines).  
2004 was significantly lower than in 2003 (3,126 million).  
DaimlerChrysler recorded an operating profit of 5,754 million  
in 2004, which was slightly higher than the result of the prior  
year (5,686 million). We thus achieved our target of significantly  
improving on the prior year’s operating profit, adjusted to ex-  
clude the restructuring expenses at the Chrysler Group (469  
million) and the gain realized on the disposal of MTU Aero Engines  
Charges on earnings resulted at the Mercedes-Benz Passenger  
Cars business unit from a slight decrease in unit sales of 2% to a  
total of 1,074,600 vehicles, an effect that was amplified by shifts  
in the model mix. Operating profit was also reduced by currency  
effects due in particular to the appreciation of the euro against  
the US dollar and expenses for the ongoing comprehensive quality  
offensive. Additional factors were higher marketing expenses,  
mainly relating to the launch of the SLK, the CLS-Class and the  
A-Class.  
(1,031 million).  
Chrysler Group and the Commercial Vehicles Division developed  
positively, achieving substantial increases in their operating  
profits compared with the prior year. Commercial Vehicles’ earn-  
ings improved significantly despite the charge of 475 million  
for quality and recall actions at Mitsubishi Fuso Truck and Bus  
Corporation (MFTBC). However, the Mercedes Car Group recorded  
lower earnings than in 2003. This was due partially to a less  
favorable model mix, but above all to currency effects and expen-  
ses incurred for the launch of new products and to safeguard the  
products’ high quality standards. The Services division further in-  
creased its operating profit from the financial services business.  
This increase more than compensated for the losses from the  
involvement in Toll Collect, which resulted from the reassess-  
ment of the system’s total cost and additional expenses to secure  
The smart brand sold a total of 152,100 vehicles in 2004. The  
increase compared with the prior year was a result of the launch  
of the smart forfour in the second quarter, which more than  
compensated for lower sales of the smart fortwo and the smart  
roadster. Despite higher unit sales, smart recorded a significant  
operating loss that was larger than its operating loss in 2003.  
The reasons for this deterioration were higher marketing  
expenses, launching costs for the smart forfour and increased  
development expenses.  
2
3
The Commercial Vehicles Division realized an operating profit  
of 1,332 million in 2004, thus significantly exceeding the result  
of the prior year (811 million). The improved profitability was  
primarily due to the increase in worldwide unit sales of 42% to  
712,200 units. Even without the inclusion of MFTBC, which has  
been fully consolidated with a one-month time lag since March  
Operating Profit  
2
004  
2004  
2003  
In millions  
US $  
5,367  
2,423  
7,790  
Industrial Business  
Financial Services  
DaimlerChrysler Group  
3,964  
1,790  
5,754  
4,201  
1,485  
5,686  
31, 2004, there would still have been a strong rise in unit sales of  
19%. As well as higher unit sales due to favourable market  
The Chrysler Group posted an operating profit of 1,427 million  
in 2004 compared to an operating loss of 506 million in the  
prior year. The 2004 improvement in profitability was primarily  
the result of higher worldwide factory unit sales, a lower average  
sales incentive expense per vehicle and a shift in product mix  
to higher margin vehicles. Sales incentive expense and product  
mix were positively affected by the successful launch of nine  
new products in 2004. In addition, cost reductions that have  
been achieved from the continued implementation and sustained  
effects of material cost reduction and efficiency-enhancing pro-  
grams also contributed to the improvement in operating profit.  
conditions and a modern product range, the significant increase  
in operating profit was also caused by the continued implemen-  
tation and the effects of the initiated efficiency-enhancing  
programs in the division’s business units. The improvements in  
operating results more than offset charges of 475 million arising  
at MFTBC due to its quality-improving actions and recall  
campaigns, which originate from issues during the time before  
DaimlerChrysler’s involvement in the company. The termination  
of the engine joint venture with Hyundai Motor contributed an  
additional 60 million to the division’s operating profit.  
Worldwide in 2004, Chrysler Group vehicle shipments totalled  
In 2004, the Services division generated an operating profit of  
1,250 million (2003: 1,240 million). Charges arising from its  
involvement in Toll Collect were offset by the improved earnings  
of its Financial Services business unit.  
2
,779,900 compared with 2,637,900 vehicles in the prior year.  
The 2004 operating profit included restructuring charges,  
incurred in connection with the 2001 turnaround plan and other  
workforce reduction charges totaling 283 million while the 2003  
operating loss included turnaround plan charges of 469 million.  
The turnaround plan charges recognized in 2004 and 2003  
were primarily for costs associated with the idling, closing or  
disposal of certain manufacturing facilities and related workforce  
reductions.  
The operating profit of Financial Services increased by 305  
million to 1,790 million, mainly as a result of lower risk costs.  
The overall improvement in the risk management situation in  
all markets and the measures taken to promote the active risk  
control of the portfolio contributed to reduced risk costs. In  
addition, stable interest rate margins were achieved worldwide  
despite the recent increases in interest rates, especially in the  
United States. On the other hand, an impairment charge of  
102 million was recognized relating to the investment in debis  
AirFinance.  
2
4
The division’s involvement in Toll Collect caused charges of 472  
million in the year 2004 (2003: 241 million). These charges were  
mainly a result of revaluing the system’s total costs and extra  
operating expenses required to guarantee the start of the system  
on January 1, 2005.  
In the year 2004, a settlement agreement was reached with  
Bombardier with respect to all disputes relating to the sale of  
Adtranz, which – taking into account the purchase price  
adjustment and including additional costs – led to a gain of  
120 million. As a result of this agreement, it was possible  
to realize this gain on the sale of Adtranz that had previously  
been deferred with no effect on the income statement.  
The Other Activities segment provided an operating profit of  
456 million in 2004 (2003: 1,329 million). The decrease  
Additionally, also in 2004, an impairment was recognized  
on the investment of DASA AG in debis AirFinance, leading to  
a charge of 70 million.  
was almost solely due to the gain on the disposal of MTU Aero  
Engines of 1,031 million that was realized in 2003.  
The contribution to earnings from EADS rose substantially,  
primarily due to the high operating profit at Airbus, which  
was caused by higher airplane deliveries resulting from the  
continued revival of the air-transport industry.  
Eliminations with an effect on the income statement resulted  
primarily from the leasing business in Germany. Any gains or  
losses arising from vehicle deliveries between the divisions are  
deemed to be unrealized from the Group perspective and have  
therefore been eliminated.  
The DaimlerChrysler Off-Highway business unit, which was  
allocated to Other Activities effective January 1, 2004,  
also improved its earnings compared with the prior year and  
thus also made a positive contribution to the segment’s  
operating profit.  
While the operating profit of the prior year still included the  
contribution from Mitsubishi Motors Corporation (MMC) for the  
entire year, the result for 2004 only includes the Group’s  
proportionate share for the first six months. As DaimlerChrysler  
did not participate in a capital increase at MMC, it no longer has  
a significant influence on MMC’s business and financial policies  
and therefore ceased accounting for this investment using the  
equity-method of accounting as of June 29, 2004. The dilution of  
the Group’s shareholding in MMC resulted in a loss in 2004,  
which was more than offset by the gains recognized on the hedging  
of the investment in MMC that had previously been accounted  
for with no effect on the statement of income. In total, the  
proportionate share of MMC’s operating loss was lower than  
in 2003.  
2
5
Consolidated Statements of Income (Loss)  
Reconciliation of Group Operating Profit to Income before Financial Income  
2
004  
2004  
2003  
In millions  
US $  
Operating profit  
7,790  
5,754  
(845)  
5,686  
(870)  
Pension and postretirement benefit  
expenses, other than current and  
prior service costs and settlement/  
curtailment losses  
2
004  
2004  
2003  
In millions  
US $  
192,319  
(155,100)  
37,219  
(1,144)  
Revenues  
142,059  
(114,567)  
27,492  
136,437  
(109,926)  
26,511  
Operating (profit) loss from affiliated  
and associated companies and  
financial (income) loss from related  
operating companies  
Cost of sales  
Gross profit  
118  
87  
(5)  
Selling, administrative and other  
expenses  
Operating profit from discontinued  
operations  
(24,330)  
(7,660)  
1,211  
(17,972)  
(5,658)  
895  
(17,772)  
(5,571)  
689  
(84)  
Research and development  
Other income  
Pre-tax gains from the sale of  
operating businesses and discontinued  
operations  
(520)  
6,244  
(384)  
4,612  
(1,031)  
(308)  
Turnaround plan expenses –  
Chrysler Group  
(196)  
6,244  
-
(145)  
4,612  
-
(469)  
3,388  
(1,960)  
(832)  
(2,792)  
596  
Miscellaneous items  
Income before financial income  
Impairment of investment in EADS  
Other financial expense, net  
Financial expense, net  
Income before financial income  
3,388  
(1,458)  
(1,458)  
4,786  
(1,594)  
146  
(1,077)  
(1,077)  
3,535  
(1,177)  
108  
Reconciliation of operating profit to income before  
financial income  
Income before income taxes  
Income tax expense  
(979)  
(35)  
Pension and postretirement benefit expenses, other than cur-  
Minority interests  
rent and prior service costs and settlement/curtailment losses”  
is the sum of the interest cost, the expected return on plan  
assets, and the amortization of unrecognized net actuarial gains  
or losses. Operating profit excludes these components of the  
net periodic pension and postretirement benefit expense, since  
they are driven by financial factors and are not within the  
responsibility of the divisions.  
Income (loss) from continuing  
operations  
3,338  
2,466  
(418)  
14  
Income from discontinued operations,  
1
net of taxes  
Income on disposal of discontinued  
2
operations, net of taxes  
882  
Cumulative effects of changes  
in accounting principles:  
transition adjustments resulting from  
adoption of FIN 46R and SFAS 142,  
net of taxes  
The reconciliation item “Operating (profit) loss from affiliated and  
associated companies and financial (income) loss from related  
operating companies” includes the contributions to earnings  
from our operating investments which are reported as a compo-  
nent of financial income (expense), net, in the consolidated  
statements of income. These contributions are allocated to the  
operating profit (loss) of the respective divisions. In 2004,  
this resulted in a negative overall contribution to operating profit  
of 87 million (2003: positive contribution of 5 million). The  
decrease was primarily a result of the proportionate share of the  
loss recorded by Toll Collect, and was only partially offset by  
a distinct increase in the contribution from EADS compared with  
the prior year.  
(30)  
448  
Net income  
3,338  
2,466  
1
2
DaimlerChrysler sold its 100% stake in MTU Aero Engines on December 31, 2003. Therefore the  
income of MTU Aero Engines is included in the “Income (loss) from discontinued operations.”  
Gain on disposal of the MTU Aero Engines Group on December 31, 2003, after taxes.  
2
6
Reconciliation by Reportable Segment of Operating Profit to Income (Loss) before Financial Income  
Daimler-  
Chrysler  
Group  
Mercedes  
Car Group  
Chrysler  
Group  
Commercial  
Vehicles  
Other  
Activities  
Total  
Segments  
Services  
Eliminations  
In millions of €  
2004  
Operating profit (loss)  
1,666  
(34)  
1,427  
(697)  
1,332  
(55)  
1,250  
(5)  
456  
(54)  
6,131  
(845)  
(377)  
-
5,754  
(845)  
Pension and postretirement benefit expenses, other  
than current and prior service costs and settlement/  
curtailment losses  
Operating (profit) loss from affiliated and associated  
companies and financial (income) loss from related  
operating companies  
2
9
(9)  
549  
(539)  
12  
75  
87  
Operating profit from discontinued operations  
Pre-tax gains from the sale of operating businesses and  
discontinued operations  
(5)  
(364)  
904  
(4)  
(11)  
(384)  
4,914  
(384)  
4,612  
Miscellaneous items  
Income (loss) before financial income  
1,634  
734  
1,790  
(148)  
(302)  
2
003  
Operating profit (loss)  
3,126  
(136)  
(506)  
(561)  
811  
1,240  
(5)  
1,329  
(54)  
6,000  
(870)  
(314)  
5,686  
(870)  
Pension and postretirement benefit expenses, other  
than current and prior service costs and settlement/  
curtailment losses  
(114)  
Operating (profit) loss from affiliated and associated  
companies and financial (income) loss from related  
operating companies  
(116)  
60  
(103)  
325  
(329)  
(84)  
(163)  
(84)  
158  
(5)  
Operating profit from discontinued operations  
(84)  
Pre-tax gains from the sale of operating businesses and  
discontinued operations  
(32)  
(9)  
(17)  
(1,031)  
(250)  
(419)  
(1,031)  
(308)  
(1,031)  
(308)  
Miscellaneous items  
Income (loss) before financial income  
2,874  
(1,039)  
585  
1,543  
3,544  
(156)  
3,388  
Operating profit from discontinued operations” shows the  
For 2004, the reconciliation item “Miscellaneous items” consists  
almost solely of the share of minority interests in the expenses  
for the quality actions and recall campaigns at MFTBC. These  
expenses were allocated to minority interests and not to operating  
profit as they were caused by quality problems at MFTBC which  
arose before the acquisition of shares in that company by Daimler-  
Chrysler. In the prior year, this reconciliation item almost solely  
consisted of the settlement of a consolidated class-action case in  
connection with the merger of Daimler-Benz and Chrysler to form  
DaimlerChrysler AG. In this regard, a charge of US $300 million  
was recognized in the consolidated statement of income in 2003.  
operating profit of the MTU Aero Engines business unit, which  
is included in the separate line “Income from discontinued  
operations, net of taxes” in the 2003 consolidated statement of  
income.  
Pre-tax gains from the sale of operating businesses and dis-  
continued operations” shows the pre-tax gain of €1,031 million  
realized on the sale of the MTU Aero Engines business unit in  
2
003.  
2
7
Development of Earnings  
In billions of €  
Dividend per Share  
In €  
Operating profit  
Net income  
9.0  
7.5  
1
.5  
6.0  
4.5  
3.0  
1.5  
1.2  
0.9  
0.6  
0.3  
2
001  
2002  
2003  
2004  
2001  
2002  
2003  
2004  
Financial income  
Income taxes  
Financial loss for 2004 was 1,077 million, compared with a  
financial loss of 2,792 million in 2003.  
In 2004, the Group recorded an income tax expense of 1,177  
million, compared with an expense of 979 million in 2003.  
The loss from investments decreased by 1,831 million to a loss  
of 606 million (2003: loss of 2,437 million), reflecting the  
impairment recognized on the Group’s equity investment in EADS  
of 1,960 million in the prior year. In 2004, there was a positive  
effect from the significant increase in the profit contribution from  
EADS as well as a gain of 252 million from the disposal of the  
Group’s 10.5% equity interest in Hyundai Motor Company (HMC).  
Charges arose from the proportionate share of the losses record-  
ed by Toll Collect and MMC. The decreased contribution from  
MMC was caused by charges from the operating business as well  
as impairments recognized on capitalized deferred tax assets.  
Together with the effects from the dilution of the Group’s interest  
in MMC and related currency hedging effects, financial income  
was debited from MMC with a negative amount of 580 million  
Related to income before income taxes of 3,535 million (2003:  
596 million), the effective tax rate was 33.3% after 164.3%  
in the prior year. In 2004, the effective tax rate was positively  
affected by the tax-free gain realized on the sale of the 10.5%  
investment in HMC, higher contributions to earnings from EADS  
which are almost tax-free, and tax-free gains included in  
net periodic pension costs and net postretirement benefit costs.  
Non-tax deductible losses arising from our investments in  
MMC and debis AirFinance partially offset this development.  
The high effective tax rate in the prior year was primarily due  
to the fact that the impairment recognized on the carrying value  
of the Group’s investment in EADS was not tax deductible.  
In combination with the low pre-tax earnings, this impairment  
caused a substantial increase in the arithmetical tax rate. In  
2003, the effective tax rate was also increased by the non-tax-  
deductible losses of the equity-method investments.  
(
2003: negative amount of 281 million). As the Group ceased to  
account for the investment in MMC using the equity method on  
June 29, 2004, it has had no effect on financial income since that  
date.  
Additional information on income taxes can be found in Note 9  
to the consolidated financial statements.  
The net interest loss of 300 million was lower than the net  
interest loss for the prior year (390 million).  
Other financial loss amounted to 171 million (2003: Other  
financial income of 35 million). The decrease compared with  
the prior year was due in particular to the write down of loan  
receivables due from debis AirFinance.  
Net income  
The DaimlerChrysler Group recorded net income of 2,466  
million in 2004, compared with 448 million in the prior year.  
The increase in net income of 2,018 million resulted from earn-  
ings improvements in the operating business and also from a  
higher financial income, which had been significantly impacted in  
the prior year by, among other factors, the impairment of the  
book value of the Group’s investment in EADS (1,960 million).  
Based on the reported net income, earnings per share amounted  
to 2.43 (2003: 0.44).  
2
8
Value-based  
Performance Measures  
In connection with the sale of the MTU Aero Engines business  
unit in 2003, the income of this business unit was presented as  
Management and control tools  
Income from discontinued operations, net of taxes” in accor-  
The performance measures used at the DaimlerChrysler Group  
provide for the decentralization of corporate responsibility to the  
divisions and business units and create enhanced transparency  
between the various areas of the Group.  
dance with the US accounting standard SFAS 144. The after-tax  
profit of 882 million which resulted from the sale in 2003 is  
shown in the 2003 consolidated statement of income in a sepa-  
rate line as “Income on disposal of discontinued operations,  
net of taxes”.  
For purposes of financial controlling, DaimlerChrysler differen-  
tiates between the Group level and the level of the divisions and  
business units. Value added is one element of the control system  
on both levels and is determined as the difference between  
the operating result and the weighted average cost of capital  
employed. This ratio determines the extent to which the Group  
and its divisions/business units have satisfied or exceeded the  
minimum required rate of return of the shareholders and creditors,  
thus creating value added. The methodology of value added is  
based on the figures provided by the external reporting in accor-  
dance with US GAAP. This secures transparency both within the  
DaimlerChrysler Group and towards shareholders and creditors.  
The initial application of the consolidation provisions of FIN 46R to  
special-purpose entities as of December 31, 2003 was reflected  
in DaimlerChrysler’s consolidated statement of income in the prior  
year as a cumulative effect of a change in accounting principles  
in an amount of 30 million. This income effect is shown in a  
separate line in the consolidated statement of income as “Cumu-  
lative effects of changes in accounting principles: transition  
adjustments resulting from the adoption of FIN 46R and SFAS  
1
42, net of taxes”.  
Dividend  
The operating result used at the Group level is net operating  
income, which can be derived from the net income as shown in  
the statement of income. At the level of the divisions/business  
units, the operating profit of the individual segments is used,  
which can be derived from income before financial income, and  
which reflects the specific earnings responsibility of the divi-  
sions/business units.  
The Board of Management and the Supervisory Board will  
recommend the distribution of 1,519 million of unappropriated  
profits of DaimlerChrysler AG or €1.50 per share (determined in  
accordance with German GAAP and after a withdrawal of 2,029  
million from retained earnings) to the shareholders for approval  
at the annual meeting, which will be held on April 6, 2005. This  
proposal takes account not only of the development of operating  
profit and cash flow in 2004, but also of our expectations for  
the coming years.  
The capital employed (net assets) is determined at Group level on  
the liabilities side from the balance sheet components of stock-  
holders’ equity (including minority interests) and the financial lia-  
bilities and accrued pension obligations of the industrial business.  
At the industrial divisions/business units level, the net assets are  
determined on the basis of the allocable operating components  
of assets and liabilities. The average capital employed is ultimately  
determined as an average of the capital employed at the beginning  
and at the end of the financial year. In the financial services  
business, financial controlling takes place on an equity basis, in  
line with the usual practice in the banking business.  
2
9
Return on Net Assets (RONA) DaimlerChrysler Group (after taxes)  
in %  
9.0  
7.5  
6.0  
4.5  
3.0  
1.5  
2
001  
2002  
2003  
2004  
The profitability ratio, return on net assets (RONA) has a special  
significance as a fundamental component of value added. By  
examining the ratio of net operating income to average capital  
employed, a statement can be made about the profitability of  
the Group or the divisions/business units using standard units of  
measure. To assess the profitability of the financial services  
business, return on equity (ROE) is used.  
Development of return on net assets  
Net operating income amounted to 3.2 billion in 2004, com-  
pared with 1.5 billion in the prior year. In combination with a  
decrease in average net assets of 3.7 billion to 56.3 billion,  
this resulted in a return on net assets (RONA) for the Group of  
5.6% after taxes (2003: 2.4%). Value added thus improved by 2.0  
billion to minus 1.3 billion. Calculated with cost of capital of 7%  
value added would have been minus €0.8 billion.  
The required rate of return on capital employed and thus the cost  
of capital are derived from the minimum returns that investors  
expect on their invested capital. Due to the long-term financing  
character, non-funded pension obligations are included in addi-  
tion to equity and borrowings in the determination of the Group’s  
cost of capital. The cost of equity is determined according to the  
capital-asset pricing model, using the interest rate for long-term,  
risk-free securities (i.e. government bonds, fixed-interest bonds)  
plus a risk premium for an investment in shares reflecting the  
specific risks of the DaimlerChrysler Group. The cost of borrowed  
capital is derived from the required rate of return for obligations  
entered into by the Group with outside sources supplying the  
capital. The capital costs for the non-funded pension obligations  
are calculated on the basis of the discount rates used pursuant  
to US GAAP. The Group’s cost of capital is then a result of the  
weighted average of the individual required rates of return, and  
amounted to 8% after taxes in 2004. At the level of the industrial  
divisions/business units, the cost of capital amounted to 13%  
before taxes; for the financial services business a return on equi-  
ty of 14% before taxes was used. Primarily due to the sustained  
fall in interest rates, the Group’s cost of capital has been reduced  
to 7% after taxes at the beginning of 2005. For the industrial  
divisions/business units, this will result in a cost of capital before  
taxes of 11%. The return on equity before taxes required for the  
financial services business remains unchanged at 14%.  
With a RONA of 12.3% in 2004, the Mercedes Car Group did not  
achieve the minimum required rate of return. The considerable  
decrease compared with the prior year is primarily due to  
changes in the model mix and negative currency effects. Operating  
profit was further reduced by increased marketing expenses and  
expenses for the continuation of the comprehensive quality  
offensive. In addition, average net assets increased due to the  
business expansion at smart. The Chrysler Group’s RONA  
increased from minus 4.4% in 2003 to plus 16.4% in 2004. This  
substantial improvement was partially the result of lower net  
assets, but in particular of increased unit sales, lower expendi-  
tures for sales promotion actions and a shift in sales towards  
vehicles with higher margins. The Commercial Vehicles Division  
achieved a RONA of 13.8% and thus surpassed the minimum  
required rate of return. The increased operating profit was due  
not only to higher unit sales, but also to the effect of the effi-  
ciency improving measures initiated by the division. At Financial  
Services, lower risk costs and stable interest-rate margins led  
to an increase in return on equity to 22.0% (2003: 17.7%) so that  
the minimum required rate of return was again significantly  
surpassed.  
3
0
Liquidity and  
Capital Resources  
Net Assets and Return on Net Assets  
Cash flow  
2
004  
2003  
2004  
2003  
%
(
Annual average, in billions of )  
Net assets  
Cash provided by operating activities of 11.1 billion was  
below the prior-year level (13.8 billion). This development was  
caused by, among other factors, increased working capital. This  
increase was due in particular to higher inventories than in the  
prior year, which primarily related to the market launch of new  
products, the higher level of production compared with the end  
of 2003 and the partially difficult market situation. The funds  
released by trade liabilities as a result of the higher level of pro-  
duction only partially compensated for the total effect on working  
capital compared to the prior year. In addition, cash provided by  
operating activities was reduced by exchange rate effects from  
the weaker US dollar, causing the cash inflow from the American  
companies translated into euros to fall compared with the prior  
year. Furthermore, there were changes from higher income taxes  
paid in 2004 compared to 2003 and from (net) contributions  
made by DaimlerChrysler to pension and health-care funds of  
1.6 billion (1.4 billion). Accordingly, the development of cash  
provided by operating activities of the Industrial Business cor-  
responded with the effects mentioned above and decreased to  
Return on net assets  
DaimlerChrysler Group,  
after taxes)  
(
56.3  
60.0  
5.6  
2.4  
Industrial divisions,  
(
before interest and taxes)  
Mercedes Car Group  
Chrysler Group  
13.5  
8.7  
9.7  
4.7  
12.8  
11.6  
7.0  
12.3  
16.4  
13.8  
13.4  
24.3  
(4.4)  
11.5  
22.4  
Commercial Vehicles  
Other Activities 1  
6.4  
Stockholders’ equity  
8.1 8.4  
Return on equity 2  
Financial Services  
22.0 17.7  
1
The Other Activities segment contains the Off-Highway business unit and the equity investment in  
EADS. In 2003, the segment also included the MTU Aero Engines business unit and the equity  
investment in MMC.  
Before taxes.  
2
Net assets are derived from the consolidated balance sheet, as  
illustrated by the following table.  
Net Assets 1  
of the DaimlerChrysler Group  
3.8 billion (2003: 6.8 billion).  
2
004  
2003  
Cash used for investing activities increased by 3.1 billion to  
16.7 billion. This increase was primarily attributable to the finan-  
In millions  
Stockholders’ equity 2  
31,479  
909  
31,913  
470  
cial services business, due to higher investments in new equip-  
ment on operating leases and lower proceeds from the sale of  
equipment on operating leases. The net change in receivables  
from Financial Services was similar to the high level of the prior  
year. There were opposing effects reducing the cash outflow for  
investing activities with regard to property, plant and equipment  
as well as investments in subsidiaries and associated companies.  
For property, plant and equipment, these effects came from low-  
er additions almost solely due to exchange rate movements, as  
well as higher inflows from the sale of equipment, including the  
sale of production plants by the Chrysler Group in connection  
with its turnaround plan. The gradual acquisition of shares in  
MFTBC resulted in lower payments than in the prior year. Taking  
into consideration the addition to cash resulting from the first  
time consolidation of MFTBC (0.4 billion), there was nearly no  
change in cash due to the shares purchased in 2004.  
Minority interests  
Financial liabilities of the industrial segment  
Pension provisions of the industrial segment  
Net assets  
8,680  
13,867  
54,935  
11,779  
13,416  
57,578  
1
2
Represents the value at year-end; the average for the year was 56.3 billion (2003: 60.0 billion).  
Adjusted for the effects from the application of SFAS 133.  
Reconciliation to Net Operating Income  
2
004  
2003  
In millions  
Net income (loss)  
Minority interests  
2,466  
(108)  
448  
35  
Interest expense related to industrial activities,  
after taxes  
295  
377  
Interest cost of pensions related to industrial activities,  
after taxes  
512  
607  
Net operating income  
3,165  
1,467  
3
1
Net Increase (Decrease) in Cash and Cash Equivalents  
maturing within 3 months or less)  
(
In millions of €  
1
1,060  
1
0,767  
2
,549  
7,381  
-
313  
-
16,682  
Cash and Cash provided  
Cash used  
Cash used  
for  
Effect of  
foreign  
Cash and  
cash  
cash by operating for investing  
equivalents  
2/31/2003  
activities  
activities  
financing exchange rate  
activities  
equivalents  
changes 12/31/2004  
1
In 2003, payments of 0.8 billion were made for the acquisition  
of shares in MFTBC. The inflows from the sale of businesses  
included in cash used for investing activities contributed a total  
of 1.2 billion (2003: 1.2 billion). In 2004, these inflows were  
mainly related to the disposal of the Group’s shares in HMC  
Refinancing  
DaimlerChrysler’s refinancing activities during 2004 were  
primarily determined by the ongoing controlled growth of the  
Group’s financial services activities. To cover a relatively low  
requirement for additional funding compared with the prior year  
and to refinance debts becoming due, DaimlerChrysler used  
a broad spectrum of financial and capital-market instruments  
spanning its global network of regional holding and finance  
companies.  
(
0.7 billion). In the prior year, the corresponding inflows were  
primarily a result of the sale of MTU Aero Engines (0.9 billion).  
Cash provided by financing activities in 2004 was affected by  
the (net) increase in financial liabilities and the dividend distribu-  
tion of 1.5 billion. Overall, there was a cash inflow of 2.5 billion  
(
2003: 2.5 billion), including income from the early termination  
of cross currency hedges in an amount of 1.3 billion (2003:  
0.6 billion).  
In 2004, DaimlerChrysler issued benchmark public US dollar  
and euro transactions. There were also smaller national and  
international issues of medium-term note programs in the form of  
private placements. In addition, the securitization of receivables,  
mainly in the field of financial services, was utilized by the Group  
as a source of funding on an ongoing basis, particularly in the  
United States. In 2004, DaimlerChrysler sold receivables due  
from end customers of 9,329 million (2003: 9,557 million),  
and receivables due from dealers of 35,414 million (2003:  
46,678 million). With these transactions, the Group generated  
cash inflows of 11,360 million and 35,393 million, respectively  
As a total of the individual cash flows, and with consideration  
of exchange rate effects, cash and cash equivalents with an  
original maturity of three months or less decreased by 3.4  
billion to 7.4 billion compared with December 31, 2003. Total  
liquidity, which also includes long-term investments and securi-  
ties, decreased as intended from 14.3 billion to 11.7 billion.  
(2003: 10,018 million and 46,623 million) and income of  
79 million and 157 million, respectively (2003: 249 million  
and 196 million).  
At the end of 2004, DaimlerChrysler had short-term and long-  
term committed credit lines totaling 35.2 billion, of which 18.3  
billion was not utilized at that time. These credit lines include a  
US $18 billion syndicated global credit facility with international  
banks in a total of three tranches: The first tranche comprises  
a 5-year line with a maturity until May 2008, allowing Daimler-  
Chrysler AG and various of the Group’s subsidiaries to draw a  
total of US $7 billion under this facility. DaimlerChrysler North  
America Holding can draw a total of US $6 billion under a 364-  
day facility with a maturity lasting until May 2005. In December  
2004, DaimlerChrysler took advantage of the very good situation  
3
2
in the credit market and refinanced the third tranche of this  
global credit facility earlier than it was necessary. The originally  
seven-year tranche with a volume of US $5 billion and a maturity  
lasting until July 2006 was transformed into a new facility of  
DaimlerChrysler AG with the same volume and a maturity of an  
initial five years, i.e. until December 2009. After 12 or 24 months,  
with the consent of the banks, this maturity can be extended  
by another year until December 2010 or 2011.  
Above all, the progress made with the restructuring of the  
Chrysler Group, but also in the Commercial Vehicles Division,  
caused Fitch Ratings (Fitch) to lift its outlook for DaimlerChrysler’s  
long-term rating from stable to positive on June 24, 2004.  
At the same time, Fitch confirmed its long-term rating of BBB+  
and its short-term rating of F2.  
Due in particular to the improvement in the Chrysler Group’s  
operating profit, on August 11, 2004, Standard & Poor’s lifted its  
outlook for DaimlerChrysler’s long-term rating from negative  
to stable. Its long-term rating of BBB and its short-term rating of  
A-2 were confirmed.  
DaimlerChrysler’s self-financing strength and the combination  
of liquid reserves, short-term and long-term committed credit  
lines and the possibility to generate cash inflows through the  
securitization of receivables give the Group sufficient flexibility  
to cover its refinancing needs at any time.  
The Canadian organization Dominion Bond Rating Service did  
not alter its long-term rating of A- or its short-term rating of R-1-.  
Rating  
2
004  
2003  
Credit rating, short-term  
Standard & Poor’s  
Moody’s  
A-2  
P-2  
F2  
A-2  
P-2  
F2  
Fitch  
Dominion Bond  
R-1-  
R-1-  
Credit rating, long-term  
Standard & Poor’s  
Moody’s  
BBB  
A3  
BBB  
A3  
Fitch  
BBB+  
A-  
BBB+  
A-  
Dominion Bond  
On June 14, 2004, Moody’s Investors Service (Moody’s) confirmed  
DaimlerChrysler’s short-term rating of P-2 and its long-term  
rating of A3 and lifted the outlook from negative to stable. The  
improved outlook is based on the assessment by Moody’s that  
DaimlerChrysler is well positioned worldwide and that Mercedes-  
Benz has a very good market position in the premium segment.  
3
3
Balance Sheet Structure  
In billions of €  
1
83  
183  
18%  
1
78  
178  
19%  
Financial Position  
Fixed assets  
Stockholders’ equity  
4
0%  
4
0%  
2
3% Accrued liabilities  
2
2%  
Non-fixed assets  
of which: Liquidity  
57%  
Liabilities  
5
8%  
55%  
3%  
54%  
4
3% of which: Financial liabilities  
4
Deferred taxes and pre-  
paid expenses  
Deferred taxes  
and income  
6%  
8%  
2%  
3
%
4%  
5%  
2
004 2003 2003 2004  
Consolidated balance sheet  
The decrease in other assets to €12.9 billion resulted principally  
from the redemption and valuation of derivatives. The market  
values of retained interests in sold receivables also decreased  
due to the declining ABS portfolio.  
The Group’s total assets increased by 2% compared with the prior  
year to €182.7 billion (2003: €178.3 billion). The increase was  
due in part to the full consolidation of MFTBC, and in particular  
to the expansion of the leasing and sales financing business in  
the Services division. Opposing effects arose from currency trans-  
lation due to the appreciation of the euro against the US dollar.  
The assets and liabilities of our US companies were translated  
into euros using the exchange rate of €1 = US $1.3621 as of  
December 31, 2004 (prior year: €1 = US $1.2630 as of Decem-  
ber 31, 2003). This higher exchange rate resulted in correspon-  
dingly lower balance sheet amounts in euros. In total, currency  
effects caused a €7.4 billion reduction in total assets; if exchange  
rates had remained at their 2003 year-end levels, total assets  
would have increased by €11.8 billion. On the assets side, pro-  
perty, plant and equipment increased by 3% to €34.0 billion, pri-  
marily due to the full consolidation of MFTBC. This factor was in  
part offset by opposing effects from depreciation and disposals  
of fixed assets, particularly at the Chrysler Group, and also from  
currency translation. Financial assets amounted to €7.0 billion  
on the balance sheet date (2003: €8.8 billion). In addition to the  
sale of shares in HMC and the lower book value of the investment  
in MMC, the reduction was caused by the elimination of the book  
value of MFTBC due to the full consolidation of this company.  
Total liquidity decreased, as intended, by 18% to €11.7 billion,  
and comprised cash and cash equivalents (€7.8 billion) and  
marketable securities (€3.9 billion). Liquid funds are actively  
managed within the Group to ensure a minimum level of  
corporate liquidity.  
The change in the balance of deferred tax assets and liabilities  
was a result of the full consolidation of MFTBC, but primarily of  
changes in deferred taxes due to the minimum pension liability  
and the valuation of derivative financial instruments (with no  
effect on the income statement).  
Stockholders’ equity decreased to €33.5 billion (2003: €34.5  
billion). The decrease was mainly due to the dividend distribution  
for the 2003 financial year, the change of the minimum pension  
liability, currency translation, and the fair value accounting of  
derivative financial instruments (with no effect on the income  
statement). Conversely, stockholders’ equity was increased by  
net income. The equity ratio, adjusted for the proposed dividend  
distribution for the 2004 financial year (€1.5 billion), declined  
by 1 percentage point to 17.5% (2003: 18.5%). The equity ratio for  
the Industrial Business amounted to 25.3% (2003: 26.1%).  
The decrease in these ratios was partly attributable to the full  
consolidation of MFTBC.  
Leased equipment increased, due in particular to the expansion  
of the vehicle-leasing business, by €2.3 billion to €26.7 billion.  
Currency translation had an opposing effect of €1.3 billion.  
Inventories – less advance payments received – increased  
compared with the prior year and reached a level of €16.8 billion  
The increase in minority interests to €0.9 billion (2003: €0.5  
billion) was almost solely due to the full consolidation of MFTBC,  
35% of whose stock was held by outside shareholders on the  
balance sheet date.  
(
2003: €15.0 billion). This increase was partly due to the full  
consolidation of MFTBC.  
Receivables from Financial Services increased by €4.1 billion to  
€56.8 billion. Adjusting for currency translation effects results  
in an increase of €6.9 billion. In total, the leasing and sales  
financing business accounted for €83.5 billion, or 46%, of total  
assets.  
3
4
Balance Sheet Structure of the Industrial Business  
In billions of €  
9
5
95  
95  
95  
Property, plant and equipment  
36%  
34%  
27%  
26% Stockholders’ equity  
4
3% Accrued liabilities  
4
0%  
1
7%  
Other fixed assets  
Inventories  
15%  
16%  
14%  
18%  
Receivables  
Liquidity  
17%  
32%  
1%  
3
1% Liabilities  
1
1%  
13%  
4%  
Deferred taxes and prepaid  
expenses  
Deferred taxes  
and income  
5%  
0%  
2
004 2003 2003 2004  
Accrued liabilities increased by €2.4 billion to €41.6 billion.  
The development of other accrued liabilities was primarily due to  
higher accruals for product guarantees, partly related to the  
quality actions and recall campaigns at MFTBC and the quality  
offensive at the Mercedes Car Group. Conversely, other accrued  
liabilities were reduced by currency translation effects. The  
increased accruals for pension obligations and health care were  
mainly caused by the reduced discount factors and the full con-  
solidation of MFTBC. The development was partially offset by  
opposing effects from currency translation and contributions to  
the pension funds.  
Financing of pensions and similar obligations  
At the end of 2004, the Group’s pension obligations of 34.4  
billion (2003: 32.1 billion) were covered by fund assets of 27.8  
billion (2003: 26.3 billion). This led to an underfunded status  
of 6.6 billion at the end of the year (end of 2003: underfunded  
by 5.8 billion). The decrease in the financing status resulted  
primarily from an increase of the pension obligations due to the  
decrease of the discount rate in 2004 and the first-time con-  
solidation of MFTBC, partially offset by the increase of the plan  
assets due to further contributions totaling €1.6 billion (2003:  
2.1 billion) and ongoing good performance of the stock markets  
The Group’s financial liabilities reached €76.6 billion as of the  
balance-sheet date (2003: €75.7 billion). This development is  
related to the increased funding requirements of the leasing and  
sales-financing business. The increase in financial liabilities was  
partially offset by currency translation effects.  
in 2004. The realized yields on the Group’s German and foreign  
plan assets in 2004 were 8.2% and 13.7%, respectively (2003:  
14.6% and 23.0%). Taking into consideration the balance sheet  
pension accruals of 5.6 billion (2003: 5.0 billion), pension  
obligations were underfunded at the end of 2004 by 1.0 billion  
(end of 2003: underfunded by 0.8 billion).  
Trade liabilities and other liabilities increased by €1.2 billion to  
€21.6 billion, primarily due to the full consolidation of MFTBC.  
The other postretirement benefit obligations totaled 14.4  
billion at the end of 2004 (end of 2003: 14.9 billion), and were  
covered by fund assets in an amount of 1.6 billion (2003: 1.5  
billion). The financing status was thus undercovered by 12.8  
billion (2003: 13.4 billion). The improvement compared with the  
prior year was primarily a result of the reduced obligations due to  
the effects of the Medicare Act in the US. There was an opposing  
effect from the decrease of the discount rate and the adjust-  
ment of assumed inflation rates in 2004, and also from the normal  
annual increase of obligations less payments to beneficiaries.  
Taking into consideration the balance sheet accruals of 8.0  
billion (2003: 8.2 billion), the postretirement benefit obligations  
were underfunded by a total of 4.8 billion at the end of 2004  
(end of 2003: 5.2 billion).  
Additional information on pension plans and similar obligations  
can be found in Note 25a to the consolidated financial state-  
ments.  
3
5
Purchasing Volume by Division  
In %  
Factor Input  
Mercedes Car Group  
Chrysler Group  
38  
32  
26  
4
Commercial Vehicles  
Other Activities  
Capital expenditure  
Research and development  
Last year, the DaimlerChrysler Group invested a total of 6.4  
billion in property, plant and equipment (2003: 6.6 billion). The  
focus of the investments of 2.3 billion by the Mercedes Car  
Group was on expanding the plants in Rastatt and Tuscaloosa for  
the production of the new A-Class and M-Class vehicle families,  
production preparations for the next S-Class model, and the  
expansion of production facilities for the new diesel and gasoline  
engines. The Chrysler Group’s investments of 2.6 billion were  
primarily applied to prepare for the production of nine new mod-  
els launched in 2004 and at least five additional models to come  
in the year 2005. Furthermore, investments were made in the  
plants in order to enhance their efficiency and flexibility in pro-  
duction. Important projects in the Commercial Vehicles division,  
which invested a total of 1.2 billion, included the new Euro-4  
trucks engines and preparations for the successor to the Sprinter.  
Research and development expenditure totaled 5.7 billion in  
2004 (2003: 5.6 billion). Of this total, 2.6 billion was account-  
ed for by the Mercedes Car Group. This division’s most important  
projects were the B-Class and R-Class sports tourers and the  
successors to the M-Class and S-Class models. Research and  
development work at the Chrysler Group was influenced by the  
product offensive; efficiency improvements were achieved once  
again in terms of the yield on the funds applied. R&D expenditure  
of 1.6 billion by the Chrysler Group was lower than the prior-  
year level. 1.2 billion was applied for research and development  
by Commercial Vehicles (2003: 0.9 billion), where the increase  
over the prior year was primarily a result of consolidating Mit-  
subishi Fuso Truck and Bus Corporation. The division’s most  
important projects included the successor to the Sprinter and  
the new engine family for heavy trucks. Some additional areas of  
R&D activities at DaimlerChrysler were new drive-system tech-  
nologies, especially hybrid drives and fuel cells, and electronic  
systems designed to enhance traffic safety (see pages 74 f).  
Investments in Property, Plant and Equipment  
2
004  
2004  
2003  
In millions  
US $  
Research and Development Expenditure  
DaimlerChrysler Group  
Mercedes Car Group  
Chrysler Group  
8,645  
3,172  
3,584  
1,603  
123  
6,386  
2,343  
2,647  
1,184  
91  
6,614  
2,939  
2,487  
958  
2004  
2004  
2003  
In millions  
US $  
Commercial Vehicles  
Services  
Other Activities 1  
DaimlerChrysler Group  
Mercedes Car Group  
Chrysler Group  
7,660  
3,566  
2,125  
1,660  
309  
5,658  
2,634  
1,570  
1,226  
228  
5,571  
2,687  
1,689  
946  
76  
181  
134  
169  
1
2003 figures include discontinued operations (MTU Aero Engines).  
Commercial Vehicles  
Other Activities 1  
420  
1
2003 figures include discontinued operations (MTU Aero Engines).  
3
6
Employees by Division  
DaimlerChrysler Group  
384,723  
The Workforce  
Mercedes Car Group  
Chrysler Group  
105,857  
84,375  
114,602  
48,029  
11,224  
20,636  
Commercial Vehicles  
Sales Organziation  
Services  
Other Activities  
Procurement  
Employment situation. At December 31, 2004, DaimlerChrysler  
employed 384,723 people worldwide (end of 2003: 362,063).  
Of this total, 185,154 were employed in Germany (2003: 182,739)  
and 98,119 in the United States (2003: 102,391). Employment  
rose sharply in the Commercial Vehicles division in particular,  
due to new recruitment in Europe and North America and above  
all the consolidation of Mitsubishi Fuso Truck and Bus Corpora-  
tion (MFTBC) with 18,281 employees. Staffing levels also rose in  
the Mercedes Car Group, the Services division and the joint  
sales organization for Mercedes-Benz passenger cars and com-  
mercial vehicles. The workforce at Chrysler Group decreased pri-  
marily due to the disposal of component plants. Adjusted for  
changes in the consolidated Group, the DaimlerChrysler workforce  
grew by 2% (see pages 72 f).  
Worldwide, DaimlerChrysler purchased goods and services for  
101.4 billion in 2004 (2003: 99.7 billion). 38% of our purchas-  
ing volume was accounted for by the Mercedes Car Group, 32%  
by the Chrysler Group, 26% by the Commercial Vehicles division  
and 4% by the other units. In order to manage this purchasing  
volume efficiently while maintaining proximity to suppliers, our  
procurement is organized on a global scale with activities all  
over the world.  
In cooperation with our suppliers, we are currently concentrating  
on three areas of action in order to achieve the best overall  
results: Global Scale, Global Supply Base and Global Processes.  
By bundling purchasing volumes and selectively placing orders  
with due consideration of cost-risk factors, we can optimize our  
cost position and further increase our efficiency.  
Securing the Future 2012. On July 23, 2004, DaimlerChrysler’s  
management and employee representatives in Germany reached  
an agreement entitled “Securing the Future 2012”. This agree-  
ment will help to improve competitiveness and enhance labor  
flexibility, and thus also to protect jobs. It will allow annual  
cost savings totalling 500 million in the medium-term (see pages  
72 f).  
With the goal of maintaining business relations with the world’s  
best suppliers and to strengthen the global reach of our  
procurement activities, we have further developed the Extended  
®
Enterprise supplier program. A key component of Extended  
®
Enterprise is an assessment system with which we can analyze  
the performance of our suppliers’ procurement and supply activi-  
ties from a global perspective.  
With our global procurement management, long-term supplier  
contracts with key suppliers and close cooperation with proven  
partners, we have created a broad range of instruments to safe-  
guard supplies to our plants and to limit the effects on our pro-  
duction materials of continually rising prices even in the currently  
difficult situation of the international raw-material markets  
(
see page 78).  
3
7
Events after the End of the  
004 Financial Year  
Risk Report  
2
Since the end of the 2004 financial year, apart from the afore-  
mentioned developments, there have been no further occur-  
rences which are of major significance to DaimlerChrysler and  
which would lead to a modified assessment of the Group’s  
position. The course of business in the first two months of  
Risk management  
Within the framework of their global activities and as a result of  
increasingly intensive competition in all markets, DaimlerChrysler’s  
divisions and business units are exposed to a large number of  
risks, which are inextricably linked with corporate business.  
Effective management and control instruments are combined into  
a uniform risk management system, meeting the requirements  
of applicable law and subject to continuous improvement, which  
is employed for the early detection, evaluation and management  
of risks. The risk management system is integrated into the value-  
based management and planning system and complies with the  
Group’s principles of corporate governance. It is an integral part  
of the overall planning, control and reporting process in all relevant  
legal entities and central functions, and aims to systematically  
identify, assess, control and document risks. Taking defined risk  
categories into account, risks are identified by the management  
of the divisions and business units, the key associated companies  
and the central departments, and assessed regarding their  
probability of occurrence and possible extent of damage. The  
assessment of the possible extent of damage usually takes place  
in terms of the risks’ effect on operating profit. The communication  
and reporting of relevant risks is controlled by value limits set  
by management. The responsible persons also have the task of  
developing, and initiating as required, measures to avoid,  
reduce and hedge risks. The development of major risks and the  
countermeasures taken are monitored within the framework  
of a regular controlling process. As well as the regular reporting,  
there is also an internal reporting obligation within the Group  
for risks arising unexpectedly. The Group’s central Risk Manage-  
ment department regularly reports on risks to the Board of  
Management and the Supervisory Board.  
2
005 confirms the statements made in the following chapter  
Outlook”.  
3
8
The Group’s risk management system enables corporate  
management to identify key risks at an early stage and to initiate  
suitable countermeasures. By carrying out targeted audits, the  
Internal Audit department monitors compliance with the statuto-  
ry framework and the Group’s internal guidelines as defined  
in the Risk Management Manual, and if required, initiates appro-  
priate action. In addition, the auditor tests the system for the  
early detection of risks that is integrated into the risk management  
system in terms of its fundamental suitability for the early  
recognition of developments that could jeopardize the continued  
existence of the company.  
The disappointing economic development of the European Union,  
especially in Germany, has a considerable risk potential due to  
the region’s importance as a sales market for DaimlerChrysler.  
The situation of the Japanese economy is similar: although it  
expanded much faster than expected in 2004, its structural prob-  
lems are far from solved. A renewed weakening of the Japanese  
economy would not only reduce the Group’s exports to Japan, but  
would also put a substantial burden on the earnings trend of our  
subsidiary Mitsubishi Fuso Truck and Bus Corporation. In addi-  
tion, another economic downturn in Japan could have a negative  
impact on the emerging markets of Asia. The Group’s strategic  
expansion plans in Asia would be negatively affected by such a  
development.  
Economic risks  
A marked reduction in growth rates in China would also be  
strategically relevant for the Group, as this is currently the most  
dynamic automobile market in the world and has enormous  
potential for the future. In view of China’s economic power and  
the sharp increase in the flows of international trade and invest-  
ment with China, such a slump would not only have serious con-  
sequences for the whole of the Asian continent, but could also  
cause significant growth losses for the world economy, with neg-  
ative effects on DaimlerChrysler’s projects. Potential economic  
crises in the emerging markets in which the Group has produc-  
tion facilities could also be of particular relevance. Crises in  
emerging markets where the Group is solely active in a sales  
function, however, would result in a more limited risk exposure.  
2004 was a year of strong growth for the world economy, although  
there was still a significant degree of uncertainty regarding future  
economic developments. A key indicator of this uncertainty is  
the sustained increase in the price of gold, which is normally only  
in such high demand as a safe investment in times of crisis. By the  
middle of 2004, the rate of global expansion had already weak-  
ened. Against the backdrop of high raw material prices, the United  
States’ enormous current account deficit, and the sustained appre-  
ciation of the euro, doubts have also increased as to whether the  
soft landing of the world economy with a return to long-term  
growth rates, as expected by most economists, will actually take  
place. DaimlerChrysler’s assets, finances and earnings are thus  
exposed to additional substantial economic risks. Due to the high  
importance of the United States for the world economy, an isolated  
massive slowdown of economic expansion in the US would also  
have negative consequences.  
Risks for market access and the global networking of the Group’s  
facilities could arise as a result of a significant delay in multi-  
lateral trade liberalization, and in particular due to the weakening  
of the World Trade Organization in favor of regional trade blocks  
or a return to protectionist tendencies.  
The biggest individual risk for the world economy must be seen  
in a continuation of the high oil price, or even further increases, as  
well as in the enormous deficit of the United States. Worldwide  
growth could be dampened by 0.5 to 1.0 percentage point if the  
oil price remains above the mark of US $45 per barrel for much  
longer. With a long-term rise in the price of oil above US $55 per  
barrel, some economies could even slip into a recession.  
If a correction of the US current account deficit would take place  
with a drastic devaluation of the US dollar, this could, in com-  
bination with rising interest rates, lead to significantly lower global  
growth.  
3
9
Industry- and company-specific risks  
DaimlerChrysler counteracts procurement risks through targeted  
commodity and supplier risk management. But in view of recent  
increases in raw material prices, especially steel and oil, the  
effects of these measures are limited. If price pressure in our  
procurement markets remain at their current high level for a long  
period, or actually rise further, there will be a consequential  
impact on the Group’s profitability. Production and business  
processes could also be affected by unforeseeable events such  
as natural disasters or terrorist attacks on our facilities or  
data centers. Security measures and emergency plans have been  
prepared for such eventualities, as well as for the protection of  
DaimlerChrysler’s intellectual property.  
Weak overall economic developments, the overcapacity in the  
automotive industry and sluggish consumer demand could  
also have an impact on the automotive industry. This would pri-  
marily affect DaimlerChrysler’s major markets in Western Europe  
and the NAFTA region. In the United States, which is still the  
engine of the global economy, high competitive pressure in the  
automobile market in recent years has led to the proliferation  
of financing offers and price incentives. Continued weak econom-  
ic developments could make such discount financing and price  
incentives necessary in the future, at similar or even higher levels.  
This would not only reduce our earnings from the sale of new  
vehicles, but would also lead to lower prices in the used-car mar-  
ket and to falling residual values. As a result of intensifying  
competition in Western Europe, the practice of offering discount  
financing and price incentives is also increasing in this region.  
In order to achieve appropriate prices, factors such as outstanding  
technical features on the basis of innovative research and  
development, as well as brand image and product quality, are  
becoming increasingly important.  
DaimlerChrysler’s Services division mainly comprises the provi-  
sion of financing and leasing for Group products, insurance and  
services in the field of fleet management. The international orien-  
tation of this business and the raising of capital are linked with  
credit, exchange rate and interest rate risks. DaimlerChrysler  
counteracts these risks by means of appropriate market analyses  
and the use of derivative financial instruments. The Daimler-  
Chrysler Bank’s full banking license and its risk exposure have  
no significant effects at Group level.  
In view of increasing price pressure, the fulfillment of Daimler-  
Chrysler’s own high quality standards is extremely important for  
the Group’s future profitability. Product quality has a key impact  
on a customer’s decision to buy a particular brand of passenger  
car or commercial vehicle. Technical problems could lead to fur-  
ther recall and repair campaigns, or can even necessitate new  
developments which have to be homologated. Furthermore, dete-  
riorating product quality can also lead to higher warranty and  
goodwill costs.  
Due to the DaimlerChrysler Group’s involvement in the develop-  
ment of a system to record and charge tolls for the use of high-  
ways by certain trucks in Germany, we are exposed to a number  
of risks which could have negative effects on the Group’s finan-  
cial condition, operating results and cash flows. The development  
and operation of the electronic toll collection system is the  
responsibility of the operator company, Toll Collect GmbH, in  
which DaimlerChrysler holds a 45% ownership interest and which  
is included in the consolidated financial statements using the  
equity method of accounting. Besides the stake in the consortium,  
the equity interests in Toll Collect GmbH, guarantees were  
issued supporting obligations of Toll Collect GmbH towards the  
Federal Republic of Germany concerning the completion and  
operation of the toll system. After the original start of the system  
planned for August 31, 2003 was not possible due to technical  
problems, the toll system successfully went into operation on  
January 1, 2005 with slightly reduced functionality. Risks can arise  
primarily due to lower tolls derived from the system and a delay  
Legal and political frameworks also have a considerable influence  
on DaimlerChrysler’s future business success. Regulations con-  
cerning exhaust emissions and fuel consumption and the devel-  
opment of energy prices play a particularly important role. The  
Group monitors these factors and attempts to anticipate foresee-  
able requirements already in the phase of product development.  
4
0
in the start of the system with full functionality, which is scheduled  
for January 1, 2006. Additional information on the electronic toll  
collection system and the related risks can be found in the Notes  
to the consolidated financial statements: Note 3 (Significant  
Equity Method Investments), Note 31 (Legal Proceedings) and  
Note 32 (Contingent Obligations and Commercial Commitments).  
Any market sensitive instruments, including equity and fixed  
interest bearing securities, that DaimlerChrysler holds for  
pension plans or similar obligations are not included in this  
quantitative and qualitative analysis. Please refer to Note 25a to  
the Group’s consolidated financial statements for additional  
information regarding the Group’s pension plans.  
DaimlerChrysler bears a proportionate share of the risks of  
its subsidiaries and its associated and affiliated companies in  
line with its share of their equity capital.  
In accordance with the organizational standards in the international  
banking industry, DaimlerChrysler maintains risk management con-  
trol systems independent of corporate treasury and with a separate  
reporting line.  
Foreign exchange rate, interest rate, equity price  
and commodity price risk  
Management of exchange rate risks. The global nature of  
DaimlerChrysler’s business activities results in cash receipts and  
payments denominated in various currencies. Cash inflows and  
outflows of the business segments are offset and netted if they are  
denominated in the same currency. Within the framework of central  
currency management, currency exposures are regularly assessed  
and hedged with suitable financial instruments, predominantly  
foreign exchange forwards and currency options, according to  
exchange rate expectations, which are constantly reviewed. The net  
assets of the Group which are invested in subsidiaries and affiliated  
companies outside the euro zone are generally not hedged against  
currency risks. However, in specific circumstances, DaimlerChrysler  
hedges the currency risk inherent in certain of its long-term invest-  
ments. Besides this, DaimlerChrysler does in general not hedge the  
currency translation risk which arises from our subsidiaries who  
report their revenues and results in a functional currency other than  
euro.  
The DaimlerChrysler Group is exposed to market risks from  
changes in foreign currency exchange rates, interest rates and  
equity prices. Furthermore, commodity price risks arise from  
procurement. These market risks may adversely affect Daimler-  
Chrysler’s operating results and financial condition. The Group  
seeks to manage and control these risks primarily through its  
regular operating and financing activities, and if appropriate,  
through the use of derivative financial instruments. Additional  
information on financial instruments and derivatives can be  
found in Notes 33 to the consolidated financial statements.  
DaimlerChrysler evaluates these market risks by monitoring  
changes in key economic indicators and market information on  
an ongoing basis.  
To quantify the exchange rate risk, interest rate risk and equity  
price risk of the Group on a continuous basis, DaimlerChrysler’s  
risk management systems employ value-at-risk analyses as rec-  
ommended by the Bank for International Settlements. The value-  
at-risk calculations employed by DaimlerChrysler express potential  
losses in fair values assuming a 99% confidence level and a hold-  
ing period of five days. This method is based on the variance-  
covariance approach of the RiskMetrics™ model. Estimates of  
volatilities and correlations are drawn from the RiskMetrics™  
datasets and supplemented by additional exchange rate, interest  
rate and equity price information. The Group does not use deri-  
vative financial instruments for speculative purposes.  
4
1
The following table shows values-at-risk figures for DaimlerChrysler’s  
004 and 2003 portfolio of derivative financial instruments used  
to hedge the underlying currency exposure. We have computed the  
average exposure based on an end-of-quarter basis.  
Management of interest rate risks. DaimlerChrysler holds a  
variety of interest rate sensitive financial instruments to manage  
its liquidity and the cash needs of the day-to-day operations. A  
substantial volume of interest rate sensitive assets and liabilities  
is related to the leasing and sales financing business operated  
by DaimlerChrysler Services. The leasing and sales financing busi-  
ness enters into transactions with customers which primarily  
result in fixed-rate receivables. DaimlerChrysler’s general policy  
is to match funding in terms of maturities and interest rates.  
However, for a limited portion of the receivables portfolio, the  
funding does not match in terms of maturities and interest rates.  
As a result, DaimlerChrysler is exposed to risks due to changes  
in interest rates.  
2
Value-at-Risk  
Average  
for  
2004  
Average  
for  
2003  
1
2
2.31.  
004  
12.31.  
2003  
In millions of €  
Exchange rate sensitive derivate  
1
financial instruments  
148  
256  
381  
398  
1
Forward foreign exchange contracts, foreign exchange swap contracts, currency options.  
The average and period-end values-at-risk of derivative financial  
instruments used to hedge exchange rate risk decreased in  
DaimlerChrysler coordinates funding activities of the Industrial  
Business and Financial Services at the Group level. It uses  
interest rate derivative instruments, such as interest rate swaps,  
forward rate agreements, swaptions, caps and floors, to  
achieve the desired interest rate maturities and asset/liability  
structures (asset and liability management).  
2
004, primarily as a result of lower foreign exchange rate volatili-  
ties and the strengthening of the euro especially against the  
US dollar. In addition, the values-at-risk decreased due to the  
reduced foreign exchange derivatives’ volume.  
Due to exchange rate fluctuations, especially of the US dollar  
and other major currencies against the euro, DaimlerChrysler is  
exposed to exchange rate risks and resultant transaction risks.  
These transaction risks primarily affect the Mercedes Car Group  
division, as a significant portion of its revenues are generated  
in foreign currencies while most of its costs are incurred in euros.  
The Commercial Vehicles Division is also exposed to such trans-  
action risks, but only to a minor degree because of its worldwide  
production network. Chrysler Group’s transaction risks are also  
low, as most of its revenues and costs are generated in US  
dollars.  
The following table shows value-at-risk figures for DaimlerChrysler’s  
2004 and 2003 portfolio of interest rate sensitive financial  
instruments. We have computed the average exposure based on  
an end-of-quarter basis.  
Value-at-Risk  
Average  
for  
2004  
Average  
for  
2003  
1
2
2.31.  
004  
12.31.  
2003  
In millions of €  
Interest-rate-sensitive  
financial instruments  
73  
75  
115  
148  
The strengthening of the euro against nearly all major currencies  
in which DaimlerChrysler conducts business imposed a heavier  
burden on operating profit than in the previous year, despite  
foreign exchange hedging activities. If the euro remains strong  
for an extended period or further strengthens relative to the  
other, for the Group crucial currencies, this could have an even  
greater negative impact on the Group’s profitability and financial  
situation in the year 2005 and beyond.  
4
2
In 2004, the average and period-end value-at-risk of our portfolio  
of interest rate sensitive financial instruments decreased,  
primarily due to less volatile interest rates, a stronger euro and  
a reduced mismatch in terms of interest rate maturities between  
both the fixed interest receivables from the Group’s leasing  
and sales financing business and the respective funding of that  
business.  
Legal risks  
Various legal proceedings are pending against the Group. Daimler-  
Chrysler believes that in the main, these proceedings constitute  
ordinary, routine litigation that is incidental to our business. How-  
ever, the possibility cannot be ruled out that the final resolution  
of some of these lawsuits could cause DaimlerChrysler to incur  
substantial costs and cash outflows. Although the final resolution  
of any such lawsuit could have a material effect on the Group’s  
earnings in a particular reporting period, DaimlerChrysler believes  
that any resulting obligations are unlikely to have a sustained  
effect on the Group’s assets, finances or earnings. Information on  
various legal proceedings can be found in Note 31 to the consoli-  
dated financial statements.  
Management of equity price risks. DaimlerChrysler holds in-  
vestments in equity securities, but presently only to a minor  
extent. The corresponding market risk in 2004 was not, and is not  
currently, material to the Group. Thus, DaimlerChrysler does  
not separately present the value-at-risk figures for the remaining  
equity price risk. According to international banking standards,  
DaimlerChrysler does not include investments in equity securities  
which the Group classifies as long term investments in the equity  
price risk assessment.  
Overall risk  
Management of commodity price risks. Associated with  
DaimlerChrysler’s business operations, the Group is exposed to  
changes in prices of commodities. For example, prices for steel  
used in the manufacturing of vehicle components increased  
sharply in 2004. DaimlerChrysler addresses those procurement  
risks by a concerted commodity and supplier risk management.  
There are no discernible risks that could jeopardize the continued  
existence of the company.  
To a minor extent, DaimlerChrysler uses derivative commodity  
instruments, primarily to reduce market risks arising from  
the purchase of precious metals. The risk resulting from deriva-  
tive commodity instruments in 2004 was not and is currently  
not significant to the Group. Therefore DaimlerChrysler does not  
separately present the value-at-risk figures for its derivative  
commodity instruments.  
4
3
Outlook  
The world economy  
In the coming years, the expansion of global demand for auto-  
mobiles will primarily take place in the emerging markets of Asia  
and South America, and probably also Eastern Europe – a result  
of the dynamic growth in purchasing power and the rising need  
for mobility in these regions. The limited scope for growth in the  
major automobile markets of North America, Europe and Japan  
combined with high production capacity will further intensify  
competition in all market segments. DaimlerChrysler therefore  
assumes that there will be no relaxation of price competition in  
the United States or Europe. Additional factors will be stricter  
environmental and safety regulations, the fulfillment of which will  
cause substantial costs for all producers. Against this backdrop,  
the ability to set oneself apart from the competition by means of  
innovation and strong brands will become increasingly impor-  
tant. Another success factor in international competition will be  
a worldwide presence with the possibility to participate in the  
growth of the emerging markets and to achieve cost advantages  
from larger production volumes.  
Global conditions indicate that the growth of the world economy  
will be lower in 2005 than in the prior year. In the United States,  
rising interest rates, the end of fiscal-policy stimulus and slo-  
wer expansion of domestic demand are likely to dampen growth.  
Domestic demand should revive slightly in Western Europe,  
but the region’s total economic growth rate will probably remain  
unchanged due to the lower contribution from foreign trade.  
Following its expansion of the last two years, the Japanese econ-  
omy will probably slow down. Neither will the emerging markets  
be immune from the weaker economic momentum; in particular,  
the economies of Asia and South America will grow at lower  
rates than hitherto. In China, the administrative measures taken  
to restrain the country’s economy, which was overheating last  
year, will increasingly take effect. Overall, we anticipate global  
economic growth of slightly more than 3% in 2005 and similar  
rates in the following years. The return to a sustained and stable  
growth trend will only be possible if raw-material prices do not  
rise again significantly, however.  
DaimlerChrysler’s divisions  
Automobile markets  
Despite the weak growth of major markets, the Mercedes Car  
Group plans to increase its unit sales in 2005 and the following  
years. This will be primarily based on the renewal and expansion  
of the division’s model range. With entirely new vehicles such  
as the B-Class and the R-Class, we will add the market segment  
of sports tourer starting in the year 2005. The new S-Class will  
be available in the fall of 2005; with this car we intend to  
further extend the innovation and technology leadership of the  
Mercedes Car Group in the premium segment. For all of the  
products of the Mercedes-Benz brand, quality is the top priority.  
For this reason, our quality offensive is being pushed forward  
with great deter-mination. The Mercedes Car Group’s profitability  
is to be improved over the long term as a result of the CORE  
program, which was started in February 2005. In this way we  
intend to achieve a return on sales of 7% by 2007. The competi-  
Parallel to the slowdown in the world’s economic expansion,  
the growth in global demand for automobiles should be rather  
lower in 2005 than in 2004. While demand for passenger cars in  
the emerging markets is likely to rise significantly once again,  
we expect the North American market for passenger cars and  
light trucks and the passenger-car markets of Western Europe  
and Japan to remain at the level of 2004.  
The expansion of worldwide demand for commercial vehicles  
should continue, although at a rather lower rate than in 2004.  
The North American market for heavy-duty trucks and the mar-  
kets for commercial vehicles in the emerging economies are  
likely to show further growth, while demand in Western Europe  
should continue at the same high level as in 2004.  
4
4
tive situation of the smart business unit is to be strengthened  
as a result of its sales offensive in Europe’s major markets.  
The possibility of launching the smart in additional international  
markets is being intensively investigated at present. In addition  
we are working on a long-term viable business model for the  
smart brand, which aims to improve cost structures and increase  
productivity.  
The second cornerstone of Global Spark consists of deriving  
appropriate cost advantages from the large volumes that  
DaimlerChrysler realizes as the world’s leading producer of  
commercial vehicles. The core of this strategy is to use as many  
identical parts and shared components as possible, and to  
use existing vehicle concepts for the maximum possible produc-  
tion volumes while protecting the identity of our brands and  
products. The third Global Spark cornerstone is to further ex-  
pand our presence in Asia. An important step in this direction  
was the acquisition of a majority shareholding in Mitsubishi Fuso  
Truck and Bus Corporation (MFTBC). The activities we have  
initiated in China will help us to significantly strengthen our posi-  
tion also for commercial vehicles in this market of the future.  
Another strategic focus of the Mercedes Car Group is its pres-  
ence in Asia, especially in China; in the coming years, we intend  
to continue expanding this presence within the framework of  
DaimlerChrysler’s Asia strategy.  
The Chrysler Group is pursuing the following strategy: On the  
one hand, further progress is to be made in terms of efficiency;  
on the other hand, we intend to achieve a sustained improvement  
in our competitive position with innovative new products. The  
Chrysler Group’s attractive new vehicles will help it to close the  
gap with the world’s best competitors in terms of customer  
awareness, product quality and productivity. At the same time,  
we aim to set ourselves apart from the competition with our out-  
standing design and by offering excellent value for money. In  
The development of the division’s unit sales in the coming years  
will be supported by numerous attractive new models from all its  
business units. The Commercial Vehicles Division expects to  
increase unit sales once again in the year 2005 also as a result of  
the full consolidation of Mitsubishi Fuso Truck and Bus Cor-  
poration (MFTBC). A further contribution to higher unit sales in  
the years 2005 and 2006 is expected to come from purchases  
being brought forward due to future emission regulations in the  
United States and Japan.  
2
004 alone, nine new models were launched, and another 16 will  
follow in 2005 and 2006. In the coming years, markets outside  
the NAFTA region will increasingly contribute to the growth  
of the Chrysler Group. For this purpose the Dodge brand will be  
launched in Europe. At the same time, we are continuing the  
programs for efficiency improvements and cost reductions. With  
the new products, unit sales should continue increasing in  
the years 2005 through 2007.  
The Services division will continue to focus on its business of  
providing automotive financial services, thus intensifying the  
function of sales support for the automobile divisions. In close  
cooperation with the vehicle brands, financial services packages  
will be prepared, tailored to the specific requirements of each  
market’s customers. In the NAFTA region for example, Chrysler  
Financial is developing special leasing packages for corporate  
customers with vehicle fleets through its projects “Business Vehi-  
cle Finance” and “Full Service Leasing”. DaimlerChrysler Ser-  
vices is thus making an important contribution to strengthening  
the competitiveness of DaimlerChrysler’s vehicle brands in the  
rapidly growing market for corporate customers. One of the divi-  
sion’s key goals is to continue improving its processes over the  
long term by, among other things, applying the most up-to-date  
risk-management systems. Following the successful start of  
The Commercial Vehicles Division is pursuing the goal of  
securing and further developing the strong competitive position it  
attained in 2004. To ensure that this goal is achieved, the strate-  
gic initiative “Global Spark” is being consistently implemented.  
Global Spark is based on three main cornerstones. The first  
includes the cost-reducing and efficiency-improving programs of  
the various business units, which will be continued in the coming  
years.  
4
5
Investments in Property, Plant and Equipment 2005–2007  
In billions of €  
DaimlerChrysler Group  
21.1  
Mercedes Car Group  
Chrysler Group  
Commercial Vehicles  
Services  
7.4  
9.1  
4.2  
0.1  
0.3  
Other Activities  
the toll system for trucks on autobahns in Germany, Toll Collect  
intends to change over to the second version of the on-board  
units on January 1, 2006.  
A fundamental condition for the targeted increase in earnings is  
a generally stable economic and political situation and the mod-  
erate upturn in the worldwide demand for automobiles expected  
for the years of 2005 through 2007. Challenges may arise,  
however, from a continuation of the weak US dollar and high  
raw-material prices.  
The DaimlerChrysler Off-Highway business unit anticipates a  
moderate recovery for its major markets in the years 2005  
through 2007. It aims to increase its market share through prod-  
uct innovations and intensified sales activities. The efficiency  
and restructuring projects that have already been initiated will  
be further continued.  
Capital expenditure  
In the planning period of 2005 through 2007, DaimlerChrysler  
expects to invest a total of 21 billion in property, plant and  
equipment. At the Mercedes Car Group, the focus of investment  
will be on preparations for the successor models to the C-Class,  
the E-Class and the smart fortwo. Principal investments by the  
Chrysler Group will be in the modernization of its plants and the  
continuation of its product offensive. At Commercial Vehicles,  
major investments are planned for the successor model to the  
Sprinter, the new Century Class by Freightliner, and the new fam-  
ily of engines for heavy trucks. DaimlerChrysler also plans to  
invest substantial funds in the context of the Group’s involvement  
in China.  
EADS expects a distinct recovery in the market for civil aircraft.  
Due primarily to rising Airbus deliveries, revenues are likely to  
grow significantly in the coming years. This development will also  
be assisted by the new A380 wide-body aircraft, of which the  
first examples are to be delivered to customers before the end of  
2
006. Despite the situation of tight government budgets in  
Europe, based on a high order book EADS is further expanding its  
defense business. The Space unit will continue its positive devel-  
opment in the coming years.  
The DaimlerChrysler Group  
Investments in property, plant and equipment  
Assuming a moderate increase in the worldwide demand for  
automobiles, we expect total unit sales by the DaimlerChrysler  
Group to increase in 2005 and the following years. Higher  
unit sales by all divisions will contribute to this development.  
Revenues should also continue to rise.  
2
004  
2005—2007  
In billions  
DaimlerChrysler Group  
Mercedes Car Group  
Chrysler Group  
6.4  
2.3  
2.6  
1.2  
0.1  
0.1  
21.1  
7.4  
9.1  
4.2  
0.1  
0.3  
After a weaker first and second quarter, for the full-year 2005 we  
expect a slightly higher operating profit than in the previous year.  
Significant earnings improvements are to be expected as of  
the year 2006 and 2007, when the Mercedes Car Group’s product  
offensive takes full effect and additional new models become  
available from the Chrysler Group. A key contribution to this posi-  
tive earnings development will also be made by the efficiency-  
enhancing programs which will be pushed steadily forward in all  
divisions. The increasing networking of our global activities, the  
knowledge transfer within the Group, and the cross-divisional  
projects will also have a positive impact on earnings in the com-  
ing years.  
Commercial Vehicles  
Services  
Other Activities  
4
6
Research and Development Expenditure 2005–2007  
In billions of €  
DaimlerChrysler Group  
17.0  
Mercedes Car Group  
Chrysler Group  
7.2  
5.1  
3.8  
0.9  
Commercial Vehicles  
Other Activities  
Research and development  
Forward-looking statements in this Annual Report:  
This Annual Report contains forward-looking statements that reflect management’s  
current views with respect to future events. The words “anticipate,” “assume,” “believe,”  
For research and development activities, DaimlerChrysler will  
invest a total of €17 billion in the period of 2005 through 2007,  
thus maintaining the high level of recent years. The focus of  
DaimlerChrysler’s research and development expenditure is on  
the new vehicle models from the Mercedes Car Group and the  
Chrysler Group divisions. Important projects at Commercial Vehi-  
cles include new truck engines fulfilling the future emission regu-  
lations in the United States, Western Europe and Japan, a new  
platform for the successor models to the Actros, the Atego and  
the Axor, and two new trucks from the Mitsubishi Fuso brand.  
“estimate,” “expect,” “intend,” “may,” “plan,” “project” and “should” and similar  
expressions identify forward-looking statements. Such statements are subject to risks  
and uncertainties, including, but not limited to: an economic downturn in Europe or  
North America; changes in currency exchange rates and interest rates and in raw-material  
prices; introduction of competing products; increased sales incentives; and a decline  
in resale prices of used vehicles. If any of these or other risks and uncertainties occur  
(some of which are described under the heading “Risk Report” in this Annual Report  
and under the heading “Risk Factors” in DaimlerChrysler’s most recent Annual Report on  
Form 20-F filed with the Securities and Exchange Commission), or if the assumptions  
underlying any of these statements prove incorrect, then actual results may be materially  
different from those expressed or implied by such statements. We do not intend or  
assume any obligation to update any forward-looking statement, which speaks only as  
of the date on which it is made.  
Significant investment is also planned for new technologies with  
which we intend to improve the safety, environmental compati-  
bility and fuel economy of road vehicles.  
Research and development expenditure  
2
004  
2005—2007  
In billions  
DaimlerChrysler Group  
Mercedes Car Group  
Chrysler Group  
5.7  
2.6  
1.6  
1.2  
0.2  
17.0  
7.2  
5.1  
Commercial Vehicles  
Other Activities  
3.8  
0.9  
The workforce  
Due to the planned development of unit sales and the expected  
productivity advances, DaimlerChrysler assumes that employee  
numbers will remain fairly constant in the years of 2005 through  
2
007, both for the Group as a whole and in the individual divi-  
sions.  
4
7
Mercedes Car Group  
4
8
From the forge of Mercedes-Benz: the new CLS-Class.  
A coupe generation ahead.  
Hans-Dieter Futschik, Siegfried Mack, Professor Jürgen Bräuchle and Nicola Ehrenberg (from left to right)  
worked on refining the design of the CLS coupe from the start. Its appealing aesthetics and trailblazing  
technology infuse driving with a new passion – an innovative automobile concept!  
4
9
Mercedes Car Group  
Unit sales slightly above prior year’s level | Product offensive successfully continued |  
High expenditures for new models and quality offensive | Program started to  
increase efficiency and earnings  
lower than in 2003  
| Sales offensive by smart | Operating profit significantly  
Business developments affected by model changeovers.  
The Mercedes Car Group – comprising the brands Mercedes-Benz,  
Maybach, smart, Mercedes-Benz AMG and Mercedes-Benz  
McLaren – sold 1,226,800 vehicles in 2004 (2003: 1,216,900).  
For model lifecycle reasons, unit sales of the Mercedes-Benz  
brand were 2% lower than in the prior year, whereas smart’s unit  
sales increased by 22% due to the launch of the smart forfour.  
The division’s revenues decreased slightly to 49.6 billion (2003:  
2
004  
2004  
2003  
Amounts in millions  
US $  
Operating profit  
Revenues  
2,255  
67,189  
1,666  
3,126  
49,630  
51,446  
Investments in property,  
plant and equipment  
3,172  
3,566  
2,343  
2,939  
Research and development  
expenditure  
51.4 billion). This development was due to exchange-rate effects  
2,634  
1,246,726  
1,226,773  
105,857  
2,687  
1,211,981  
1,216,938  
104,151  
and the changed model mix of Mercedes-Benz passenger cars,  
which was primarily caused by lifecycle-related factors. At 1.7  
billion, operating profit was significantly lower than the 3.1 billion  
posted in 2003. This was due partially to the changed model mix  
and exchange-rate effects, but also to the high launch costs for  
new products and the costs of the quality offensive at Mercedes-  
Benz. In addition, the contribution from smart was significantly  
negative as a result of higher marketing expenses, the launch  
costs for the smart forfour and higher development expenditure  
Production (units)  
Unit sales  
Employees (Dec. 31)  
(see page 23).  
Focus on quality, efficiency and productivity. In order to improve  
the Mercedes Car Group’s profitability, we are highly focused on  
the issues of quality, efficiency and productivity. Quality is one of  
the most important attributes of the Mercedes-Benz brand and is  
thus the key focus of all activities at the Mercedes Car Group. As  
part of our comprehensive quality offensive, a range of measures  
is being taken to ensure the highest quality at all levels of activity  
from vehicle development and production all the way to sales  
5
0
The astounding endurance of the Mercedes-Benz A-Class.  
Testing to the limit.  
Thomas Zeeb has driven them all over the world, through snow and heat, forced them  
through steeply banked curves and put them through their paces in the crash center.  
The director of the A-Class vehicle-testing department is proud and utterly convinced  
of his new car: with the most innovative safety concept in its category!  
and service. In addition, we have intensified cooperation with our  
S- and E-Class remain worldwide leaders in their market  
segments. With a market share of 35%, the S-Class maintained  
its worldwide leading position in the luxury segment over the  
competing cars, some of which are significantly younger. Although  
sales of the S-Class decreased due to the approaching model  
changeover in 2005, with 85,400 units sold in 2004  
suppliers during the initial development process and conduct  
supplier audits during the production process itself. We test our  
vehicles during the product-creation process even more com-  
prehensively and have stepped up our dialog with customers  
regarding their satisfaction with our products. We are also  
intensifying employee training in our worldwide sales-and-service  
organization, including the establishment of a global training  
center with state-of-the-art media technology in Stuttgart in  
October 2004. To ensure the top quality of newly delivered vehicles  
in use with our customers, we carry out precautionary checks  
of hardware and software functions during regular workshop  
services.  
(2003: 108,300) it was still well ahead of its competitors.  
The E-Class (including the CLS) remained the number one upper-  
range model worldwide in 2004, recording deliveries of 294,200  
vehicles. Unit sales were down 4% from the prior year’s high level,  
however. With a global market share of approximately 37% for  
the station wagon and 31% for the sedan, the two versions of the  
E-Class clearly dominate their respective market segments.  
In February 2005, the Mercedes Car Group started a compre-  
hensive program designed to increase efficiency and earnings. With  
the CORE program, potential for improvement along the entire  
automotive value chain will be analyzed and then rapidly and con-  
sistently implemented in the organization. The Mercedes Car  
Group intends to improve its earnings by more than €3 billion as  
a result of CORE, leading to a return on sales of 7% for the  
division in 2007.  
In an extremely competitive market with a large number of new  
models, the M-Class, which is to be replaced with a new model  
in the spring of 2005, performed very well with sales of 70,900  
units (2003: 81,200).  
CLS: A new generation of coupes with four doors. In  
September 2003, we underscored Mercedes-Benz’ role as a  
trendsetter in automotive innovation by presenting a pioneering  
coupe study at the Frankfurt Motor Show. Just one year later,  
we were able to deliver the first new CLS-Class vehicles to our  
customers. The CLS, the world’s first four-door coupe in series  
production, is based on a unique vehicle concept that combines  
the elegance and dynamism of a coupe with the comfort and  
functionality of a sedan. The CLS was received by the markets  
very well. By the end of the year 8,100 units of the four-door  
coupe were sold.  
Mercedes-Benz remains the most successful premium brand.  
Unit sales by the Mercedes-Benz brand of 1,074,600 passenger  
cars worldwide were 2% lower than the high number sold in 2003.  
The decrease in unit sales was primarily due to the fact that  
several new models were not fully available until the end of the  
year. With its product and marketing offensive, the Mercedes-  
Benz brand has succeeded in significantly rejuvenating its model  
range, making it even more appealing, and maintaining its  
position as the world’s most successful premium brand despite  
intense competition.  
New impetus for the C-Class. The new C-Class generation was  
launched in the early summer of 2004. Building on the tried-  
and-trusted features of the C-Class, the model was particularly  
enhanced in terms of dynamism, comfort and perceived value. The  
market response to the new C-Class generation has been very  
positive: it became the global market leader in its segment shortly  
after it was launched. The success enjoyed by the improved  
model enabled us to sell a total of 474,800 C-Class cars in the  
year under review, an increase of 7% compared to the prior year.  
Unit sales in key markets developed variously in 2004. For  
example, unit sales in Western Europe fell by 3%, with growth in  
Spain (+10%) more than offset by declining sales in Germany  
(
-3%), the United Kingdom (-9%), France (-5%), and Italy (-4%). In  
contrast, unit sales to customers in the United States increased  
by 1% from the prior year. Unit sales in Japan did not match the  
figure for 2003 (-10%), but sales increased in the growing Chinese  
market by 6% to 9,800 vehicles.  
5
1
The smart car with double the driving fun.  
Turn two into four.  
Alexander Pothoven, Sieglinde Jeggle, Anke Kilian and Michael Jopp (from left to right)  
have successfully reaffirmed the brand’s key features with the smart forfour. In addition  
to compact-car functionality and the emotional charge of a young automobile brand,  
now an absolute novelty for smart: the first four-seater!  
The unit sales figure for 2004 includes 53,700 SLK roadsters and  
9,800 CLK coupes and convertibles, which remained in great  
demand.  
Market launch of new Mercedes-Benz SLR. Mercedes-Benz  
7
began delivering its new SLR super sports car to customers in  
April 2004. The vehicle was presented to the public for the first  
time at the Frankfurt Motor Show in September 2003, where it  
met with a tremendous response. In 2004, we produced  
more than 350 units of this exclusive sports car at the McLaren  
pro-duction plant in Woking, England.  
The second-generation SLK roadster, which we presented to the  
public in the spring of 2004, is even sportier than the predecessor  
model when it comes to driving dynamics, engine performance  
and design. Right from the start, the new SLK roadster won 32 of  
3
3 possible auto prizes. Among others it was awarded both the  
Auto Trophy and the Golden Steering Wheel in 2004. A total of  
7,800 new SLK roadsters were sold in 2004, and the car has  
Maybach debuts in China. In June 2004, the presentation of the  
Maybach at the Auto China show and the handing over of keys  
to the brand’s first Chinese customers marked the debut of the  
exclusive Maybach brand in China. We opened Maybach Centers  
in Beijing and Shanghai in the second half of the year. We also  
presented a new seating configuration for the exclusive Maybach  
models at the Paris Auto Show, featuring an additional rear  
passenger seat alongside the high-comfort individual seats in the  
rear of the luxury automobiles. We sold approximately 500  
exclusive Maybach sedans worldwide in 2004.  
4
a market share of 21% in its segment, making it number one in  
the world in its vehicle category.  
The new A-Class: Unique design and vehicle concept.  
Deliveries of the new A-Class began in September, and the car  
was very successful right from the start. It sets new standards  
in its market segment in terms of comfort, safety, perceived value  
and spaciousness. A total of 142,500 A-Class cars were delivered  
in 2004, including 59,100 of the new model. Demand for the new  
A-Class was particularly high in Germany and Italy.  
smart boosts sales with the new forfour. Unit sales by the  
smart brand increased by 22% to 152,100 in 2004, due to  
the introduction of the smart forfour, the compact brand’s first  
car with four seats. Germany (sales of 48,800 units) and Italy  
(39,800 units) remained the most important markets for the  
smart. Above-average growth was recorded in France (14,500  
vehicles, +53%) and Spain (7,900 vehicles, +75%).  
Vision R” and “Vision B” – excellence in design, driving  
dynamics and spaciousness. At the 2004 Paris Auto Show, we  
presented the European version of the “Vision R” grand sports  
tourer, and also unveiled the new “Vision B” compact sports tourer.  
Both models combine the benefits of existing vehicle types –  
such as sporty sedan, station wagon, van and sport utility vehicle  
The smart forfour, which was launched in April 2004, has now  
established smart as a brand with a wide model range. The  
smart forfour distinguishes itself through its unique combination  
of emotional appeal and practicality, its intelligent lightweight  
design, and the high performance and sporty driving pleasure it  
offers. The most visible aspect of the model’s comprehensive  
safety concept is the Tridion safety cell in contrasting colors.  
With this feature, the innovative four-seater remains true to the  
values of the smart brand. By the end of 2004, a total of 59,100  
smart forfours were sold in the hotly contested Western European  
small-car segment, which shrank by 7% in 2004. We will generate  
additional sales potential for the forfour with the diesel models,  
which have been available since September 2004, and the right-  
hand-drive versions for the United Kingdom and Japan.  
into a completely individual profile. The two vehicles will be  
launched as the R-Class and B-Class in the summer of 2005. They  
extend the M-Class and the A-Class into product families,  
allowing the utilization of synergy effects. Like the M-Class, the  
R-Class Grand Sports Tourer will be produced at our US plant  
in Tuscaloosa, Alabama. To this end, we are expanding the plant  
with an investment of US $600 million and increasing its work-  
force to some 4,000 people. The B-Class compact sports tourer  
will be manufactured at our plant in Rastatt, Germany, where  
the workforce will be increased by 1,800 people to 6,500.  
5
2
A total of 79,500 units of the smart fortwo coupe and smart  
fortwo convertible were sold in the year under review (2003:  
Unit Sales 2004 1  
1
,000  
04/03  
units  
in %  
104,600). This decline in sales was due to the unfavorable market  
environment in the European small-car segment. However, the  
smart fortwo was still the best-selling car in its market segment  
in Germany. In order to attract new customers for the smart  
fortwo, we have expanded the model’s product range to include  
innovative limited editions, among them the i-move edition –  
the first automobile ever to feature an Apple iPod digital music  
player as standard equipment. The i-move limited edition sold  
out just a few weeks after it became available.  
Mercedes-Benz  
of which: S-Class/SL/Maybach/SLR  
E-Class/CLS  
C-Class  
1,075  
86  
-2  
-21  
-4  
294  
475  
80  
+7  
of which: CLK  
SLK  
-7  
54  
+145  
-12  
-3  
Sport Coupe  
A-Class  
47  
143  
71  
M-Class  
-13  
-14  
+22  
+1  
After very high sales of 20,100 units in a limited market in 2003,  
sales of the smart roadster and smart roadster coupe declined  
sharply to 13,600 units in 2004. In the spring of 2004, the roadster  
options were expanded to include the BRABUS design and  
equipment line.  
G-Class  
6
smart  
152  
1,227  
387  
434  
240  
222  
10  
Mercedes Car Group  
of which: Germany  
-1  
Western Europe (excluding Germany)  
+3  
NAFTA  
+2  
Start of sales offensive for smart. With its unique products, the  
smart brand has become well established in many markets  
within just a few years. We intend to utilize the potential of these  
markets even better in the future. We have therefore started a  
sales offensive in key European markets. Within the framework of  
this offensive, we intend to make more use of the Mercedes-Benz  
dealer network for the distribution of smart cars. We are  
also gradually moving into new markets. For example, in 2004, we  
launched the smart brand in Canada, Malaysia, Malta, Norway  
and Romania. Following in the footsteps of Mexico, Canada has  
become the second NAFTA market where the smart brand is  
available, and Malaysia is the first market in Southeast Asia where  
customers can purchase smart cars. At present, we are working  
on a long-term viable business model for the smart brand.  
This includes not only the aforementioned sales offensive,  
but also measures designed to improve cost structures and  
increase productivity.  
United States (retail sales)  
South America  
+1  
-8  
Asia/Oceania (excluding Japan)  
Japan  
67  
-0  
41  
-10  
1
Group sales, unless otherwise indicated (including leased vehicles)  
5
3
Chrysler Group  
5
4
The Chrysler 300C pushes the right buttons!  
A really hot number.  
Ralph Gilles is convincing. Since graduating from college he has been working in the Chrysler Design  
department. He says that most of the designers and engineers have been disappointed by the  
market place’s declining interest in the American automobile. So they set out to fix that: an innovative  
renaissance!  
5
5
Chrysler Group  
Successful launch of nine new models | Further substantial improvements in  
productivity and product quality | Increased manufacturing flexibility | Considerable  
positive earnings due to market success of new products  
Positive business developments due to new products.  
2
004  
2004  
2003  
Developments at the Chrysler Group were very positive in 2004,  
despite the continuation of difficult market conditions in  
North America. After reporting an operating loss of €506 million  
Amounts in millions  
US $  
Operating profit (loss)  
Revenues  
1,932  
1,427  
(506)  
(including restructuring costs of €469 million) for the prior  
67,010  
49,498  
49,321  
year, the Chrysler Group achieved an operating profit of €1.4  
billion including additional restructuring expenses of €283  
in 2004 (see page 24).  
Investments in property,  
plant and equipment  
3,584  
2,125  
2,647  
1,570  
2,487  
1,689  
Research and development expenditure  
Production (units)  
2,652,186  
2,779,895  
84,375  
2,552,308  
2,637,867  
93,062  
Worldwide, the Chrysler Group posted factory unit sales  
Unit sales (factory shipments)  
Employees (Dec. 31)  
(shipments) of 2.8 million passenger cars, minivans, sport-utility  
vehicles and light trucks of the Chrysler, Dodge and Jeep®  
brands in 2004, a 5% increase over 2003. The United States  
was the largest market with 2.3 million vehicles (+7%),  
followed by Canada with 212,300 vehicles (-7%) and Mexico  
with 110,400 vehicles (+10%). The Chrysler Group also  
shipped 170,200 vehicles to markets outside of NAFTA (-6%).  
Worldwide retail and fleet sales for the Chrysler Group totalled  
2.7 million in 2004, a 4% increase over 2003 (2003: 2.61 million).  
Due to the success of several new products, the Chrysler Group  
increased its market share in the US to 12.8% (2003: 12.5%).  
The Chrysler Group reinforced its market position, particularly in  
the passenger car, minivan and sports-utility vehicle segments.  
In the US, the Chrysler 300/300C set segment records with  
107,200 vehicles sold in 2004 since the launch in April. The  
Dodge Magnum sold 39,200 in just eight months of sales, and  
the new Chrysler and Dodge minivans sold 386,700 vehicles  
TM  
+3%), due to the market success of the innovative Stow’n Go  
(
5
6
The Jeep Grand Cherokee convinces off and on-road.  
®
An award-winning package.  
Legendary Jeep off-road capability and on-road refinement set a new benchmark.  
®
From overall vehicle quality to program financials, chief engineer Phil Cousino  
had to keep an eye on everything. And now on your marks, get set, go – in a really  
innovative SUV!  
seating and storage system. The Chrysler Group also achieved  
responsiveness, room and refinement.” The vehicle was also  
named “North American Car of the Year” at the North American  
International Auto Show in Detroit in January 2005, by a jury of  
respected automotive reporters.  
significant increases in sales of the Chrysler Crossfire (+272%),  
Chrysler Pacifica (+63%), Dodge Durango (+27%) and Jeep®  
Wrangler (+11%).  
Revenues of €49.5 billion were at the level of the previous year;  
measured in US dollars, revenues increased by 10%. This increase  
was primarily the result of the higher worldwide factory unit  
sales, a lower average sales incentive expense per vehicle and a  
shift in product mix to higher-priced vehicles.  
In order to meet consumer demand for the Chrysler 300 and  
300C, a third shift is planned at the Brampton Ontario Assembly  
Plant, and starting in mid-2005, the Chrysler 300C will be pro-  
duced by Magna Steyr in Graz, Austria. The Chrysler 300C Tour-  
ing sports wagon, a vehicle designed specifically for European  
markets, will also be assembled in Graz.  
At the end of the year, dealers in the United States had inventories  
totaling 600,600 vehicles (end of 2003: 521,100 vehicles). In  
terms of days’ supply, inventories increased to 81 days (end of  
Additional new models from the Chrysler brand in 2004 included  
two convertibles, the Chrysler PT Cruiser Convertible and  
Chrysler Crossfire Roadster, which continue the brand’s long and  
successful tradition of open-air driving.  
2
003: 74 days).  
Product offensive starts with nine new models in 2004.  
The Chrysler Group’s strategy of enhancing its competitive  
position over the long term was bolstered by the launch of nine  
all-new models – the most all-new products ever launched in  
the company’s history.  
Dodge brand strengthened by new products. In 2004 the  
Dodge brand launched the Dodge Magnum, Dodge Dakota and  
Dodge Ram SRT-10.  
The Dodge Magnum combines a unique styling statement with  
comprehensive safety technology (including ESP, electronic sta-  
bility program), powerful engines, versatile cargo management  
and rear-wheel drive. The result is an excellent driving experience  
in a uniquely different package – all at a very competitive price.  
An ambitious plan to bring innovative and aspirational products to  
market will continue for the years to come. In 2005, for example,  
the company will launch several highly anticipated products,  
including the Dodge Charger, the Dodge Ram Mega Cab and the  
Jeep Commander, which will be the first Jeep vehicle ever with  
®
®
three-row seating.  
Available in dealerships since September 2004, the new Dodge  
Dakota pickup is even more powerful and spacious than the  
previous model. In fact, it is the largest and most powerful pick-  
up in its class, and was named “Editor’s Most Wanted Compact  
Truck” by Edmunds.com, a well known provider of consumer  
automotive information.  
Chrysler 300 and 300C highly successful in the market. In  
004, the Chrysler brand made an impact on the passenger  
2
car market with the introduction of the Chrysler 300 and 300C  
sedans, which have achieved a 30% share of their market seg-  
ment in the United States in the nine months since their launch.  
The success of these new models boosted the Chrysler brand’s  
worldwide factory unit sales by 23% to 748,600.  
The Dodge Ram SRT-10, equipped with an 8.3-liter Viper V-10  
engine that produces 500 horsepower, rounds out the roster of  
new Dodge products launched in 2004.  
Since its introduction, the Chrysler 300 has won numerous  
awards. Motor Trend, a highly respected US magazine, voted the  
Chrysler 300 its “2005 Car of the Year”. Judges said, “The  
Chrysler 300 is an extremely compelling combination of power,  
The brand’s worldwide factory unit sales increased to 1,479,100  
(+4%) vehicles in 2004.  
5
7
The reason for Stow’n GoTM in the Dodge Caravan.  
Where are the seats?  
Could you imagine folding the seats into the floor? After working on minivans  
for 13 years, Bob Feldmaier, the former director of minivan engineering, got  
the oppurtunity to create something minivan customers would really appreciate:  
an innovative seating and storage system.  
Jeep Grand Cherokee sets new standards. The Jeep brand  
use. Popular Science, a magazine devoted to technology, named  
®
®
captivated the attention of its customers with the introduction of  
two new products in 2004. The third generation of the Jeep®  
Grand Cherokee offers improved capability and superior on-road  
ride and handling in a well-appointed package. Safety is  
the Stow’n Go™ seating and storage system the “Best of What’s  
New” in the Auto Tech category.  
In 2004, the Chrysler Group also raised the bar in advanced engine  
technology with the introduction of the Multi-Displacement  
enhanced by ESP, which is available for the first time in a Jeep®.  
®
System (MDS) on its 5.7-liter HEMI engine. MDS seamlessly  
With its extended wheel base, the new Jeep Wrangler Unlimited  
alternates between smooth, high fuel economy four-cylinder mode  
when less power is needed and V-8 mode when more power is  
in demand. This technology increases fuel economy by up to 20%.  
®
is significantly more spacious than the base model and has even  
better ride and handling, while maintaining its tremendous off-  
road capabilities.  
The Chrysler Group also demonstrated its engineering expertise  
with added safety features (such as the ESP) and better safety  
ratings. In fact, starting with the Chrysler Pacifica in 2003,  
Chrysler Group products have earned eight consecutive Five-Star  
ratings for frontal crash protection, including: Chrysler and  
Dodge Minivan, Chrysler 300, Dodge Magnum, and Dodge Dakota.  
In addition, Chrysler Group vehicles consistently earned very  
good ratings on the government’s new dynamic rollover tests.  
Chrysler Pacifica received the best score of any SUV tested.  
Due to the Grand Cherokee model changeover in the second half  
of the year, the brand’s worldwide factory unit sales of 547,800  
SUVs did not equal the prior-year level (-8%).  
Product offensive in international markets. The volume sales  
of the Chrysler and Jeep brands outside North America continue  
®
to be driven by the following core product ranges: Chrysler  
Voyager and Grand Voyager, Chrysler PT Cruiser and Convertible,  
Jeep Cherokee (called Liberty in the US) and the Jeep Grand  
®
®
Cherokee. These core products are combined with the recently  
launched Chrysler Crossfire Coupe and Roadster and the  
Chrysler 300C Sedan and Touring.  
Major advances in quality and productivity. In the past four  
years, the Chrysler Group has improved its processes in an  
effort to significantly enhance product quality and productivity to  
improve its competitive position long term. The Chrysler Group  
aims to be world-class in vehicle quality and productivity in the  
North American volume automobile market by 2007.  
This product offering is supported by the expansion of the Dodge  
brand in international markets, including Western Europe. By  
2
007, the Chrysler Group will significantly increase the number of  
models supplied in markets outside of North America. During the  
same time period, the company will further expand its interna-  
tional offerings of diesel and right-hand-drive models.  
An important indicator of the progress made by the Chrysler  
Group is the 2004 Harbour Report, which measures the  
productivity of North American auto manufacturers. The Harbour  
Report announced that the Chrysler Group improved its  
manufacturing productivity in 2003 by 7.8% (2002: 8.3%). This  
is the second consecutive year in which the Chrysler Group  
posted the largest year-over-year improvement among all auto-  
motive manufacturers.  
Innovation in technology and safety. Twenty-one years after  
inventing the minivan, the Chrysler Group has once again raised  
the bar with its new Stow’n Go™ seating and storage system.  
This innovative technology, which is offered on the long-wheel-  
base Dodge Grand Caravan and Chrysler Town & Country mini-  
vans, allows the second and third rows of seats to fold into the  
floor with very little effort. What’s more, the system provides  
additional storage space under the floor when the seats are in  
5
8
The quality of Chrysler, Jeep and Dodge vehicles continued to  
improve in 2004. According to the 2004 J.D. Power Initial Quality  
Study (IQS), the quality of Chrysler Group vehicles improved by  
Unit Sales 2004 1  
1
,000  
04/03  
units  
in %  
1
1% over the prior year.  
Total  
2,780  
624  
+5%  
+10%  
+0%  
of which: Passenger cars  
Light trucks  
Sports tourers  
Minivans  
Increased manufacturing flexibility. The Chrysler Group’s  
North American manufacturing strategy aims to optimize  
the company’s existing facilities while creating a greater ability  
to quickly respond to customers’ product needs. This type of  
flexibility involves being able to produce multiple vehicles at a  
plant while test-building another without losing production  
time. It also involves being able to shift production of hot-selling  
vehicles among plants, depending on vehicle orders.  
668  
280  
500  
708  
+28%  
+5%  
SUVs  
-0%  
United States  
Canada  
2,287  
212  
+7%  
-7%  
Mexico  
110  
+10%  
-6%  
Other markets  
170  
Two examples of these efforts were announced at the Warren  
1
Shipments (including leased vehicles)  
(
(
Michigan) Truck Assembly Plant plant and the Jefferson North  
Detroit, Michigan) assembly plant. Warren Truck Assembly Plant  
launched the 2005 Dodge Dakota and added a third shift, while  
continuing to build the Dodge Ram pickup truck. Jefferson North  
was originally constructed to run one vehicle at high volumes –  
the Jeep Grand Cherokee. The facility now has the capability to  
®
run multiple models while test-building another and that capability  
will be further proven in 2005 with the introduction of the Jeep®  
Commander.  
Advanced supplier collaboration. Within the context of Daimler-  
Chrysler’s worldwide procurement strategy, the Chrysler Group  
reduced material costs in collaboration with the supplier industry  
at an industry-leading rate over the last four years. To maintain  
this level of improvement, the Chrysler Group has entered into  
innovative partnerships and new forms of cooperation with its  
suppliers. For example, three suppliers will be located at the  
Toledo (Ohio) Assembly Plant, where the Jeep Wrangler and the  
®
Jeep Liberty are currently produced. These suppliers will build  
®
and manage key manufacturing processes in body, paint and  
chassis operations on future products.  
5
9
Commercial Vehicles  
6
0
Shared electronics for DaimlerChrysler commercial vehicles.  
Pulling together on the same line.  
The four DaimlerChrysler Managers, Dr. Michael Kokes, Wolfgang Appel, Dr. Sascha Paasche and Nobuaki  
Takeda (from left to right), have combined their worldwide expertise: In a shared project, they have  
created a common electrical/electronic architecture to be applied in the future truck generations from  
Freightliner, Mercedes-Benz and Mitsubishi Fuso.  
6
1
Commercial Vehicles  
Dynamic upswing in commercial vehicle markets | Positive developments in all business  
segments | New structure implemented, further efficiency improvements | Stronger  
position in Asia due to acquisition of Mitsubishi Fuso and joint venture for vans | Strong  
increase in operating profit  
Substantial increase in unit sales, revenues and operating  
2
004  
2004  
2003  
profit. Commercial vehicle markets developed very favorably  
worldwide in 2004, allowing the Commercial Vehicles Division to  
boost its sales of trucks, vans and buses by 42% to 712,200  
units. Revenues also grew substantially to 34.8 billion (2003:  
Amounts in millions  
US $  
Operating profit  
Revenues  
1,803  
1,332  
811  
47,064  
34,764  
26,806  
26.8 billion). Unit sales and revenues rose by 19% and 16%  
Investments in property,  
plant and equipment  
respectively, if Mitsubishi Fuso Truck and Bus Corporation (MFTBC)  
is excluded. Since March 31, 2004, MFTBC has been consolidated  
within the division with a one-month time lag. The acquisition of a  
majority shareholding in this company has allowed Daimler-  
Chrysler to further strengthen its position as the world’s market  
leader for commercial vehicles.  
1,603  
1,660  
1,184  
958  
Research and development  
expenditure  
1,226  
718,787  
712,166  
114,602  
946  
500,445  
500,981  
88,014  
Production (units)  
Unit sales  
Employees (Dec. 31)  
Despite charges of 475 million resulting from quality improvement  
measures and recall campaigns at MFTBC, DaimlerChrysler’s  
Commercial Vehicles division posted an operating profit of 1.3  
billion, which was substantially more than the €0.8 billion  
achieved in 2003. This increase was achieved due to substantially  
higher unit sales and the successful implementation of efficiency-  
boosting programs (see page 24).  
New structure implemented. In order to achieve additional  
cost reductions and better meet competitive challenges, we  
further improved the organization of our business units in 2004,  
as described below.  
6
2
What a van might look like in the future.  
The safety package.  
Mathias Lenz, Gerhard Honer, Christopher Khanna, Nicolai Berger, Andreas Grossmann,  
Bernd Heintel and Tim Achilles (from left to right) call it the “Sprinter safety study.”  
This van, which is based on the Mercedes-Benz Sprinter, combines current and potential  
future safety technology for driver, vehicle and load security: an innovative safety study!  
On January 1, 2004, the business units Trucks Europe/Latin  
Strong performance by Trucks Europe/Latin America  
(Mercedes-Benz). Worldwide sales of Mercedes-Benz brand  
trucks rose by 24% over the previous year’s level to an all-time  
high of 137,400 units. Growth rates were particularly high in  
our key markets of Western Europe, Latin America and Turkey.  
However, we also posted record sales figures in the Middle  
East and in the new member states of the European Union. With  
66,100 units sold (2003: 59,300) and a market share of 22%  
(2003: 21%), Mercedes-Benz was once again the leading brand  
in Western Europe for medium-duty and heavy-duty trucks. In  
the year under review, we exported 32% (2003: 28%) of the trucks  
produced in Europe to countries outside of Western Europe,  
thus underscoring Mercedes-Benz truck’s international competi-  
tiveness.  
America (Mercedes-Benz) and Trucks NAFTA (Freightliner, Sterling,  
Thomas Built Buses) as well as the functional unit Truck Product  
Creation were combined into a new Trucks business segment. The  
former DaimlerChrysler Powersystems business unit was dis-  
banded and its plants were assigned to the two business units.  
MFTBC became an integral part of this business segment on  
March 31, 2004. The business units Mercedes-Benz Vans and  
DaimlerChrysler Buses remain unchanged.  
Global coordination has been significantly improved, thanks to  
the consolidation of product planning, development, procurement  
and production planning processes. In order to achieve economies  
of scale, our products will increasingly contain intelligently shared  
parts in the future, without, however, in any way diminishing  
from the distinctive features that our customers require.  
Mercedes-Benz trucks were again among the best-selling brands  
in Brazil, and positive developments in this market lifted truck  
sales in Latin America from 23,800 to 31,100 units.  
In 2004, we decided to install the same electrical and electronics  
architecture in all future truck models. In addition, we moved  
ahead with the development of a new heavy-duty engine family  
for all truck business units and uniform axle components for  
different models and brands.  
The business unit’s sales success was due in part to the intro-  
duction in 2003 of the new heavy-duty Actros truck, which  
combines a high level of customer utility with excellent quality.  
The new truck’s outstanding position is further highlighted  
by the fact that the vehicle was voted “Truck of the Year 2004”.  
Very positive development of truck business in all key  
markets. Thanks to the success of our new products and increased  
demand in our key markets, as well as the full consolidation of  
MFTBC, sales by the Trucks business segment increased by 74%  
to 403,300 units.  
The new medium-duty truck Atego 2 and the new Axor 2 were  
presented in 2004. Both vehicles use many identical parts  
and feature numerous innovations, such as a modular cockpit  
that is available in three different versions. We are convinced  
that these new products will achieve the same success as the  
Actros. The introduction of these vehicles in Brazil is a further  
example of how we are implementing our strategy of transferring  
our European product program to all key markets.  
In addition, the implementation of various efficiency-boosting  
programs has led to improved processes at the component  
plants. Furthermore, the incorporation of more DaimlerChrysler  
components into Freightliner and Sterling trucks has allowed  
us to increase the capacity utilization of the component plants.  
6
3
Sales up sharply in North America. Thanks to positive market  
developments, the Trucks NAFTA business unit (Freightliner,  
Sterling, Thomas Built Buses) was able to increase its truck sales  
in the 2004 financial year by 28% to 152,400 vehicles.  
2004, with a one-month time lag. MFTBC is included in the  
overall results with unit sales of 118,100 trucks and buses,  
of which 39,000 were sold in the company’s home market of  
Japan and 79,100 in other markets.  
In the NAFTA region, the Freightliner, Sterling and Western Star  
brands saw sales of Class 8 vehicles (heavy-duty trucks over 15  
metric tons gross vehicle weight) rise to 87,700 units (2003:  
As expected, Japan’s commercial vehicle market contracted last  
year, following a sharp rise in demand in 2003 as a result of  
special factors. These factors included a new regulation that took  
effect on January 1, 2004, stipulating that only environmentally  
friendly trucks are allowed to drive into major cities. Partly as  
a result of market developments, but also due to a number of  
re-calls and the associated delays in approvals of vehicle changes  
by local authorities, Mitsubishi Fuso’s share of the Japanese  
market for medium-duty and heavy-duty trucks in Japan fell to  
25% (2003: 28%).  
67,700). Market share fell, however, to 35% (2003: 38%), due to  
production bottlenecks and the discontinuation of insufficiently  
profitable fleet-management contracts. Despite this fall, the busi-  
ness unit retained its undisputed position as the market leader.  
Sales volume in an expanding market was also much improved for  
vehicles in Classes 5-7 (medium-duty trucks), where 50,500  
units were sold (+18%). Market share was at 25% (2003: 26%).  
Meanwhile, the introduction of the new Saf-T-Liner school bus  
has allowed the Trucks NAFTA business unit to secure its strong  
position in the school-bus market.  
In 2004, the introduction of a new quality-management system  
and subsequent in-depth investigations revealed that vehicles  
manufactured by MFTBC in the past did not meet quality standards.  
These deficiencies originated exclusively in the period before  
DaimlerChrysler acquired a stake in MFTBC. Approximately  
960,000 vehicles are affected by the quality problems in Japan.  
MFTBC expects that most of the faults can be rectified in 2005.  
During the year under review, the business unit started  
assembling axles in the NAFTA region that share many parts with  
the axles produced in Europe. This is a further step toward  
achieving economies of scale through the common use of parts  
and components.  
Higher sales figures for the Vans business unit. The Vans  
business unit posted sales of 260,700 vehicles in 2004 (2003:  
230,900). The 13% sales increase was primarily due to the  
success of the Sprinter, the Vito and the Viano, which were in  
great demand in all key regions. In 2004, we expanded our  
market leadership in Western Europe with an 18% share of the  
medium and large van segments (2003: 17%).  
Following the successful conclusion of the restructuring measures,  
the business unit launched a process-and-quality offensive with  
a program known as “Total Business Excellence”. The aim of this  
program is to improve product and service quality and to further  
optimize internal processes and thus to improve earning power.  
Mitsubishi Fuso strengthens its position in Asia. Following the  
acquisition of a 43% shareholding in Mitsubishi Fuso Truck and  
Bus Corporation (MFTBC) in 2003, DaimlerChrysler increased its  
share in the company by a further 22% in March 2004. Since  
DaimlerChrysler now owns a 65% stake in the company, MFTBC  
has been fully consolidated within the division since March 31,  
6
4
How two bus brands create new products simultaneously.  
Take a seat!  
The Setra Comfort Class 400 is the first product of the New Coach Interurban project  
managed by Gustav Tuschen. In all, five new touring coaches and overland buses  
of the Mercedes-Benz and Setra brands will be developed, manufactured and marketed  
in the 7-year project under Tuschen’s direction in Neu-Ulm and Turkey:  
an innovative dual-brand project!  
The new Vito introduced in 2003 was named “Van of the Year  
005”. Of particular note were the vehicle’s appealing design,  
its excellent handling properties and its high level of comfort. The  
Sprinter also continued its success story, and underscored  
its unique status by achieving record sales of 151,300 (2003:  
Last year, we supplied three Citaro fuel-cell buses to the Australian  
city of Perth. These vehicles will augment the 30 Mercedes-Benz  
fuel-cell buses that major European cities have been testing in  
everyday operation since 2003. We also signed a contract to supply  
three fuel-cell buses to the city of Beijing.  
2
138,300) vans in its ninth year of production. The Sprinter’s  
growth in sales of 59% to 18,900 units in the region NAFTA  
is a further example of the successful utilization of synergies  
within the Group.  
Unit Sales 2004 1  
1
,000  
04/03  
units  
in %  
The business unit continued to pursue its growth strategy in  
Total  
712  
261  
403  
37  
+42  
+13  
+74  
+32  
+15  
+15  
+9  
2
004. On November 26, 2004, DaimlerChrysler teamed up with  
of which: Vans  
its partners Fujian Motor Industry Group and the China Motor  
Corporation to establish the joint venture “DaimlerChrysler Vans  
Trucks 2  
Buses & Coaches  
Other products 3  
(
4
China) Ltd.”. Starting in 2006, it is intended to produce up to  
0,000 Sprinters, Vitos and Vianos a year at a new plant in Fuzhou  
11  
Europe  
of which: Germany  
Western Europe (excluding Germany)  
318  
111  
164  
36  
in the province of Fujian. As a result of this joint venture, the  
Vans unit is well prepared to meet the challenges associated with  
the rapidly growing Chinese market. The Commercial Vehicles  
Division’s position in Asia has been further strengthened by the  
introduction of completely knocked down (CKD) assembly for  
the Sprinter in Vietnam.  
+11  
+7  
of which: United Kingdom  
France  
Italy  
30  
+15  
-0  
18  
NAFTA  
177  
151  
58  
+32  
+32  
+43  
+17  
+343  
of which: United States  
South America  
Unit-sales record for buses and coaches. Sales by the Buses  
business unit achieved an all-time record of 32,800 buses and  
coaches of the Mercedes-Benz, Setra and Orion brands in 2004  
of which: Brazil  
36  
Asia/Australia  
130  
(+16%). In Western Europe sales amounted to 7,200 buses  
(2003: 6,700), giving the business unit a market share of 28%  
(2003: 28%). Sales of Mercedes-Benz buses were up sharply  
1
2
3
Group sales (including leased vehicles)  
Including school buses by Thomas Built Buses and bus chassis by Freightliner  
Mitsubishi L200 pickup and the Mitsubishi Pajero manufactured in South Africa  
in Brazil, rising by 16% to 8,600 vehicles. The resulting increase  
in market share from 47% to 55% ensured that buses of the  
Mercedes-Benz brand continued to dominate the Brazilian market  
in 2004.  
This favorable development is primarily due to the business unit’s  
technological leadership and the continuous enhancement of its  
full-line product portfolio. For example, at the recent Commercial  
Vehicle Show in Hanover we presented the new Setra overland  
bus and innovations featured by the Mercedes-Benz Travego travel  
coach. These include driver-assistance and safety systems,  
proximity cruise control, the lane guidance system and the contin-  
uous brake-force limiter.  
6
5
Services  
6
6
How DaimlerChrysler Services guarantees customer satisfaction.  
Callers welcome.  
Marguerite Lawig and her team work in a call center. The display at the Troy Customer Contact Center  
shows them how many calls have been received at any one time. However, the most important  
number for the team is on the right-hand side of the display. Thanks in part to the short waiting times,  
this is nearly always an impressive 99%: an innovative high service level!  
6
7
Services  
Positive business developments in all regions | North America remains most important  
market for financial services | Toll Collect successfully launches toll system for trucks  
in Germany on January 1, 2005 | Operating profit at prior year’s high level  
Successful expansion of sales-financing activities in North  
2
004  
2004  
2003  
America. DaimlerChrysler Services further expanded its financial-  
services activities for all vehicle segments in what was a very  
competitive North American automotive market in 2004. When  
adjusted for exchange-rate effects, new business in the region  
increased by 16% to 37.8 billion. In order to increase new business  
and profitability, we implemented reward programs and also  
expanded activities that strengthen customer loyalty. The portfolio  
in North America totaled 72.2 billion in 2004, and contract  
volume was up 10% after adjusting for exchange-rate effects. North  
America also remained the division’s most important market  
worldwide, accounting for 70% of the total portfolio. As part of  
a series of national events, we worked together with North  
American dealers in 2004 to develop a common strategy for further  
exploiting earnings potential. For example, DaimlerChrysler  
Services Truck Finance introduced a full-service leasing program  
for the Freightliner brand that allows customers to supplement  
their financing and leasing contracts with an additional mainte-  
nance contract. According to the latest survey conducted by  
the American Automobile Association, DaimlerChrysler Services’  
financial-services products achieved their best results ever  
among Chrysler Group dealers with regard to customer and  
dealer satisfaction.  
Amounts in millions  
US $  
Operating profit  
Revenues  
1,692  
18,871  
1,250  
13,939  
1,240  
14,037  
98,199  
Contract volume  
138,628  
102,399  
Investments in property,  
plant and equipment  
123  
91  
76  
Employees (Dec. 31)  
11,224  
11,035  
Positive business developments at DaimlerChrysler Services.  
The Services division continued to develop positively in 2004.  
Close cooperation with the automotive divisions played a key role  
in the 7% increase in new business to 50.9 billion. In particular,  
reward programs met with a highly favorable response from cus-  
tomers. We also introduced new financial-services products in  
many countries in 2004. Contract volume rose by 4% to 102.4  
billion; adjusted for exchange-rate effects the increase was 9%.  
At the end of the year, our portfolio consisted of more than 6.6  
million leased or financed vehicles in 39 countries.  
Despite additional charges of 472 million from Toll Collect,  
operating profit of 1,250 million (2003: 1,240 million) was at  
the prior year’s high level. At the end of 2004, DaimlerChrysler  
Services employed 11,224 people, an increase of 2% compared  
with the prior year (see page 24).  
6
8
Everything from a single source at DaimlerChrysler Bank.  
Insurance the easy way.  
Together with the colleagues from the Insurance Services department, Dalibor Rezic and  
Tom Schneider developed the new vehicle insurance offered by DaimlerChrysler Bank.  
This product provides the customers not only with an excellent insurance policy, but also  
with a simple process for making applications at dealerships. Customers now receive  
everything they need from a single source: the vehicle, the financing and the insurance  
coverage.  
A stronger position in all key European markets. In 2004,  
Our portfolio in the Asia/Pacific region grew by 5% to 3.2 billion,  
with 45% of this figure being accounted for by the Japanese  
market. In China, preparations continued for the launch of our  
financing activities in that country: In November we received  
a provisional permit to commence business activities, and  
DaimlerChrysler Services plans to support sales of Group vehicle  
brands in China with its own financing company.  
the Services division also improved its competitive position  
in Europe as a captive finance company. This was particularly  
true with regard to business development in Germany, our  
most important European market.  
DaimlerChrysler Bank continued with the expansion of its core  
areas of leasing and financing in 2004. New business increased by  
9
% to 8.2 billion, and contract volume was up 10% to 14.5  
Fleet-management activities further expanded. The Fleet  
Management unit expanded its worldwide vehicle fleet by 14% to  
383,300 units in 2004, gaining numerous new customers by  
offering attractive new products, particularly in European markets.  
We currently offer customers fleet-management services in  
11 countries around the world, with a particular focus on Europe.  
billion. DaimlerChrysler Bank also expanded its portfolio in 2004  
to include attractive new products such as auto insurance, an  
investment certificate, the small-format smart VISA Card, a com-  
bined program including account and credit card, and a dual  
investment package consisting of a money-market account and  
a mutual fund. Customer deposits at DaimlerChrysler Bank  
totaled 3.1 billion at the end of the year (end of 2003: 3.1 billion),  
the number of credit cards issued increased to 290,000 (+17%).  
The bank served 926,000 customers in 2004, or 10% more than  
in 2003.  
Smooth start for truck toll system in Germany. Following the  
successful execution of important tests of the satellite-based  
toll-collection system and a full trial confirming the functionality  
and compatibility of the various system components, Toll Collect  
was granted a special provisional operating permit at the end of  
2004. The toll system then started smoothly on January 1, 2005.  
This start fulfilled the agreement of February 2004 between the  
German federal government and the operator consortium, Toll  
Collect, to begin collecting tolls for trucks over 12 metric tons gross  
vehicle weight on German autobahns on the first day of 2005.  
At present, the first version of the on-board units (OBU1) is in use.  
As of January 1, 2006, it is planned to extend the system’s  
functionality with the second version of the on-board units (OBU2).  
It will then be possible to update the road-pricing system and  
road-network information by radio. DaimlerChrysler has a 45%  
shareholding in Toll Collect.  
DaimlerChrysler Services’ portfolio in the other European  
countries grew significantly in the year under review (+6% to  
10.6 billion). Particularly high growth was registered in the  
United Kingdom (+11%) and Sweden (+33%). Business develop-  
ments in the new EU member states were also very dynamic:  
Services’ portfolio in Poland, Hungary, the Czech Republic,  
Slovakia and Slovenia grew by an average of 16% to a total of  
815 million.  
Positive business developments in Latin America and Asia.  
The portfolio in the Latin America/Africa/Middle East region  
totaled 1.9 billion at the end of 2004 (end of 2003: 1.4 billion).  
Economic conditions in Latin America improved throughout the  
course of the year, a development that had a positive impact on  
our Brazilian leasing and sales-financing activities in particular.  
The Latin American portfolio, which primarily consists of com-  
mercial vehicles, grew by 60% to 527 million. In South Africa,  
we succeeded in increasing our leasing and financing volume  
by 37% to 1.2 billion.  
6
9
Other Activities  
Operating profit lower than prior-year result, which was boosted by gain on the sale of  
MTU Aero Engines | DaimlerChrysler Off-Highway achieves growth in Europe and Asia |  
EADS posts substantial increase in earnings  
DaimlerChrysler Off-Highway  
2
004  
2004  
2003  
Amounts in millions  
US $  
Solid developments under difficult market conditions.  
Following two weak years, demand for diesel engines rose in  
Operating profit 1  
Revenues 1  
617  
456  
1,329  
4,084  
2004. This was primarily driven by growth in Asia, which, however,  
2,978  
2,200  
benefited manufacturers of diesel engines in countries with  
currencies linked to the US dollar more than those in Europe,  
due to the continued weakness of the dollar.  
Investments in property,  
plant and equipment  
Research and development expenditure 1  
1
181  
309  
134  
228  
169  
420  
Employees (Dec. 31)  
20,636  
20,192  
At €1.75 billion, DaimlerChrysler Off-Highway’s revenues in 2004  
were about 2% higher than in the previous year. Growth was  
achieved in particular in the segment of Power Generation  
(engines for stationary electricity generators), as well as with  
engines for trains and for yachts. In addition to Europe, the  
region of Asia also contributed to the positive development.  
The current energy shortage in China led to strong demand for  
engines for stationary power generators.  
1
2003 figures include discontinued operations (MTU Aero Engines).  
The Other Activities segment consists of our 33% holding in  
the EADS (European Aeronautic Defence and Space Company)  
and, since January 1, 2004, the DaimlerChrysler Off-Highway  
business unit. The previous year’s figures have been adjusted for  
comparability. This segment also includes Corporate Research,  
our real-estate activities and our holding and finance companies.  
As DaimlerChrysler did not participate in a capital increase for  
Mitsubishi Motors Corporation (MMC), our ownership interest in  
MMC was reduced from 37% to 19.7% during 2004. As a result,  
since June 30, 2004, our shareholding in Mitsubishi Motors  
Corporation has been included in the consolidated financial  
statements as a financial investment shown at fair value.  
In the year under review, the business unit recorded incoming  
orders totaling €1.84 billion, 7% higher than the figure for 2003.  
As was the case with revenues, incoming orders benefited mainly  
from the demand for engines for stationary power generators, as  
well as for train engines. The volume of orders received for ship  
engines was also significantly higher than in the prior year.  
The Other Activities segment saw its operating profit decrease  
from €1.3 billion to €0.5 billion. The reason for the reduction  
is that the operating profit for the prior year included a gain of  
€1.0 billion on the sale of MTU Aero Engines (see page 23).  
7
0
The new MTU marine engine 2000 Common Rail about to pull off.  
Power package for yachts.  
After more than 3,000 test cycles under diverse load conditions, design engineer  
Hermann Baumann is convinced that this new high-output diesel engine for  
yachts is a particularly inspiring development by MTU Friedrichshafen. Faster, more  
compact, lighter, more economical and cleaner: an innovative marine engine!  
EADS  
Airbus maintains global market leadership. In 2004, Airbus  
maintained its leading position in the civil aviation sector by  
EADS continues to grow. Thanks to increased demand in the  
civil aviation sector, the EADS (European Aeronautic Defence and  
Space Company) performed very well in 2004. EADS, which is  
one of the world’s leading aerospace and defense groups, will  
publish its results for the 2004 financial year on March 9, 2005.  
delivering 320 aircraft to its customers, once again outperforming  
its main competitor, Boeing. All in all, Airbus recorded 370 new  
firm orders in 2004 (2003: 284). This substantial increase on the  
previous year’s figure was due to a significantly improved  
market situation. In the year 2004, Airbus had an order book  
of 1,500 civil aircraft (2003: 1,454).  
During the first nine months of 2004, the company generated  
revenues of €21.5 billion as defined by the International Financial  
Reporting Standards (IFRS), or 16% more than in the same  
period of 2003. All of EADS’ divisions contributed to this increase,  
and revenues were particularly boosted by the rise in Airbus  
deliveries to 224 aircraft during the first nine months (compared  
to 199 aircraft in the period of January through September  
Airbus received purchase commitments from Etihad Airways –  
the national airline of the United Arab Emirates – as well as from  
Thai Airways. Both customers are substantially expanding their  
fleets of Airbus aircraft and have also decided to purchase the new  
A380 wide-body jet. This new aircraft is scheduled to make its  
maiden flight in spring 2005. In addition, Airbus landed several  
major contracts from companies in Central Asia: a further 49  
Airbus aircraft were ordered in 2004 by China Eastern Airlines  
and Air China.  
2
003).  
In the first nine months of the year, the company achieved an EBIT  
earnings before interest, taxes, goodwill amortization and  
exceptional items) of €1.5 billion, up 91% on the same period of  
003. This encouraging growth in earnings was driven by the  
(
In December 2004, EADS decided to go ahead with the  
development of the new A350. With this aircraft, Airbus will be  
well posi-tioned in the market for the next generation of highly  
efficient long-distance planes.  
2
excellent result at Airbus and the turnaround at the Space division.  
Incoming orders at EADS for the months of January through  
September amounted to €20.6 billion, thus nearly equaling the  
level of revenues. The order book was again the largest in the  
industry and had reached €179.7 billion by the end of September  
Upswing for other divisions as well. Within the Aeronautics  
division, the growth in earnings at Eurocopter offset the  
continued weak performance of the maintenance business.  
2
004.  
Two examples of EADS’ commercial success last year are the  
order received from the Australian armed forces for the Airbus  
A330 MRTT tanker aircraft, and the helicopters ordered by  
the US Department of Homeland Security.  
Due to the continued upswing of the civil aviation market and  
the positive business developments assumed for the fourth  
quarter, EADS expects for the year as a whole revenues of around  
€32 billion and to result in an EBIT of more than €2.3 billion.  
The Space division managed to achieve the turnaround in the past  
financial year, thus laying the foundation for further improve-  
ments in profitability. The division’s order book was substantially  
increased in May 2004 by the signing of a contract for 30 Ariane  
5
launchers.  
7
1
Human Resources  
Global Human Resources Strategy promotes worldwide cooperation | “Securing  
the Future 2012” agreement ensures competitiveness and protects jobs | Workforce  
numbers increase from 362,063 to 384,723; 8,400 new jobs created  
At the end of 2004, 185,154 of our employees were working in  
2
004  
2003  
Germany (end of 2003: 182,739), and 98,119 were working in  
the United States (end of 2003: 102,391). The number of trainees  
worldwide totaled 10,047 (end of 2003: 9,926).  
Employees (Dec. 31)  
DaimlerChrysler Group  
Mercedes Car Group  
Chrysler Group  
384,723  
105,857  
84,375  
114,602  
48,029  
11,224  
362,063  
104,151  
93,062  
88,014  
45,609  
11,035  
20,192  
Further enhancement of the Global Human Resources  
Strategy. Our Global Human Resources Strategy serves to promote  
international cooperation. Solutions for various issues are also  
generated more rapidly through the concentration of human-  
resources activities into globally defined areas. These include  
the support of personnel in the establishment and expansion of  
activities in China. Through the “Aging Workforce” program,  
we are implementing initiatives that help maintain employees’  
performance levels as the average age of the workforce rises.  
Such initiatives include ergonomic programs and training and  
qualification measures. Another important project in the year  
under review was the worldwide standardization of our human  
resources management processes. Our goal here is to imple-  
ment standardized systems and processes in order to reduce  
process times and costs and further promote global integration.  
In the “Excellent Work Performance and Productivity” project,  
we are searching for solutions that will help strengthen our com-  
petitiveness. The concepts that have resulted from this project  
played a major role in enabling us to conclude the “Securing the  
Future 2012” agreement in July 2004.  
Commercial Vehicles  
Sales Organization Automotive Businesses  
Services  
Other Activities 1  
20,636  
1
DaimlerChrysler Off-Highway business unit, Corporate Research department, real-estate  
activities, holding and finance companies  
Number of employees at DaimlerChrysler rises sharply. On  
December 31, 2004, DaimlerChrysler employed 384,723 people  
worldwide (end of 2003: 362,063). A total of 18,281 employees  
joined the Group’s workforce due to the first-time inclusion of  
Mitsubishi Fuso Truck and Bus Corporation workers in the  
Commercial Vehicles Division’s employee statistics. The number  
of employees at Commercial Vehicles was thus 30% higher than  
the prior year’s figure. Workforce numbers were also up at the  
Mercedes Car Group (+2%), Services (+2%) and throughout the  
joint sales organization for Mercedes-Benz passenger cars and  
commercial vehicles (+5%). The number of people employed by  
the Chrysler Group fell by 9% due largely to the division’s sale  
of several component plants. When adjusted for changes in the  
consolidated group, workforce numbers were up 2% in 2004.  
We also created approximately 8,400 new jobs during the year  
under review.  
“Securing the Future 2012” will make profitable growth  
possible. DaimlerChrysler plans to use the “Securing the Future  
2012” agreement, which was reached between the Group’s  
management and the General Labor Council, primarily to achieve  
7
2
A commitment to quality in the training program.  
Fit for competition.  
DaimlerChrysler Malaysia’s modern training center provides multi-brand instruction  
to ensure that all trainees finishing the course are skilled to support the service  
network. No wonder the trainees win numerous awards, like, for example, Looi Ming Kit  
(
winner of national and ASEAN skills competitions): That’s innovative junior-  
management development!  
the following goals: improving competitiveness, enhancing  
DaimlerChrysler remains an attractive employer. In order to  
successfully provide human resources support for global  
activities, a company must recruit, integrate and further develop  
suitable and committed employees. Our numerous personnel  
marketing activities enable us to obtain the best college graduates  
for the Group. In 2004, we held the first-ever “DaimlerChrysler  
Recruitment Days”, designed to establish contacts with university  
graduates in technical subjects. In total, we hired 1,400 gradu-  
ates and new professionals in 2004.  
innovative capabilities, safeguarding jobs, and boosting work  
flexibility. In addition to the agreed annual cost reductions  
totaling 500 million, which will take effect in the medium-term  
a package of measures will be implemented to create the con-  
ditions necessary for making appropriate medium-term product  
and investment decisions that will safeguard our German manu-  
facturing locations. The key measures agreed upon include:  
A comprehensive restructuring of the remuneration system  
in connection with the implementation of the Remuneration  
Framework Agreement beginning in 2007.  
Working hours and remuneration structures for service units  
closely associated with those within the industry along the  
lines of common labor-market practice in such sectors.  
Flexible regulation of personnel deployment and an employment  
balance through the transfer of young skilled workers to  
an internal human-resources hub (“DC MOVE”), as well as  
the expanded use of temporary workers.  
Training programs ensure that employees continue to  
perform well on a long-term basis. DaimlerChrysler signed  
approximately 2,600 new training contracts in Germany in  
2004, thereby maintaining the prior year’s very high level. We  
offer young people career prospects while underscoring our  
responsibility to society. DaimlerChrysler currently employs  
some 8,500 trainees in Germany, equivalent to about 40% of  
the trainee positions among the German automakers.  
Acceleration of processes that lead to the creation of new  
technologies and products through the possibility to extend the  
weekly working time to 40 hours in all development and plan-  
ning departments.  
Managing diversity is a key competitive factor. DaimlerChrysler  
employs a diverse workforce and has a diverse customer base.  
Managing diversity is therefore a key element for attaining a  
competitive advantage globally in both the workplace and the  
marketplace. A new global diversity management initiative was  
developed in 2004 under the leadership of the Chrysler Group  
to support these objectives. The core elements of this approach  
include communicating the business case for diversity, attracting  
and developing diverse top talent and implementing standardized  
and consistent processes for the selection and placement of  
candidates. The main element of this approach will be a Global  
Diversity Council that will provide guidance and direction  
regarding the company’s diversity initiatives to foster a culture  
of inclusion for all employees.  
New health-care initiatives. DaimlerChrysler conducts many  
activities to promote the health of its employees. In 2004, we  
implemented a health campaign in Germany focusing on the  
prevention of illness and enhancing employees’ awareness of  
health issues. We also launched a pilot project for onsite health  
care at our truck assembly plant in Wörth, Germany, whereby  
external doctors work together with staff from the plant infirmary  
to ensure comprehensive medical care for employees.  
Intensified management development. Five years ago,  
DaimlerChrysler introduced a Group-wide standardized process  
for management development known as Leadership Evaluation  
and Development (LEAD). The results we have achieved with the  
program form the basis for measures aimed at the systematic  
development and improvement of executives. In 2004, LEAD was  
further developed so that it can become a sustained resource-  
management system for key technology and management areas.  
DaimlerChrysler Corporate University (DCU) was restructured  
in the year under review. DCU’s programs focus on the issues of  
leadership, general management and strategy within an every-  
day company and work-environment context.  
A thank you to our employees. The Board of Management thanks  
all of the Group’s employees for their initiative, commitment and  
achievements. We are convinced that their ability, enthusiasm and  
energy will secure a successful future for DaimlerChrysler. We  
also extend our thanks to the employee representatives for their  
constructive cooperation in 2004.  
7
3
Research and Technology  
The Group invests €5.7 billion in research and development | 29,000 research and  
®
development employees worldwide | ESP reduces the number of newly registered  
Mercedes-Benz cars involved in accidents by more than 40% | “Vision of accident-free  
driving” and “Energy for the future” implemented in F500 Mind research vehicle  
Setting the pace for future developments. At DaimlerChrysler,  
The F500 Mind, our latest research vehicle, proved itself in  
numerous practical tests in 2004, thus paving the way for  
bringing various new systems to customers. The innovations  
tested last year include a night-vision system developed by  
DaimlerChrysler Research. We also monitored the operating  
behavior of a diesel-hybrid drive installed in the F500 Mind,  
in order to determine the ideal conditions for employing either  
the diesel engine or the electric motor. The research car  
combines an advanced V8 diesel engine delivering 184kW/250  
hp with a powerful electric motor (50kW). The F500 Mind thus  
provides a perfect example of the focus at Corporate Research:  
the “Vision of accident-free driving” and the development of  
“Energy for the future”.  
we are pursuing a clear strategy of guaranteeing individual  
mobility, conserving resources, and creating innovations that  
benefit our customers while securing competitive advantages  
for the Group.  
To this end, DaimlerChrysler invested a total of €5.7 billion in  
research and development in 2004 (2003: €5.6 billion). At  
the end of 2004, Corporate Research employed 2,900 people  
(
2003: 2,900), and a further 26,100 men and women were  
employed in the development departments at the Mercedes Car  
Group, Chrysler Group and Commercial Vehicles divisions  
(
2003: 23,800).  
Research work focused on six core technology fields in 2004:  
Enhancing safety through accident prevention. Safety  
research not only has a long tradition at DaimlerChrysler, it  
has also always been given top priority. We intend to use  
our expertise to make a sustained contribution to traffic safety.  
Propulsion technology  
Vehicle structure and the human-machine interface  
Materials technology  
Production technology  
Electric/electronic systems and intelligent transportation  
systems  
Analysis of the latest accident statistics shows that since  
®
Mercedes-Benz cars were first fitted with ESP (Electronic  
Software and process technology  
Stability Program) as standard equipment, they have been  
involved far less frequently in serious driver-related accidents  
than vehicles from other brands. Thanks to ESP , the number  
of newly registered Mercedes models involved in driver-related  
accidents fell by more than 40% between 1998/99 and  
2002/03.  
®
F500 Mind – an innovative concept for the future. The F500  
Mind continues the DaimlerChrysler tradition of creating widely  
respected research vehicles. The vehicle is a concept that serve  
to strengthen our practically oriented research work. It enables  
us to test complex systems in vehicles in the early stages of devel-  
opment, while supporting the rapid transfer of research ideas  
into activities geared toward mass production.  
In 2004, we also continued with the development of the PRE-  
®
SAFE occupant-protection system, which has been offered  
as standard equipment in the S-Class since 2002.  
7
4
The new compatibility of low temperatures and fuel cells.  
Minus 4 degrees Fahrenheit? Who Cares!  
On the way to the market: The research team led by Dr. Christian Mohrdieck (left) and  
Dr. Florian Finsterwalder developed a reliable method for harnessing engine power  
from a fuel cell even in icy temperatures. Although the cold-test chamber was turned  
down to minus 20° C (minus 4° F), this Mercedes-Benz A-Class started immediately:  
with an innovative fuel cell, ready for a cold start!  
The next step in our safety-system development activities will  
In 2004, we delivered to customers the first E 200 NGT na-  
tural-gas-powered vehicles, which are based on the Mercedes-  
Benz E 200 Kompressor with bivalent drive. These vehicles  
have a range of approximately 1,000 kilometers, with 300 kilo-  
meters being covered by the natural-gas system and 700  
kilometers by the gasoline drive system. When the natural-gas  
involve the use of sensors that monitor the vehicle’s immediate  
surroundings. For example, we are currently testing a short-  
distance radar system that observes the immediate area around  
the vehicle, analyzes traffic conditions and then works with  
other systems to support the driver in coping with dangerous  
®
situations. As such, PRE-SAFE will ensure a comprehensive link  
unit is engaged, CO emissions are reduced by more than 20%.  
2
between active and passive safety systems in the future.  
The use of synthetic biogenic fuels, also known as biomass-to-  
liquid (BTL) fuels, has enabled us to reduce greenhouse gas  
emissions throughout a vehicle’s entire lifecycle by 60% to 90%  
compared to conventional diesel fuel. This is because biogenic  
fuels contain neither sulfur nor aromatic compounds. They are  
also odorless and can be used in existing vehicles without having  
to modify their engines. In order to better exploit the poten-  
tial offered by BTL fuels, DaimlerChrysler and Volkswagen are  
cooperating with Choren Industries GmbH in Freiberg – the  
manufacturer of the world’s first BTL fuel, which is sold under  
the brand name of “SunDiesel”.  
The Individual Safety research project also promises to enhance  
safety significantly. The goal of the project is to create a system  
that automatically adjusts seatbelts and airbags to the position and  
physique of each occupant in order to better protect that indi-  
vidual in the event of an impact. Another DaimlerChrysler Research  
project involves the AIDER system, which provides assistance in  
situations where an accident can no longer be prevented. Imme-  
diately following a crash, data such as the number of vehicle  
occupants, severity of the accident, direction of impact and vehicle  
type is automatically collected and analyzed by the system. The  
information is then sent automatically along with details about the  
accident location to emergency services units. Such a system  
can help rescuers better prepare their recovery procedure, saving  
time – and possibly lives.  
Hybrid technology as an interim step toward fuel-cell  
systems. DaimlerChrysler views hybrid technology as a  
significant interim step on the road to the fuel cell (see page 76),  
which is the overall objective of our propulsion-system strategy.  
This is why we have repeatedly presented different vehicle  
concepts equipped with hybrid drive in the past – most recently  
the F500 Mind research vehicle. In December 2004, we also  
reached an agreement with General Motors (GM) regarding the  
development of a common hybrid-drive architecture. This will  
enable the specific incorporation of this innovative technology  
into the model portfolios of the Mercedes Car Group, the  
Chrysler Group and GM. At the same time, the individual attributes  
of all of the brands involved (e.g., power and torque characteris-  
tics and driving dynamics) will be retained. It will also be possible  
to combine this two-mode hybrid system with various types of  
engine. Each company involved in the project will be responsible  
for integrating the technology into its own model range. The  
single-mode systems common today require significantly larger  
electric motors than is the case with the new patented two-mode  
hybrid system. The two-mode system also offers the advantage of  
reduced fuel consumption combined with maximum performance  
levels, particularly in the long-distance driving cycle. It also  
displays superior traction. We expect to sign the final contract for  
the two-mode hybrid project in the spring of 2005.  
Drive systems and fuels of the future. As an automaker well  
aware of its responsibility to the environment, we are consistently  
working to further reduce carbon-dioxide emissions and con-  
serve natural resources. Our activities in this area are pursued  
through a five-stage model based on a holistic approach:  
Further advances with combustion engines  
Improving conventional fuels  
Use of largely CO -neutral biogenic fuels  
2
Further developing hybrid drives as an interim solution  
Emission-free mobility with fuel-cell vehicles  
The use of innovative technologies and new concepts has enabled  
DaimlerChrysler to reduce the CO emissions of its vehicle  
2
fleet by about 28% in Europe since 1990. The fuel consumption of  
diesel cars fell by more than 25% during the same period,  
due in particular to the new common-rail direct-injection systems.  
7
5
DaimlerChrysler and the Environment  
€1.6 billion spent on environmental protection | Over 100 fuel-cell vehicles in use with  
customers worldwide | DaimlerChrysler commercial vehicles using BlueTec diesel  
technology already comply with Euro 4 and Euro 5 standards | Biodiesel being tested  
as an alternative fuel  
Environmental protection as a corporate goal. DaimlerChrysler  
drive are delivering packages in the United States, and Mercedes  
A-Class cars with fuel-cell drive are being tested in everyday  
use in Berlin, Japan, Singapore and the US.  
is committed to fully integrated environmental protection. In other  
words, we aim to set the pace not only in the areas of innovation  
and safety, but also with leading-edge technology to protect the  
environment. Our commitment to this position is demonstrated  
by our expenditures for environmental protection, which totaled  
to approximately €1.6 billion in 2004.  
The Clean Energy Partnership (CEP) is an initiative launched by  
partners in the automotive and oil industries as well as energy  
suppliers, with the goal of establishing new energy infrastructures  
for innovative drive systems and vehicle concepts. In November  
2004, CEP opened the world’s largest hydrogen filling station in  
Berlin. With our ten fuel-cell vehicles, we are the largest mobility  
partner in the Clean Energy Partnership.  
We aim to safeguard individual mobility in a sustainable manner  
by using natural resources sparingly and further reducing our  
products’ fuel consumption and emissions. In order to pursue  
these goals sustainably, we have combined our activities in a  
five-stage initiative called “Energy for the future” (see page 74).  
In 2004, DaimlerChrysler Corporate Research produced a fuel  
cell with cold-start capability, thereby setting a milestone on  
the road towards market maturity. This fuel cell can be started  
at temperatures as low as minus 20 degrees Celsius. The key  
advantage of this fuel cell is its exact management of water and  
heat so that the fuel cell does not freeze. In addition to its  
ability to start even at temperatures far below freezing point, this  
innovative fuel cell also delivers enough energy within seconds  
to cover all the power requirements imposed by normal driving  
conditions. Its starting performance is therefore comparable to  
that of diesel engines.  
Mercedes-Benz has 20 passenger-car models that are equipped  
with diesel particulate filters and comply with the Euro 4 emission  
limits – more than any other German automaker. In the C, E  
and S-Class segments, more than 80% of our German customers  
already order their diesel-engined cars with particulate filters.  
Unlike other similar exhaust-treatment techniques, the Mercedes-  
Benz system operates without any additives and therefore  
requires no maintenance.  
Hydrogen in the fuel tank: fuel-cell vehicles. DaimlerChrysler  
has handed over more than 100 fuel-cell vehicles to customers all  
over the world: more than any other automaker. A total of 33  
Mercedes-Benz Citaro buses are currently being tested in every-  
day use by regional public-transport authorities in Europe and  
Australia. In 2005, three additional fuel-cell buses will go into  
operation in Beijing. Meanwhile, Sprinter vans with fuel-cell  
Biodiesel from the jatropha plant. DaimlerChrysler aims to  
promote systematically the development, testing and market  
launch of renewable fuels. “SunDiesel” (see page 75) is particularly  
suitable for countries that possess enough readily accessible  
high-quality agricultural and forestry land that is not needed for  
food production.  
7
6
How ceramics have prepared catalytic converters for the future.  
One step ahead of emission standards.  
DaimlerChrysler’s commercial vehicles could not be better prepared for the  
stricter diesel emission standards to come. Rolf Strölin (left) and Dr. Ralf Pötzschke  
are making sure that by the fall of 2006, all trucks, buses and vans will be  
ready for the next step of stricter emission limits with the latest SCR technology:  
with innovative ceramic catalytic converters.  
Countries in tropical and subtropical regions have the promising  
reduces the limits for nitrogen-oxide emissions by 30% and  
for particulate emissions by 80%. In addition, BlueTec diesel  
technology will enable DaimlerChrysler vehicles to comply  
with the Euro 5 standard, which will come into effect in Octo-  
ber 2009 and reduce the Euro 4 limits by a further 40%.  
alternative of producing environmentally friendly biodiesel from the  
jatropha plant. This plant needs hardly any cultivation and grows  
readily in eroded soil. What’s more, it improves soil quality in the  
course of several years of growth. It can be found growing wild  
in many parts of the world. The oil in its seeds can be converted  
into biodiesel through esterfication. The biodiesel thus produced  
ignites readily and has a very low sulfur content. In partnership  
with India’s Central Salt & Marine Chemicals Research Institute  
However, the necessary emission reductions cannot be achieved  
through engine improvements alone. This is why an aqueous  
urea solution is hydrolyzed to ammonia in the exhaust-gas flow  
of our vehicles. This ammonia converts the nitrogen oxides (NOx)  
(
CSMCRI) and the University of Hohenheim, we are running a  
successful project to produce jatropha-based diesel fuel in India.  
A modified Mercedes-Benz C 220 CDI ran for approximately  
produced during combustion into molecular nitrogen (N ) and  
2
water (H O) in a downstream catalytic converter. To further  
2
5
,900 kilometers on this fuel in India between April and May 2004.  
improve this process, our researchers have developed an ammonia  
sensor that can considerably increase the effectiveness of the  
catalytic converter.  
Use of renewable natural materials. DaimlerChrysler has also  
broken new ground in its research with abaca fibers from banana  
trees. For the first time in automobile history, a natural fiber has  
been approved for use in a series-produced exterior part. We use  
abaca fibers to strengthen the underfloor paneling in the three-  
door Mercedes-Benz A-Class. Natural fibers were previously used  
only in vehicle interiors, because exterior parts, especially those  
in underfloor paneling, are subject to more stress. However, the  
excellent specific mechanical values of abaca fibers, their high  
tensile strength for example, make them suitable as strengthening  
agents for plastic parts after being appropriately processed.  
In fact, abaca fibers can even be substituted for glass fibers.  
Truck diesel technology for the United States. From the year  
2007 onwards, new emission limits will also apply to commercial  
vehicles in the United States. To fulfill these limits, we will in-  
crease the exhaust-gas recirculation already in use to up to 25%.  
As an improvement inside the engines, we will also introduce a  
flexible fuel-injection system allowing us to achieve the future  
nitrogen-oxide limits. The new particulate limits will be met with  
the use of an active regenerable particle filter.  
Award for successful environmental protection. With our  
in-house Environmental Leadership Award, we promote our  
employees’ commitment to environmental protection worldwide.  
In 2004, this award was won by a number of project teams,  
including the two described below:  
DaimlerChrysler has entered into a public-private partnership  
with the German Investment and Development Company (DEG),  
the University of Hohenheim and our supplier Riter to promote  
the sustainable cultivation of abaca fibers and to optimize the  
procedures involved in their production and processing.  
– The team of employees at DaimlerChrysler’s production plant  
in Düsseldorf created a water-based single-coat paint  
containing only 15% solvent rather than the previous 45%,  
thus drastically reducing odorous emissions.  
BlueTec diesel technology. DaimlerChrysler’s commercial vehi-  
cles are well prepared for the impending reduction of diesel  
emission limits in Europe, Japan and the United States. Daimler-  
Chrysler vehicles now have significantly lower fuel consumption  
and produce up to 80% less pollution thanks to the SCR (Selec-  
tive Catalytic Reduction) technology for exhaust-gas treatment.  
As a result, they already comply with the Euro 4 standard for  
vehicles with a permissible gross vehicle weight of more than  
– Another team was recognized for its work on the European  
Union’s CUTE project (Clean Urban Transport for Europe), which  
has put the world’s first fuel-cell buses into service.  
3
.5 tons, which will come into effect in October 2006. Euro 4  
7
7
Global Procurement and Supply  
Total purchasing of goods and services worth €101.4 billion | Performance-based  
supplier relations secure our competitiveness | Enhanced risk management due to  
suppliers’ challenging economic situations  
Global procurement volume of €101.4 billion. In the year 2004,  
DaimlerChrysler purchased goods and services for a total of  
101.4 billion (2003: €99.7 billion). The Mercedes Car Group  
accounted for 38% of our total purchasing volume, the Chrysler  
Group 32%, Commercial Vehicles 26% and other units 4%.  
In order to manage this purchasing volume efficiently and to  
ensure proximity to the suppliers as well as to our manufacturing  
facilities, our procurement is organized on a global scale with  
activities all over the world.  
A key method for managing our global strategies is the Material  
Strategy and Innovation Council (MSIC). This global council  
aligns engineering, procurement, cost analysis and research and  
technology across business units to facilitate global material cost  
reduction, commonization and innovation.  
Under the heading of Global Processes, we focus on all of  
our activities with the aim of standardizing processes worldwide  
to provide suppliers and divisions with a globally integrated,  
cost-optimized network. With the supplier portal we provide  
access to all DaimlerChrysler supplier applications via one  
common framework with a single sign-on.  
Intensified involvement in Asia. As part of the expansion of our  
activities in Asia, in the year 2004 we realigned our purchasing  
offices in Singapore and Tokyo and opened a new purchasing  
office in Beijing. The purchasing offices are not only responsible  
for procurement in the respective regions, but also have the  
function of improving transparency on Asian procurement markets.  
In the context of the Global Supply Base, we optimize the  
distribution of procurement volumes between the various suppliers  
taking cost-risk aspects into consideration. For this purpose, we  
engage in intensive dialogue with existing and potential suppliers.  
In top level meetings we discuss individual performance and  
capabilities with our suppliers to agree on measures for continuous  
improvement.  
Increased corporate value through procurement processes.  
In cooperation with our suppliers we are currently concentrating  
on three areas of action for achieving the best overall results:  
Global Scale, Global Processes and Global Supply Base.  
®
Extended Enterprise strengthens strategic supplier  
With a global procurement volume of €101.4 billion, we offer our  
supply base global-scale opportunities. In addition, increasing  
volume by bundling purchasing volumes worldwide helps us  
to optimize costs. We define and implement strategies for each  
commodity to set directions and lay the foundation for future  
procurement actions.  
relations. To strengthen the global aspect of our procurement  
activities and maintain business relations with the world’s  
best suppliers, we have developed the Extended Enterprise  
®
supplier program further.  
®
Within the framework of Extended Enterprise and with the aid of  
a scorecard model, we analyze and evaluate the procurement  
and supply performance of our suppliers from a global perspective.  
7
8
®
The Extended Enterprise , a successful cooperation.  
We are proud.  
Successful supplier performance is recognized and awarded in the Electronics  
component category. “The cooperation with DaimlerChrysler is characterized by a  
focus on performance and mutual appreciation” said Chikanore Abe, President  
and CEO of NGK. Receiving his award at the annual Global Supplier Award ceremony,  
he is pictured between Jeffrey Wakai (l.) and Gunnar Güthenke (r.) from Global  
Procurement. The trophy was designed by Chris Nelson (photo right, third person  
from right) at the Center of Creative Studies in Detroit.  
We have identified four important aspects of performance  
intensive discussion of specific financial parameters with the  
suppliers’ top management to the joint design of new financing  
plans. In 2004, many suppliers experienced financial difficulties.  
Working closely together with our supplier partners, we were able  
to avoid production losses caused by this situation. A key enabler  
of our success is our supplier risk management process.  
from which our supplier criteria are derived: quality, systems cost,  
technology and supply. These performance aspects are  
supplemented by three behavioral aspects, aligned with our  
social responsibility principles: communication, commitment and  
integrity.  
With the help of all seven criteria, we can define business pro-  
cesses transparently, compare performance and discuss the  
results of assessments constructively with the suppliers. This is  
important to us, because a successful supplier network featuring  
global and performance-based cooperation helps us to maintain  
our position in the world market.  
In addition, as a result of our global procurement management,  
long-term contracts with key suppliers and close collaboration with  
reliable partners, we have the benefit of a broad spectrum of  
instruments for limiting the impact of rising raw-material prices  
on our production costs.  
Socially responsible behavior. In connection with our  
DaimlerChrysler Supplier Awards 2004. We expect global  
benchmark performance from our suppliers. For calendar year  
purchasing activities, it is also very important for us to open up  
opportunities in the world’s markets for minority suppliers  
and historically disadvantaged groups of people. Thus, for example,  
DaimlerChrysler’s Board of Management Member for Global  
Procurement and Supply has also been active as Vice Chairman  
of the National Minority Supplier Development Council. This  
organization supports the growth of minority-owned businesses  
in the United States. In addition, the purchasing activities of  
DaimlerChrysler in North America sourced goods and services  
worth over US $3 billion from minority-owned suppliers in 2004.  
2
004, we awarded our second DaimlerChrysler Global Supplier  
Award to recognize outstanding supplier performance at this  
level. Awards were earned in nine categories: chassis, electrical/  
electronics, exterior, interior, powertrain, raw materials/body-  
in-white, logistics, general goods/services, and manufactured  
goods/services. The winning suppliers are:  
Anchor Manufacturing Group, United States  
raw materials/body-in-white),  
(
BEHR, Germany (interior),  
Brose, Germany (exterior),  
DaimlerChrysler is also committed to the Black Economic Empower-  
ment initiative in South Africa. With our support, it was possi-  
ble to establish a joint venture between a German media-services  
provider and a black-owned South African printing company. In  
the fourth quarter of 2004, DaimlerChrysler also led a trade  
delegation to South Africa. Minority-owned automotive suppliers  
from the United States were introduced to local black business  
owners and entrepreneurs. This business mission should in-  
crease the economic vitality of the South African supply base.  
EMC, United States (general goods/services),  
Exel, United Kingdom (logistics),  
Federal-Mogul, United States (powertrain),  
GROB-WERKE, Germany (manufactured goods/services),  
NGK, Japan (electrical/electronics), and  
Trelleborg, Sweden (chassis).  
Risk management in procurement. A continuously smooth  
material supply is very important for us. Therefore, we have  
well-established processes to monitor the financial health of  
our supply base. In the light of the ongoing global economic  
challenges for many suppliers, these tools have been enhanced  
in recent years. These enhancements help to ensure that the  
continuity of our production processes is guaranteed in our  
plants and DaimlerChrysler’s financial risks are minimized. The  
possible remedial measures that can be taken range from more  
7
9
DaimlerChrysler’s Social Responsibility  
DaimlerChrysler assumes social responsibility | Promotion of social, cultural,  
environmental and scientific projects | Initiative to combat HIV/AIDS extended from  
South Africa to further locations | New responsibility partnerships forged between  
political and social organizations and the business community  
Assuming responsibility as a global player and a good  
Worldwide commitment in the fight against HIV/AIDS.  
DaimlerChrysler is responsible for the well-being of its employees.  
It demonstrates this commitment, among other ways, through  
its involvement in the struggle against HIV/AIDS. In the mid-  
1990s, we introduced a workplace program in South Africa that  
is now regarded as exemplary, ensuring free medical treatment  
for all employees and members of their families infected with  
HIV. Information, prevention and reducing stigmatization of the  
people infected are key components of this program, through  
which we are now reaching some 30,000 people in South Africa.  
The positive results of this initiative encourage us to extend our  
fight against HIV/AIDS – adapted to local conditions – to other  
companies of the Group. The Chairman of our Board of Manage-  
ment, Jürgen E. Schrempp, has made a personal commitment to  
the struggle against HIV/AIDS. From 2002 to 2004, he headed  
the “Global Business Coalition on HIV/AIDS”.  
corporate citizen. As a global corporation, DaimlerChrysler  
operates in all regions of the world. In so doing we are responsible  
for our activities not only to our shareholders, but also with  
respect to our employees and many external partners. After all, a  
company is successful only if it can survive in both the “products  
market” and the “opinions market.” Wherever we live and work,  
DaimlerChrysler and its employees accept social responsibility.  
We are involved in numerous projects to improve people’s living  
conditions on a sustainable basis.  
Promoting stability and ensuring that globalization is fair.  
Ensuring a fair globalization process is of vital importance to our  
company. Affluence helps stabilize societies, weakens extremism  
and promotes dialogue between religions and cultures. In addition,  
the process of training employees and upgrading their skills is  
a stabilizing factor in a society. Last but not least, we serve as a  
model by acting in accordance with legal and ethical standards,  
particularly in countries where such standards have not yet been  
fully established. Accordingly, DaimlerChrysler has from the  
very start supported the United Nations Global Compact initiative  
launched by Kofi Annan and its principles, which include the  
recognition of human rights, the creation of humane working con-  
ditions, environmental protection and the fight against corruption.  
These principles are anchored in our “Social Responsibility  
Principles” and our “Integrity Code”, and are valid for all our  
employees worldwide.  
The Global Sustainability Network. We are striving to reconcile  
economic and social goals in the field of environmental protection.  
To improve the use of natural resources, we have established the  
Global Sustainability Network. The POEMA project in the Brazilian  
rainforest is searching for ways in which to use renewable  
resources in vehicle production. In Freiberg in Saxony (Germany),  
we are working to develop alternative drive systems using biomass.  
In India, we support research on the jatropha plant as a source of  
biodiesel. At the same time, this robust plant is also being used  
to counteract further soil erosion. In the Philippines, preparations  
are under way to use the local abaca fiber as a substitute for  
glass fiber in vehicle interiors and exteriors. Through the Global  
Sustainability Network, DaimlerChrysler is creating skilled jobs,  
caring for the environment, increasing the share of renewable  
resources in industrial production and preserving ecosystems.  
8
0
DaimlerChrysler is committed to its role in society.  
Social responsibility.  
Clifford Panter is chief physician at the South African DaimlerChrysler plant in East  
London. In the mid-1990s, we started a comprehensive program to employees  
and their families in the fight against HIV/AIDS which is beginning to pay off. The  
infection rate in the workforce has clearly declined, and the number of deaths  
has been more than halved: a pioneering health project!  
Making mobility safe. Targeted specifically at children between  
Training network promotes intercultural exchange. As  
languages, cultures and religions differ in almost every country,  
we see it as our duty to promote intercultural dialogue through  
our social activities. DaimlerChrysler has therefore established a  
learning and training network that enables a global transfer of  
knowledge. In addition to training sites in Kabul, Palestine and  
Tashkent, this effort also includes financial support for young  
people who are unable to pay for their education. We also maintain  
outstanding partnerships with a large number of Chinese univer-  
sities. Since 1994, we have cooperated with the University of  
Beida, one of China’s oldest and most internationally renowned  
universities.  
the ages of eight and twelve, the MobileKids campaign we  
launched in 2001 provides youngsters with information on how to  
behave sensibly in traffic situations. The campaign consists of  
three main elements: a series of television commercials featuring  
international stars, an animated TV series called “The Nimbols”,  
and a website (www.mobilekids.net). The project has also been  
expanded to countries outside Germany. For example, Daimler-  
Chrysler Thailand has established a local traffic school along the  
lines of MobileKids.  
Employees’ social commitment. DaimlerChrysler promotes social  
commitment at all of its business locations. The DaimlerChrysler  
Corporation Fund supports numerous charitable and relief orga-  
nizations in the NAFTA region in four fields of action: Community  
Vitality, Public Policy, Future Workforce and Employee Activities.  
In 2004, the Fund invested US $250,000 to reclaim land near the  
Promoting dialogue between cultures. The Mondialogo project,  
which DaimlerChrysler has supported since 2003 in partnership  
with UNESCO, promotes intercultural dialogue and understanding,  
respect and acceptance among young people. Through this  
project, young people meet their peers from other parts of the  
world to share experiences and collaboratively solve problems.  
The Mondialogo School Contest carried out in 2004 became the  
largest contest of its kind worldwide, with more than 24,000 par-  
ticipants from 126 countries. The project’s website has estab-  
lished itself as an information and discussion platform focusing on  
intercultural dialogue. Thousands of online reports and links with  
other portals direct interested users to www.mondialogo.org.  
Toledo North Assembly Plant (home of the Jeep Liberty and  
®
the Jeep Wrangler) and build the nearby Liberty Park, which has  
®
pathways for cyclists and picnic places. DaimlerChrysler employ-  
ees also volunteer their leisure time to improve their communities.  
For example, over 100 employees from the Jefferson North  
Assembly Plant (home of the Jeep Grand Cherokee) and the Mack  
®
Engine Plant have renovated two residential facilities on the east  
side of Detroit.  
Transatlantic dialogue. As a German-American company, we  
maintain the transatlantic dialogue in a variety of ways. For ex-  
ample, DaimlerChrysler is one of the main sponsors of the resto-  
ration of the Hotel de Talleyrand in Paris, where the Marshall  
Plan was drawn up after World War II. In 2004, the “Bridge New  
York-Berlin” initiative, a group of several German companies  
headed by DaimlerChrysler, fulfilled the promise made by Chan-  
cellor Schröder shortly after the terrorist attacks of September 11,  
Immediate disaster recovery aid. To alleviate suffering in the  
regions affected by the tsunami in Asia of December 26, 2004,  
DaimlerChrysler provided aid worth €2 million within a very short  
time. In addition to this immediate assistance, we are also  
involved in measures with long-term effects such as rebuilding  
schools and orphanages. The DaimlerChrysler national companies  
also provided vehicles, which were urgently required to distribute  
the donated goods. The willingness of our worldwide employees  
to donate was a sign of solidarity with the victims of the disaster.  
2001 to invite 1,000 New York students to spend time in Germany.  
Many pressing problems can only be overcome through joint  
action. This is why DaimlerChrysler is playing an active role in the  
creation of new “responsibility partnerships” with political and  
social organizations and the business community. These partner-  
ships foster trust, reduce alienation and build bridges between  
different cultures and value systems.  
8
1
Report of the Supervisory Board  
In seven meetings during the 2004 financial year, the Supervisory  
Board dealt in detail with the business situation of Daimler-  
Chrysler and the strategic development of the Group and its divi-  
sions. The agendas of the meetings also included various  
individual issues that were dealt with and discussed together  
with the Board of Management.  
matters concerning the Board of Management, a discussion took  
place on a revised offer to the German federal government con-  
cerning the introduction of an electronic toll system for trucks in  
Germany. Additionally, approval was granted for the sale by  
DaimlerChrysler Corporation of its New Venture Gear subsidiary.  
Three Supervisory Board meetings were held in April 2004. Various  
Supervisory Board and Board of Management matters were dealt  
with in the Supervisory Board meeting subsequent to the Annual  
Meeting. In an extraordinary meeting of the Supervisory Board  
held in the middle of April, the main topic was a decision on  
whether to provide further financial support to MMC. Following  
an intensive exchange of opinions with the Board of Management  
and within the Supervisory Board, the two Boards decided not to  
participate in the capital increase planned by MMC, but to continue  
with current alliance projects as far as possible. In the Supervisory  
Board meeting held at the end of April, the agenda included the  
recent developments at MMC and various Board of Management  
matters, as well as a report about the strategy of Daimler-  
Chrysler Services, a report on the situation of the Mercedes Car  
Group, and relations with Hyundai Motor Company. Under clearly  
defined conditions, approval was granted to terminate the truck  
joint venture and the related truck-engine joint venture with  
Hyundai Motor Company, and to sell the Group’s shares in this  
company.  
Cooperation between the Supervisory Board and the Board  
of Management. In its meetings, the Supervisory Board was  
regularly and fully informed by the Board of Management on the  
situation of the Group, particularly its business and financial  
developments, personnel situation, investment plans and questions  
of fundamental business policy and strategy. The Board of Man-  
agement presented the Group’s key performance figures to the  
Supervisory Board in the form of monthly reports, and submitted  
in good time those issues that the Supervisory Board had identified  
as requiring its specific approval. The Supervisory Board was also  
kept fully informed of specific matters between its meetings. In  
addition, the Chairman of the Board of Management informed the  
Chairman of the Supervisory Board in regular individual discus-  
sions about all important developments and forthcoming decisions.  
The Supervisory Board also convened on several occasions with-  
out the Board of Management.  
In an environment in 2004 that featured only moderate growth in  
the “triad” markets, further gains by the euro against the US dollar,  
and rising raw-material prices, the Supervisory Board dealt in  
depth with the development of the individual divisions. Additional  
subjects of repeated discussion included the Group’s policy on  
cooperation with Mitsubishi Motors Corporation (MMC), the  
development and installation of an electronic toll system for  
trucks in Germany by Toll Collect GmbH, and various business  
projects in China.  
The focus of the meeting held in July was on the interim report for  
the first half of the year. In this context, the business develop-  
ment, structure and strategy of the Commercial Vehicles Division  
were described and discussed in detail. Another item on the  
agenda was information concerning the engagement of KPMG  
Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschafts-  
prüfungsgesellschaft, to conduct the external audit, and on the  
important audit issues determined by the Audit Committee  
in conjunction with KPMG. In addition, the Supervisory Board  
discussed various investments planned by the Group in China.  
Furthermore, decisions were made concerning negotiations  
on the acquisition of a majority share in Netherlands Car B.V.  
and transactions related to the fuel-cell alliance within Ballard  
Power Systems. Various Board of Management matters were  
dealt with also in the July meeting.  
Issues discussed at the meetings in the year 2004. In the  
meeting held in February 2004, the Supervisory Board dealt with  
the audited 2003 financial statements of DaimlerChrysler AG, the  
2
003 consolidated financial statements, the 2003 management  
report of DaimlerChrysler AG, the 2003 Group management  
report and the proposal by the Board of Management on the  
appropriation of earnings. In this meeting, the Supervisory Board  
also discussed in detail the situation at MMC. As well as various  
8
2
In the meeting held in September, consultations centered on the  
development of the Chrysler Group. The Supervisory Board also  
received information on the progress of the project for the launch  
of the electronic toll system for trucks in Germany and on the  
work of the Executive Automotive Committee.  
agement, the structure and function of which were discussed  
with the Supervisory Board and were then presented in summarized  
form to the Annual Meeting in April 2004. In addition, the Presi-  
dential Committee prepared the plenary meetings, dealt with  
questions of corporate governance, and participated in the effi-  
ciency evaluation of the Supervisory Board and its commitees  
that was carried out at the end of the year.  
In December, the main subjects for discussion were the operative  
planning for the period of 2005 through 2007 and the approval of  
a financing limit for the 2005 financial year. In this context, the  
Board of Management reported extensively to the Supervisory  
Board on the company’s risk-monitoring system and its results.  
The Supervisory Board also received information on the formation  
of various joint ventures in China, and approved several projects  
in this context. Additional items on the agenda included a report  
on the Group’s global procurement activities and consultations  
on an altered procedure for the publication of the annual results.  
The Audit Committee met six times in 2004. Details of these  
meetings are given in a separate report of this committee.  
The Mediation Committee, a body formed in accordance with  
the stipulations of the German Codetermination Law, was not  
required to convene last year.  
The Supervisory Board was regularly informed about the work  
and, in particular, the decisions of the committees.  
Corporate governance. A number of corporate-governance issues  
were also dealt with in the December meeting. In this context,  
pursuant to Section 161 of the German Stock Corpo-ration Act, the  
declaration of compliance with the German Corporate Governance  
Code in its version of May 21, 2003 was approved. Finally, there  
was a detailed discussion of the results of the efficiency evaluation  
of the Supervisory Board and its committees that was carried  
out in 2004.  
Personnel changes in the Supervisory Board. In April 2004,  
the Annual Meeting approved the proposal to reappoint the  
existing members of the Supervisory Board representing the  
shareholders. In accordance with a suggestion of the German  
Corporate Governance Code, the Supervisory Board proposed  
differing terms of office for these members. The Annual Meeting  
confirmed the proposed terms of office of five years for Messrs.  
Earl G. Graves, Victor Halberstadt, Peter A. Magowan, William A.  
Owens, Manfred Schneider, Bernhard Walter, Lynton R. Wilson  
and Mark Wössner. As proposed, Mr. Hilmar Kopper was  
appointed for another three years and Mr. Robert J. Lanigan for  
another two years as representatives of the shareholders. The  
Supervisory Board then approved the election of Mr. Hilmar  
Kopper as Chairman of the Supervisory Board, the election of Mr.  
Manfred Schneider as a member of the Mediation Committee  
and of the Presidential Committee, and the election of Mr. Hilmar  
Kopper and Mr. Bernhard Walter as members of the Audit  
Committee representing the shareholders. Subsequently, the Audit  
Committee elected Mr. Bernhard Walter as its Chairman.  
Relating to the decisions on further financial support for Mitsubishi  
Motors Corporation and for various consultations on Board of  
Management matters, the Supervisory Board sometimes convened  
without the presence of the Board of Management.  
Any potential conflicts of interest connected with the intended  
sale of New Venture Gear and the Group’s involvement in Toll  
Collect arising due to other board positions held by some members  
of the Supervisory Board were avoided, since those members  
disclosed such positions to the entire Supervisory Board and did  
not participate in the discussions and voting on those topics.  
Personnel changes in the Board of Management. During the  
year, the Supervisory Board took decisions on various Board of  
Management matters. At the beginning of the year, it was decided  
that with effect from December 16, 2004, Mr. Bodo Uebber  
would become a full member of the Board of Management and  
Report on the committees. The Presidential Committee con-  
vened six times in 2004, and dealt in detail with various Board of  
Management matters. It also discussed the introduction of a  
new stock-based element of compensation for the Board of Man-  
8
3
assume responsibility for the area of Finance and Controlling  
in addition to his responsibility for the DaimlerChrysler Services  
division. Mr. Thomas W. LaSorda was appointed as successor to  
Mr. Wolfgang Bernhard as a deputy member of the Board of  
Management of DaimlerChrysler AG with the position of Chief  
Operating Officer Chrysler Group, effective May 1, 2004 for a  
term of three years. Mr. Thomas Weber, responsible for the area  
of Research and Technology, was appointed as a full member of  
the Board of Management as of May 1, 2004, and given the  
additional responsibilty for the area of Passenger Car Development  
at the Mercedes Car Group.  
Audit of the 2004 financial statements. The DaimlerChrysler  
AG financial statements and the management report for 2004  
were audited by KPMG Deutsche Treuhand-Gesellschaft  
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin and  
Frankfurt am Main, and were given an unqualified opinion. The  
same applies to the consolidated financial statements prepared  
according to US GAAP, which were supplemented with a group  
management report and additional notes pursuant to Section  
292a of the German Commercial Code (HGB). Also in accordance  
with Section 292a of the HGB, the US GAAP consolidated financial  
statements presented in this report grant exemption from the  
obligation to prepare consolidated financial statements according  
to German law.  
On April 7, 2004, following the Annual Meeting, the Supervisory  
Board approved the reappointment of Mr. Jürgen E. Schrempp  
as Chairman of the Board of Management of DaimlerChrysler AG  
with effect from April 7, 2005 for a term of an additional three  
years.  
The financial statements and the appropriation of earnings pro-  
posed by the Board of Management, as well as the auditors’  
report, were submitted to the Supervisory Board. They were  
thoroughly inspected by the Audit Committee and the Supervisory  
Board and discussed in the presence of the auditors. The Super-  
visory Board has declared itself in agreement with the results of  
the audit and has established that there are no objections to be  
made. The Supervisory Board has approved the financial state-  
ments presented by the Board of Management. The financial  
statements are thereby adopted. Finally, the Supervisory Board  
has also examined the appropriation of earnings proposed by  
the Board of Management and has consented to this proposal.  
The original intention of assigning responsibility for the Mercedes  
Car Group to Mr. Wolfgang Bernhard – from May 1, 2004 jointly  
with Mr. Jürgen Hubbert and from August 1, 2004 in sole respon-  
sibility – was revised by the Supervisory Board at the end of April,  
and Mr. Jürgen Hubbert was requested to retain responsibility for  
this area until further notice. In July, the Supervisory Board  
approved the early departure of Mr. Wolfgang Bernhard from the  
Board of Management of DaimlerChrysler AG by mutual consent  
with effect from July 29, 2004. It was also decided, as of October 1,  
2
004 to make Mr. Eckhard Cordes responsible for the Mercedes  
Appreciation. The Supervisory Board expresses its gratitude to  
the management, the departing members of the Board of Man-  
agement, and in particular the employees of the DaimlerChrysler  
Group for their outstanding individual efforts and achievements  
in 2004.  
Car Group and Mr. Jürgen Hubbert for the Executive Automotive  
Committee. At the same time, Mr. Andreas Renschler was  
appointed as a full member of the Board of Management effective  
October 1, 2004 for a term of three years, with responsibility for  
the Commercial Vehicles Division.  
Stuttgart-Möhringen, February 2005  
The Supervisory Board  
Mr. Manfred Gentz, previously responsible for Finance & Control-  
ling, departed from the Board of Management of DaimlerChrysler  
AG upon the expiry of his term of office on December 15, 2004.  
On February 22, 2005, the Supervisory Board approved the  
reappointment of Mr. Thomas Weber with effect from January 1,  
Hilmar Kopper  
Chairman  
2006 for a term of an additional five years. The area of  
responsibility of Mr. Thomas Weber remains unchanged.  
8
4
Members of Supervisory Board  
Dr. Thomas Klebe 1  
Frankfurt am Main  
Director Department for General Shop  
Floor Policy and Codetermination,  
German Metalworkers’ Union (IG Metal)  
Wolf Jürgen Röder 1  
Frankfurt am Main  
Member of the Executive Council  
of the German Metalworkers’ Union  
(IG Metal)  
Hilmar Kopper  
Committees of the Supervisory  
Board:  
Frankfurt am Main  
Chairman of the Supervisory Board  
of DaimlerChrysler AG  
Chairman  
Committee pursuant to Section 31,  
Subsection 3 of the German Law  
of Industrial Codetermination  
Hilmar Kopper (Chairman)  
Erich Klemm  
Erich Klemm 1  
Sindelfingen  
Jürgen Langer 1  
Frankfurt am Main  
Dr. rer. pol. Manfred Schneider  
Dr. Thomas Klebe  
Dr. rer. pol. Manfred Schneider  
Leverkusen  
Chairman of the Corporate Labor  
Council, DaimlerChrysler Group  
and DaimlerChrysler AG  
Deputy Chairman  
Chairman of the Labor Council of  
the Frankfurt/Offenbach Dealership,  
DaimlerChrysler AG  
Chairman of the Supervisory Board  
of Bayer AG  
Presidential Committee  
Hilmar Kopper (Chairman)  
Erich Klemm  
Stefan Schwaab 1  
Robert J. Lanigan  
Toledo  
Chairman Emeritus of Owens-Illinois,  
Inc.; Founding Partner, Palladium Equity  
Partners  
Gaggenau  
Dr. rer. pol. Manfred Schneider  
Dr. Thomas Klebe  
Prof. Dr. Heinrich Flegel 1  
Stuttgart  
Director Research Materials and  
Manufacturing, DaimlerChrysler AG,  
Chairman of the Management  
Representative Committee,  
DaimlerChrysler Group  
Vice Chairman of the Corporate  
Labor Council, DaimlerChrysler  
Group and DaimlerChrysler AG,  
Vice Chairman of the Labor Council  
Gaggenau Plant, DaimlerChrysler AG  
Audit Committee  
Bernhard Walter (Chairman)  
Hilmar Kopper  
Helmut Lense 1  
Erich Klemm  
Stuttgart  
Bernhard Walter  
Stefan Schwaab  
Chairman of the Labor Council,  
Untertürkheim Plant,  
DaimlerChrysler AG  
Frankfurt am Main  
Former Spokesman of the Board of  
Management of Dresdner Bank AG  
Nate Gooden 1  
Detroit  
1 Representative of the employees  
Vice President of the International  
Union, United Automobile, Aerospace  
and Agricultural Implement Workers  
of America (UAW)  
Peter A. Magowan  
San Francisco  
Lynton R. Wilson  
Toronto  
President of San Francisco Giants  
Chairman of the Board of CAE Inc.;  
Chairman of the Board of Nortel  
Networks Corporation  
Earl G. Graves  
New York  
William A. Owens  
Publisher, Black Enterprise Magazine  
Kirkland  
President and Chief Executive Officer  
of Nortel Networks Corporation  
Dr.- Ing. Mark Wössner  
Munich  
Prof. Victor Halberstadt  
Amsterdam  
Professor of Public Economics  
at Leiden University, Netherlands  
Former CEO and Chairman of the  
Supervisory Board of Bertelsmann AG  
Gerd Rheude 1  
Wörth  
Chairman of the Labor Council,  
Wörth Plant, DaimlerChrysler AG  
Udo Richter 1  
Bremen  
Chairman of the Labor Council,  
Bremen Plant, DaimlerChrysler AG  
8
5
Report of the Audit Committee  
The Audit Committee convened six times in the year 2004. Follo-  
wing discussions with the external auditor, who also attended  
those meetings, the Audit Committee consulted extensively on the  
financial statements and the consolidated financial statements  
for 2003 including the annual report on Form 20-F, the financial  
statements for the first half of 2004, and the interim reports on  
the first and the third quarters of 2004.  
Furthermore, in 2004, the Audit Committee was occupied with  
new accounting standards and their interpretation, as well as  
with the status of the introduction within the company of the  
International Financial Reporting Standards. In addition, the Audit  
Committee conducted a specific self-evaluation of its activities.  
In February 2005, in the presence of the external auditor, the Audit  
Committee thoroughly examined the 2004 financial statements  
and related documents, the proposal by the Board of Management  
on the appropriation of earnings, and the audit report submitted  
by the external auditor, and recommended that the Supervisory  
Board approve those financial statements.  
The Audit Committee regularly examined the suitability, qualifica-  
tions and independence of the external auditor. In this context,  
during the year, the Audit Committee monitored the compliance  
with the principles governing the approval of services provided by  
the external auditor. After receiving the approval of the Annual  
Meeting, the Audit Committee engaged KPMG Deutsche Treuhand-  
Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,  
Berlin and Frankfurt am Main, to conduct the annual audit, nego-  
tiated the audit fee of the external auditor and determined the  
important audit issues for the year 2004.  
Stuttgart-Möhringen, February 2005  
The Audit Committee  
The Audit Committee was also occupied with the company’s  
risk-monitoring system and with the reports and programs of the  
internal auditors.  
Bernhard Walter  
Chairman  
The Audit Committee regularly dealt with complaints and criticism  
with regard to accounting, the internal monitoring systems and  
the annual audit that were received confidentially, and if so desired  
anonymously, from DaimlerChrysler employees. In connection  
with this work, the Audit Committee received information and  
support from the Business Practices Office, which it also super-  
vised. In addition, the Audit Committee regularly received reports  
on the implementation of the provisions of the Sarbanes-Oxley  
Act. In this context, the Audit Committee received reports, in  
a special meeting at the end of September for example, but also  
regularly in written form, on inquiries and investigations by the  
Securities and Exchange Commission (SEC) and on the related  
investigations taking place in the company, and supported the  
cooperation with the SEC.  
8
6
Corporate Governance at DaimlerChrysler  
Issues of company management and supervision are the subject  
of discussion by a wide spectrum of society under the heading  
of corporate governance. DaimlerChrysler welcomes the various  
initiatives aimed at raising general standards of corporate gov-  
ernance. Many of the resulting principles and recommendations  
have already been practiced for a long time at our company.  
DaimlerChrysler’s corporate bodies  
Shareholders and the Annual Meeting. The company’s share-  
holders exercise their rights and cast their votes at the Annual  
Meeting. Each share in DaimlerChrysler AG entitles its owner to  
one vote. There are no shares with multiple voting rights,  
no preferred or privileged stock, and no maximum voting rights.  
As DaimlerChrysler is a company with its roots in both Germany  
and the United States, the Board of Management and the Super-  
visory Board aim to make DaimlerChrysler’s corporate gover-  
nance system more international and transparent. This purpose  
is also served by the details given on the following pages. Further  
information on corporate governance at DaimlerChrysler is avai-  
lable on the Internet at www.daimlerchrysler.com/corpgov_e.  
Various important decisions can only be taken by the Annual  
Meeting. These include the decision on the appropriation of  
distributable profits, the ratification of the actions of the members  
of the Board of Management and of the Supervisory Board,  
the election of the independent auditors and the election of  
members of the Supervisory Board. The Annual Meeting also  
takes decisions on amendments to the Memorandum and Arti-  
cles of Incorporation, capital measures, and consent to certain  
intercompany agreements. The influence of the Annual Meeting  
on the management of the company is limited by law, however.  
The Annual Meeting can only take management decisions if it is  
requested to do so by the Board of Management.  
General conditions. DaimlerChrysler is a stock corporation with  
its domicile in Germany. The legal framework for corporate  
gov-ernance therefore derives from German Law, particularly the  
Stock Corporation Law, the Codetermination Law and legislation  
concerning capital markets, as well as from the Memorandum  
and Articles of Incorporation of DaimlerChrysler AG.  
Separation of corporate management and supervision.  
DaimlerChrysler AG is obliged by the German Stock Corporation  
Law to apply a dual management system featuring the strict  
separation of the two boards responsible for managing and for  
supervising the company (two-tier board). With this system, the  
company’s Board of Management is responsible for the executive  
functions, while the Supervisory Board appoints, monitors and  
advises the Board of Management. No person may be a member  
of these two boards at the same time.  
As our shares are listed on stock exchanges outside Germany,  
and in particular on the New York Stock Exchange (NYSE), we  
also have to adhere to those countries’ capital-market legislation  
and the listing regulations applicable at those stock exchanges.  
The Sarbanes-Oxley Act of the United States of America is of  
particular significance in this respect. We are therefore in favor  
of the convergence of international stock-exchange regulations.  
A general description of the differences between DaimlerChrysler’s  
corporate governance practices and those applicable to US  
companies under NYSE corporate governance listing standards is  
available on our website at www.daimlerchrysler.com/corpgov_e.  
The members of the Board of Management bear shared respon-  
sibility for managing the company, and the work of the Board  
of Management is coordinated by the Chairman of the Board of  
Management.  
The Supervisory Board is involved in decisions of fundamental  
importance, and the work of the Supervisory Board is coordinated  
by the Chairman of the Supervisory Board. Half of the members  
of the Supervisory Board are elected by the shareholders at  
the Annual Meeting. The other half comprises members who are  
elected by the company’s German employees. The members  
8
7
representing the shareholders and the members representing  
the employees are equally obliged by law to act in the company’s  
best interests.  
a previously proposed appointment did not obtain the legally  
required majority of votes.  
Board of Management. As of December 31, 2004, the Board of  
Management of DaimlerChrysler AG comprised eleven members.  
The Rules of Procedure define the areas of responsibility of the  
entire Board of Management, its Chairman and the individual  
members. The areas of responsibility of the individual Board of  
Management members are described on pages 10 and 11 of this  
Annual Report. The structure of the Board of Management  
reflects the global orientation of the Group and its concentration  
on the automotive business, while facilitating a strong focus on  
markets and customers.  
Supervisory Board. In accordance with the German Codeter-  
mination Law, the Supervisory Board of DaimlerChrysler AG  
comprises twenty members. The Supervisory Board has formed  
three committees: the Presidential, the Audit and the Mediation  
Committee.  
The Presidential Committee has particular responsibility for the  
contractual affairs of the members of the Board of Management  
and determines their compensation. It also supports and advises  
the Chairman of the Supervisory Board and his deputy and  
prepares the meetings of the Supervisory Board.  
Executive Automotive Committee. The Executive Automotive  
Committee (EAC) was established as a committee of the Board  
of Management. The task of the EAC is to coordinate all cross-  
divisional automotive issues and to identify potential for improving  
efficiency. The EAC prepares Board of Management decisions  
and regularly informs the Board of Management of its activities  
(see page 19).  
The Audit Committee deals with questions of accounting and risk  
management. It discusses the effectiveness of the internal con-  
trolling systems and regularly receives reports on the work of the  
Internal Audit department. It also discusses the interim financial  
statements and the annual financial statements, individual and  
consolidated, of DaimlerChrysler AG. The Audit Committee makes  
recommendations concerning the selection of independent audi-  
tors, assesses such auditors’ suitability and independence, and,  
after the independent auditor is elected by the Annual Meeting,  
commissions it to conduct the annual audit, negotiates an audit  
fee and determines the important audit issues of this audit. The  
Audit Committee receives reports from the independent auditors  
on any accounting matters that might be regarded as critical  
and on any differences of opinion with the Board of Management.  
In addition, it makes recommendations to the Supervisory  
Board, for example, concerning the appropriation of distributable  
profits and capital measures. Finally, the Audit Committee  
approves services provided by the independent auditors or affili-  
ated companies to DaimlerChrysler AG or to companies of the  
DaimlerChrysler Group that are not directly related to the annual  
audit.  
Chairman’s Council. The Chairman’s Council, comprising ten  
internationally experienced representatives from the fields of  
politics and business, is headed by the Chairman of the Board  
of Management of DaimlerChrysler AG. The function of this  
committee is to advise the Board of Management, primarily on  
questions of global business strategy. The Chairman’s Council  
combines elements of US and German corporate governance.  
The principles guiding our activities  
Transparency. DaimlerChrysler regularly informs shareholders,  
financial analysts, shareholders’ associations, the media and  
the interested public on the situation of the Group and on any  
significant changes in its business.  
The Mediation Committee is formed solely to perform the functions  
laid down in Section 31, Subsection 3 of the German Code-  
termination Law. Accordingly, it has the task of making proposals  
for the appointment of members of the Board of Management if  
Information is made public according to the principle of fair  
disclosure. All new material facts that are communicated to  
financial analysts and institutional investors are simultaneously  
also made available to all shareholders and the interested public.  
8
8
If any information is made public outside Germany as a result of  
the regulations governing capital markets in the respective  
countries, we also make this information available without delay  
in Germany in the original version, or at least in English. In order  
to ensure that information is provided quickly, DaimlerChrysler  
makes full use of the Internet, but also of other methods of com-  
munication. All the dates of important disclosures (e.g. the  
Annual Report, interim reports, the Annual Meeting) are published  
in advance in a Finance Calendar. The Financial Calendar can be  
seen inside the rear cover of this Annual Report and on the Internet  
at www.daimlerchrysler.com/ir/calendar.  
contains rules of conduct for international transactions and for any  
conflicts of interests that may occur, questions of equality, the  
exclusion of corruption, the role of internal monitoring systems, the  
right to the fulfillment of statutory standards, and other internal  
and external regulations.  
Code of Ethics. In July 2003, the Supervisory Board approved a  
Code of Ethics for DaimlerChrysler AG. This code addresses the  
members of the Board of Management and a large number of  
senior officers who have a significant influence on planning and  
reporting in the context of the year-end and interim financial  
statements. The provisions of the code aim to prevent mistakes  
by the persons addressed and to promote ethical behavior as  
well as the complete, appropriate, accurate, timely and clear  
publication of information on the Group. The wording of the Code  
of Ethics can be seen on the Internet at  
In addition to its regular scheduled reporting, DaimlerChrysler  
reports, without delay and in accordance with applicable law, any  
so-called inside information which directly affects the company  
(
ad-hoc disclosure).  
www.daimlerchrysler.com/corpgov_e.  
In accordance with the requirements of the law, DaimlerChrysler  
also reports without delay after receiving notification that by  
means of acquisition, disposal or any other method, the share-  
holding in DaimlerChrysler AG of any person or institution has  
reached, exceeded or fallen below 5, 10, 25, 50 or 75 percent of  
the company’s voting rights.  
Risk management. DaimlerChrysler has a risk-management  
system commensurate with its position as a company with global  
operations (see pages 38 ff). The risk-management system is  
one component of the overall planning, controlling and reporting  
process. Its goal is to enable the company’s management to  
recognize significant risks at an early stage and to initiate appro-  
priate countermeasures in a timely manner. The Chairman of  
the Supervisory Board has regular contacts with the Board of  
Management not only to discuss the Group’s strategy and  
business developments, but also to discuss the issue of risk  
management. The Internal Audit department monitors adherence  
to the legal framework and Group standards by means of targeted  
audits, and, if required, initiates appropriate actions.  
Any securities transactions conducted by members of the Board of  
Management or the Supervisory Board or certain senior officers  
who have regular access to inside information and who are  
authorized to take significant business decisions (or by related  
parties as defined by the German Securities Trading Law) are  
disclosed by DaimlerChrysler without delay after the company is  
informed of such transactions (directors’ dealings), in accordance  
with the requirements of the German Securities Trading Law.  
The relevant details are given in the Notes to the Consolidated  
Financial Statements (see note 38), and, in accordance with  
the requirements of the law, are also available on the Internet at  
www.daimlerchrysler.com/corpgov_e.  
Accounting principles. The consolidated financial statements of  
the DaimlerChrysler Group are prepared in accordance with  
United States Generally Accepted Accounting Principles (US GAAP).  
Details of US GAAP can be found in the Notes to the Consolidated  
Financial Statements (see note 1).  
Integrity Code defines worldwide standards of behavior. The  
Integrity Code is a guideline for behavior that has been in effect  
since 1999 and which was revised in 2003. It defines binding limits  
to the activities of all employees worldwide and is regularly  
referred to. Adherence to this code is monitored by the Internal  
Audit department. Among other things, the Integrity Code  
The year-end financial statements of DaimlerChrysler AG, which  
is the parent company, are prepared in accordance with the  
accounting guidelines of the German Commercial Code (HGB).  
Both sets of financial statements are audited by an independent  
company of auditors.  
8
9
Compensation Report  
The Compensation Report summarizes the principles that are  
applied to determine the compensation of the Board of Manage-  
ment of DaimlerChrysler AG and explains the level and structure  
of its members’ compensation.  
In order to ensure the competitiveness and appropriateness of  
Board of Management compensation, its structure, the individual  
components and the total compensation are reviewed each year  
in relation to a benchmark group of companies in the United States  
and Europe. For this purpose, the Presidential Committee is  
regularly assisted by external consultants.  
Furthermore, the principles and level of the compensation of the  
Supervisory Board are also described, and details are given of  
DaimlerChrysler shares owned by the Board of Management and  
the Supervisory Board.  
Structure of Board of Management compensation.  
The Board of Management compensation in 2004 consisted of  
four components, set out below:  
Compensation of the Board of Management  
– The fixed base salary, paid in 12 monthly installments, is related  
to the area of responsibility of each Board of Management  
member. This results in differing base salaries taking into con-  
sideration each area’s strategic and operative responsibility.  
Responsibility. Responsibility for determining the structure and  
level of compensation of the Board of Management of Daimler-  
Chrysler AG is delegated by the Supervisory Board to the Presi-  
dential Committee (see page 88). The principles to be applied  
have been laid down by the Supervisory Board in the Rules of  
Procedure for the Presidential Committee. If requested by the  
Committee, the Supervisory Board also holds discussions on the  
structure of the compensation system for the Board of Manage-  
ment and regularly reviews this structure.  
– The annual bonus is a variable cash compensation, the level of  
which is related to the fixed base salary and varies in relation  
to the degree to which DaimlerChrysler’s planned operating  
profit has been achieved. Additional goals may also be taken  
into account, such as the development of total shareholder  
return. When setting the level of the annual bonus, the Presi-  
dential Committee of the Supervisory Board also has the  
possibility to reflect the Board of Management members’  
individual performance, which is not directly reflected in the  
performance of the Group, with a supplementary payment  
or a deduction of up to 25%. The operating profit target is  
determined annually in advance on the basis of the planning  
approved by the Supervisory Board.  
Goals. The aim of the compensation system for the Board of  
Management is to compensate the members of the Board of Man-  
agement commensurately with their areas of activity and  
responsibility when compared internationally. The system should  
also clearly and directly reflect in the variability of compensation  
the joint and individual performance of the Board of Management  
members and the success of the Group.  
The stock-based compensation in the year 2004 was based for  
the last time on two components: the medium term incentive and  
the stock option plan.  
For this purpose, the compensation system comprises a base  
salary, an annual bonus and an element of stock-based  
compensation. The latter was granted for the last time in the  
2
004 financial year in the form of a three-year performance plan  
– The idea behind the medium-term incentive (MTI) is to reflect  
the mid-term development of the company within a three-year  
perspective in Board of Management compensation. The MTI is  
determined by two equally weighted comparative parameters.  
The first is the relative positioning of return on sales compared  
with selected competitors. At present, these are BMW, Ford,  
GM, Honda, Toyota and VW. The second is the return on net  
assets compared with the target set in the approved planning.  
as a medium-term incentive and a stock option plan as a long-  
term incentive. As of 2005, the variable element of compensation  
with a long-term incentive effect and risk component will be  
redesigned (see note 38).  
9
0
The MTI is also linked to the share-price development. This is  
effected by allocating phantom shares. For these phantom  
shares, a dividend equivalent is paid during the period of the  
plan. At the end of the three-year period, the number of phan-  
tom shares is determined depending on the aforementioned  
parameters. The amount to be paid out is calculated by multi-  
plying the number of phantom shares by the share price at that  
time.  
Total Board of Management compensation in 2004. The total  
compensation paid by Group related companies to the members  
of the Board of Management of DaimlerChrysler AG is calculated  
from the amount of compensation paid in cash and from the  
non-cash benefits in kind. The total remuneration in 2004 for the  
members of the Board of Management of DaimlerChrysler AG  
amounted to €31.6 million, of which €11.8 million is fixed and  
€19.8 million is short-term and mid-term incentive compensation  
components. These figures relate to the members active at the  
end of the year and pro rata to the members who departed from  
the Board of Management during the year.  
The DaimlerChrysler stock option plan is a component of  
long-term incentive compensation. The options granted in the  
context of this plan can be exercised at a pre-determined  
reference price per DaimlerChrysler share, plus a 20% premium.  
Half of the options can be exercised two years after being  
granted and the other half one year later. Options not exercised  
become void ten years after they were granted. If the market  
price per DaimlerChrysler ordinary share on the date of excer-  
cise is at least 20% higher, than the reference price, the holder  
is entitled to receive a cash payment equal to the original exer-  
cise premium of 20%. For long-term variable compensation  
granted as of the year 2004, the Presidential Committee can  
reserve the right to impose a possible limit in the case of extra-  
ordinary, unforeseeable developments.  
In 2004, 1.265 million stock options from the Stock Option Plan  
2000 were for the last time granted to the members of the Board  
of Management as a long-term compensation component. Also  
in 2004, 395,000 performance-based awards were granted to the  
members of the Board of Management based on a 3 year perfor-  
mance plan.  
The so-called fair value of the stock options and performance-  
based awards on the day they were allocated in 2004 amounts to  
€7.85 per option and €36.31 per performance-based award.  
Whether, when and in what amount the allocated stock options  
or performance based awards are actually paid out depends on  
future share price and dividend developments and on the fulfill-  
ment of the set targets. Except for the stock option plan granted  
in 2003 (vesting period not yet expired, however), the options’  
exercise price had not been achieved by December 31, 2004, i.e.  
the participants were unable to exercise their options. Further  
information on Board of Management compensation can be  
found in the Notes to the Consolidated Financial Statements  
under Note 38.  
In connection with the allocation of stock-based compensation,  
retroactive changes of performance targets or comparison para-  
meters are expressly excluded. Further information on stock  
based compensation can be found in the Notes to the Consoli-  
dated Financial Statements under Note 24.  
Guidelines for share ownership. As a supplement to these  
four components of Board of Management compensation, the  
Presidential Committee of the Supervisory Board of Daimler-  
Chrysler AG has approved Stock Ownership Guidelines for the  
Board of Management, under which the members of the Board  
of Management are required to invest a portion of their private  
assets in DaimlerChrysler shares within a period of several years  
and to hold these shares until the end of their Board of Manage-  
ment membership.  
New stock-based compensation as of the 2005 financial  
year. The new component of compensation is linked to the  
long-term development of corporate value. The new program is  
based on the principles of performance orientation, benchmark  
comparison and share ownership.  
9
1
This is achieved on the one hand by a performance-based model  
of four year’s duration, which builds upon internationally  
accepted performance measures. Target achievement is oriented  
towards the return on net assets that is actually achieved  
by the Group and on its return on sales compared with selected  
vehicle manufacturers (BMW, Ford, GM, Honda, Iveco, Toyota,  
Volvo and VW).  
Sideline activities of the Board of Management members.  
Members of the Board of Management require the consent of  
the Chairman of the Supervisory Board before commencing any  
sideline activities. This ensures that neither the time required  
nor the compensation paid for such activities leads to a conflict  
with the members’ duties to the Group.  
Insofar as such sideline activities are memberships of other  
supervisory boards or comparable boards, these are disclosed  
in the financial statements of DaimlerChrysler AG and on the  
Internet.  
Due to the allocation of phantom shares, the development of  
DaimlerChrysler’s share price is also taken into consideration.  
After three years, the number of phantom shares is calculated  
from the degree of target achievement. These phantom shares  
must then be held for one more year. After four years, the  
amount to be paid out is calculated by multiplying the number of  
phantom shares by the share price valid at that time.  
No compensation is paid to Board of Management members for  
other positions held at companies of the Group.  
The members of the Board of Management have to use a quarter  
of this gross amount paid out to purchase “real” shares in the  
company. These shares have to be held until the end of their  
Board of Management membership.  
Compensation of the Supervisory Board  
Supervisory Board compensation in 2004. The compensation  
of the Supervisory Board is determined by the Annual Meeting  
of DaimlerChrysler AG and is governed by the company’s Articles  
of Incorporation. The current regulation lays down that the  
members of the Supervisory Board receive, in addition to the  
refund of their expenses and the costs of any value added tax  
incurred by them in the performance of their office, a fixed  
compensation of € 75,000 , three times this amount for the  
Chairman of the Supervisory Board, twice this amount for the  
Deputy Chairman of the Supervisory Board and the Chairman of  
the Audit Committee, 1.5 times this amount for the chairmen  
of other Supervisory Board committees and 1.3 times this amount  
for members of the Supervisory Board committees. If a member  
of the Supervisory Board exercises several of the aforementioned  
functions, he shall be remunerated solely according to the function  
with the highest compensation. The individual compensation of  
the members of the Supervisory Board is shown in the table on the  
right.  
Composition of Board of Management compensation as of  
the year 2005. Thus, as of the year 2005, Board of Management  
compensation comprises the three components of base salary,  
annual bonus and long-term stock-based compensation as  
described above.  
Pensions. The pension agreements of the current Board of  
Management members with DaimlerChrysler AG include a  
commitment to an annual retirement pension which is calculated  
as a percentage of the fixed annual base salary.  
In 2004, disbursements to former members of the Board of  
Management of DaimlerChrysler AG and their survivors amounted  
to €17.4 million. An amount of €203.8 million has been accrued  
for pension obligations to former members of the Board of Manage-  
ment and their survivors.  
The members of the Supervisory Board and its committees  
receive a meeting fee of €1,100 for each Supervisory Board  
meeting and committee meeting that they attend.  
The aggregate amount accrued by us during the year ended  
December 31, 2004, to provide pension, retirement and similar  
benefits for the members of the Board of Management was  
€9.0 million.  
9
2
Except for the compensation paid to employee representatives  
within the Supervisory Board in accordance with their contracts  
of employment, no compensation was paid for services provided  
personally beyond the aforementioned Supervisory Board  
activities, in particular for advisory or agency services.  
Shares held by the Board of Management and  
Supervisory Board  
Shares held by the Board of Management. Pursuant to Section  
15a of the German Securities Trading Law (WpHG), among other  
persons, members of the Board of Management and persons who  
are in a close relationship to members of the Board of Manage-  
ment are obliged to disclose significant acquisitions and dispos-  
als of DaimlerChrysler shares, related options and other  
The compensation paid in 2004 to the members of the Supervisory  
Board of DaimlerChrysler AG for services in all capacities to the  
Group amounted to €2.0 million.  
derivatives. The transactions reported and disclosed by the  
Board of Management members in 2004 are shown in the Notes  
to the Consolidated Financial Statements under Note 38.  
Compensation of the Members of the Supervisory Board  
Name  
Position  
Total 2004  
As of December 31, 2004, the current members of the Board of  
Management held a total of 10.4 million shares, options or stock  
appreciation rights of DaimlerChrysler AG (1.027% of the shares  
issued).  
Hilmar Kopper  
Erich Klemm 1  
Heinrich Flegel  
Nate Gooden 2  
Earl G. Graves  
Victor Halberstadt  
Thomas Klebe 1  
Chairman of the Supervisory Board  
Deputy Chairman of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
245,900  
170,900  
82,700  
79,400  
80,500  
82,700  
Shares held by the Supervisory Board. The aforementioned  
regulation of Section 15a of the German Securities Trading Law  
(WpHG) also applies to the members of the Supervisory Board.  
In 2004, no transactions subject to disclosure were reported by  
the Supervisory Board.  
Member of the Supervisory Board and of the  
Presidential Committee  
111,800  
82,700  
80,500  
82,700  
80,500  
81,600  
82,700  
82,700  
82,700  
Jürgen Langer 1  
Robert J. Lanigan  
Helmut Lense 1  
Peter A. Magowan  
William A. Owens  
Gerd Rheude 1  
Udo Richter 1  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
As of December 31, 2004, the current members of the Super-  
visory Board held a total of 0.1 million shares, options or stock  
appreciation rights of DaimlerChrysler AG (0.012% of the shares  
issued).  
Wolf Jürgen Röder 1 Member of the Supervisory Board  
Loans to members of the Board of Management or Super-  
visory Board. In 2004, no advances or loans existed to  
members of the Board of Management or the Supervisory  
Board of DaimlerChrysler AG.  
Manfred Schneider Member of the Supervisory Board and of the  
Presidential Committee  
109,600  
111,800  
Stefan Schwaab 1  
Member of the Supervisory Board and of the  
Audit Committee  
Bernhard Walter  
Member of the Supervisory Board and Chairman  
of the Audit Committee (since April 7, 2004)  
149,286  
81,600  
81,600  
Lynton R. Wilson 3  
Mark Wössner  
Member of the Supervisory Board  
Member of the Supervisory Board  
1
The members representing the employees have stated that their compensation should be paid  
to the Hans-Böckler Foundation, in accordance with the guidelines of the German Trade Union  
Federation.  
2
3
Mr. Gooden abstained from his compensation and meeting fees. At his request, these amounts  
were transferred to the Hans-Böckler Foundation.  
Mr. Wilson also receives €5,258 for his activity as a member of the Supervisory Board of  
DaimlerChrysler Canada Inc.  
9
3
Declaration of Compliance with  
the German Corporate Governance Code  
Section 161 of the German Stock Corporation Act (AktG) requires  
the Board of Management and the Supervisory Board of listed  
stock corporations to declare each year that the recommenda-  
tions of the “German Corporate Governance Code Government  
Commission” published by the Federal Ministry of Justice in  
the official section of the electronic Federal Gazette have been  
and are being followed or, if not, which recommendations have  
not been or are not being applied. Shareholders must be given  
permanent access to these declarations.  
I. Deviations from the Recommendations of the German  
Corporate Governance Code  
Deductible with the D&O insurance (Code Clause 3.8, Para-  
graph 2) The Directors’ and Officers’ Liability (D&O) insurance  
obtained by DaimlerChrysler AG for the Board of Management  
and the Supervisory Board does not provide any insurance cover  
for intentional acts and omissions or for breaches of duty know-  
ingly committed.  
The German Corporate Governance Code (“Code”) contains rules  
with varying binding effects. Apart from outlining aspects of the  
current German Stock Corporation Act, it contains recommen-  
dations from which companies are permitted to deviate. However,  
if they do so, they must disclose this each year. The Code also  
contains suggestions which can be ignored without giving rise to  
any disclosure requirement.  
Insurance cover is limited to negligent breaches of duty by  
members of the Board of Management and Supervisory Board,  
so that this is the only context in which the question of the  
agreement of a deductible arises.  
It is not advisable to agree on a deductible for negligence on the  
part of the members of the Supervisory Board, as Daimler-  
Chrysler AG endeavors to staff its Supervisory Board with promi-  
nent members of the community from Germany and abroad who  
have extensive business experience, and the company may be  
impeded in this aim if members of its Supervisory Board have to  
accept far-reaching liability risks for potential negligence. The  
fact that a deductible is fairly unusual in other countries makes  
this even more of a problem.  
The Board of Management and the Supervisory Board of Daimler-  
Chrysler AG have decided to disclose not only deviations from  
the Code’s recommendations (see I.) but also – without being  
legally obliged to do so – deviations from its suggestions (see II.).  
The Board of Management and the Supervisory Board of Daimler-  
Chrysler AG declare that both the recommendations and the  
suggestions of the “German Corporate Governance Code Govern-  
ment Commission”, in effect as of May 21, 2003, published by the  
Federal Ministry of Justice in the official section of the electronic  
Federal Gazette, have been and are being followed. The Board of  
Management and the Supervisory Board also intend to follow  
the recommendations and suggestions of the German Corporate  
Governance Code in the future. Only the following recom-  
mendations and suggestions have not been and are not being  
applied:  
On the part of members of the Board of Management, the D&O  
insurance of DaimlerChrysler AG envisages a deductible for  
cases of ordinary or gross negligence. Moreover, in cases of a  
grossly negligent breach of duty by a member of the Board of  
Management, the Presidential Committee of the Supervisory  
Board which is responsible for the Board of Management’s  
service contracts may agree to make a percentage deduction  
from the variable portion of the compensation of the member of  
the Board of Management concerned. In terms of its overall  
financial result, this would be the same as an additional deductible.  
In the view of DaimlerChrysler AG, this rule enables individual  
cases to be judged more fairly on their merits than the blanket  
approach of the Code.  
9
4
Individualized reporting of Board of Management compensa-  
tion (Code Clause 4.2.4) As in the past, the compensation for  
the Board of Management is not reported individually. The com-  
pensation of the Board of Management has been and will be  
reported, broken down into fixed and variable elements and into  
components with a long-term incentive effect. This information is  
crucial for assessing whether the division of such compensation  
between fixed and performance-related components is appropri-  
ate and whether the structure of such compensation provides  
adequate incentives for the Board of Management. As the Board  
of Management operates according to the principle of collective  
responsibility, the incentives provided for the Board of Manage-  
ment as a whole are the decisive factor, not those for each indi-  
vidual member. Another factor is that listing these details  
individually could lead to a leveling of performance-related and  
task-related differences in compensation.  
II. Deviations from the Suggestions of the German Corporate  
Governance Code  
Proxy voting at the Annual Meeting (Code Clause 2.3.3) As of  
the Annual Meeting to be convened in 2005, it shall be possible  
to contact the representative appointed by the company to vote  
on behalf of the shareholders until shortly before the voting  
procedure is started.  
Broadcast of the Annual Meeting (Code Clause 2.3.4) The  
Annual Meeting of DaimlerChrysler AG will be broadcast on the  
internet until the end of the Board of Management’s report.  
Continuing the broadcast after this point, particularly the broad-  
cast of individual shareholders’ spoken contributions, could be  
construed as interference in those shareholders’ privacy rights.  
For this reason the company has decided not to broadcast this  
part of the Annual Meeting.  
Approval of sideline activities (Code Clause 4.3.5) For rea-  
sons of practicality, approval of sideline activities by members of  
the Board of Management, has been and will be granted not by  
the whole Supervisory Board, but by its Chairman. The Presiden-  
tial Committee of the Supervisory Board is informed of the  
decisions of the Chairman of the Supervisory Board in this matter.  
Chairman of the Audit Committee (Code Clause 5.2) Until the  
Annual Meeting in 2004, the Chairman of the Supervisory Board  
chaired the Audit Committee. With the election of the new  
shareholders’ representatives to the Supervisory Board, Bernhard  
Walter – who is nominated as Financial Expert – was elected as  
Chairman of the Audit Committee.  
Compensation of the Supervisory Board (Code Clause 5.4.5,  
Paragraphs 2 and 3) The decision on the introduction of per-  
formance-related compensation for the members of the Supervi-  
sory Board will be taken at a later date. This is particularly due to  
the fact that the ways by which criteria for the assessment of  
success can adequately be structured are subject to substantial  
legal uncertainties.  
Differing terms of office of the members of the Supervisory  
Board (Code Clause 5.4.4) Differing terms of office were  
introduced with the 2004 election of the shareholders’ represen-  
tatives on the Supervisory Board.  
Variable compensation of the Supervisory Board relating to  
the company’s long-term success (Code Clause 5.4.5) The  
decision on performance-related compensation will be taken at a  
later date, see also the comments on I. Clause 5.4.5  
An individualized listing of the Supervisory Board’s compensation  
subdivided according to its components as well as other advan-  
tages granted for services provided individually will be reported  
starting with the financial year 2004.  
Stuttgart, December 2004  
The Board of Management  
The Supervisory Board  
9
5
Consolidated Financial Statements  
9
9
8 Statement by the Board of Management  
108 Notes to Consolidated Financial Statements –  
Basis of Presentation  
9 Report of Independent Registered  
Public Accounting Firm  
1
00 Consolidated Statements of Income (Loss)  
02 Consolidated Balance Sheets  
03 Consolidated Statements of Changes in  
Stockholders’ Equity  
04 Consolidated Statements of Cash Flows  
06 Consolidated Fixed Assets Schedule  
108 Summary of Significant Accounting Policies  
1
115 Presentation of Receivables from Financial Services  
in Consolidated Statements of Cash Flows  
1
115 Scope of Consolidation, Certain Variable Interest Entities  
and Significant Equity Method Investments  
1
120 Acquisitions and Dispositions  
1
123 Notes to Consolidated Statements of Income (Loss)  
1
23 Functional Costs and Other Expenses  
24 Other Income  
24 Turnaround Plan for the Chrysler Group  
26 Financial Income (Expense), net  
27 Income Taxes  
29 Discontinued Operations  
29 Cumulative Effects of Changes in Accounting Principles  
1
1
1
1
1
1
9
6
1
30 Notes to Consolidated Balance Sheets  
150 Notes to Consolidated Statements of Cash Flows  
150 Consolidated Statements of Cash Flows  
1
30 Goodwill  
31 Other Intangible Assets  
31 Property, Plant and Equipment, net  
31 Equipment on Operating Leases, net  
32 Inventories  
32 Trade Receivables  
32 Receivables from Financial Services  
33 Other Assets  
33 Securities, Investments and Long-Term Financial Assets  
35 Liquid Assets  
35 Prepaid Expenses  
35 Stockholders’ Equity  
37 Stock-Based Compensation  
39 Accrued Liabilities  
48 Financial Liabilities  
49 Trade Liabilities  
49 Other Liabilities  
49 Deferred Income  
1
1
1
150 Other Notes  
1
1
150 Legal Proceedings  
1
154 Contingent Obligations and Commercial Commitments  
156 Information About Financial Instruments and Derivatives  
1
1
159 Retained Interests in Sold Receivables and Sales of  
Finance Receivables  
1
1
61 Segment Reporting  
65 Earnings (Loss) per Share  
65 Related Party Transactions  
66 Compensation and Share Ownership of the Members  
1
1
1
1
1
1
1
of the Board of Management and the Supervisory Board  
and Further Additional Information Concerning German  
Corporate Governance Code  
1
1
1
1
9
7
Preliminary Note  
Statement by the Board of  
Management  
The accompanying consolidated financial statements (consolidated  
balance sheets as of December 31, 2004 and 2003, consolidated  
statements of income (loss), cash flows and changes in stock-  
holders’ equity for each of the financial years 2004, 2003 and  
The Board of Management of DaimlerChrysler AG is responsible  
for preparing the accompanying financial statements.  
We have implemented effective controlling and monitoring  
systems to guarantee compliance with accounting principles and  
the adequacy of reporting. These systems include the application  
of uniform guidelines group-wide, the use of reliable software,  
the selection and training of qualified personnel, and regular  
reviews by our internal auditing department.  
2
002) were prepared in accordance with US generally accepted  
accounting principles (US GAAP).  
In order to comply with Section 292a of the HGB (German  
Commercial Code), the consolidated financial statements were  
supplemented with a consolidated business review report and  
additional explanations. Therefore, the consolidated financial  
statements, which have to be filed with the Commercial Register  
and published in the Federal Gazette, comply with the Fourth  
and Seventh Directive of the European Community. For the  
interpretation of these directives we relied on the statement by  
the German Accounting Standards Committee.  
In accordance with German legal requirements we have integrated  
the group’s early warning systems into a risk management  
system. This enables the Board of Management to identify signifi-  
cant risks at an early stage and to initiate appropriate measures.  
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft  
Wirtschaftsprüfungsgesellschaft audited the consolidated financial  
statements, which were prepared in accordance with US  
generally accepted accounting principles, and issued an unqualified  
audit report.  
The consolidated financial statements and the consolidated  
business review report as of December 31, 2004, prepared in  
accordance with Section 292a of the HGB (German Commercial  
Code) and filed with the Commercial Register in Stuttgart  
under the number HRB 19 360, will be provided to shareholders  
on request.  
Together with the independent auditors, the Supervisory Board’s  
Audit Committee examined and discussed the consolidated  
financial statements including the business review report and  
the auditors’ report in depth. Subsequently, the entire Supervisory  
Board reviewed the documentation related to the consolidated  
financial statements. The result of this examination is included in  
the Report of the Supervisory Board.  
Jürgen E. Schrempp  
Bodo Uebber  
9
8
Report of Independent Registered  
Public Accounting Firm  
The Supervisory Board DaimlerChrysler AG:  
As described in Note 1 to the consolidated financial statements,  
DaimlerChrysler changed its method of accounting for stock-  
based compensation in 2003. As described in Notes 3 and 11 to  
the consolidated financial statements, DaimlerChrysler also  
adopted the required portions of FASB Interpretation No. 46  
(revised December 2003), “Consolidation of Variable Interest  
Entities – an interpretation of ARB No. 51”, in 2003. As described  
in Note 11 to the consolidated financial statements, Daimler-  
Chrysler adopted Statement of Financial Accounting Standards  
No. 142, “Goodwill and Other Intangible Assets,” in 2002.  
We have audited the accompanying consolidated balance sheets  
of DaimlerChrysler AG and subsidiaries (“DaimlerChrysler”) as of  
December 31, 2004 and 2003, and the related consolidated  
statements of income, changes in stockholders’ equity, and cash  
flows for each of the years in the three-year period ended  
December 31, 2004. These consolidated financial statements  
are the responsibility of DaimlerChrysler’s management. Our  
responsibility is to express an opinion on these consolidated  
financial statements based on our audits.  
Stuttgart, Germany  
February 21, 2005  
We conducted our audits in accordance with the standards of the  
Public Company Accounting Oversight Board (United States).  
Those standards require that we plan and perform the audit to  
obtain reasonable assurance about whether the financial state-  
ments are free of material misstatement. An audit includes  
examining, on a test basis, evidence supporting the amounts and  
disclosures in the financial statements. An audit also includes  
assessing the accounting principles used and significant esti-  
mates made by management, as well as evaluating the overall  
financial statement presentation. We believe that our audits  
provide a reasonable basis for our opinion.  
KPMG Deutsche Treuhand-Gesellschaft  
Aktiengesellschaft  
Wirtschaftsprüfungsgesellschaft  
In our opinion, the consolidated financial statements referred to  
above present fairly, in all material respects, the financial posi-  
tion of DaimlerChrysler as of December 31, 2004 and 2003, and  
the results of their operations and their cash flows for each  
of the years in the three-year period ended December 31, 2004,  
in conformity with generally accepted accounting principles  
in the United States of America.  
Prof. Dr. Wiedmann  
Wirtschaftsprüfer  
Krauß  
Wirtschaftsprüfer  
9
9
Consolidated Statements of Income (Loss)  
Consolidated  
Year ended December 31,  
Note  
2004  
2004  
2003  
2002  
(
in millions, except per share amounts)  
(Note 1) $  
Revenues  
35.  
5.  
192,319  
(155,100)  
37,219  
(24,330)  
(7,660)  
1,211  
142,059  
(114,567)  
27,492  
(17,972)  
(5,658)  
895  
136,437  
(109,926)  
26,511  
(17,772)  
(5,571)  
689  
147,368  
(119,624)  
27,744  
(18,166)  
(5,942)  
777  
Cost of sales  
Gross profit  
Selling, administrative and other expenses  
Research and development  
Other income  
5.  
6.  
7.  
Turnaround plan expenses – Chrysler Group  
Income before financial income  
Impairment of investment in EADS  
(196)  
(145)  
(469)  
(694)  
6,244  
4,612  
3,388  
3,719  
(1,960)  
Other financial income (expense), net (therein loss on issuance of  
associated company stock of 135 in 2004 and gain on issuance  
of related company stock of 24 in 2003)  
(1,458)  
(1,458)  
4,786  
(1,594)  
146  
(1,077)  
(1,077)  
3,535  
(1,177)  
108  
(832)  
(2,792)  
596  
2,206  
2,206  
5,925  
(1,115)  
(15)  
Financial income (expense), net  
8.  
9.  
Income (loss) before income taxes  
Income tax expense  
(979)  
(35)  
Minority interests  
Income (loss) from continuing operations  
Income from discontinued operations, net of taxes  
Income on disposal of discontinued operations, net of taxes  
3,338  
2,466  
(418)  
14  
4,795  
82  
10.  
10.  
882  
Cumulative effects of changes in accounting principles: transition  
adjustments resulting from adoption of FIN 46R and SFAS 142, net of taxes  
11.  
(30)  
448  
(159)  
4,718  
Net income (loss)  
3,338  
2,466  
Earnings per share  
36.  
Basic earnings per share  
Income (loss) from continuing operations  
Income from discontinued operations  
Income on disposal of discontinued operations  
Cumulative effects of changes in accounting principles  
Net income  
3.29  
2.43  
(0.41)  
0.01  
4.76  
0.08  
0.87  
(0.03)  
0.44  
(0.16)  
4.68  
3.29  
2.43  
Diluted earnings per share  
Income (loss) from continuing operations  
Income from discontinued operations  
Income on disposal of discontinued operations  
Cumulative effects of changes in accounting principles  
Net income  
3.29  
2.43  
(0.41)  
0.01  
4.74  
0.08  
0.87  
(0.03)  
0.44  
(0.15)  
4.67  
3.29  
2.43  
The accompanying notes are an integral part of these Consolidated Financial Statements.  
1
00  
Industrial Business  
1
Financial Services  
1
Year ended December 31,  
Year ended December 31,  
2
004  
2003  
2002  
2004  
2003  
2002  
(in millions, except per share amounts)  
Revenues  
1
28,133  
103,771)  
4,362  
16,741)  
122,397  
(98,937)  
23,460  
(16,374)  
(5,571)  
637  
131,668  
(106,443)  
25,225  
(16,451)  
(5,942)  
709  
13,926  
(10,796)  
3,130  
(1,231)  
14,040  
(10,989)  
3,051  
(1,398)  
15,700  
(
(13,181)  
Cost of sales  
2
2,519  
Gross profit  
(
(1,715)  
Selling, administrative and other expenses  
Research and development  
Other income  
(
5,658)  
33  
145)  
68  
8
62  
52  
(
(469)  
(694)  
Turnaround plan expenses – Chrysler Group  
Income before financial income  
Impairment of investment in EADS  
2
,651  
1,683  
2,847  
1,961  
1,705  
872  
(1,960)  
Other financial income (expense), net (therein loss on issuance of  
associated company stock of 135 in 2004 and gain on issuance  
of related company stock of 24 in 2003)  
(
(
1,043)  
1,043)  
(775)  
(2,735)  
(1,052)  
(352)  
(30)  
2,325  
2,325  
5,172  
(738)  
(12)  
(34)  
(34)  
1,927  
(735)  
(5)  
(57)  
(57)  
1,648  
(627)  
(5)  
(119)  
(119)  
753  
(377)  
(3)  
Financial income (expense), net  
1
,608  
442)  
13  
Income (loss) before income taxes  
Income tax expense  
(
1
Minority interests  
1
,279  
(1,434)  
14  
4,422  
82  
1,187  
1,016  
373  
Income (loss) from continuing operations  
Income from discontinued operations, net of taxes  
Income on disposal of discontinued operations, net of taxes  
882  
Cumulative effects of changes in accounting principles: transition  
(30)  
(124)  
4,380  
(35)  
338  
adjustments resulting from adoption of FIN 46R and SFAS 142, net of taxes  
1
,279  
(568)  
1,187  
1,016  
Net income (loss)  
Earnings per share  
Basic earnings per share  
Income (loss) from continuing operations  
Income from discontinued operations  
Income on disposal of discontinued operations  
Cumulative effects of changes in accounting principles  
Net income  
Diluted earnings per share  
Income (loss) from continuing operations  
Income from discontinued operations  
Income on disposal of discontinued operations  
Cumulative effects of changes in accounting principles  
Net income  
1
Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.  
1
01  
Consolidated Balance Sheets  
Consolidated  
Industrial Business  
1
Financial Services  
1
At December 31,  
At December 31,  
At December 31,  
Note  
2004  
2004  
2003  
2004  
2003  
2004  
2003  
(
in millions)  
(Note 1) $  
Assets  
Goodwill  
12.  
13.  
14.  
20.  
15.  
2,712  
3,616  
2,003  
2,671  
1,816  
2,819  
1,945  
2,602  
33,835  
6,767  
3,099  
48,248  
15,317  
6,755  
1,757  
2,731  
32,761  
8,416  
2,890  
48,555  
13,560  
5,851  
58  
69  
59  
88  
Other intangible assets  
Property, plant and equipment, net  
Investments and long-term financial assets  
Equipment on operating leases, net  
Fixed assets  
46,031  
9,535  
34,001  
7,043  
32,917  
8,748  
166  
156  
276  
332  
36,160  
98,054  
22,733  
9,410  
26,711  
72,429  
16,792  
6,951  
24,385  
70,685  
14,948  
6,081  
23,612  
24,181  
1,475  
196  
21,495  
22,130  
1,388  
230  
Inventories  
16.  
17.  
18.  
19.  
20.  
21.  
Trade receivables  
Receivables from financial services  
Other assets  
76,876  
17,497  
5,258  
56,785  
12,924  
3,884  
52,638  
15,848  
3,268  
56,785  
3,715  
410  
52,638  
4,719  
467  
9,209  
3,474  
6,771  
41,526  
3,988  
953  
11,129  
2,801  
9,719  
43,060  
2,527  
1,002  
Securities  
Cash and cash equivalents  
Non-fixed assets  
10,520  
142,294  
5,591  
7,771  
11,017  
103,800  
2,688  
1,000  
63,581  
142  
1,298  
60,740  
161  
105,107  
4,130  
Deferred taxes  
9.  
Prepaid expenses  
22.  
1,395  
1,030  
1,095  
77  
93  
Total assets (thereof short-term  
2
004: 68,597; 2003: 65,051)  
247,334  
182,696  
178,268  
94,715  
95,144  
87,981  
83,124  
Liabilities and stockholders’ equity  
Capital stock  
3,565  
10,887  
40,657  
(9,701)  
2,633  
8,042  
30,032  
(7,166)  
2,633  
7,915  
29,085  
(5,152)  
Additional paid-in capital  
Retained earnings  
Accumulated other comprehensive loss  
Treasury stock  
Stockholders’ equity  
Minority interests  
23.  
45,408  
1,231  
33,541  
909  
34,481  
470  
25,439  
885  
26,361  
454  
8,102  
24  
8,120  
16  
Accrued liabilities  
25.  
26.  
27.  
28.  
56,272  
103,728  
17,483  
11,788  
132,999  
2,963  
41,566  
76,620  
12,914  
8,707  
98,241  
2,189  
6,250  
39,172  
75,690  
11,583  
8,805  
96,078  
2,736  
5,331  
40,506  
8,680  
12,704  
6,095  
27,479  
(3,989)  
4,395  
38,439  
11,779  
11,359  
6,030  
1,060  
67,940  
210  
733  
Financial liabilities  
63,911  
224  
Trade liabilities  
Other liabilities  
2,612  
70,762  
6,178  
1,855  
2,775  
66,910  
6,113  
1,232  
Liabilities  
29,168  
(3,377)  
4,099  
Deferred taxes  
9.  
Deferred income  
29.  
8,461  
Total liabilities (thereof short-term  
2
004: 77,928; 2003: 70,542)  
201,926  
149,155  
143,787  
178,268  
69,276  
94,715  
68,783  
95,144  
79,879  
87,981  
75,004  
83,124  
Total liabilities and stockholders’ equity  
247,334  
182,696  
1
Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.  
The accompanying notes are an integral part of these Consolidated Financial Statements.  
1
02  
Consolidated Statements of Changes in Stockholders’ Equity  
Accumulated other comprehensive loss  
Additional  
paid-in  
capital  
Cumulative  
translation  
adjustment  
Available-  
for-sale  
securities  
Derivative  
financial  
instruments  
Minimum  
pension  
liability  
Capital  
stock  
Retained  
earnings  
Treasury  
stock  
Total  
(
in millions of )  
Balance at January 1, 2002  
Net income  
2,609  
7,319  
26,441  
4,718  
3,850  
61  
(337)  
(906)  
39,037  
4,718  
Other comprehensive income (loss)  
Total comprehensive loss  
(3,238)  
(135)  
1,402  
(6,301)  
(8,272)  
(3,554)  
Stock based compensation  
57  
57  
Issuance of shares upon conversion  
of notes  
24  
482  
(49)  
49  
506  
(49)  
Purchase of capital stock  
Re-issuance of treasury stock  
Dividends  
49  
(1,003)  
(1,003)  
(39)  
Other  
(39)  
7,819  
Balance at December 31, 2002  
2,633  
30,156  
612  
(74)  
1,065  
(7,207)  
35,004  
Net income  
448  
448  
452  
900  
Other comprehensive income (loss)  
Total comprehensive income  
(1,561)  
407  
1,162  
444  
Stock based compensation  
95  
95  
Issuance of shares upon conversion  
of notes  
1
(28)  
28  
1
(28)  
Purchase of capital stock  
Re-issuance of treasury stock  
Dividends  
28  
(1,519)  
29,085  
(1,519)  
34,481  
Balance at December 31, 2003  
2,633  
7,915  
(949)  
333  
2,227  
(6,763)  
Net income  
2,466  
2,466  
(2,014)  
452  
Other comprehensive loss  
Total comprehensive income  
(691)  
(206)  
(369)  
(748)  
Stock based compensation  
Purchase of capital stock  
Re-issuance of treasury stock  
Dividends  
127  
(30)  
30  
127  
(30)  
30  
(1,519)  
30,032  
(1,519)  
33,541  
Balance at December 31, 2004  
2,633  
8,042  
(1,640)  
127  
1,858  
(7,511)  
The accompanying notes are an integral part of these Consolidated Financial Statements.  
1
03  
Consolidated Statements of Cash Flows *  
Consolidated  
Year ended December 31,  
2
004  
2004  
2003  
2002  
(
in millions)  
(Note 1) $  
3,338  
(146)  
Net income (loss)  
2,466  
(108)  
448  
35  
4,718  
14  
Income (loss) applicable to minority interests  
Cumulative effects of changes in accounting principles  
Gains on disposals of businesses  
30  
159  
(380)  
(281)  
(956)  
1,960  
5,579  
5,838  
644  
(2,645)  
Impairment of investment in EADS  
Depreciation and amortization of equipment on operating leases  
Depreciation and amortization of fixed assets  
Change in deferred taxes  
7,371  
7,875  
(803)  
1,263  
(372)  
(704)  
(35)  
5,445  
5,817  
(593)  
933  
7,244  
6,379  
268  
Equity (income) loss from associated companies  
Change in financial instruments  
538  
16  
(275)  
(520)  
(26)  
160  
214  
(Gains) losses on disposals of fixed assets/securities  
(424)  
71  
(595)  
257  
Change in trading securities  
Change in accrued liabilities  
1,820  
196  
1,344  
145  
1,015  
469  
3,312  
694  
Turnaround plan expenses – Chrysler Group  
Turnaround plan payments – Chrysler Group  
Net changes in inventory-related receivables from financial services  
Changes in other operating assets and liabilities:  
(296)  
(3,324)  
(219)  
(2,455)  
(279)  
(2,670)  
(512)  
(2,107)  
Inventories, net  
(1,886)  
328  
(1,393)  
242  
(293)  
(441)  
6
(305)  
Trade receivables  
Trade liabilities  
1,606  
(878)  
1,186  
(648)  
11,060  
1,081  
1,021  
13,826  
(266)  
Other assets and liabilities  
(942)  
Cash provided by operating activities  
14,973  
15,909  
Purchases of fixed assets:  
Increase in equipment on operating leases  
Purchases of property, plant and equipment  
Purchases of other fixed assets  
(23,932)  
(8,645)  
(696)  
(17,678)  
(6,386)  
(514)  
(15,604)  
(6,614)  
(303)  
(17,704)  
(7,145)  
(315)  
Proceeds from disposals of equipment on operating leases  
Proceeds from disposals of fixed assets  
14,172  
1,003  
(357)  
10,468  
741  
11,951  
643  
15,112  
878  
Payments for investments in businesses  
(264)  
(1,021)  
1,209  
(10,432)  
10,260  
(28,946)  
16,577  
9,196  
(560)  
Proceeds from disposals of businesses  
1,649  
(8,093)  
8,571  
1,218  
5,686  
(13,012)  
12,319  
(34,494)  
19,699  
8,546  
(5,305)  
5,376  
80  
Investments in/collections from wholesale receivables  
Proceeds from sale of wholesale receivables  
Investments in retail receivables  
(5,978)  
6,331  
(30,488)  
17,148  
9,531  
(4,211)  
3,481  
(81)  
(41,275)  
23,215  
12,903  
(5,701)  
4,713  
Collections on retail receivables  
Proceeds from sale of retail receivables  
Acquisitions of securities (other than trading)  
Proceeds from sales of securities (other than trading)  
Change in other cash  
(5,175)  
4,785  
(134)  
(111)  
Cash provided by (used for) investing activities  
Change in commercial paper borrowings and short-term financial liabilities  
Additions to long-term financial liabilities  
(22,584)  
3,320  
20,325  
(18,100)  
(2,094)  
41  
(16,682)  
2,453  
15,013  
(13,370)  
(1,547)  
30  
(13,608)  
129  
(10,839)  
2,678  
9,964  
(17,117)  
(1,015)  
49  
16,436  
(12,518)  
(1,537)  
44  
Repayment of long-term financial liabilities  
Dividends paid (including profit transferred from subsidiaries)  
Proceeds from issuance of capital stock (including minority interests)  
Purchase of treasury stock  
(41)  
(30)  
(36)  
(49)  
Cash provided by (used for) financing activities  
Effect of foreign exchange rate changes on cash and cash equivalents  
3,451  
2,549  
2,518  
(5,490)  
(
maturing within 3 months)  
Net increase (decrease) in cash and cash equivalents  
maturing within 3 months)  
(424)  
(313)  
(1,069)  
1,667  
(1,195)  
(1,615)  
(
(4,584)  
(3,386)  
Cash and cash equivalents (maturing within 3 months)  
At beginning of period  
14,576  
9,992  
10,767  
7,381  
9,100  
10,715  
9,100  
At end of period  
10,767  
The accompanying notes are an integral part of these Consolidated Financial Statements.  
*
For other information regarding Consolidated Statements of Cash Flows, see Notes 1, 2, and 30.  
1
04  
Industrial Business  
1
Financial Services  
1
Year ended December 31,  
Year ended December 31,  
2
004  
2003  
2002  
2004  
2003  
2002  
(in millions)  
1
,279  
(568)  
30  
4,380  
11  
1,187  
5
1,016  
5
338  
3
Net income (loss)  
(
113)  
Income (loss) applicable to minority interests  
Cumulative effects of changes in accounting principles  
Gains on disposals of businesses  
30  
124  
35  
(281)  
(956)  
1,960  
609  
(2,645)  
Impairment of investment in EADS  
5
44  
,693  
1,211)  
51  
288)  
524)  
29)  
,198  
45  
219)  
2,455)  
544  
4,901  
124  
618  
(18)  
13  
4
4,970  
103  
450  
(1)  
19  
6,700  
122  
766  
94  
9
Depreciation and amortization of equipment on operating leases  
Depreciation and amortization of fixed assets  
Change in deferred taxes  
5
5,735  
194  
6,257  
(498)  
(78)  
(
9
539  
Equity (income) loss from associated companies  
Change in financial instruments  
(
141  
205  
(
(424)  
82  
(599)  
312  
4
(Gains) losses on disposals of fixed assets/securities  
Change in trading securities  
(
3
(11)  
(83)  
(55)  
20  
1
1,098  
469  
3,292  
694  
146  
Change in accrued liabilities  
1
Turnaround plan expenses – Chrysler Group  
Turnaround plan payments – Chrysler Group  
Net changes in inventory-related receivables from financial services  
Changes in other operating assets and liabilities:  
– Inventories, net  
(
(279)  
(2,670)  
(512)  
(2,107)  
(
(
1,535)  
10  
,193  
805)  
,753  
(502)  
(500)  
1,082  
715  
172  
(314)  
142  
32  
209  
59  
(166)  
9
2
– Trade receivables  
1
(97)  
(7)  
(1)  
(169)  
1,245  
8,955  
– Trade liabilities  
(
(2,187)  
6,954  
157  
7,307  
306  
7,041  
– Other assets and liabilities  
3
6,785  
Cash provided by operating activities  
Purchases of fixed assets:  
(
(
3,828)  
6,298)  
(3,973)  
(6,539)  
(250)  
(4,842)  
(7,052)  
(250)  
4,974  
828  
(13,850)  
(88)  
(11,631)  
(75)  
(12,862)  
(93)  
– Increase in equipment on operating leases  
– Purchases of property, plant and equipment  
– Purchases of other fixed assets  
(
496)  
,514  
05  
244)  
,176  
9,911  
27,849)  
,457  
3,848)  
115)  
4,210)  
(18)  
(53)  
(65)  
4
4,577  
606  
5,954  
36  
7,374  
37  
10,138  
50  
Proceeds from disposals of equipment on operating leases  
Proceeds from disposals of fixed assets  
Payments for investments in businesses  
Proceeds from disposals of businesses  
Investments in/collections from wholesale receivables  
Proceeds from sale of wholesale receivables  
Investments in retail receivables  
7
(
(967)  
(532)  
5,168  
38,888  
(37,274)  
3,339  
(2,506)  
(108)  
(20)  
(54)  
(28)  
1
1,179  
42  
30  
518  
2
37,346  
(34,938)  
3,829  
(3,206)  
(361)  
(35,889)  
34,180  
(34,945)  
20,996  
9,646  
(1)  
(47,778)  
45,198  
(32,775)  
19,783  
9,557  
(212)  
98  
(51,900)  
49,593  
(37,833)  
22,205  
8,654  
(55)  
(
4
(
Collections on retail receivables  
(
Proceeds from sale of retail receivables  
Acquisitions of securities (other than trading)  
Proceeds from sales of securities (other than trading)  
Change in other cash  
(
(4,963)  
4,687  
(207)  
(5,250)  
5,283  
(191)  
3
,445  
189)  
36  
93  
(
108  
73  
271  
(
2,869)  
,481  
,661  
6,953)  
(3,180)  
(1,392)  
5,469  
(4,229)  
(908)  
475  
(13,813)  
972  
(10,428)  
1,521  
10,967  
(8,289)  
(629)  
264  
(11,314)  
1,707  
8,054  
(9,421)  
(581)  
276  
Cash provided by (used for) investing activities  
Change in commercial paper borrowings and short-term financial liabilities  
Additions to long-term financial liabilities  
Repayment of long-term financial liabilities  
Dividends paid (including profit transferred from subsidiaries)  
Proceeds from issuance of capital stock (including minority interests)  
Purchase of treasury stock  
1
971  
2
1,910  
(7,696)  
(434)  
(227)  
12,352  
(6,417)  
(962)  
285  
(
(
(
585)  
255)  
(220)  
(30)  
(36)  
(49)  
(3,681)  
(1,316)  
(5,525)  
6,230  
3,834  
35  
Cash provided by (used for) financing activities  
Effect of foreign exchange rate changes on cash and cash equivalents  
(maturing within 3 months)  
(
291)  
(981)  
(1,087)  
817  
(22)  
(88)  
359  
(108)  
Net increase (decrease) in cash and cash equivalents  
(maturing within 3 months)  
(
3,088)  
1,308  
(298)  
(2,432)  
Cash and cash equivalents (maturing within 3 months)  
At beginning of period  
9
,469  
8,161  
7,344  
8,161  
1,298  
1,000  
939  
3,371  
939  
6
,381  
9,469  
1,298  
At end of period  
1
Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.  
1
05  
Consolidated Fixed Assets Schedule  
Acquisition or Manufacturing Costs  
Balance at  
January  
Change in  
Currency consolidated  
Balance at  
December  
31, 2004  
Reclassifica-  
1
, 2004  
change  
companies  
Additions  
tions  
Disposals  
(
in millions of )  
Goodwill  
3,057  
3,513  
6,570  
(160)  
(199)  
(359)  
284  
213  
497  
4
233  
237  
(4)  
(7)  
132  
276  
408  
3,049  
3,477  
6,526  
Other intangible assets  
Intangible assets  
(11)  
Land, leasehold improvements and buildings  
including buildings on land owned by others  
18,701  
31,867  
(430)  
2,515  
337  
335  
381  
511  
20,991  
32,536  
Technical equipment and machinery  
(1,032)  
1,146  
1,950  
1,732  
Other equipment, factory and  
office equipment  
21,077  
(674)  
268  
1,136  
1,763  
785  
22,785  
Advance payments relating to plant and  
equipment and construction in progress  
4,946  
76,591  
1,020  
54  
(237)  
10  
3,818  
6,435  
119  
(4,196)  
73  
3,101  
88  
4,268  
80,580  
1,035  
247  
Property, plant and equipment  
Investments in affiliated companies  
Loans to affiliated companies  
Investments in associated companies  
Investments in related companies  
Loans to associated and related companies  
Long-term securities  
(2,373)  
3,130  
(102)  
1
(17)  
2
269  
78  
5,982  
1,348  
282  
65  
(1,262)  
682  
(279)  
279  
859  
809  
34  
4,329  
1,033  
242  
(6)  
7
208  
145  
4
353  
114  
(1)  
611  
Other loans  
246  
(2)  
31  
21  
258  
Investments and long-term financial assets  
Equipment on operating leases  
9,285  
32,448  
57  
(1,121)  
1,423  
17,889  
1,889  
13,665  
7,755  
35,080  
(1,705)  
113  
1
Currency translation changes with period end rates.  
The consolidated fixed assets schedule is part of the Notes to Consolidated Financial Statements.  
1
06  
Depreciation/Amortization  
Book Value  
1
Balance at  
January  
Change in  
Currency consolidated  
Balance at  
December  
31, 2004  
Balance at  
December  
31, 2004  
Balance at  
December  
31, 2003  
Reclassifica-  
tions  
1
, 2004  
change  
companies  
Additions  
Disposals  
(in millions of )  
1
,241  
(67)  
(22)  
(89)  
3
28  
31  
169  
169  
(1)  
(11)  
(12)  
130  
52  
1,046  
806  
2,003  
2,671  
4,674  
1,816  
2,819  
4,635  
Goodwill  
694  
Other intangible assets  
Intangible assets  
1
8
,935  
182  
1,852  
Land, leasehold improvements and buildings  
including buildings on land owned by others  
,931  
(169)  
(596)  
531  
230  
576  
(28)  
(31)  
271  
9,570  
11,421  
11,100  
9,770  
2
1
0,725  
2,553  
1,445  
21,436  
11,142  
Technical equipment and machinery  
Other equipment, factory and  
office equipment  
3,937  
(357)  
196  
2,367  
9
655  
15,497  
7,288  
7,140  
Advance payments relating to plant and  
equipment and construction in progress  
8
1
(6)  
957  
23  
2
5,498  
20  
(1)  
(51)  
76  
46,579  
211  
10  
4,192  
34,001  
824  
4,865  
32,917  
818  
4
3,674  
(1,128)  
2,371  
Property, plant and equipment  
Investments in affiliated companies  
Loans to affiliated companies  
Investments in associated companies  
Investments in related companies  
Loans to associated and related companies  
Long-term securities  
202  
8
34  
2
237  
46  
(2)  
(2)  
4,331  
780  
5,982  
1,120  
246  
228  
30  
5
253  
164  
12  
3
6
3
128  
12  
78  
599  
353  
6
1
64  
194  
183  
Other loans  
5
37  
(2)  
23  
193  
5,445  
39  
712  
8,369  
7,043  
26,711  
8,748  
24,385  
Investments and long-term financial assets  
Equipment on operating leases  
8
,063  
(399)  
63  
4,803  
1
07  
Notes to Consolidated Financial Statements –  
Basis of Presentation  
1
. Summary of Significant Accounting Policies  
Use of Estimates. Preparation of the financial statements in  
conformity with U.S. GAAP requires management to make esti-  
mates and assumptions related to the reported amounts of  
assets and liabilities and the disclosure of contingent assets and  
liabilities at the date of the consolidated financial statements and  
the reported amounts of revenues and expenses for the period.  
Significant items related to such estimates and assumptions  
include recoverability of investments in equipment on operating  
leases, collectibility of sales financing and finance lease receiv-  
ables, realizability of investments in associated companies, war-  
ranty obligations, sales incentive obligations, valuation of deriva-  
tive instruments, and assets and obligations related to employee  
benefits. Actual amounts could differ from those estimates.  
General. The consolidated financial statements of Daimler-  
Chrysler AG and subsidiaries (“DaimlerChrysler” or the “Group”)  
have been prepared in accordance with generally accepted  
accounting principles in the United States of America (“U.S.  
GAAP”). All amounts herein are presented in euros (“”) and, for  
the year 2004 amounts, also in U.S. dollars (“$”), the latter being  
unaudited and presented solely for the convenience of the reader  
at the rate of 1 = $1.3538, the Noon Buying Rate of the Federal  
Reserve Bank of New York on December 31, 2004.  
Certain amounts reported in previous years have been reclassi-  
fied to conform to the 2004 presentation. In 2004, the presenta-  
tion of the consolidated statements of cash flows was modified  
with regard to certain receivables from financial services. Further  
information, including the effects on comparative periods pre-  
sented in the financial statements, is provided in Note 2.  
DaimlerChrysler’s financial position, results of operations, and  
cash flows are subject to numerous risks and uncertainties. Fac-  
tors that could affect DaimlerChrysler’s future financial state-  
ments and cause actual results to vary materially from expecta-  
tions include, but are not limited to, further adverse changes in  
global economic conditions; overcapacity and intense competi-  
tion in the automotive industry; the concentrations of Daimler-  
Chrysler’s revenues derived from the United States and Western  
Europe; the significant portion of DaimlerChrysler’s workforce  
subject to collective bargaining agreements; fluctuations in  
currency exchange rates, interest rates and commodity prices;  
significant legal proceedings and environmental and other  
government regulations.  
Commercial practices with respect to certain products manufac-  
tured by DaimlerChrysler necessitate that sales financing,  
including leasing alternatives, be made available to the Group’s  
customers. Accordingly, the Group’s consolidated financial  
statements are also significantly influenced by activities of its  
financial services business. To enhance the readers’ understand-  
ing of the Group’s consolidated financial statements, the accom-  
panying financial statements present, in addition to the audited  
consolidated financial statements, unaudited information with  
respect to the financial position, results of operations and cash  
flows of the Group’s industrial and financial services business  
activities. Such information, however, is not required by U.S.  
GAAP and is not intended to, and does not represent the sepa-  
rate U.S. GAAP financial position, results of operations and cash  
flows of the Group’s industrial or financial services business  
activities. Transactions between the Group’s industrial and finan-  
cial services business activities principally represent intercompa-  
ny sales of products, intercompany borrowings and related  
interest, and other support under special vehicle financing  
programs. The effects of transactions between the industrial and  
financial services businesses have been eliminated within the  
industrial business columns.  
Principles of Consolidation. The accompanying consolidated  
financial statements include the financial statements of Daimler-  
Chrysler AG and all of its material, majority-owned subsidiaries  
and certain variable interest entities for which DaimlerChrysler is  
determined to be the primary beneficiary (see Note 3).  
All significant intercompany accounts and transactions relating  
to consolidated subsidiaries and consolidated variable interest  
entities have been eliminated.  
1
08  
Investments in Associated Companies. Significant equity  
investments in which DaimlerChrysler does not have a controlling  
financial interest, but has the ability to exercise significant  
influence over the operating and financial policies of the investee  
The assets and liabilities of foreign operations in highly inflation-  
ary economies are translated into euro on the basis of period-end  
rates for monetary assets and liabilities and at historical rates for  
non-monetary items, with resulting translation gains and losses  
recognized in earnings. Further, for foreign operations in such  
economies, depreciation and gains and losses from the disposal  
of non-monetary assets are determined using historical rates.  
In all periods presented the Group had foreign operations in one  
economy that was considered highly inflationary.  
(
“associated companies”) are accounted for using the equity  
method.  
The excess of DaimlerChrysler’s initial investment in equity  
method companies over the Group’s ownership percentage in the  
underlying net assets of those companies is attributed to certain  
fair value adjustments with the remaining portion recognized as  
goodwill (“investor level goodwill”) which is not amortized.  
Revenue Recognition. Revenue for sales of vehicles, service  
parts and other related products is recognized when persuasive  
evidence of an arrangement exists, delivery has occurred or ser-  
vices have been rendered, the price of the transaction is fixed  
and determinable, and collectibility is reasonably assured. Rev-  
enues are recognized net of discounts, cash sales incentives,  
customer bonuses and rebates granted. Non-cash sales incen-  
tives that do not reduce the transaction price to the customer are  
classified within cost of sales. Shipping and handling costs are  
recorded as cost of sales in the period incurred.  
A decline in fair value of an investment in any associated compa-  
ny below its carrying amount that is deemed to be other than  
temporary results in a reduction in carrying amount of the invest-  
ment to fair value. The impairment is charged to earnings and  
a new cost basis for the investment is established.  
The European Aeronautic Defence and Space Company EADS  
N.V. (“EADS”) represents a significant associated company.  
Because the financial statements of EADS are not made available  
timely to DaimlerChrysler in order to apply the equity method  
of accounting, the Group’s proportionate share of the results of  
operations of this associated company are included in Daimler-  
Chrysler’s consolidated financial statements on a three month  
lag.  
DaimlerChrysler uses price discounts (primarily at the Chrysler  
Group) to adjust market pricing in response to a number of mar-  
ket and product factors, including: pricing actions and incentives  
offered by competitors, economic conditions, the amount of  
excess industry production capacity, the intensity of market com-  
petition, and consumer demand for the product. The Group may  
offer a variety of sales incentive programs at any point in time,  
including: cash offers to dealers and consumers, lease subsidies  
which reduce the consumer’s monthly lease payment, or reduced  
financing rate programs offered to consumers.  
Foreign Currencies. The assets and liabilities of foreign opera-  
tions where the functional currency is not the euro are generally  
translated into euro using period-end exchange rates. The  
resulting translation adjustments are recorded as a component  
of accumulated other comprehensive loss. The statements of  
income (loss) and the statements of cash flows are translated  
using average exchange rates during the respective periods.  
The Group records as a reduction to revenue at the time of sale  
to the dealer the estimated impact of sales incentives programs  
offered to dealers and consumers. This estimated impact repre-  
sents the incentive programs offered to dealers and consumers  
as well as the expected modifications to these programs in order  
for the dealers to sell their inventory.  
The exchange rates of the U.S. dollar, as the significant foreign  
currency, used in preparation of the consolidated financial state-  
ments were as follows:  
The Group offers extended, separately priced warranty contracts  
for certain products. Revenues from these contracts are  
2
004  
1 =  
2003  
2002  
deferred and recognized into income over the contract period in  
proportion to the costs expected to be incurred based on histori-  
cal information. In circumstances in which there is insufficient  
historical information, income from extended warranty contracts  
is recognized on a straight-line basis. A loss on these contracts  
is recognized in the current period, if the sum of expected costs  
for services under the contract exceeds unearned revenue.  
1 =  
1 =  
Exchange rate at December 31,  
Average exchange rates  
First Quarter  
1.3621  
1.2630  
1.0487  
1.2497  
1.2046  
1.2218  
1.2977  
1.0735  
1.1355  
1.1248  
1.1885  
0.8766  
0.9191  
0.9838  
0.9989  
Second Quarter  
Third Quarter  
Fourth Quarter  
For transactions with multiple deliverables, such as when  
vehicles are sold with free service programs the Group allocates  
revenue to the various elements based on their relative fair  
values, if the separation criteria outlined in Emerging Issues Task  
Force (“EITF”) 00-21, “Revenue Arrangements with Multiple  
Deliverables,” are met.  
1
09  
When below market rate loans under special financing programs  
are used to promote sales of vehicles and the Services segment  
finances the vehicle, the effect of the rate differential at the con-  
tract origination date is deducted from revenues and recorded as  
unearned income in the consolidated balance sheet. Services  
amortizes the unearned income balance into earnings using the  
interest method over the original (contractual) life of the receiv-  
ables. Upon prepayment or sale of the receivable, the unamor-  
tized unearned income is recognized into earnings.  
Estimated Credit Losses. DaimlerChrysler determines its  
allowance for credit losses based on an ongoing systematic  
review and evaluation performed as part of the credit-risk evalua-  
tion process. The evaluation performed considers historical loss  
experience, the size and composition of the portfolios, current  
economic events and conditions, the estimated fair value and  
adequacy of collateral and other pertinent factors. Certain homo-  
geneous loan portfolios are evaluated collectively, taking into  
consideration primarily historical loss experience adjusted for the  
estimated impact of current economic events and conditions,  
including fluctuations in the fair value and adequacy of collateral.  
Other receivables, such as wholesale receivables and loans to  
large commercial borrowers, are evaluated for impairment indi-  
vidually based on the fair value of the underlying collateral. Credit  
exposures deemed to be uncollectible are charged against the  
allowance for doubtful accounts. DaimlerChrysler generally does  
not originate or purchase receivables for resale. Loans that are  
classified as held for sale are carried at the lower of cost or mar-  
ket when it is determined that market price for the loan represent  
the estimated future cash flows on the loan.  
Sales under which the Group guarantees the minimum resale val-  
ue of the product, such as in sales to certain rental car company  
customers, are accounted for similar to an operating lease in  
accordance with EITF 95-1, “Revenue Recognition on Sales with a  
Guaranteed Minimum Resale Value.” The guarantee of the resale  
value may take the form of an obligation by DaimlerChrysler to  
pay the deficiency, if any, between the proceeds the customer  
receives upon resale in an auction and the guaranteed amount or  
an obligation to reacquire the vehicle after a certain period of  
time at a set price. Gains or losses from resale of these vehicles  
are included in gross profit.  
Research and Development and Advertising. Research and  
Revenue from operating leases is recognized on a straight-line  
basis over the lease term.  
development and advertising costs are expensed as incurred.  
Sales of Newly Issued Subsidiary Stock. Gains and losses  
resulting from the issuance of stock by a Group subsidiary to  
third parties that reduce DaimlerChrysler’s percentage owner-  
ship (“dilution gains and losses”) and DaimlerChrysler’s share of  
any dilution gains and losses reported by its investees accounted  
for under the equity method are recognized in the Group’s  
consolidated statement of income (loss) in the line item “Other  
financial income (expense), net.”  
Revenue from sales financing and finance lease receivables is  
recognized using the interest method. Recognition of revenue is  
generally suspended when a finance or lease receivable becomes  
contractually delinquent for periods ranging from 60 to 120 days.  
The Group sells significant amounts of finance receivables as  
asset-backed securities through securitization transactions. The  
Group sells a portfolio of receivables to a non-consolidated trust  
and usually remains as servicer for a servicing fee. Servicing fees  
are recognized on a consistent yield basis over the remaining  
term of the related receivables sold. In a subordinated capacity,  
the Group retains residual cash flows, a beneficial interest in  
principal balances of receivables sold and certain cash deposits  
provided as credit enhancements for investors. Gains and losses  
from the sale of finance receivables are recognized in the period  
in which the sale occurs. In determining the gain or loss for  
each qualifying sale of finance receivables, the investment in  
the receivable pool sold is allocated between the portion sold  
and the portion retained based upon their relative fair values.  
Discontinued Operations. The results of operations of discon-  
tinued Group components and gains or losses from their disposal  
are each presented separately net of tax in the Group’s state-  
ment of income (loss) for all periods presented. A Group compo-  
nent is considered a discontinued operation if its operations and  
cash flows have been or will be eliminated from the ongoing  
activities of the Group as a result of the disposal transaction, the  
Group will not have any significant subsequent continuing  
involvement with the component, and the component can be  
clearly distinguished, operationally and for financial reporting  
purposes. If not disposed of by the balance sheet date, to qualify  
as discontinued operations, a component must also meet the  
conditions to be classified as held for sale. Net assets of a dis-  
continued Group component classified as held for sale are mea-  
sured at the lower of its carrying amount or fair value less cost to  
sell. Gains from the sale of a discontinued Group component are  
recognized in the period realized and reported separately.  
1
10  
Pension and Other Postretirement Plans. The measurement of  
pension and postretirement benefit liabilities is based upon  
the projected unit credit method in accordance with Statement  
of Financial Accounting Standards (“SFAS”) 87, “Employers’  
Accounting for Pensions,” and SFAS 106, “Employers’ Accounting  
for Postretirement Benefits Other Than Pensions,” respectively.  
As permitted under SFAS 87 and SFAS 106, changes in the  
amount of either the projected benefit obligation (for pension  
plans), the accumulated benefit obligation (for other postretire-  
ment plans) or differences between actual and expected return  
on plan assets and from changes in assumptions can result in  
gains and losses not yet recognized in the Group’s consolidated  
financial statements. The expected return on plan assets is deter-  
mined based on the expected long-term rate of return on plan  
assets and the fair value or market-related value of plan assets.  
Amortization of an unrecognized net gain or loss is included as a  
component of the Group’s net periodic benefit plan cost for a  
year if, as of the beginning of the year, that unrecognized net gain  
or loss exceeds 10 percent of the greater of (1) the projected  
benefit obligation (for pension plans) or the accumulated postre-  
tirement benefit obligation (for other postretirement plans) or (2)  
the fair value or market-related value of that plan’s assets. In  
such case, the amount of amortization recognized by the Group  
is the resulting excess divided by the average remaining service  
period of active employees expected to receive benefits under  
the plan (see Note 25a).  
Goodwill and Other Intangible Assets. The Group accounts for  
all business combinations initiated after June 30, 2001, using the  
purchase method of accounting. Goodwill represents the excess  
of the cost of an acquired entity over the fair values assigned to  
the assets acquired and the liabilities assumed after taking into  
consideration the types of acquired intangible assets that are  
required to be recognized and reported separately from goodwill.  
Beginning January 1, 2002, goodwill acquired and intangible  
assets determined to have an indefinite useful life are not amor-  
tized, but instead are tested for impairment. Prior to January 1,  
2002, goodwill was amortized on a straight-line basis over its  
estimated useful life of 3 to 40 years, and was assessed for  
recoverability based on estimated undiscounted future cash  
flows.  
DaimlerChrysler evaluates the recoverability of its goodwill at  
least annually or when significant events occur or there are  
changes in circumstances that indicate the fair value of a report-  
ing unit of the Group is less than its carrying value. The Group  
determines the fair value of each of its reporting units by estimat-  
ing the present value of their future cash flows. In addition, any  
recognized intangible asset determined to have an indefinite use-  
ful life is tested at least annually for impairment until its life  
is determined to no longer be indefinite. Intangible assets with  
estimable useful lives are valued at acquisition cost, are amor-  
tized on a straight-line basis over their respective estimated use-  
ful lives (2 to 10 years) to their estimated residual values, and are  
reviewed for impairment whenever events or changes in circum-  
stances indicate that the carrying amount of the asset or asset  
group may not be recoverable.  
DaimlerChrysler elected retroactive application as of January 1,  
2
004, to account for subsidies provided under the Medicare Pre-  
scription Drug, Improvement and Modernization Act of 2003  
“Medicare Act”). Under certain conditions, the Medicare Act pro-  
(
vides for subsidies related to postretirement healthcare benefits  
that reduce the accumulated postretirement benefit obligation  
(
“APBO”) of companies in the United States. See Note 25a for  
further information about the impact of the Medicare Act on the  
Group’s consolidated financial statements.  
Earnings Per Share. Basic earnings per share is calculated by  
dividing income (loss) from continuing operations and net income  
(
loss), respectively, by the weighted average number of shares  
outstanding. Diluted earnings per share reflects the potential  
dilution that would occur if all securities and other contracts to  
issue Ordinary Shares were exercised or converted (see Note  
3
6).  
1
11  
Property, Plant and Equipment. Property, plant and equipment  
is valued at acquisition or manufacturing costs plus the fair value  
of related asset retirement cost, if any, less accumulated depreci-  
ation. Plant and equipment under capital leases are stated at the  
lower of present value of minimum lease payments or fair value  
less accumulated amortization. Depreciation expense is recog-  
nized using the straight-line method. The costs of internally pro-  
duced equipment and facilities include all direct costs and alloca-  
ble manufacturing overhead including depreciation charges  
as well as the fair value of related asset retirement cost, if any.  
Costs of the construction of certain long-term assets include  
capitalized interest, which is amortized over the estimated useful  
life of the related asset. Property, plant and equipment are de-  
preciated over the following useful lives:  
Impairment of Long-Lived Assets. Long-lived assets held and  
used, such as property, plant and equipment, and purchased  
intangible assets subject to amortization, are reviewed for impair-  
ment whenever events or changes in circumstances indicate that  
the carrying amount of an asset or group of assets may not be  
recoverable. Recoverability of assets to be held and used is mea-  
sured by comparing the carrying amount of an asset or asset  
group to the estimated future undiscounted cash flows expected  
to be generated by the asset or group of assets. If the carrying  
amount of an asset or group of assets exceeds its estimated  
future undiscounted cash flows, an impairment charge is recog-  
nized in the Group’s financial statements by the amount by which  
the carrying amount of the asset or group of assets exceeds fair  
value of the asset or group of assets.  
Assets to be disposed of are disclosed separately and are report-  
ed at the lower of the carrying amount or fair value less costs to  
sell, and are no longer depreciated.  
Buildings  
10 to 50 years  
5 to 40 years  
3 to 30 years  
2 to 33 years  
Site improvements  
Technical equipment and machinery  
Other equipment, factory and office equipment  
Non-fixed Assets. Non-fixed assets represent the Group’s inven-  
tories, receivables, securities and cash, including amounts to be  
realized in excess of one year. In the accompanying notes, the  
portion of assets to be realized in excess of one year has been  
disclosed.  
Leasing. Leasing includes all arrangements that transfer the  
right to use specified property, plant or equipment for a stated  
period of time, even if the right to use such property, plant or  
equipment is not explicitly described in an arrangement. The  
Group is a lessee of property, plant and equipment and lessor of  
equipment, principally passenger cars and commercial vehicles.  
All leases that meet certain specified criteria intended to repre-  
sent situations where the substantive risks and rewards of own-  
ership have been transferred to the lessee are accounted for as  
capital leases. All other leases are accounted for as operating  
leases. Rent expense on operating lease where the Group is  
lessee is recognized over the respective lease terms using the  
straight-line method. Equipment on operating leases where the  
Group is lessor is carried initially at its acquisition or production  
cost and is depreciated over the contractual term of the lease,  
using the straight-line method, to its estimated residual value.  
The estimated residual value is initially determined using pub-  
lished third party information as well as projections based on his-  
torical experience about expected resale values for the types of  
equipment leased.  
Inventories. Inventories are valued at the lower of acquisition or  
manufacturing cost or market, cost being generally determined  
on the basis of an average or first-in, first-out method (“FIFO”).  
Certain of the Group’s U.S. inventories are valued using the last-  
in, first-out method (“LIFO”). Manufacturing costs comprise  
direct material and labor and applicable manufacturing over-  
heads, including depreciation charges.  
Marketable Securities and Investments. Securities and certain  
investments are accounted for at fair value, if fair value is readily  
determinable. Unrealized gains and losses on trading securities,  
representing securities bought and held principally for the  
purpose of near term sales, are included in earnings. Unrealized  
gains and losses on available-for-sale securities are included  
as a component of accumulated other comprehensive loss, net of  
applicable taxes, until realized. All other securities and invest-  
ments are recorded at cost. A decline in value of any available-  
for-sale security or cost method investment below cost that  
is deemed to be other than temporary results in an impairment  
charge to earnings that reduces the carrying amount of the secu-  
rity or the cost method investment to fair value establishing  
a new cost basis.  
1
12  
Valuation of Retained Interests in Sold Receivables. Daimler-  
Chrysler retains residual beneficial interests in certain pools of  
sold and securitized retail and wholesale finance receivables.  
Such retained interests represent the present value of the esti-  
mated residual cash flows after repayment of all senior interests  
in the sold receivables. The Group determines the value of its  
retained interests using discounted cash flow modeling upon the  
sale of receivables and at the end of each quarter. The valuation  
methodology considers historical and projected principal and  
interest collections on the sold receivables, expected future cred-  
it losses arising from the collection of the sold receivables, and  
estimated repayment of principal and interest on notes issued to  
third parties and secured by the sold receivables.  
Derivative Instruments and Hedging Activities. Daimler-  
Chrysler uses derivative financial instruments such as forward  
contracts, swaps, options, futures, swaptions, forward rate  
agreements, caps and floors for hedging purposes. The account-  
ing of derivative instruments is based upon the provisions of  
SFAS 133, “Accounting for Derivative Instruments and Hedging  
Activities,” as amended. On the date a derivative contract is  
entered into, DaimlerChrysler designates the derivative as either  
a hedge of the fair value of a recognized asset or liability or of an  
unrecognized firm commitment (fair value hedge), a hedge of a  
forecasted transaction or the variability of cash flows to be  
received or paid related to a recognized asset or liability (cash  
flow hedge), or a hedge of a net investment in a foreign opera-  
tion. DaimlerChrysler recognizes all derivative instruments as  
assets or liabilities on the balance sheet and measures them at  
fair value, regardless of the purpose or intent for holding them.  
Changes in the fair value of derivative instruments are recognized  
periodically either in earnings or stockholders’ equity, as a com-  
ponent of accumulated other comprehensive loss, depending on  
whether the derivative is designated as a hedge of changes in  
fair value or cash flows. For derivatives designated as fair value  
hedges, changes in fair value of the hedged item and the deriva-  
tive are recognized currently in earnings. For derivatives desig-  
nated as cash flow hedges, fair value changes of the effective  
portion of the hedging instrument are recognized in accumulated  
other comprehensive loss on the balance sheet, net of applicable  
taxes, until the hedged item is recognized in earnings. The inef-  
fective portions of the fair value changes are recognized in earn-  
ings immediately. Derivatives not meeting the criteria for hedge  
accounting are marked to market and impact earnings. SFAS 133  
also requires that certain derivative instruments embedded in  
host contracts be accounted for separately as derivatives.  
The Group recognizes unrealized gains or losses attributable to  
the change in the fair value of the retained interests, which are  
recorded in a manner similar to available-for-sale securities, net  
of related income taxes as a component of accumulated other  
comprehensive loss until realized. The Group is not aware of an  
active market for the purchase or sale of retained interests, and  
accordingly, determines the estimated fair value of the retained  
interests by discounting the estimated cash flow releases (the  
cash-out method) using a discount rate that is commensurate  
with the risks involved. In determining the fair value of the  
retained interests, the Group estimates the future rates of pre-  
payments, net credit losses and forward yield curves. These esti-  
mates are developed by evaluating the historical experience of  
comparable receivables and the specific characteristics of the  
receivables sold, and forward yield curves based on trends in the  
economy.  
An impairment adjustment to the carrying value of the retained  
interests is recognized in the period a decline in the estimated  
cash flows below the cash flows inherent in the cost basis of an  
individual retained interest (the pool-by-pool method) is consid-  
ered to be other than temporary. Other than temporary impair-  
ment adjustments are generally recorded as a reduction of rev-  
enue.  
Further information on the Group’s financial instruments is  
included in Note 33.  
Cash Equivalents. The Group’s liquid assets are recorded under  
various balance sheet captions as more fully described in Note 21.  
For purposes of the consolidated statements of cash flows, the  
Group considers all highly liquid instruments with original maturi-  
ties of three months or less to be cash equivalents.  
1
13  
Commitments and Contingencies. Liabilities for loss contin-  
gencies are recorded when it is probable that a liability to third  
parties has been incurred and the amount can be reasonably  
estimated. Liabilities for loss contingencies are regularly adjusted  
as further information develops or circumstances change.  
Stock-Based Compensation. DaimlerChrysler adopted the fair  
value recognition provisions of SFAS 123, “Accounting for Stock-  
Based Compensation,” prospectively to all employee awards  
granted, modified, or settled after January 1, 2003. Compensa-  
tion expense for all stock-options granted prospectively from  
December 31, 2002, has been measured principally at the grant  
date based on the fair value of the equity award using a modified  
Black-Scholes option-pricing model. Compensation expense is  
recognized over the employee service period with an offsetting  
credit to equity (paid-in capital). DaimlerChrysler options granted  
prior to January 1, 2003, continue to be accounted for using the  
intrinsic value based approach under Accounting Principles  
Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to  
Employees,” and related Interpretations. Compensation expense  
under APB 25 was measured at the grant date based on the dif-  
ference between the strike price of the equity award and the fair  
value of the underlying stock as of the date of grant. The follow-  
ing table illustrates the effect on net income and earnings per  
share if the fair value based method had been applied to all out-  
standing and unvested awards in each period.  
The accrued liability for expected warranty-related costs is estab-  
lished when the product is sold, upon lease inception, or when a  
new warranty program is initiated. Estimates for accrued warran-  
ty costs are primarily based on historical experience. Because  
portions of the products sold and warranted by the Group con-  
tain parts manufactured (and warranted) by suppliers, the  
amount of warranty costs accrued also contains an estimate of  
recoveries from suppliers.  
The accrued liability for sales incentives is based on the estimat-  
ed cost of the sales incentive programs and the number of vehi-  
cles held in dealers’ inventory. The majority of vehicles held in  
dealers’ inventory are sold to consumers within the next quarter  
and the sales incentives accrued liability is adjusted to reflect  
recent actual experience.  
Year ended December 31,  
2
004  
2003  
2002  
In accordance with Financial Accounting Standards Board  
(
in millions of €)  
(
“FASB”) Interpretation (“FIN”) 45, “Guarantor’s Accounting and  
Net income  
2,466  
81  
448  
4,718  
Disclosure Requirements for Guarantees, Including Indirect Guar-  
antees of Indebtedness of Others – an interpretation of FASB  
Statements No. 5, 57 and 107 and rescission of FASB Interpreta-  
tion No. 34” DaimlerChrysler recognizes, at inception of a guar-  
antee, a liability for the fair value of the non-contingent portion of  
the obligation due to the issuance of the guarantee. Daimler-  
Chrysler applies these provisions for guarantees issued or modi-  
fied after December 31, 2002. If performance under the guaran-  
tee is probable and the amount can be reasonably estimated, a  
liability for the contingent obligation is recognized for any guaran-  
tee regardless of its date of issuance. Further information on  
the Group’s obligations under guarantees is included in Note 25b  
and 32.  
Add: Stock-based employee compensation  
expense included in reported net income,  
net of related tax effects  
81  
47  
Deduct: Total stock-based employee  
compensation expense determined under  
fair value based method for all awards,  
net of related tax effects  
(113)  
(164)  
365  
(161)  
Pro forma net income  
2,434  
4,604  
Earnings per share (in ):  
Basic  
2.43  
2.40  
2.43  
2.40  
0.44  
0.36  
0.44  
0.36  
4.68  
4.57  
4.67  
4.54  
Basic – pro forma  
Diluted  
Diluted – pro forma  
DaimlerChrysler records the fair value of an asset retirement  
obligation in the period in which it incurs a legal obligation  
associated with the retirement of tangible long-lived assets and  
subsequently adjusts the carrying amount for changes in  
expected cash flows and the passage of time.  
Further information on stock-based compensation is included in  
Note 24.  
Deposits from Direct Banking Business. Demand deposit  
accounts are classified as financial liabilities. Interest paid on  
demand deposit accounts is recognized in cost of sales as  
incurred.  
1
14  
New Accounting Standards Not Yet Adopted. In November  
003 and March 2004, the EITF reached partial consensuses on  
Exchange Commission”, management has decided to report the  
cash flow related effects of those receivables from financial ser-  
vices which relate to sales of the products to customers within  
operating cash flows in the consolidated statements of cash  
flows. This presentation results in the elimination of the inter-  
company activity between the industrial business and financial  
services business. Management also determined to revise the  
presentation in the consolidated statements of cash flows for the  
years 2003 and 2002 to achieve a comparable presentation for  
all periods presented herein.  
2
EITF 03-1, “The Meaning of Other-Than-Temporary Impairment  
and Its Application to Certain Investments.” EITF 03-1 addresses  
the meaning of other than temporary impairment and its applica-  
tion to investments classified as either available-for-sale or held-  
to-maturity under SFAS 115, “Accounting for Certain Investments  
in Debt and Equity Securities,” and investments accounted for  
under the cost method. The EITF agreed on certain quantitative  
and qualitative disclosures about unrealized losses pertaining to  
securities classified as available-for-sale or held-to-maturity. In  
addition, EITF 03-1 requires certain disclosures about cost  
method investments. The recognition and measurement provi-  
sions of EITF 03-1 have been deferred until additional guidance is  
issued. The disclosures required by EITF 03-1 have been included  
in Note 20.  
The cash flow related effects of receivables from financial ser-  
vices that are unrelated to the Group’s inventory or involve  
investments in loans or finance leases to retail customers of a  
dealer-customer continue to be reported within cash used for  
investing activities.  
In November 2004, the FASB issued SFAS 151, “Inventory Costs,  
an amendment of ARB No. 43, Chapter 4” to clarify that abnor-  
mal amounts of idle facility expense, freight, handling costs, and  
wasted material (spoilage) should be recognized as current peri-  
od charges and to require the allocation of fixed production over-  
heads to the costs of conversion based on the normal capacity of  
the production facilities. SFAS 151 is effective prospectively  
for inventory costs incurred during fiscal years beginning after  
June 15, 2005. DaimlerChrysler is currently determining the  
effect of SFAS 151 on the Group’s consolidated financial state-  
ments but does not expect the effect to be material.  
The balance of cash and cash equivalents at December 31, 2003  
and 2002 and the total net increase or decrease in cash and  
cash equivalents and cash provided by or used for financing  
activities for the years ended December 31, 2003 and 2002  
remained unchanged. The impact of the reclassification on the  
captions within the consolidated statements of cash flows with  
respect to the years 2003 and 2002 is:  
Year ended December 31,  
2
003  
2002  
(in millions of €)  
Cash provided by operating activities, as previously reported  
Amount reclassified from investing activities  
16,496  
(2,670)  
13,826  
18,016  
(2,107)  
15,909  
In December 2004, the FASB issued SFAS 123 (revised 2004),  
Cash provided by operating activities, after reclassification  
Share-Based Payment” (“SFAS 123R”). SFAS 123R establishes  
accounting guidance for transactions in which an entity  
Cash used for investing activities, as previously reported  
Amount reclassified to operating activities  
(16,278) (12,946)  
2,670 2,107  
(13,608) (10,839)  
exchanges its equity instruments for goods or services. It also  
addresses transactions in which an entity incurs liabilities in  
exchange for goods or services that are based on the fair value of  
the entity’s equity instruments or that may be settled by the  
issuance of those equity instruments. Equity-classified awards  
are measured at grant date fair value and are not subsequently  
remeasured. Liability-classified awards are remeasured to fair  
value at each balance-sheet date until the award is settled. SFAS  
Cash used for investing activities, after reclassification  
3. Scope of Consolidation, Certain Variable Interest Entities  
and Significant Equity Method Investments  
123R applies to all awards granted after July 1, 2005, and to  
Scope of Consolidation  
awards modified, repurchased or cancelled after that date using  
a modified version of prospective application. DaimlerChrysler  
is currently determining the effect of SFAS 123R on the Group’s  
consolidated financial statements.  
DaimlerChrysler comprises, besides DaimlerChrysler AG, 485  
(2003: 440) German and non-German subsidiaries as well as  
4 (2003: 4) companies (variable interest entities) that have been  
consolidated in accordance with the requirements of FIN 46R.  
A total of 105 (2003: 100) companies are accounted for in the  
consolidated financial statements using the equity method of  
accounting. During 2004, 74 subsidiaries were included in the  
consolidated financial statements for the first time. A total of 29  
subsidiaries were no longer included in the consolidated group.  
The effects of changes in the Group’s consolidated balance  
sheets and the consolidated statements of income (loss), if mate-  
rial, are explained further in the notes to the consolidated finan-  
cial statements. In addition, 3 (2003: 3) companies administering  
pension funds whose assets are subject to restrictions have not  
been included in the consolidated financial statements. The  
impact of non-consolidated subsidiaries (affiliated companies)  
and investments that were not accounted for using the equity  
method of accounting (associated companies) on the consolidat-  
ed financial position, results of operations or cash flows of the  
Group was neither material for individual companies nor in the  
aggregate.  
2
. Presentation of Receivables from Financial Services in Con-  
solidated Statements of Cash Flows  
In prior periods, DaimlerChrysler reported the effects of all  
receivables from financial services as investing activities for pur-  
poses of presentation in the consolidated statements of cash  
flows as well as the accompanying information about cash flows  
of the financial services business. This policy, when applied to  
receivables from financial services related to sales of the Group’s  
products to its customers, had the effect of presenting an invest-  
ing cash outflow and an operating cash inflow even though there  
was no cash flow on a consolidated basis. In the current year,  
based on concerns raised by the staff of the “Securities and  
1
15  
Consolidated Special Purpose Entities  
On July 7, 2004, DaimlerChrysler entered into a securities lending  
agreement with Deutsche Bank AG concerning 22,227,478 EADS  
shares (2.8% of the voting stock). The securities lending has  
several tranches with terms ranging between three and four  
years. As collateral, DaimlerChrysler received a lien on a securities  
account of equivalent value as the shares loaned by Daimler-  
Chrysler. Because this transaction does not meet the criteria of a  
sale, the loaned shares continue to be carried as investments  
on the balance sheet and, accordingly, our proportionate share  
of EADS’ income is still accounted at a percentage of 33.0%.  
DaimlerChrysler applied the provisions of FASB Interpretation  
No. 46 (revised December 2003) “Consolidation of Variable Inter-  
est Entities” (“FIN 46R”), to special purpose entities as of  
December 31, 2003, and to all other entities as of March 31,  
2
004. The implementation of FIN 46R resulted in the consolida-  
tion of several entities, among them primarily leasing arrange-  
ments that were off-balance in the past and qualify as special  
purpose entities as defined in FIN 46R. DaimlerChrysler is the  
primary beneficiary of those structures and, accordingly, consoli-  
dated them effective December 31, 2003. Under the leasing  
arrangements, variable interest entities were established and  
owned by third parties.  
The variable interest entities raised funds by issuing either debt  
or equity securities to third party investors. The variable interest  
entities used the debt and equity proceeds to purchase property  
and equipment, which is leased by the Group and used in the  
normal course of business. At the end of the lease term, Daimler-  
Chrysler generally has the option to purchase the property and  
equipment or re-lease the property and equipment under new  
terms. Total assets of those consolidated entities total 0.7 bil-  
lion and 0.4 billion and total liabilities amount to 0.8 billion and  
As of September 30, 2003, DaimlerChrysler determined that the  
decline in fair value below the carrying value of its investment in  
EADS was other-than-temporary. To evaluate the fair value of the  
investment the Group used the market price of a share of EADS  
common stock, multiplied by the number of shares owned. In  
making that determination, DaimlerChrysler considered the dura-  
tion and severity of the decline and the reasons for the decline.  
Although EADS is involved in a variety of businesses, it is primari-  
ly an aircraft manufacturer because of its Airbus division, which  
manufactures commercial aircraft and represents more than  
60 % of EADS’ revenues. As a consequence, EADS’ share price  
declined as a result of the negative outlook for the airline indus-  
try in the aftermath of the terrorist attacks at September 11,  
2001, the outbreak of the SARS disease, the war in Iraq and the  
decline of the U.S. dollar compared to the euro which further  
depressed market participants’ expectations for the commercial  
airline industry. Consequently, DaimlerChrysler reduced the car-  
rying value of its investment in EADS by 1.96 billion to its mar-  
ket value, based on the quoted market price, which approximated  
3.5 billion at that time. As a result of the impairment a new  
cost basis was established.  
0.4 billion as of December 31, 2004 and 2003, respectively. The  
cumulative effect of consolidating these special purpose entities  
on the Group’s consolidated statement of income (loss) in 2003  
was (30) million, net of taxes of 35 million ((0.03) per share).  
The assets consist primarily of property, plant and equipment  
that generally serves as collateral for the entities’ long-term bor-  
rowings. The creditors of these entities do not have recourse  
to the general credit of the Group, except to the extent of guaran-  
tees provided.  
Further significant Variable Interest Entities  
DaimlerChrysler also holds variable interests in a number of oth-  
er entities, but determined that it is not the primary beneficiary  
of those entities. The discussion below under the headline  
DaimlerChrysler’s equity in the earnings or losses of EADS was  
249 million, (1,845) million and 281 million in 2004,  
2003 and 2002, respectively, including investor-level adjust-  
ments. DaimlerChrysler’s equity in the earnings or losses of  
EADS is shown in the Group’s statements of income (loss) within  
“Financial income (expense), net,” except for the other-than-tem-  
porary impairment of 1,960 million in 2003, which is included in  
a separate caption within “Financial income (expense), net.” The  
2002 result excludes the Group’s proportionate share of EADS’  
transitional goodwill impairment charge of 114 million in 2002  
that resulted from the adoption of SFAS 142 and was reported in  
DaimlerChrysler’s consolidated statement of income (loss) in  
the line item “cumulative effects of changes in accounting princi-  
ples.”  
Significant Equity Method Investments“ and Note 34 provide dis-  
closure about variable interest entities accounted for under the  
equity method of accounting and for multiseller conduits, respec-  
tively. Additionally, DaimlerChrysler has equity or other variable  
interests in a number of other entities where it is not the primary  
beneficiary, among them investments accounted for using the  
cost method, which comprise of dealers, suppliers and service  
providers. Total assets and total liabilities of these entities  
amounted to 0.4 billion and 0.5 billion as of December 31,  
2
004, and 0.3 billion and 0.3 billion as of December 31, 2003,  
respectively. The maximum exposure to loss arising from Daim-  
lerChrysler’s involvement with those entities totaled 0.1 billion  
and 0.2 billion as of December 31, 2004 and 2003, respectively.  
The carrying amount of DaimlerChrysler’s investment in EADS at  
December 31, 2004 and 2003 was 3,854 million and 3,583  
million, respectively. DaimlerChrysler's share of the underlying  
reported net assets of EADS exceeded the carrying value of  
DaimlerChrysler's investment at December 31, 2004 and 2003,  
by 1,899 million, primarily as a result of the impairment write  
down recognized in the third quarter of 2003. The market value  
at December 31, 2004, of DaimlerChrysler’s investment in  
EADS based on quoted market prices was 5,704 million.  
Significant Equity Method Investments  
EADS. At December 31, 2004, the European Aeronautic Defence  
and Space Company EADS N.V. (“EADS”) was the most signifi-  
cant investment accounted for under the equity method. The  
Group’s legal ownership percentage in EADS as of December 31,  
2
004, was 30.2%.  
1
16  
The following table presents summarized U.S. GAAP financial  
information for EADS, which are the basis for applying the equity  
method in the Group’s consolidated financial statements:  
The new investor that acquired a 33.3% voting interest entered  
into a contractual agreement with MMC that awarded it the uni-  
lateral right to make significant operating decisions. In addition,  
the new shareholder has acted in concert with other large institu-  
tional shareholders who together with the new shareholder own  
a majority of the voting stock. Accordingly, such Japanese share-  
holder groups who acted in concert in the recapitalization are  
in a position to control MMC.  
EADS  
2
004  
2003  
2002  
(
in millions of )  
Income statement information 1  
Revenues  
30,977  
753  
27,650  
348  
28,769  
521  
Net income  
The MMC board of directors includes 12 board members in total,  
with the DaimlerChrysler’s representation down to 2 board  
members (16.7% representations) which does no longer enable  
DaimlerChrysler to block or veto any matters coming to a vote  
at board level.  
Balance sheet information 2  
Fixed assets  
29,331  
26,099  
55,430  
27,305  
24,804  
52,109  
Non-fixed assets  
Total assets  
DaimlerChrysler’s ownership interest in voting stock was diluted  
from 37.0% to 24.7%. The dilution below one-third is significant  
because Japanese laws require a one-third minimum quorum to  
afford a shareholder protective rights, e.g. in cases of the disso-  
lution of the company, the sale of all or substantial part of the  
business of the company, or agreements to merge with other  
companies. As a result, DaimlerChrysler no longer has the block-  
ing and veto rights that DaimlerChrysler believes are an essential  
factor in exercising significant influence by ownership interest.  
DaimlerChrysler surrendered significant rights by agreeing not to  
oppose the restructuring plan. Upon conversion of the mandatory  
convertible preferred instruments issued to other MMC investors,  
DaimlerChrysler’s interest in MMC’s voting stock will be further  
diluted to below 11%.  
Stockholders’ equity  
Minority interests  
17,434  
1,971  
16,611  
1,717  
Accrued liabilities  
9,299  
8,055  
Other liabilities  
26,726  
55,430  
25,726  
52,109  
Total liabilities and stockholders’ equity  
1
2
For the period October 1 to September 30.  
Balance sheet information as of September 30.  
MMC. On April 22, 2004, the Board of Management and the  
Supervisory Board of DaimlerChrysler AG decided to withdraw  
from providing any financial support to Mitsubishi Motors Corpo-  
ration (“MMC”) and not to participate in a recapitalization of  
MMC anticipated to occur in July 2004. At the time of this deci-  
sion, DaimlerChrysler held 37% of MMC’s voting stock and 3  
of the 8 members of MMC’s board of directors (approximately  
Furthermore, all executive officers appointed by DaimlerChrysler  
resigned and all other DaimlerChrysler expatriates, in total more  
than 50 managers that were assigned to our investee, left MMC  
prior to June 30, 2004, and returned to DaimlerChrysler. Even pri-  
or to the June 29, 2004 shareholder meeting, an announcement  
was made on May 24, 2004 informing MMC employees that our  
assignees were released from their managerial responsibilities  
and have delegated their responsibilities to other managers, none  
of whom is our representative.  
3
8% representations) were its representatives.  
Between DaimlerChrysler’s Board vote on April 22, 2004, and the  
MMC shareholder meeting on June 29, 2004, MMC worked with  
its other significant shareholders, lenders and potential investors  
on a restructuring plan that included a recapitalization of MMC  
which was presented for vote at the June 29 shareholder meet-  
ing. DaimlerChrysler was not party to those discussions nor did  
DaimlerChrysler participate in any of the measures set forth  
in the restructuring plan; however, DaimlerChrysler’s concurrence  
to the measures was required as its ownership level at such  
time provided it with veto powers.  
Based on the factors outlined above, DaimlerChrysler lost its abil-  
ity to significantly influence MMC’s operating and financial poli-  
cies. Consequently, as of the annual shareholders‘ meeting of  
MMC on June 29, 2004, DaimlerChrysler ceased to account for  
its investment in MMC using the equity method and has since  
accounted for MMC shares as a marketable security at fair value  
(see Note 20).  
On June 29, 2004, the shareholders of MMC approved the  
restructuring plan which resulted in a new investor obtaining a  
33.3% interest in MMC’s voting stock, thereby becoming MMC’s  
largest shareholder, and in the issuance of three classes of  
convertible preferred instruments to other investors and some  
existing MMC shareholders (not including DaimlerChrysler).  
1
17  
Through December 31, 2004, the Group’s interest in the voting  
stock of MMC had been further reduced to 19.7%. The carrying  
amount of the Group’s investment in MMC at December 31, 2004  
and 2003, was 459 million and 959 million, respectively.  
Toll Collect. In December 2002, DaimlerChrysler Services AG  
(“DaimlerChrysler Services”), Deutsche Telekom AG (“Deutsche  
Telekom”), and Compagnie Financière et Industrielle des  
Autoroutes S.A. (“Cofiroute”) (together the “Consortium”)  
entered into a partnership agreement to develop and in the  
framework of a separate joint venture company to install and  
operate a system for the electronic collection of tolls. This was  
based on a contract entered into in September 2002 between  
DaimlerChrysler Services, Deutsche Telekom and Cofiroute as  
well as the Federal Republic of Germany to develop, install and  
operate a system for electronic collection of tolls from all com-  
mercial vehicles over 12t GVW using German highways (“Operat-  
ing Agreement”). DaimlerChrysler Services and Deutsche  
Telekom each hold a 45% equity interest and Cofiroute holds the  
remaining 10% equity interest in both the consortium (Toll Collect  
GbR) and the joint venture company (Toll Collect GmbH) (togeth-  
er “Toll Collect”). Cofiroute’s risks and obligations are limited to  
Through June 29, 2004, the results from MMC are included in the  
Group’s consolidated statements of income using the equity  
method of accounting. The Group’s proportionate share in the  
negative results of MMC through June 29, 2004, 2003 and 2002,  
were (655) million, (281) million and (88) million, respectively.  
The amount for 2004 includes the effects from the dilution of the  
Group’s interest in MMC of (135) million and related realized  
gains from currency hedging of the net investment of 195 mil-  
lion (after tax 120 million). These effects from the dilution as  
well as these realized gains from currency hedging are reflected  
in DaimlerChrysler’s consolidated statement of income (loss)  
in the line item “financial income (expense), net”.  
70 million. DaimlerChrysler Services and Deutsche Telekom are  
The following table presents summarized U.S. GAAP financial  
information for MMC, which were the basis for applying the equi-  
ty method in the Group’s consolidated financial statements:  
currently jointly obliged to indemnify Cofiroute for amounts  
exceeding this limitation. DaimlerChrysler Services accounts for  
its investment in Toll Collect using the equity method of account-  
ing. The Group has a significant variable interest in Toll Collect, a  
variable interest entity, but determined that it is not the primary  
beneficiary and therefore not required to consolidate Toll Collect.  
MMC  
2
004  
2003  
2002  
(
in millions of )  
Income statement information 1  
Toll Collect has not yet generated any revenues after its forma-  
tion in 2002. Toll Collect’s net loss for the years ended December  
Revenues  
9,858  
27,129  
(759)  
27,847  
(238)  
Net loss  
(1,730)  
31, 2004, 2003 and 2002, was 1,071 million, 206 million and  
45 million, respectively. At December 31, 2004 and 2003, Toll  
Balance sheet information 2  
Fixed assets  
Collect’s current assets totaled 77 million and 114 million, its  
non-current assets totaled 458 million and 818 million, its cur-  
rent liabilities totaled 296 million and 883 million, its non-cur-  
rent liabilities totaled 1,173 million and 71 million, and its equi-  
ty totaled (934) million and (22) million, respectively. Toll  
Collect’s assets were primarily comprised of equipment repre-  
senting the toll collection system and its liabilities were primarily  
comprised of bank debt and amounts due to subcontractors.  
7,287  
10,237  
17,524  
Non-fixed assets  
Total assets  
Stockholders’ equity  
Minority interests  
1,116  
114  
Accrued liabilities  
4,077  
12,217  
17,524  
Other liabilities  
Total liabilities and stockholders’ equity  
The Group’s involvement with Toll Collect is comprised of its  
equity interest and certain guarantees to fund Toll Collect GmbH  
and to support the obligations of Toll Collect GmbH towards the  
Federal Republic of Germany relating to the completion and oper-  
ation of the toll collection system. As a result of an analysis of  
the Operating Agreement and the supplement thereto and the  
activities of Toll Collect GmbH, DaimlerChrysler recognized loss-  
es of 480 million, 261 million and 20 million in 2004, 2003  
and 2002, respectively. The aggregate losses recognized exceed-  
ed DaimlerChrysler’s investment. After reducing the carrying  
amount of the investment to zero in 2003, DaimlerChrysler rec-  
ognized an amount of 480 million and 65 million which is  
included in accrued liabilities on DaimlerChrysler’s consolidated  
balance sheets as of December 31, 2004 and 2003, respectively,  
as a result of DaimlerChrysler’s exposure under the aforemen-  
tioned guarantees. The losses attributed to Toll Collect are  
included in Financial income (expense), net, in DaimlerChrysler’s  
1
2
2004 for the period October 1, 2003 to March 31, 2004;  
003 and 2002 for the period October 1 to September 30, respectively.  
Balance sheet information as of September 30. For 2004 no balance sheet information provided  
due to change from equity method to marketable security.  
2
2004, 2003 and 2002 statements of income.  
1
18  
The most significant assumptions used in its accounting for the  
investment in Toll Collect relate to the launch date of the toll col-  
lection system, the estimated cost to design and construct the  
system, and the operation of the system. According to the Oper-  
ating Agreement, the toll collection system was to be operational  
no later than August 31, 2003. Delays in the expected launch  
date of the toll collection system resulted in a loss of revenue for  
Toll Collect and in payments of contractual penalties for delays.  
In addition, cost overruns related to the design and construction  
of the toll collection system that will not be reimbursed by the  
Federal Republic of Germany resulted in additional losses.  
Penalties and revenue reductions under the Operating  
Agreement. Failure to perform various obligations under the  
Operating Agreement may result in penalties, additional revenue  
reductions and damage claims that could become significant  
over time. However, penalties and revenue reductions are capped  
at 75 million per year during phase 1, at 56.25 million for the  
first nine months following the end of phase 1, at 150 million  
per year thereafter until the final operational permit has been  
issued, and at 100 million per year following issuance of the  
final operational permit. These cap amounts are subject to a 3%  
increase for every year of operation. Contractual penalties, rev-  
enue reductions and recourse claims in the case of third party  
liability of the Federal Republic of Germany are not subject to the  
liability cap of 1 billion per year in phase 1.  
On February 19, 2004, the Federal Republic of Germany sent an  
advance notice of termination to the Toll Collect consortium. In  
subsequent negotiations, on February 29, 2004, the consortium  
members reached an agreement with the Federal Republic of  
Germany to continue the Toll Collection project. According to the  
additional agreement (supplement to the Operating Agreement) ,  
notarized in April 2004, the Federal Republic of Germany and the  
consortium members agreed on introducing toll collection on  
January 1, 2005, with on-board units (“OBUs”) that allow for  
slightly less than full technical performance in accordance with  
the technical specification (start of phase 1). Subject to an exten-  
sion of phase 1 up to one year under certain circumstances, the  
toll collection system will be installed and operated with full  
effectiveness as specified in the Operating Agreement no later  
than January 1, 2006 (start of phase 2).  
The Operating Agreement calls for submission of all disputes  
related to the toll collection system to arbitration. The Federal  
Republic of Germany has initiated arbitration proceedings against  
DaimlerChrysler Services AG, Deutsche Telekom AG and the con-  
sortium by serving an introductory writ. The Federal Republic of  
Germany is seeking damages, including contractual penalties and  
reimbursement of lost revenues, that allegedly arose from delays  
in the operability of the toll collection system. See Note 31 for  
additional information.  
Each of the consortium members (including DaimlerChrysler Ser-  
vices) have provided guarantees supporting the obligations of Toll  
Collect GmbH towards the Federal Republic of Germany relating  
to the completion and operation of the toll collection system,  
which are subject to specific triggering events. In addition, Daim-  
lerChrysler AG has guaranteed bank loans obtained by the con-  
sortium. The guarantees are described in detail below:  
Penalties, revenue reductions and other provisions under the  
supplement to the Operating Agreement and the Operating  
Agreement itself are described in more detail below.  
Revenue reductions and other provisions under the supple-  
ment of the Operating Agreement:  
Guarantee of bank loan. DaimlerChrysler AG issued a guarantee  
to third parties up to a maximum amount of 600 million,  
which represents a 50% share of security to bank loans  
obtained by the consortium.  
During phase 1, Toll Collect GmbH or the consortium will be  
liable for any shortfall of net toll proceeds (i.e., excess of tolls  
over the fees payable to Toll Collect GmbH) of the Federal  
Republic of Germany. However, such liability will be limited to  
Guarantee of obligations. Towards the Federal Republic of Ger-  
many the consortium members have jointly and severally guar-  
anteed the obligations of Toll Collect GmbH resulting from the  
operating agreement concerning the delivery and operation of  
the toll collection system. This guarantee expires one year after  
the successful launch of the completed toll collection system,  
which is scheduled for January 1, 2006.  
1 billion per year but in any event will not exceed 83.4 mil-  
lion per month.  
Due to the slightly reduced technical functionality during phase  
1, the Federal Republic of Germany will pay Toll Collect GmbH  
only 95% of the fees which would otherwise be payable under  
the Operating Agreement.  
However, if the total toll revenues received by the Federal  
Republic of Germany from the toll collection system in any  
month of operation during phase 1 are less than 80% of the  
projected toll collection revenues for this month, the fees will  
be subject to a sliding scale based on the actual toll revenues  
collected. No fees will be paid if during phase 1 the revenues  
collected for the respective month do not exceed 20% of the  
projected toll collection revenues for this month plus 83.4 mil-  
lion.  
1
19  
Equity Maintenance Undertaking. The consortium members  
have the obligation to contribute, on a joint and several basis,  
additional funds to Toll Collect GmbH as may be necessary for  
Toll Collect GmbH to maintain a minimum equity (based on Ger-  
man GAAP) of 15% of total assets (20% until August 31, 2004).  
This funding obligation will terminate on August 31, 2015, when  
the Operating Agreement expires, or earlier if the agreement is  
terminated. Additional funding needs may arise if Toll Collect  
GmbH is subject to revenue reductions caused by underperfor-  
mance, if the Federal Republic of Germany is successful in  
claiming lost revenues against Toll Collect GmbH for any period  
the system was not fully operational or if Toll Collect GmbH  
incurs penalties that may become payable under the above  
mentioned agreements. If such penalties, revenue reductions  
and other events reduce Toll Collect GmbH’s equity to a level  
that is below the minimum equity percentage agreed upon, the  
consortium members are obligated to fund Toll Collect GmbH's  
operations to the extent necessary to reach the required mini-  
mum equity.  
DaimlerChrysler’s involvement with dAF consists primarily of its  
equity interest and also subordinated loans receivable and unse-  
cured loans that have been provided to dAF. In the fourth quarter  
of 2004, DaimlerChrysler recorded impairment charges of 222  
million relating to its investment which are based on estimates of  
the fair value of DaimlerChrysler’s proportionate share of dAF’s  
underlying equity and of the loans provided to dAF. Daimler-  
Chrysler believes that its maximum exposure to loss as a result  
of its involvement with dAF is primarily limited to the remaining  
carrying value of its total investments (including loans) in dAF  
of 291 million at December 31, 2004.  
Other Equity Method Investments that are also Variable  
Interest Entities. Furthermore, DaimlerChrysler holds significant  
variable interests in a number of other companies, accounted for  
using the equity method, but determined that it is not the primary  
beneficiary of those entities. Total assets and total liabilities  
of these entities amounted to 0.6 billion and 0.4 billion as of  
December 31, 2004, and 0.6 billion and 0.4 billion as of  
December 31, 2003, respectively. The maximum exposure to loss  
arising from DaimlerChrysler’s involvement with those entities  
totaled 0.3 billion and 0.3 billion as of December 31, 2004 and  
2003, respectively.  
While DaimlerChrysler’s maximum future obligation resulting  
from the guarantee of the bank loan can be determined (600  
million), the Group is unable to accurately estimate its maximum  
exposure to loss resulting from the guarantee of obligations and  
the guarantee in form of the equity maintenance undertaking due  
to the various uncertainties described above. Therefore, in addi-  
tion to the maximum exposure from the guarantee of the bank  
loan and the risks already provided for under the established  
accruals, the Group’s exceeding maximum exposure to loss could  
be material.  
4. Acquisitions and Dispositions  
Acquisitions. On March 14, 2003, as part of the Group’s global  
commercial vehicle strategy, DaimlerChrysler acquired from  
MMC a 43% non-controlling interest in Mitsubishi Fuso Truck and  
Bus Corporation (“MFTBC”) for 764 million in cash plus certain  
direct acquisition costs. MFTBC is involved in the development,  
design, manufacture, assembly and sale of small, mid-size and  
heavy-duty trucks and buses, primarily in Japan and other Asian  
countries. Also, on March 14, 2003, ten Mitsubishi Group compa-  
nies entered into a separate share sale and purchase agreement  
with MMC pursuant to which they purchased from MMC 15% of  
MFTBC’s shares for approximately 266 million in cash. On  
March 18, 2004, DaimlerChrysler acquired from MMC an addi-  
tional 22% interest in MFTBC for 394 million in cash, thereby  
reducing MMC’s interest in MFTBC to a non-controlling 20%. The  
aggregate amount paid by DaimlerChrysler for its 65% controlling  
interest in MFTBC was 1,251 million consisting of consideration  
paid plus direct acquisition costs in 2003 and 2004 (770 million  
and 394 million, respectively) plus a re-allocation of 87 million  
of the initial purchase price of MMC pertaining to MFTBC and  
previously included in the Group’s investment in MMC which was  
an equity method investee of DaimlerChrysler when the business  
combination with MFTBC was consummated. DaimlerChrysler  
has included the consolidated results of MFTBC beginning at the  
consummation date in the Group’s Commercial Vehicles seg-  
ment. Prior to then, the Group’s proportionate share of MFTBC’s  
results are included in the Commercial Vehicles segment using  
the equity method of accounting (see Note 35).  
After the accession of Toll Collect GmbH to the Operating Agree-  
ment on December 14, 2004, then on December 15, 2004, Toll  
Collect received the special preliminary operating permit for  
operating the toll collection system during phase 1 by the govern-  
ment; the system was successfully launched with phase 1 func-  
tionality on January 1, 2005.  
debis AirFinance. In November 1995, DaimlerChrysler assumed  
a 45% equity ownership interest in debis AirFinance (“dAF”), an  
Amsterdam registered Private Limited Liability Company that was  
established for purposes of leasing aircraft and related technical  
equipment to airlines and financial intermediaries. Several banks  
hold the remaining ownership interests in dAF. DaimlerChrysler  
holds significant variable interests in dAF, a variable interest enti-  
ty, but determined that the Group is not the primary beneficiary  
of that entity and therefore is not required to consolidate dAF.  
DaimlerChrysler accounts for its investment in dAF under the  
equity method.  
Revenues of dAF were 323 million in 2004, 340 million in  
2
2
financial liabilities totaled 1,803 million and 1,783 million,  
total liabilities were 2,400 million and 2,521 million, and equity  
totaled 117 million and 105 million, respectively.  
003 and 528 million in 2002. At December 31, 2004 and  
003, total assets of dAF were 2,517 million and 2,626 million,  
1
20  
Subsequent to the acquisition of the controlling interest in  
MFTBC, a number of quality problems concerning MFTBC vehi-  
cles spanning production years since July 1974 were identified.  
During the second and third quarter of 2004, DaimlerChrysler  
was able to comprehensively assess those quality issues and  
define necessary technical solutions and a course of action to  
perform them. The estimates of cost in the interim periods of  
The following table is prepared on a pro forma basis for 2004 and  
2003, as though DaimlerChrysler acquired its controlling interest  
in MFTBC as of the beginning of the periods presented. The pro  
forma amounts include charges for acquired in-process R&D.  
2
004  
2003  
(in millions of  except earnings per share)  
2
004 were based on the status of the investigation and Daimler-  
Revenues  
143,950 142,999  
Chrysler’s best estimate of the probable costs to be incurred to  
address and remedy the identified quality issues.  
Income (loss) from continuing operations  
2,449  
2,449  
(407)  
459  
Net income  
Earnings (loss) per share from continuing operations  
Of the 1.1 billion recorded by MFTBC, (i) 0.1 billion was recog-  
nized in “Financial income (expense), net” on the statement of  
income representing DaimlerChrysler’s proportionate share of  
the results of MFTBC which is included on a one month lag relat-  
ing to amounts attributed to refinements to estimates that were  
made before MFTBC was fully consolidated, (ii) 0.7 billion to  
cost of sales representing the sum of the 43% attributed to the  
March 2003 investment (for which the purchase price allocation  
period is closed) and the 35% of the costs attributed to minority  
shareholders of MFTBC; (iii) 0.2 billion to goodwill attributed to  
the 22% interest acquired in 2004; and (iv) 0.1 billion to  
deferred tax assets.  
Basic  
2.42  
2.41  
(0.40)  
(0.40)  
Diluted  
The pro forma results above are not necessarily indicative of what  
would have occurred if DaimlerChrysler’s acquisition of a  
controlling interest in MFTBC had been in effect for the periods  
presented. They do not reflect any synergies that are expected  
to be achieved from combining the operations of DaimlerChrysler  
and MFTBC, and are not intended to be a projection of future  
results.  
DaimlerChrysler believes that it has valid claims as a result of  
representations and warranties by the seller (MMC) in connec-  
tion with the purchase of its controlling interest in MFTBC and is  
currently in discussions with MMC regarding these issues. If  
DaimlerChrysler receives consideration from MMC as a result of  
the ongoing discussions, it will be recognized when realized and  
allocated to income and goodwill consistent with the accounting  
for the quality issues subsequent to the business combination.  
Due to the complexity of the issues, the investigation of these  
quality issues and evaluation of the extent of required product  
recalls and other quality measures is not finalized and Daimler-  
Chrysler may need to revise or refine the approach. MFTBC  
expects to be able to complete the majority of the field cam-  
paigns by the end of 2005.  
DaimlerChrysler assigned 95 million of the aggregate prelimi-  
nary purchase price to registered trademarks that are not subject  
to amortization, 81 million to technology with a useful life of  
Dispositions. At December 31, 2004, the Group classified fixed  
assets with a carrying amount of 92 million as held for sale  
which are included in property, plant and equipment, net, in the  
consolidated balance sheet.  
10 years, 49 million to other identifiable intangible assets and  
14 million to acquired in-process R&D that was expensed in the  
periods the investments were made. In addition, DaimlerChrysler  
assigned 6,206 million to tangible assets acquired and 5,469  
million to liabilities assumed. The remaining 275 million were  
allocated to goodwill of the Commercial Vehicles segment and is  
not expected to be deductible for tax purposes.  
In May 2004, as part of the realignment of its strategic alliance  
with Hyundai Motor Company (“HMC”), DaimlerChrysler termi-  
nated discussions with HMC regarding the formation of a com-  
mercial vehicles joint venture. Also in May 2004, DaimlerChrysler  
sold its non-controlling 50% interest in DaimlerHyundai Truck  
Corporation (“DHTC”) to HMC for a total pretax gain of 60 mil-  
lion (27 million is recognized in other income and 33 million is  
recognized in financial income (expense), net), which is attributed  
to the Commercial Vehicles segment. In August 2004, as part  
of the realignment of its strategic alliance with HMC, Daimler-  
Chrysler sold its 10.5% stake in HMC for 737 million in cash,  
resulting in a pretax gain of 252 million that is included  
in financial income (expense), net, of the unaudited condensed  
consolidated statements of income.  
1
21  
On December 31, 2003, as part of the Group’s ongoing strategy  
to focus on its core automotive business, DaimlerChrysler sold  
its 100% equity interest in MTU Aero Engines GmbH (“MTU Aero  
Engines”) to Kohlberg, Kravis and Roberts & Co. Ltd. (“KKR”), an  
investment company. The sales price for the operative business  
of MTU Aero Engines amounted to 1,450 million. Excluding  
cash, cash equivalents and debts, which remain at MTU Aero  
Engines, the net sales price amounted to 1,052 million. Consid-  
eration received by DaimlerChrysler included a note receivable  
from KKR and cash of 877 million. As a result of this transac-  
tion, DaimlerChrysler paid a compensation of $250 million to  
United Technologies Corporation, the parent company of Pratt &  
Whitney, in January 2004. In 2003, DaimlerChrysler realized a  
gain of 882 million from this sale, net of taxes of 149 million.  
The operating results and cash flows from MTU Aero Engines’  
business are included in DaimlerChrysler’s consolidated financial  
statements through December 31, 2003. However the operating  
results and gain are presented as discontinued operations in  
accordance with SFAS 144 (see Note 10). The following classes  
of assets and liabilities were part of this disposal group in 2003:  
In the fourth quarter of 2002, as part of the Group’s ongoing  
strategy to focus on its core automotive business, Daimler-  
Chrysler entered into an agreement to sell a 51% controlling  
interest in VM Motori S.p.A. and its 100% ownership interest in  
Detroit Diesel Motores do Brasil Ltda., both wholly-owned sub-  
sidiaries of DaimlerChrysler. The transactions were completed by  
the fourth quarter of 2003. Based on the agreed purchase price  
of 26 million, DaimlerChrysler recorded an impairment charge  
in 2002 for long-lived assets and goodwill related to the disposal  
groups and long-lived assets and goodwill to be retained. The  
total asset impairment and goodwill impairment charges recog-  
nized in 2002 were 1 million and 40 million, respectively,  
which are included in other expenses of the Other Activities seg-  
ment. DaimlerChrysler accounts for its remaining 49% interest  
in VM Motori S.p.A. using the equity method.  
In April 2002, DaimlerChrysler exercised its option to sell to  
Continental AG the Group’s remaining 40% interest in Conti  
Temic microelectronic GmbH (Automotive Electronics activities),  
which had been accounted for using the equity method, for 215  
million in cash. The sale resulted in a pretax gain of 128 million  
that is included in financial income (expense), net, of the Other  
Activities segment.  
366 million fixed assets, 805 million current assets, 378  
million liabilities and 863 million accrued liabilities.  
In November 2003, as part of the Group’s ongoing strategy to  
focus on its core automotive business, DaimlerChrysler sold a  
In January 2002, DaimlerChrysler exercised its option to sell to  
Deutsche Telekom the Group’s 49.9% interest in T-Systems ITS,  
which had been accounted for using the equity method, for  
4,694 million in cash. The sale, which was part of Daimler-  
Chrysler’s ongoing strategy to focus on its core automotive busi-  
ness, was consummated in March 2002 with the termination  
of the information technology joint venture, resulting in a pretax  
gain of 2,484 million that is included in the financial income  
of the Services segment.  
6
0% interest in Mercedes-Benz Lenkungen GmbH, its 100% inter-  
est in Mercedes-Benz Lenkungen U.S. LLC and its 100% interest  
in the steering activities of DaimlerChrysler do Brasil Ltda. to  
ThyssenKrupp Automotive AG (“ThyssenKrupp”) for 42 million in  
cash. DaimlerChrysler’s remaining 40% interest in Mercedes-  
Benz Lenkungen GmbH is subject to put and call options held by  
DaimlerChrysler and ThyssenKrupp, respectively, of approximate-  
ly 28 million. The sales resulted in an aggregate pretax gain of  
11 million which is included in other income of the Commercial  
Vehicles segment. DaimlerChrysler’s remaining 40% interest in  
Mercedes-Benz Lenkungen GmbH is accounted for using the  
equity method. The following assets and liabilities were part of  
this disposal group in 2003: 30.3 million fixed assets, 114.9  
million current assets, 33.2 million liabilities and 63.2 million  
accrued liabilities.  
In September 2003, as part of the Group’s ongoing strategy to  
focus on its core automotive business, DaimlerChrysler sold its  
50% interest in CTS Fahrzeug-Dachsysteme GmbH to Porsche AG  
for 55 million in cash, resulting in a pretax gain of 50 million  
which is included in financial income (expense), net, of the  
Mercedes Car Group segment. Prior to the sale, DaimlerChrysler  
accounted for CTS Fahrzeug-Dachsysteme GmbH using the  
cost method.  
1
22  
Notes to Consolidated Statements of Income (Loss)  
5
. Functional Costs and Other Expenses  
In October 2002, DaimlerChrysler entered into an agreement to  
sell to GE Capital a significant portion of its portfolio of corporate  
aircraft, consisting of finance lease receivables and owned air-  
craft currently under operating leases, over a period of approxi-  
mately 12 months beginning November 2002. The agreement  
contained provisions for DaimlerChrysler to receive a share of  
future payments throughout the remaining terms of the contracts  
in the portfolio. In connection with the agreement, the Group  
classified as held for sale at December 31, 2002, finance lease  
receivables with a carrying value of 493 million and equipment  
under operating leases with a carrying value of 40 million. The  
agreement with GE Capital was not consummated as of Decem-  
ber 31, 2002. Due primarily to adverse economic conditions, the  
Group reassessed the recoverability of its leasing portfolio as of  
December 31, 2002. Based on the results of this reassessment,  
the Services segment recognized impairment losses of 191 mil-  
lion in other expenses and 20 million in cost of sales. Daimler-  
Chrysler consummated the GE Capital transaction in 2003  
pursuant to which the Services segment sold finance lease  
receivables totaling 113 million and equipment under operating  
leases totaling 14 million for cash to GE Capital. During 2004,  
the Group also sold finance lease receivables totaling 24 million  
Selling, administrative and other expenses are comprised of the  
following:  
Year ended December 31,  
2
004  
2003  
2002  
(
in millions of )  
Selling expenses  
11,403  
6,008  
11,763  
5,351  
11,981  
5,346  
40  
Administration expenses  
Goodwill amortization and impairments  
Other expenses  
561  
658  
799  
17,972  
17,772  
18,166  
In 2004, selling expenses include advertising costs of 2,748  
million (2003: 2,965 million, 2002: 2,811 million).  
In 2003, DaimlerChrysler recognized an impairment charge  
amounting to 77 million related to certain long-lived assets  
(
primarily property, plant and equipment) at a production facility  
in Brazil. The charge is included in cost of sales of the Mercedes  
Car Group segment.  
(2003: 191 million) and operate leases totaling 17 million  
In 2002, DaimlerChrysler recognized an impairment charge  
amounting to 201 million. Moderate demand and strong compe-  
tition in the European market for commercial vehicles resulted in  
idle capacity at one of the Group’s German assembly plants. Con-  
sequently, DaimlerChrysler determined that it does not expect to  
recover the carrying value of certain long-lived assets (primarily  
manufacturing equipment and tooling) at this plant. The charge  
is included in cost of sales of the Commercial Vehicles segment.  
(2003: 5 million) to other investors. At December 31, 2004,  
after adjustments for cash received and currency translation  
effects, finance lease receivables of 15 million (2003: 98 mil-  
lion) are classified as held for sale. At December 31, 2003, equip-  
ment under operating leases totaling 17 million are classified as  
held for sale. Held for sale and held for use finance lease receiv-  
ables and equipment under operating leases are classified in  
the December 31, 2004 and 2003 balance sheets as receivables  
from financial services and equipment on operating leases,  
net, respectively.  
1
23  
In 2002, due to declining resale prices of used passenger cars  
and commercial vehicles in North America, DaimlerChrysler rec-  
ognized impairment charges totaling 256 million upon re-evalua-  
tion of the recoverability of the carrying value of its leased  
vehicles. This re-evaluation was performed using product specific  
cash flow information. As a result, the carrying values of these  
leased vehicles were determined to be impaired as the identifi-  
able undiscounted future cash flows were less than their respec-  
tive carrying values. In accordance with SFAS 144, the resulting  
impairment charges, recorded as a component of cost of sales  
in the Services segment, represent the amount by which the  
carrying values of such vehicles exceeded their respective fair  
market values.  
6. Other Income  
Other income consists of the following:  
Year ended December 31,  
2
004  
2003  
2002  
(in millions of )  
Gains of sales of property, plant and equipment  
94  
58  
48  
Rental income, other than relating to  
financial services  
100  
128  
68  
110  
11  
197  
Gains on sales of companies  
Income from employee leasing programs  
Reimbursement of contract costs  
Government subsidies  
71  
81  
17  
63  
30  
63  
56  
Other miscellaneous items  
475  
359  
689  
332  
777  
As discussed in Note 7, the DaimlerChrysler Supervisory Board  
approved a multi-year turnaround plan for the Chrysler Group in  
February 2001. The related charges are presented as a separate  
line item on the accompanying consolidated statements of  
income (loss) and are not reflected in cost of sales or selling,  
administrative and other expenses.  
8
95  
Other miscellaneous items consist of reimbursements under  
insurance policies, income from licenses, reimbursements of cer-  
tain non-income related taxes and customs duties, income from  
various employee canteens and other miscellaneous items.  
Personnel expenses included in the statement of income (loss)  
are comprised of:  
As result of the settlement agreement in connection with the sale  
of DaimlerChrysler Rail Systems GmbH (Adtranz) in 2004, a gain  
of 120 million which had been deferred since 2001 was realized  
as other income (see Note 31).  
Year ended December 31,  
2
004  
2003  
2002  
(in millions of )  
Wages and salaries  
18,750  
3,294  
948  
18,897  
3,178  
837  
19,701  
3,132  
152  
Social security and payroll costs  
Net pension cost (see Note 25a)  
Net postretirement benefit cost (see Note 25a)  
Other expenses for pensions and retirements  
7. Turnaround Plan for the Chrysler Group  
1,173  
51  
1,290  
85  
1,119  
59  
In 2001, the DaimlerChrysler Supervisory Board approved a multi-  
year turnaround plan for the Chrysler Group. Key initiatives  
for the multi-year turnaround plan included a workforce reduction  
and an elimination of excess capacity. The workforce reduction  
affected represented and non-represented hourly and salary  
employees. To eliminate excess capacity, the Chrysler Group has  
eliminated shifts and reduced line speeds at certain manufactur-  
ing facilities, and adjusted volumes at component, stamping and  
powertrain facilities. Additionally, the Chrysler Group has or is  
in the process of idling, closing or disposing of certain manufac-  
turing plants.  
2
4,216  
24,287  
24,163  
Number of employees (annual average):  
2
004  
2003  
2002  
Hourly employees  
Salaried employees  
Trainees/apprentices  
229,763 226,989 232,304  
134,949 129,656  
14,307 14,039  
79,019 370,684  
125,110  
13,263  
3
370,677  
The net charges recorded for the plan in 2004 were 145 million  
(89 million net of taxes) and are presented as a separate line  
item on the accompanying consolidated statements of income  
(loss) (139 million and 6 million would have otherwise been  
reflected in cost of sales and selling, administrative and other  
expenses, respectively). The 2004 charges and adjustments were  
for costs associated with the closing or disposition of manufac-  
turing facilities in 2003 to 2005.  
Information on the remuneration to the current and former mem-  
bers of the Board of Management and to the current members of  
the Supervisory Board is included in Note 38.  
1
24  
The net charges recorded for the plan in 2003 were 469 million  
288 million net of taxes) and are presented as a separate line  
item on the accompanying consolidated statements of income  
loss) (462 million and 7 million would have otherwise been  
reflected in cost of sales and selling, administrative and other  
expenses, respectively). The 2003 charges and adjustments were  
recorded for costs associated with the closing, significant down-  
sizing or sale of certain manufacturing facilities in 2003 to 2005,  
related workforce reduction measures as well as revisions of  
estimates based on information available or actual settlements.  
The pre-tax amounts for turnaround plan charges are comprised  
of the following:  
(
(
Workforce  
reductions  
Asset  
Other  
write-downs costs/credits  
Total  
(in millions of )  
Reserve balance  
at January 1, 2002  
506  
353  
269  
30  
510  
99  
1,016  
721  
Additional charges  
Adjustments  
Net charges  
(41)  
(16)  
83  
(27)  
312  
299  
694  
Payments  
(297)  
(215)  
(512)  
The net charges recorded for the plan in 2002 were 694 million  
Amount charged  
against assets  
(
439 million net of taxes) and are presented as a separate line  
item on the accompanying consolidated statements of income  
loss) (680 million and 14 million would have otherwise been  
(299)  
(6)  
(305)  
Amount recognized by  
and transferred to  
(
the employee benefit plans  
(152)  
(89)  
(152)  
(156)  
reflected in cost of sales and selling, administrative and other  
expenses, respectively). The 2002 charges and adjustments were  
for costs associated with the idling, closing or disposal of certain  
manufacturing facilities in 2002 and 2003 and ongoing work-  
force reduction measures as well as revisions of estimates based  
upon information currently available for actual settlements.  
Currency translation  
adjustments  
(67)  
Reserve balance  
at December 31, 2002  
280  
182  
27  
234  
15  
305  
26  
585  
442  
27  
Additional charges  
Adjustments  
Net charges  
(15)  
11  
209  
(151)  
249  
469  
(279)  
The net charges recorded for the plan in 2001 were 3,064 mil-  
lion (1,934 million net of taxes), including 1,374 million related  
to workforce reductions, 984 million related to asset write-downs  
and 706 million related to other costs.  
Payments  
(128)  
Amount charged  
against assets  
(249)  
(3)  
(252)  
Amount recognized by  
and transferred to  
the employee benefit plans  
(108)  
(32)  
198  
(37)  
148  
(108)  
(69)  
346  
Currency translation  
adjustments  
Reserve balance  
at December 31, 2003  
Additional charges/  
(
gains)  
175  
(21)  
6
37  
43  
(55)  
3
126  
19  
Adjustments  
Net charges/(gains)  
Payments  
154  
(52)  
(100)  
145  
(219)  
(119)  
Amount charged  
against assets  
(43)  
65  
22  
Amount recognized by  
and transferred to  
the employee benefit plans  
(57)  
(16)  
160  
(1)  
60  
(57)  
(17)  
220  
Currency translation  
adjustments  
Reserve balance  
at December 31, 2004  
The Chrysler Group sold the Dayton Thermal Products facility on  
May 1, 2002 to a joint venture company with Behr America, Inc.  
and maintained a minority interest for two years. The Chrysler  
Group sold its remaining minority interest in the joint venture to  
Behr America for net book value on May 1, 2004. In addition, the  
Chrysler Group sold its Graz, Austria plant to Magna International  
Inc. (“Magna”) on July 12, 2002. The exit costs of these two  
plant sales were previously provided for in the turnaround plan  
charges.  
1
25  
In January 2003, the Chrysler Group contributed its New Castle  
machining and forging facility to NC-M Chassis Systems LLC, a  
joint venture company formed with Metaldyne Corporation (“Met-  
aldyne”). The Chrysler Group owned 60% of the common stock of  
the joint venture company and Metaldyne owned the remaining  
Other costs primarily included supplier contract cancellation  
costs, facility deactivation costs and accruals related to divesti-  
ture actions. Additionally, as noted above, other costs for 2004  
included gains resulting from the sale of assets associated with  
the NVG transaction.  
4
0%. In December 2003, Metaldyne exercised its option to pur-  
chase Chrysler Group’s 60% interest in the NC-M Chassis Sys-  
tems LLC joint venture company in exchange for cash and Metal-  
dyne subordinated debt and preferred equity securities. The  
subordinated debt and preferred equity securities were valued at  
fair market value by an investment bank. The loss on the sale of  
the interest in the NC-M Chassis Systems LLC totaled 39 million  
and was included in the turnaround plan charges.  
The Chrysler Group expects to make cash payments of $0.2  
billion in 2005 for the previously recorded charges. The Chrysler  
Group may recognize additional adjustments to the turnaround  
plan charges in 2005 primarily relating to the sale or closure  
of selected operations.  
8. Financial Income (Expense), net  
In April 2004, the Chrysler Group sold its Huntsville, Alabama  
operations to Siemens VDO Automotive Electronics Corporation  
resulting in a pre-tax loss of 45 million. The exit costs associat-  
ed with this sale were previously provided for in the turnaround  
plan charges.  
Year ended December 31,  
2
004  
2003  
2002  
(
in millions of )  
Income from investments  
of which from affiliated companies  
36 (2003: 37; 2002: 44)  
86  
37  
44  
73  
In September 2004, the Chrysler Group sold its New Venture  
Gear (“NVG”) operations to Magna for consideration of 347 mil-  
lion consisting of cash, notes receivable and preferred shares of  
Magna’s newly established subsidiary. The notes receivable and  
preferred shares were valued at fair market value by an invest-  
ment bank. This transaction resulted in charges for workforce  
reduction which were offset by gains from the sale of assets,  
included in “Other costs/credits” in the table above. The sale is  
not expected to have a significant impact on the financial results.  
The final purchase price adjustments are expected to be com-  
pleted in the first half of 2005. Also in 2004, the Chrysler Group  
committed to a plan for the closure of one other facility. The exit  
costs of these actions are provided for in the turnaround plan  
charges.  
Gains, net from disposals of investments and  
shares in affiliated and associated companies  
291  
2,645  
Gains (loss) from the dilution of shares  
in affiliated companies and investments  
accounted for under the equity method  
(135)  
24  
Impairment of investment in EADS (Note 3)  
(1,960)  
Write-down of investments and shares  
in affiliated companies  
(50)  
(798)  
(606)  
(44)  
(538)  
(63)  
(17)  
Loss from companies included at equity  
Income (loss) from investments, net  
(2,437)  
2,638  
Other interest and similar income  
of which from affiliated companies  
5 (2003: 20; 2002: 9)  
490  
521  
720  
Interest and similar expenses  
of which from affiliated companies  
32 (2003: 16; 2002: 21)  
(790)  
(300)  
(911)  
(390)  
(1,040)  
(320)  
Interest expense, net  
Workforce reduction charges in 2004, 2003 and 2002 were 154  
million, 209 million and 312 million respectively. The charges of  
the voluntary early retirement programs, accepted by 503, 1,827  
and 3,175 employees in 2004, 2003 and 2002, respectively, are  
formula driven based on salary levels, age and past service. In  
addition, 5,417, 1,355 and 5,106 employees were involuntarily  
affected by the plan in 2004, 2003 and 2002, respectively. The  
amount of involuntary severance benefits paid and charged  
against the liability was 51 million, 20 million and 199 million  
in 2004, 2003 and 2002, respectively. The amount recognized by  
and transferred to the employee benefit plans represents the  
cost of the special early retirement programs and the curtailment  
of prior service costs actuarially recognized by the pension and  
postretirement health and life insurance benefit plans.  
Income (loss) from securities and long-term  
receivables of which from affiliated companies  
2 (2003: 1; 2002: 7)  
18  
(15)  
84  
Write-down of securities and long-term  
receivables  
(122)  
(67)  
(19)  
69  
(71)  
(125)  
(112)  
Other, net  
Other financial income (loss), net  
(171)  
1,077)  
35  
(
(2,792)  
2,206  
In 2004, the dilution of DaimlerChrysler’s interest in MMC result-  
ed in a loss of 135 million which is reflected in “Gain (loss)  
from the dilution of shares in affiliated companies and investments  
accounted for under the equity method”. Realized gains  
from DaimlerChrysler’s currency hedging of the net investment  
in MMC of 195 million are included in “Loss from companies  
included at equity”.  
As a result of the planned idling, closing, significant downsizing  
or sale of certain manufacturing facilities, the ability to recover  
the carrying values of certain long-lived assets at these plants  
were determined to be impaired. Accordingly, the Chrysler Group  
recorded impairment charges of 43 million, 249 million and  
299 million in 2004, 2003 and 2002, respectively. The impair-  
ment charges represent the amount by which the carrying values  
of the property, plant, equipment and tooling exceeded their  
respective fair market values.  
1
26  
In 2003, MTU Friedrichshafen GmbH, a fully consolidated compa-  
ny of the Group, created a new company, MTU CFC Solutions  
GmbH (“MTU CFC”), and contributed all of its fuel cell activities  
into a new company for 100% ownership interest. Also in 2003,  
MTU CFC issued new shares to RWE Fuel Cells GmbH for a capi-  
tal contribution. MTU Friedrichshafen GmbH did not participate  
in this increase in share capital causing the ownership interest of  
MTU Friedrichshafen GmbH in MTU CFC to dilute to 74.9%. As a  
result of this transaction, DaimlerChrysler realized a gain of 24  
million, which is included in “gain (loss) from the dilution of  
shares in affiliated companies and investments accounted for  
under the equity method.”  
In 2003, the German government enacted new tax legislation  
which, among other changes, provides that, beginning January 1,  
2004, 5% of dividends received from German companies and  
5% from certain gains from the sale of shares in affiliated and  
unaffiliated companies are no longer tax-free while losses  
from the sale of shares in affiliated and unaffiliated companies  
continue to be non-deductible. The change in tax legislation  
resulted in a deferred tax expense due to the deferred tax liabili-  
ties on the unrealized gains. The effect of the increase in the  
deferred tax liabilities of the Group’s German companies was  
recognized in the year of enactment and as a result, a deferred  
tax expense of 64 million was included in the consolidated  
statement of income (loss) in 2003.  
The Group capitalized interest expenses related to qualifying con-  
struction projects of 70 million (2003: 100 million; 2002: 147  
million).  
In 2002, the German government enacted new tax legislation for  
the purpose of financing the flood disaster which, among other  
changes, increased the Group’s statutory corporate tax rate for  
German companies from 25% to 26.5%, effective only for the  
calendar year 2003. The effect of the increase in the tax rate on  
the deferred tax assets and liabilities of the Group’s German  
companies was recognized in the year of enactment and as a  
result, a net charge of 3 million was included in the consolidated  
statement of income (loss) in 2002.  
9
. Income Taxes  
Income before income taxes consists of the following:  
Year ended December 31,  
2
004  
2003  
2002  
(
in millions of )  
The effect of the tax law changes in Germany in 2003 and 2002  
are reflected separately in the reconciliations presented below.  
Germany  
448  
(736)  
1,332  
596  
4,205  
1,720  
5,925  
Non-German countries  
3,087  
3
,535  
A reconciliation of expected income tax expense to actual income  
tax expense determined using the applicable German corporate  
tax rate for the calendar year of 25% (2003: 26.5%; 2002: 25%) plus  
a solidarity surcharge of 5.5% on federal corporate taxes payable  
plus the after federal tax benefit rate for trade taxes of 12.125%  
(2003: 11.842%; 2002: 12.125%) for a combined statutory rate of  
The income (loss) in Germany includes the income (loss) from  
companies included at equity if the shares of those companies  
are held by German companies. In 2003, the write-down of the  
investment in EADS of 1,960 million is also included.  
38.5% in 2004 (2003: 39.8%; 2002: 38.5%) is as follows:  
Income tax expense is comprised of the following components:  
Year ended December 31,  
2
004  
2003  
2002  
Year ended December 31,  
2
004  
2003  
2002  
(in millions of )  
(
in millions of )  
Expected expense for income taxes  
Foreign tax rate differential  
Gains from sales of business interests  
1,361  
(357)  
237  
2,281  
(247)  
Current taxes  
(489)  
Germany  
847  
923  
766  
1,141  
(286)  
(T-Systems ITS, TEMIC)  
(1,012)  
(34)  
Non-German countries  
Deferred taxes  
Germany  
(432)  
Trade tax rate differential  
(43)  
(37)  
Non-deductible impairment of investment  
in EADS  
(502)  
(91)  
172  
473  
979  
(441)  
701  
291  
(88)  
780  
159  
269  
64  
1
Non-German countries  
Tax effect of equity method investments  
Tax free income and non-deductible expenses  
Effect of changes in German tax laws  
Dividend distribution credit at DCAG  
Other  
1
,177  
1,115  
178  
3
For German companies, the deferred taxes at December 31,  
004 were calculated using a federal corporate tax rate of 25%  
2003: 25%; 2002: 26.5% for deferred taxes expected to reverse  
in 2003 and 25% for deferred taxes expected to reverse after  
003). Deferred taxes were also calculated with a solidarity sur-  
(57)  
2
2
(
13  
(4)  
Actual expense for income taxes  
1,177  
979  
1,115  
2
charge of 5.5% for each year on federal corporate taxes plus the  
after federal tax benefit rate for trade tax of 12.125% (2003:  
12.125%; 2002: 11.842% for deferred taxes expected to reverse in  
2
2
003 and 12.125% for deferred taxes expected to reverse after  
003). Including the impact of the surcharge and the trade tax,  
the tax rate applied to German deferred taxes amounted to  
8.5% (2003: 38.5%; 2002: 39.8% for deferred taxes expected to  
3
reverse in 2003 and 38.5% for deferred taxes expected to reverse  
after 2003).  
1
27  
In 2002, income tax credits from dividend distribution reflected  
the tax benefit from the 2001 dividend distribution of 1.00 per  
Ordinary Share paid in 2002.  
At December 31, 2004, the Group had corporate tax net operat-  
ing losses (“NOLs”) amounting to 1,705 million (2003: 2,991  
million), trade tax NOLs amounting to 81 million (2003: 40 mil-  
lion) and tax credit carryforwards amounting to 1,640 million  
(2003: 1,700 million). The corporate tax NOLs mainly relate to  
losses of U.S. companies and are partly limited in their use to the  
Group. Of the total amount of corporate tax NOLs at December  
31, 2004, 297 million expire at various dates from 2005 through  
2009, 1,076 million expire in 2024 and 332 million can be  
carried forward indefinitely. The tax credit carryforwards relate to  
U.S. companies and are partly limited in their use to the Group.  
Of the total amount of credit carryforwards at December 31,  
2004 99 million expire from 2005 through 2019, 993 million  
expire in 2024 and 548 million can be carried forward indefi-  
nitely. The trade tax NOLs are not limited in their use.  
The Group has various open income tax years unresolved with  
the taxing authorities in various jurisdictions. The open years are  
either currently under review by certain taxing authorities or not  
yet under examination. The Group believes it has adequately  
accrued for any future income taxes that may be owed for all  
open years. In 2003, the line “foreign tax rate differential” above  
included a tax benefit and related interest of 571 million which  
resulted in connection with agreements reached with the U.S. tax  
authorities on a claim pertaining to additional research and  
development credits for tax years 1986 through 1998. In 2003,  
the line “tax free income and non-deductible expenses” included  
a tax expense and related interest of 318 million pertaining pri-  
marily to tax costs associated with developments resulting from  
the examination by the German tax authorities of the Group’s  
German tax returns for the years 1994 to 1998.  
The valuation allowances, which relate to deferred tax assets of  
foreign companies that management believes will more likely  
than not expire without benefit decreased by 56 million from  
December 31, 2003 to December 31, 2004. In future periods  
management’s estimate of the amount of the deferred tax assets  
considered realizable may change, and hence the valuation  
allowances may increase or decrease.  
Deferred income tax assets and liabilities are summarized as  
follows:  
At December 31,  
2
004  
2003  
Net deferred income tax assets and liabilities in the consolidated  
balance sheets are as follows:  
(
in millions of )  
Property, plant and equipment  
Investments and long-term financial assets  
Equipment on operating leases  
Inventories  
699  
2,678  
651  
637  
2,387  
727  
At December 31, 2004  
At December 31, 2003  
Total  
thereof  
Total  
thereof  
non-current  
non-current  
671  
565  
(in millions of )  
Receivables  
834  
658  
Deferred tax assets  
4,130  
1,861  
2,688  
1,982  
(595)  
Net operating loss and tax credit carryforwards  
Pension plans and similar obligations  
Other accrued liabilities  
Liabilities  
2,643  
4,315  
5,460  
3,000  
1,371  
151  
3,252  
4,121  
4,573  
2,454  
1,069  
92  
Deferred tax liabilities  
(2,189)  
(2,099)  
(2,736)  
Deferred tax assets (liabilities),  
net  
1,941  
(238)  
(48)  
1,387  
Deferred income  
DaimlerChrysler recorded deferred tax liabilities for non-German  
withholding taxes of 222 million (2003: 239 million) on 4,434  
million (2003: 4,782 million) in cumulative undistributed earn-  
ings of non-German subsidiaries and additional German tax of  
Other  
2
2,473  
(429)  
20,535  
(485)  
20,050  
(942)  
(3,702)  
(6,333)  
(4,158)  
(366)  
(2,124)  
(166)  
Valuation allowances  
Deferred tax assets  
22,044  
(852)  
85 million (2003: 92 million) on the future payout of these for-  
Intangible assets  
eign dividends to Germany because as of today, the earnings are  
not intended to be permanently reinvested in those operations.  
Property, plant and equipment  
Equipment on operating leases  
Receivables  
(3,798)  
(6,699)  
(4,540)  
(370)  
Prepaid expenses  
Pension plans and similar obligations  
Other accrued liabilities  
(2,096)  
(148)  
Taxes on undistributed earnings of  
non-German subsidiaries  
(307)  
(887)  
(406)  
(331)  
(1,020)  
(956)  
Liabilities  
Other  
Deferred tax liabilities  
Deferred tax assets (liabilities), net  
(20,103) (20,098)  
1,941  
(48)  
1
28  
The Group did not provide income taxes or non-German withhold-  
ing taxes on 9,626 million (2003: 7,891 million) in cumulative  
earnings of non-German subsidiaries because the earnings are  
intended to be indefinitely reinvested in those operations. It is  
not practicable to estimate the amount of unrecognized deferred  
tax liabilities for these undistributed foreign earnings.  
10. Discontinued Operations  
The results of MTU Aero Engines and the gain on sale are report-  
ed as discontinued operations and the Group’s consolidated  
financial statements for all prior periods have been adjusted to  
reflect this presentation. However, for segment reporting purpos-  
es, the revenues and operating profit of MTU Aero Engines is  
included in the Other Activities segment revenues and operating  
profit in 2003 and 2002 (see Notes 4 and 35).  
In 2004, the U.S. government enacted the American Jobs Creation  
Act of 2004 (“Act”), that provides for a special one-time tax  
deduction of 85 percent of certain earnings of non-U.S. subsidiaries  
that are repatriated to the U.S., provided certain criteria are met.  
DaimlerChrysler North America Holding Corporation (“DCNAH”), a  
wholly-owned U.S. subsidiary of DaimlerChrysler, is analyzing  
the provisions of the Act and the feasibility of several alternative  
scenarios for the potential repatriation of a portion of the earnings  
of DCNAH’s non-U.S. subsidiaries. Completion of the evaluation  
is subject to the attainment of clarifying guidance and legislative  
technical corrections of key elements of the repatriation provisions  
of the Act. The evaluation is expected to be completed within a  
reasonable period of time following the publication of the additional  
clarifying language and enactment into law of needed technical  
corrections. The range of reasonably possible amounts being  
considered for repatriation to the U.S., is zero to $2.7 billion. The  
related potential income tax expense ranges from zero to $0.2  
billion.  
The operating results of the discontinued operations are as  
follows:  
Year ended December 31,  
2
003  
2002  
(in millions of €)  
Revenues  
1,933  
2,215  
Income before income taxes  
Income taxes  
67  
(53)  
143  
(62)  
1
Minority interests  
Earnings from discontinued operations  
14  
82  
11. Cumulative Effects of Changes in Accounting Principles  
Including the items charged or credited directly to related com-  
ponents of stockholders’ equity and the expense (benefit) of dis-  
continued operations and from changes in accounting principles,  
the expense (benefit) for income taxes consists of the following:  
Variable Interest Entities. DaimlerChrysler adopted the provi-  
sions of FIN 46R pertaining to the consolidation of variable inter-  
est entities that are special purpose entities as of December 31,  
2003, and to all other entities as of March 31, 2004 (see Note 3).  
The cumulative effect of adopting FIN 46R was a reduction of  
net income of 30 million, net of taxes of 35 million (0.03 per  
share), recognized in the consolidated statement of income  
Year ended December 31,  
2
004  
2003  
2002  
(
in millions of )  
(loss) in 2003.  
Expense for income taxes of continuing  
operations  
1,177  
979  
202  
1,115  
62  
Goodwill and Other Intangible Assets. DaimlerChrysler  
adopted SFAS 142, “Goodwill and Other Intangible Assets” on  
January 1, 2002. The after-tax transitional goodwill impairment  
charge recognized in the consolidated statement of income  
(loss) in 2002 by DaimlerChrysler was 159 million (0.16 per  
share), which represents the Group’s proportionate share of the  
transitional goodwill impairment charges from equity method  
investees, primarily EADS (see Note 12).  
Expense for income taxes of discontinued  
operations  
Income tax benefit from changes in accounting  
principles  
(35)  
Stockholders’ equity for items in accumulated  
other comprehensive loss  
(754)  
1,055  
(2,699)  
Stockholders’ equity for U.S. employee stock  
option expense in excess of amounts  
recognized for financial purposes  
(9)  
414  
2,201  
(1,522)  
In 2004, tax benefits of 2 million (2003: 105 million) from the  
reversal of deferred tax asset valuation allowances at sub-  
sidiaries of MMC were recorded as a reduction of the investor  
level goodwill relating to the Group’s investment in MMC.  
1
29  
Notes to Consolidated Balance Sheets  
1
2. Goodwill  
In connection with the transitional impairment evaluation  
required by SFAS 142, DaimlerChrysler performed an assess-  
ment of whether there was an indication that goodwill was  
impaired as of January 1, 2002. To accomplish this, Daimler-  
Chrysler (1) identified its reporting units, (2) determined the car-  
rying value of each reporting unit by assigning the assets and lia-  
bilities, including the existing goodwill and intangible assets, to  
those reporting units, and (3) determined the fair value of each  
reporting unit. DaimlerChrysler completed this first step of the  
transitional assessment for all of the Group’s reporting units by  
June 30, 2002 and determined that there was no indication that  
goodwill had been impaired as of January 1, 2002. Accordingly,  
no transitional goodwill impairment charge was necessary.  
Information with respect to changes in the Group’s goodwill is  
presented in the Consolidated Fixed Asset Schedule included  
herein.  
Changes in the carrying amount of goodwill as of December 31,  
2
004 compared to the previous year relate mainly to the initial  
consolidation of MFTBC (253 million). Additions to goodwill  
relating to the other acquisitions amounted to 4 million (2003:  
46 million). The remaining changes in the carrying amount of  
goodwill relate to currency translation adjustments and disposi-  
tions of businesses.  
At December 31, 2004 and 2003, the carrying value of goodwill,  
excluding investor level goodwill, allocated to the Group’s report-  
ing segments are:  
Companies accounted for by DaimlerChrysler using the equity  
method, such as EADS, were also subject to the transitional  
impairment evaluation requirements of SFAS 142. Daimler-  
Chrysler’s proportionate share of its equity method investees’  
(primarily EADS) transitional goodwill impairment charge was  
2
004  
2003  
159 million (0.16 per share). This transitional impairment  
(
in millions of )  
charge and the related per share amount are reported as the  
cumulative effect of a change in accounting principles in the  
Group’s consolidated statement of income (loss) for the year  
ended December 31, 2002 (see Note 11).  
Mercedes Car Group  
Chrysler Group  
Commercial Vehicles  
Services  
177  
898  
670  
160  
969  
425  
62  
62  
Other Activities  
Total  
196  
200  
1,816  
DaimlerChrysler’s investor level goodwill in companies accounted  
for using the equity method was 51 million at December 31,  
2,003  
2004 (2003: 559 million). Such goodwill is not subject to the  
impairment tests required by SFAS 142. Instead, the total invest-  
ment, including investor level goodwill, will continue to be evalu-  
ated for impairment when conditions indicate that a decline in  
fair value of the investment below the carrying amount is other  
than temporary.  
1
30  
1
3. Other Intangible Assets  
Future minimum lease payments due from property, plant and  
equipment under capital leases at December 31, 2004 amounted  
to 520 million and are due as follows:  
Information with respect to changes in the Group’s other intangi-  
ble assets is presented in the Consolidated Fixed Asset Schedule  
included herein.  
there-  
2
005  
96  
2006  
81  
2007  
46  
2008  
34  
2009  
32  
after  
(in millions of )  
Other intangible assets comprise:  
Future minimum  
lease payments  
231  
At December 31,  
2
004  
2003  
(
in millions of )  
The reconciliation of future minimum lease payments from capi-  
tal lease agreements to the corresponding liabilities is as follows:  
Other intangible assets subject to amortization  
Gross carrying amount  
1,309  
(806)  
503  
1,047  
(694)  
353  
Accumulated amortization  
December 31,  
2004  
Net carrying amount  
Other intangible assets not subject to amortization  
2,168  
2,466  
2,819  
(in millions of )  
2
,671  
Amount of future minimum lease payments  
Less interests included  
520  
147  
373  
Liabilities from capital lease agreements  
DaimlerChrysler’s other intangible assets subject to amortization  
represent concessions, industrial property rights and similar  
rights (260 million) as well as software developed or obtained  
for internal use (204 million). The additions in 2004 of 215  
million (2003: 178 million) with a weighted average useful life of  
15. Equipment on Operating Leases, net  
5
years primarily include software developed or obtained for  
Information with respect to changes in the Group’s equipment  
on operating leases is presented in the Consolidated Fixed Assets  
Schedule included herein. Of the total equipment on operating  
leases, 26,017 million represent automobiles and commercial  
vehicles (2003: 23,653 million).  
internal use. The aggregate amortization expense for the years  
ended December 2004, 2003 and 2002, was 169 million,  
178 million and 175 million, respectively.  
Estimated aggregate amortization expense for other intangible  
assets for the next five years is:  
Noncancellable future lease payments due from customers for  
equipment on operating leases at December 31, 2004 amounted  
to 11,922 million and are due as follows:  
2
005  
2006  
105  
2007  
62  
2008  
40  
2009  
30  
(
in millions of )  
Amortization expense  
165  
there-  
2
005  
2006  
2007  
2008  
594  
2009  
149  
after  
(in millions of )  
Future lease  
payments  
Other intangible assets not subject to amortization represent  
primarily intangible pension assets.  
5,650  
3,661  
1,743  
125  
14. Property, Plant and Equipment, net  
Information with respect to changes in the Group’s property,  
plant and equipment is presented in the Consolidated Fixed  
Assets Schedule included herein.  
Property, plant and equipment includes buildings, technical  
equipment and other equipment capitalized under capital lease  
agreements of 245 million (2003: 195 million). Depreciation  
expense and impairment charges on assets under capital lease  
arrangements were 34 million (2003: 19 million; 2002: 15  
million).  
1
31  
16. Inventories  
18. Receivables from Financial Services  
At December 31,  
At December 31,  
2
004  
2003  
2004  
2003  
(
in millions of )  
(in millions of )  
Receivables from:  
Wholesales  
Retail  
Raw materials and manufacturing supplies  
Work-in-process  
1,746  
2,545  
12,792  
75  
1,569  
2,280  
11,350  
59  
10,670  
44,202  
3,020  
9,747  
40,673  
3,483  
Finished goods, parts and products held for resale  
Advance payments to suppliers  
Other  
1
7,158  
(366)  
6,792  
15,258  
(310)  
57,892  
(1,107)  
56,785  
53,903  
(1,265)  
52,638  
Less: Advance payments received  
Allowance for doubtful accounts  
1
14,948  
Certain of the Group’s U.S. inventories are valued using the LIFO  
method. If the FIFO method had been used instead of the LIFO  
method, inventories would have been higher by 601 million  
Wholesale receivables represent loans for floor financing pro-  
grams for vehicles sold by the Group’s automotive businesses to  
the dealer or loans for assets purchased by the dealer from third  
parties, primarily used vehicles traded in by the dealer’s cus-  
tomer or real estate such as dealer showrooms.  
(
2003: 614 million). For the years 2004, 2003 and 2002, certain  
inventory quantities were reduced, which resulted in a liquidation  
of LIFO inventory carried at lower costs which prevailed in prior  
years. The effect of the liquidation was to decrease cost of sales  
by 9 million, 9 million and 42 million in 2004, 2003 and  
Retail receivables include loans and finance leases to end users  
of the Group’s products who purchased their vehicle either from  
a dealer or directly from DaimlerChrysler. The other receivables  
mainly represent investments in leases involving the purchase of  
non-automotive assets by parties other than the Group’s dealers  
or retail customers.  
2
002, respectively.  
At December 31, 2004, inventories include 295 million of  
company cars of DaimlerChrysler pledged as collateral to the  
DaimlerChrysler Pension Trust e.V. The pledge was made in 2004  
due to new requirement to provide collateral for certain vested  
employee benefits in Germany.  
Wholesale receivables from the sale of vehicles from the Group’s  
inventory to dealers as well as retail receivables from the sale of  
DaimlerChrysler’s vehicles directly to a retail customer relate to  
the sale of its inventory. The cash flow effects of such receiv-  
ables are presented as “net changes in inventory-related receiv-  
ables from financial services” within the consolidated cash flows  
from operating activities. All cash flow effects attributable to  
receivables from financial services that are not related to the sale  
of inventory to DaimlerChrysler’s direct customers are classified  
as investing activities within the consolidated statements of cash  
flows.  
17. Trade Receivables  
At December 31,  
2
004  
2003  
(
in millions of )  
Receivables from sales of goods and services  
Allowance for doubtful accounts  
7,542  
(591)  
6,668  
(587)  
6,081  
6
,951  
Receivables from financial services included 15 million and 98  
million of receivables classified as held for sale at December 31,  
2004 and 2003, respectively.  
As of December 31, 2004, 283 million of the trade receivables  
mature after more than one year (2003: 172 million).  
Included in retail and other receivables are investments in  
finance leases involving minimum lease payments of 14,072 mil-  
lion and 14,298 million, unearned income of (2,602) million  
and (2,787) million, initial direct costs of 47 million and 63  
million and estimated unguaranteed residual values of 660 mil-  
lion and 885 million at December 31, 2004 and 2003, respec-  
tively. Finance leases consist of sales-type leases of vehicles to  
the Group’s direct retail customers, direct-financing leases of  
vehicles to its independent dealers’ customers and investments  
in direct-financing leases involving non-automotive assets.  
Changes in the allowance for doubtful accounts for trade receiv-  
ables were as follows:  
Year ended December 31,  
2
004  
2003  
2002  
(
in millions of €)  
Balance at beginning of year  
Charged to costs and expenses  
Amounts written off  
587  
49  
629  
23  
646  
95  
(160)  
115  
(48)  
(17)  
587  
(63)  
(49)  
629  
Currency translation and other changes  
Balance at end of year  
591  
As of December 31, 2004, receivables from financial services  
with a carrying amount of 35,598 million mature after more  
than one year (2003:33,328 million).  
1
32  
Changes in the allowance for doubtful accounts for receivables  
from financial services were as follows:  
Changes in the allowance for doubtful accounts for other assets  
were as follows:  
Year ended December 31,  
Year ended December 31,  
2
004  
2003  
2002  
2004  
2003  
2002  
(
in millions of )  
(in millions of €)  
Balance at beginning of year  
Charged to costs and expenses  
Amounts written off  
1,265  
467  
1,559  
553  
1,602  
1,004  
(639)  
(36)  
Balance at beginning of year  
Charged to costs and expenses  
Amounts written off  
888  
61  
723  
134  
(2)  
726  
28  
(413)  
(84)  
(492)  
(63)  
(702)  
14  
(11)  
(20)  
723  
Reversals  
Currency translation and other changes  
Balance at end of year  
33  
Currency translation and other changes  
Balance at end of year  
(128)  
1,107  
(292)  
1,265  
(372)  
1,559  
261  
888  
Receivables from financial services are generally secured by vehi-  
cles or other assets. Contractual payments from the receivables  
from financial services at December 31, 2004 amounted to  
20. Securities, Investments and Long-Term Financial Assets  
Information with respect to the Group’s total investments and  
long-term financial assets is presented in the Consolidated Fixed  
Assets Schedule included herein. The carrying amounts of parti-  
cipations (investments that are not accounted for under the equity  
method) and long-term (marketable) securities which are shown  
among »Investments and long-term financial assets« in the  
Consolidated Balance Sheets are comprised of the following:  
€61,300 million and are as follows:  
there-  
after  
2
005  
2006  
2007  
2008  
2009  
(
in millions of )  
Maturities  
23,019 11,769 10,010  
6,811  
4,111  
5,580  
Actual cash flows will vary from contractual maturities due to  
future sales of finance receivables, prepayments and write-offs.  
At December 31,  
2
004  
2003  
(in millions of )  
Participations with a quoted marked price  
Participations without a quoted marked price  
Participations  
503  
277  
780  
599  
802  
318  
Based on market conditions and liquidity needs, DaimlerChrysler  
may sell portfolios of wholesale and retail receivables to third  
parties, which typically results in the derecognition of the trans-  
ferred receivables from the balance sheet. Retained interests in  
sold receivables are classified as other assets in the Group‘s con-  
solidated balance sheets (see Note 19). For additional informa-  
tion on retained interests in sold receivables and the sale of  
receivables from financial services, see Note 34.  
1,120  
353  
Long-term securities  
The main changes in investments in related companies were  
caused by the reclassification of the interest in MMC  
(see Note 3) and the sale of the stake in HMC (see Note 4).  
Investments without a quoted market price were tested for  
impairment when an impairment indicator has occurred. In 2004,  
investments without a quoted marked price with carrying  
amounts of 20 million were tested for impairment. As of Decem-  
ber 31, 2004, unrealized losses have not occurred. The disclo-  
sure of short-term securities is made in the Consolidated Balance  
Sheets among “Securities” and is recorded separately in avail-  
able-for-sale and trading:  
1
9. Other Assets  
At December 31,  
2
004  
2003  
(
in millions of )  
Receivables from affiliated companies  
Receivables from related companies 1  
1,174  
588  
1,172  
922  
Retained interests in sold receivables and  
subordinated asset backed certificates  
2,202  
9,221  
3,157  
11,485  
16,736  
(888)  
At December 31,  
Other receivables and other assets  
2
004  
2003  
1
3,185  
(in millions of )  
Allowance for doubtful accounts  
(261)  
Available-for-sale  
Trading  
3,725  
159  
3,136  
132  
1
2,924  
15,848  
1
Related companies include entities which have a significant ownership in DaimlerChrysler or  
entities in which the Group holds a significant investment.  
Short-term securities  
3,884  
3,268  
As of December 31, 2004, 3,494 million of the other assets  
mature after more than one year (2003: 6,617 million).  
1
33  
As of December 31, 2004, the table below shows the (amortized)  
costs, fair values, gross unrealized holding gains and losses per  
security class of investments with a quoted marked price, long-  
term and short-term available-for-sale securities. The aggregate  
amounts of unrealized losses of investments which are in a con-  
tinuous unrealized loss position for less than 12 months and the  
aggregate amounts of unrealized losses of investments which are  
in a continuous unrealized loss position for 12 months or longer  
are shown separately together with their appropriate fair values.  
Unrealized Loss less 1 year Unrealized Loss 1 year or more  
Unrealized Loss total  
Unrealized  
Unrealized  
Unrealized  
loss  
Unrealized  
loss  
Cost  
Fair value  
gain  
Fair value  
Fair value  
Fair value  
loss  
(
in millions of )  
Equity securities  
560  
175  
948  
175  
394  
134  
6
134  
6
Equity-based funds  
Debt securities issued by the German  
government and other political subdivisions  
360  
360  
1
1
1
1
1
Debt securities issued by non-German  
governments  
128  
1,718  
361  
132  
1,726  
361  
4
12  
1
96  
41  
4
1
5
7
96  
41  
4
Corporate debt securities  
Mortgage-backed securities  
Securities backed by other assets  
Other debt securities  
1
170  
170  
819  
820  
1
Debt-based funds  
135  
135  
4,426  
4,827  
413  
137  
135  
272  
12  
As of December 31, 2003, these values are as follows:  
Unrealized Loss less 1 year Unrealized Loss 1 year or more  
Unrealized Loss total  
Unrealized  
Unrealized  
gain  
Unrealized  
loss  
Unrealized  
loss  
Cost  
Fair value  
Fair value  
Fair value  
Fair value  
loss  
(
in millions of )  
Equity securities  
600  
141  
1,023  
141  
423  
Equity-based funds  
Debt securities issued by the German  
government and other political subdivisions  
248  
248  
Debt securities issued by non-German  
governments  
338  
1,478  
570  
343  
1,492  
572  
5
18  
3
228  
229  
4
1
5
228  
229  
4
1
5
Corporate debt securities  
Mortgage-backed securities  
Securities backed by other assets  
Other debt securities  
132  
132  
201  
205  
4
Debt-based funds  
133  
135  
2
3,841  
4,291  
455  
457  
457  
The estimated fair values of investments in debt securities  
excluding debt-based funds), by contractual maturity, are shown  
(
below. Expected maturities may differ from contractual maturi-  
ties because borrowers may have the right to call or prepay oblig-  
ations with or without penalty.  
At December 31,  
2
004  
2003  
(
in millions of )  
Due within one year  
1,157  
1,624  
330  
779  
1,366  
422  
Due after one year through five years  
Due after five years through ten years  
Due after more than ten years  
458  
425  
3
,569  
2,992  
1
34  
Proceeds from disposals of long-term and short-term available-  
for-sale securities were 3,702 million (2003: 2,743 million;  
22. Prepaid Expenses  
2
002: 5,254 million). Gross realized gains from sales of these  
Prepaid expenses are comprised of the following:  
securities were 254 million (2003: 8 million; 2002: 157 mil-  
lion), while gross realized losses were 3 million (2003: 15 mil-  
lion; 2002: 23 million). The proceeds and realized gains from  
the sale of the stake in HMC are included in these figures (see  
Note 4). The proceeds from the sale of the stake in HMC are  
shown in the Consolidated Statements of Cash Flows among the  
line item “Proceeds from disposals of businesses”, the remaining  
proceeds are disclosed in the line item “Proceeds from sales of  
securities (other than trading).”  
At December 31,  
2
004  
2003  
(
in millions of )  
Prepaid pension cost  
246  
784  
,030  
260  
835  
Other prepaid expenses  
1
1,095  
As of December 31, 2004, 435 million of the total prepaid  
expenses mature after more than one year (2003: 434 million).  
The unrealized gains included in the 2004 statement of income  
related to trading securities were 2 million (2003: 10 million;  
2
002: 6 million). Unrealized losses have not occurred in 2004  
23. Stockholders’ Equity  
(
2003: –; 2002: 1 million) for these securities.  
Number of Shares Issued and Outstanding as well as  
Treasury Stock. DaimlerChrysler had issued and outstanding  
1,012,824,191 registered Ordinary Shares of no par value at  
December 31, 2004 and 2003. Each share represents a nominal  
value of 2.60 of capital stock.  
DaimlerChrysler uses the weighted average cost method as a  
basis for determining cost and calculating realized gains and  
losses.  
Other securities classified as cash equivalents were approximate-  
ly 3.6 billion and 5.3 billion at December 31, 2004 and 2003,  
respectively, and consisted primarily of repos, commercial paper  
and certificates of deposit.  
In 2004, DaimlerChrysler purchased approximately 0.8 million  
(2003: 1.3 million; 2002: 1.1 million) Ordinary Shares in connec-  
tion with an employee share purchase plan, of which 0.8 million  
(2003: 1.3 million; 2002: 1.1 million) were re-issued to employ-  
ees.  
21. Liquid Assets  
Authorized and Conditional Capital. On April 7, 2004, the  
annual meeting authorized the Board of Management through  
October 7, 2005, to acquire treasury stock for certain defined  
purposes up to a pro rata amount of the share capital attribut-  
able to each share of 263 million of capital stock, representing  
nearly 10% of issued and outstanding capital stock.  
Liquid assets recorded under various balance sheet captions are  
as follows:  
At December 31,  
2
004  
2003  
2002  
(
in millions of )  
Cash and cash equivalents 1  
originally maturing within 3 months  
originally maturing after 3 months  
Total cash and cash equivalents  
Securities  
On April 9, 2003, the annual meeting authorized the Board of  
Management through April 8, 2008, upon approval of the Super-  
visory Board, to increase capital stock by issuing new, no par val-  
ue registered shares in exchange for cash contributions totaling  
7,381  
390  
10,767  
250  
9,100  
30  
7,771  
3,884  
11,017  
3,268  
9,130  
3,293  
5
500 million as well as by issuing new, no par value registered  
Other  
shares in exchange for non-cash contributions totaling 500 mil-  
lion and to increase capital stock by issuing Ordinary Shares to  
employees totaling 26 million.  
1
1,655  
14,285  
12,428  
1
Cash and cash equivalents are mainly comprised of cash at banks, cash on hand and checks in  
transit.  
DaimlerChrysler is authorized to issue convertible bonds and  
notes with warrants in a nominal volume of up to 15 billion prior  
to April 18, 2005. The convertible bonds and notes with warrants  
shall grant to the holders or creditors option or conversion rights  
for new shares in DaimlerChrysler in a nominal amount not to  
exceed 300 million of capital stock. DaimlerChrysler is also enti-  
tled to grant rights for issuing up to 96 million new shares (repre-  
senting up to a pro rata amount of the share capital attributable  
to each share of approximately 250 million of capital stock) with  
respect to the DaimlerChrysler Stock Option Plan by April 18,  
2005.  
1
35  
From the Stock Option Plan 1996 on December 31, 2004, out-  
standing rights in a nominal volume of 0.1 million could result  
in 46,230 new shares of DaimlerChrysler AG. In 2004 and 2003,  
no options were exercised from this Plan, while 7,035 Ordinary  
Shares were issued upon exercise of options from the Stock  
Option Plan 1996 in 2002.  
conversion price was below the adjusted minimum conversion  
price of 53.19, the number of shares was calculated based on  
the adjusted minimum conversion price. Thus each shareholder  
received 1.25643 Ordinary Shares of DaimlerChrysler AG per  
note. Fractions that remained after aggregation were settled in  
cash based on a conversion rate of 52.72 amounting to a total  
cash payment of 0.4 million.  
Convertible Notes. In June 1997, DaimlerChrysler issued 5.75%  
subordinated mandatory convertible notes due June 14, 2002,  
with a nominal amount of 66.83 per note. These convertible  
notes represented at the date of issue a nominal amount of 508  
million including 7,600,000 notes which could be converted, sub-  
ject to adjustment, into 0.86631 newly issuable shares of  
DaimlerChrysler AG for each note before June 4, 2002. During  
During 1996, DaimlerChrysler Luxembourg Capital S.A., a wholly-  
owned subsidiary of DaimlerChrysler, issued 4.125% bearer notes  
with appertaining warrants due July 5, 2003, in the amount of  
613 million (with nominal value of 511 each), which entitled the  
bond holders to subscribe for a total of 12,366,324 shares  
(7,728,048 of which represents newly issued shares totaling  
383 million) of DaimlerChrysler. According to the note agree-  
ments the option price per share was 42.67 in consideration of  
exchange of the notes or 44.49 in cash. The warrants expired  
on June 18, 2003. In 2003 (until June 18) 20,698 (2002: 50) Ordi-  
nary Shares were issued as a result of exercises of warrants. The  
repayment for the remaining options was made on July 5, 2003.  
2
002, 17,927 DaimlerChrysler Ordinary Shares were issued upon  
exercise. On June 14, 2002, the mandatory conversion date,  
,572,881 notes were converted into 9,506,483 newly issued  
Ordinary Shares of DaimlerChrysler AG. The conversion price of  
52.72 was determined on June 8, 2002, on the basis of the  
7
average closing auction price for the shares in Xetra-trading for  
the period between May 13, 2002, and June 7, 2002. Because this  
Comprehensive Income/(Loss). The changes in the compo-  
nents of accumulated other comprehensive loss are as follows:  
Year ended December 31,  
Year ended December 31,  
2003  
Year ended December 31,  
2002  
2
004  
Net  
Pretax  
Tax effect  
Pretax  
731  
Tax effect  
Net  
Pretax  
122  
Tax effect  
Net  
(
in millions of )  
Unrealized gains (losses) on securities  
(incl. retained interests):  
Unrealized holding gains (losses)  
277  
(10)  
267  
(146)  
585  
(77)  
45  
Reclassification adjustments for  
(
gains) losses included in net income (loss)  
(592)  
(315)  
119  
109  
(473)  
(206)  
(255)  
476  
77  
(178)  
407  
(223)  
(101)  
43  
(180)  
(135)  
Unrealized gains (losses) on securities  
(69)  
(34)  
Unrealized gains (losses) on derivatives  
hedging variability of cash flows:  
Unrealized derivative gains (losses)  
1,765  
(693)  
1,072  
4,406  
(1,682)  
2,724  
2,417  
(952)  
1,465  
Reclassification adjustments for  
(
gains) losses included in net income (loss)  
(2,383)  
(618)  
942  
249  
476  
(80)  
(1,441)  
(369)  
(748)  
(691)  
(2,506)  
1,900  
662  
944  
(738)  
(218)  
(30)  
(1,562)  
1,162  
444  
(111)  
2,306  
48  
(904)  
3,721  
(84)  
(63)  
1,402  
Unrealized derivative gains (losses)  
Minimum pension liability adjustments  
Foreign currency translation adjustments  
(1,224)  
(611)  
(10,022)  
(3,154)  
(6,301)  
(3,238)  
(1,531)  
(1,561)  
Changes in other comprehensive  
income (loss)  
(2,768)  
754  
(2,014)  
1,507  
(1,055)  
452  
(10,971)  
2,699  
(8,272)  
1
36  
Exchange rate effects on the components of other comprehen-  
sive income principally are shown within changes of the cumula-  
tive translation adjustment.  
The table below shows the basic terms of options issued (in mil-  
lions) under the Stock Option Plan 2000:  
Reference  
price  
Exercise  
price  
Options  
Options  
Options  
granted outstanding exercisable  
At December 31, 2004  
Effective October 1, 2004, the Chrysler Group prospectively  
changed the functional currency of DaimlerChrysler Canada Inc.  
Year of Grant  
2
2
2
2
2
000  
001  
002  
003  
004  
62.30  
55.80  
42.93  
28.67  
36.31  
74.76  
66.96  
51.52  
34.40  
43.57  
15.2  
18.7  
20.0  
20.5  
18.0  
13.5  
17.2  
18.9  
19.4  
17.5  
13.5  
17.2  
9.5  
(
“DCCI”), its Canadian subsidiary, from the U.S. dollar to the  
Canadian dollar. This change resulted from several significant  
economic and operational changes within DCCI, including a  
reduction of U.S. sourced components. The initial implementa-  
tion of this change in functional currency had the effect of  
increasing the value of the net assets of the Group and the accu-  
mulated other comprehensive loss by 179 million.  
DaimlerChrysler established, based on shareholder approvals,  
the 1998, 1997 and 1996 Stock Option Plans (former Daimler-  
Benz plans), which provided for the granting of options for the  
purchase of DaimlerChrysler Ordinary Shares to certain mem-  
bers of management. The options granted under the plans were  
evidenced by non-transferable convertible bonds with a principal  
amount of 511 per bond due ten years after issuance. During  
certain specified periods each year, each convertible bond could  
have been converted into 201 DaimlerChrysler Ordinary Shares,  
if the market price per share on the day of conversion was at  
least 15% higher than the predetermined conversion price and  
the options (granted in 1998 and 1997) had been held for a  
Miscellaneous. Under the German corporation law (Aktienge-  
setz), the amount of dividends available for distribution to share-  
holders is based upon the unappropriated accumulated earnings  
of DaimlerChrysler AG (parent company only) as reported in its  
statutory financial statements determined in accordance with the  
German commercial code (Handelsgesetzbuch). For the year end-  
ed December 31, 2004, DaimlerChrysler management has pro-  
posed a distribution of 1,519 million (1.50 per share) of the  
2
004 earnings of DaimlerChrysler AG as a dividend to the stock-  
holders.  
24 month waiting period.  
24. Stock-Based Compensation  
The basic terms of the bonds and the related stock options  
issued (in millions) under these plans are as follows:  
The Group currently has two stock option plans, various stock  
appreciation rights (“SARs”) plans and medium term incentive  
awards. As discussed in Note 1, DaimlerChrysler adopted the  
provisions of SFAS 123 prospectively for all awards granted after  
December 31, 2002. Awards granted in previous periods will  
continue to be accounted for using the provisions of APB 25 and  
related interpretations.  
Related  
stock  
options  
Stock  
options  
Stock  
options  
Stated Conversion  
interest rate  
price  
granted outstanding exercisable  
At December 31, 2004  
Bonds granted in  
1
996  
997  
998  
5.9%  
5.3%  
4.4%  
42.62  
65.90  
92.30  
0.9  
7.4  
8.2  
.
5.0  
5.8  
.
1
1
Stock Option Plans. In April 2000, the Group’s shareholders  
approved the DaimlerChrysler Stock Option Plan 2000 which pro-  
vides for the granting of stock options for the purchase of  
DaimlerChrysler Ordinary Shares to eligible employees. Options  
granted under the Stock Option Plan 2000 are exercisable at a  
reference price per DaimlerChrysler Ordinary Share determined  
in advance plus a 20% premium. The options become exercisable  
in equal installments on the second and third anniversaries from  
the date of grant. All unexercised options expire ten years from  
the date of grant. If the market price per DaimlerChrysler Ordi-  
nary Share on the date of exercise is at least 20% higher than the  
reference price, the holder is entitled to receive a cash payment  
equal to the original exercise premium of 20%.  
In the second quarter of 1999, DaimlerChrysler converted all  
options granted under the 1998 and 1997 Stock Option Plans  
into SARs. All terms and conditions of the new SARs are identical  
to the stock options which were replaced, except that the holder  
of a SAR has the right to receive cash equal to the difference  
between the exercise price of the original option and the fair val-  
ue of the Group’s stock at the exercise date rather than receiving  
DaimlerChrysler Ordinary Shares.  
1
37  
Analysis of the stock options issued is as follows (options in mil-  
lions; per share amounts in ):  
2
004  
2003  
Average  
exercise price  
per share  
2002  
Average  
exercise price  
per share  
Average  
exercise price  
per share  
Number of  
stock options  
Number of  
stock options  
Number of  
stock options  
Balance at beginning of year  
Options granted  
Exercised  
71.6  
55.18  
43.57  
53.1  
20.5  
63.40  
34.40  
33.6  
20.0  
70.43  
51.52  
18.0  
Forfeited  
(1.4)  
(1.7)  
86.5  
40.2  
40.79  
65.92  
52.78  
65.92  
(1.2)  
(0.8)  
71.6  
23.1  
51.83  
74.76  
55.18  
71.71  
(0.5)  
61.29  
Expired  
Outstanding at year-end  
Exercisable at year-end  
53.1  
7.6  
63.40  
74.56  
For the year ended December 31, 2004, the Group recognized  
compensation expense on stock options (before taxes) of 119  
million (2003: 95 million; 2002: 57 million).  
Stock Appreciation Rights Plans. In 1999, DaimlerChrysler  
established a stock appreciation rights plan (the “SAR Plan  
1999”) which provides eligible employees of the Group with the  
right to receive cash equal to the appreciation of DaimlerChrysler  
Ordinary Shares subsequent to the date of grant. The stock  
appreciation rights granted under the SAR Plan 1999 vest in  
equal installments on the second and third anniversaries from  
the date of grant. All unexercised SARs expire ten years from the  
grant date. The exercise price of a SAR is equal to the fair market  
value of DaimlerChrysler’s Ordinary Shares on the date of grant.  
On February 24, 1999, the Group issued 11.4 million SARs at an  
exercise price of 89.70 each ($98.76 for Chrysler employees),  
of which 8.6 million SARs are outstanding and exercisable at  
December 31, 2004.  
The fair values of the DaimlerChrysler stock options issued in  
2
004, 2003 and 2002 were measured at the grant date (begin-  
ning of April) based on a modified Black-Scholes option-pricing  
model, which considers the specific terms of issuance. For  
options granted to the Board of Management in 2004 and for  
which – according to the recommendations of the German Cor-  
porate Governance Code – the Presidential Committee can  
impose a limit or reserve the right to impose such a limit in the  
case of exceptional and unpredictable developments, are calcu-  
lated with the intrinsic value at December 31. The table below  
presents the underlying assumptions as well as the resulting fair  
values and total values (in millions of ):  
As discussed above (see “Stock Option Plans”), in the second  
quarter of 1999 DaimlerChrysler converted all options granted  
under its existing stock option plans from 1997 and 1998 into  
SARs.  
2
004  
2003  
2002  
Expected dividend yield  
Expected volatility  
4.4%  
33%  
2.6%  
3
5.6%  
35%  
2.0%  
30%  
In conjunction with the consummation of the merger between  
Daimler-Benz and Chrysler in 1998, the Group implemented a  
SAR plan through which 22.3 million SARs were issued at an  
exercise price of $75.56 each, of which 13.1 million SARs are  
outstanding and exercisable at December 31, 2004. The initial  
grant of SARs replaced Chrysler fixed stock options that were  
converted to DaimlerChrysler Ordinary Shares as of the consum-  
mation of the merger. SARs which replaced stock options that  
were exercisable at the time of the consummation of the merger  
were immediately exercisable at the date of grant. SARs related  
to stock options that were not exercisable at the date of consum-  
mation of the merger became exercisable in two installments;  
Risk-free interest rate  
Expected lives (in years)  
Fair value per option  
Total value by award  
2.9%  
3
4.2%  
3
€7.85  
131.9  
€6.00  
123.0  
18.70  
374.0  
Unearned compensation expense (before taxes) of all outstand-  
ing and unvested stock options as of December 31, 2004, that  
are not subject to a possible limitation according the recommen-  
dation of the German Corporate Governance Code, totals 125  
million (2003: 122 million; 2002: 104 million).  
50% on the six-month and one-year anniversaries of the consum-  
mation date.  
1
38  
A summary of the activity related to the Group’s SAR plans as  
of and for the years ended December 31, 2004, 2003 and 2002  
is presented below (SARs in millions; per share amounts in ):  
2
004  
2003  
Weighted  
average  
2002  
Weighted  
average  
Weighted  
average  
Number of  
Number of  
Number of  
SARs excercise price  
SARs excercise price  
SARs excercise price  
Outstanding at beginning of year  
Granted  
36.3  
74.24  
40.3  
79.13  
42.5  
84.75  
Exercised  
Forfeited  
(3.8)  
32.5  
32.5  
72.54  
71.37  
71.37  
(4.0)  
36.3  
36.3  
75.00  
74.24  
74.24  
(2.2)  
40.3  
40.3  
78.31  
79.13  
79.13  
Outstanding at year-end  
SARs exercisable at year-end  
Compensation expense or benefit (representing the reversal of  
previously recognized expense) on SARs is recorded based on  
changes in the market price of DaimlerChrysler Ordinary Shares.  
For the years ended December 31, 2004, 2003 and 2002, the  
Group recognized no compensation expense in connection with  
SARs, because the options underlying exercise prices were  
greater than the market price for DaimlerChrysler Ordinary  
Shares at December 31, 2004.  
a) Pension Plans and Similar Obligations  
Pension plans and similar obligations are comprised of the fol-  
lowing components:  
At December 31,  
2
004  
2003  
(in millions of )  
Pension liabilities (pension plans)  
Other postretirement benefits  
Other benefit liabilities  
5,606  
8,021  
296  
4,951  
8,203  
313  
Medium Term Incentive Awards. The Group grants medium  
term incentives to certain eligible employees that track, among  
others, the market value of the DaimlerChrysler Ordinary Shares  
over three year performance periods. The amount ultimately  
earned in cash at the end of a performance period is primarily  
based on the degree of achievement of corporate goals derived  
from competitive and internal planning benchmarks and the value  
of DaimlerChrysler Ordinary Shares at the end of three year  
performance periods. The benchmarks are return on net assets  
and return on sales. The Group issued 0.7 million medium term  
incentives in 2004 (2003: 1.3 million; 2002: 1.2 million).  
1
3,923  
13,467  
The increase of the pension liabilities of 0.7 billion resulted pri-  
marily from the first-time consolidation of MFTBC.  
The decrease in accrued other postretirement benefits of 0.2  
billion resulted mainly from lower provisions due to the Medicare  
Act in the U.S.  
DaimlerChrysler implemented in 2001 restructuring plans at  
Freightliner and Chrysler Group (see Note 7), including certain  
workforce reduction initiatives. The impacts on the pension  
and postretirement obligations resulting from settlements and  
curtailments of these turnaround plans are contained in the  
following disclosures.  
For the year ended December 31, 2004 the Group recognized  
compensation expense (before taxes) of 12 million (2003: 35  
million; 2002: 20 million) in connection with the medium  
term incentive awards.  
2
5. Accrued Liabilities  
Pension Plans  
Accrued liabilities are comprised of the following:  
The Group provides pension benefits to substantially all of its  
hourly and salaried employees. Plan benefits are principally  
based upon years of service. Certain pension plans are based on  
salary earned in the last year or last five years of employment  
while others are fixed plans depending on ranking (both wage  
level and position).  
At December 31,  
2003  
2
004  
Due after  
one year  
Due after  
Total  
Total  
one year  
(
in millions of )  
Pension plans and similar  
obligations (see Note 25a)  
13,923  
3,134  
12,634  
1,674  
13,467  
2,794  
12,275  
946  
Income and other taxes  
Other accrued liabilities  
(see Note 25b)  
24,509  
8,609  
22,911  
39,172  
8,662  
41,566  
22,917  
21,883  
1
39  
Investment Policies and Strategies. At December 31, 2004,  
plan assets were invested in diversified portfolios that consisted  
primarily of debt and equity securities, including 2,570,150 of  
DaimlerChrysler Ordinary Shares in a German Plan with a market  
value of 91 million. Assets and income accruing on all pension  
trust and relief funds are used solely to pay pension benefits and  
administer the plans. The Group’s pension asset allocation at  
December 31, 2004 and 2003, and target allocation for the year  
2
005, are as follows:  
Plan Assets German Plans  
Plan Assets Non-German Plans  
2
005  
2004  
2003  
2005  
2004  
2003  
planned  
planned  
(
in % of plan assets)  
Equity securities  
Debt securities  
Real estate  
Other  
57  
36  
3
57  
36  
2
57  
37  
3
67  
23  
6
66  
28  
4
65  
30  
4
4
5
3
4
2
1
Every 3-5 years, or more frequently if appropriate, Daimler-  
Chrysler conducts asset-liability studies for the major pension  
funds. DaimlerChrysler uses the expertise of external investment  
and actuarial advisors. These studies are intended to determine  
the optimal long-term asset allocation with regard to the liability  
structure. The resulting Model Portfolio allocation aims at mini-  
mizing the economic cost of defined benefit schemes. At the  
same time the risks should be limited to an appropriate level.  
The entire process is overseen by investment committees which  
consist of senior financial management especially from treasury  
and other appropriate executives. The Investment Committees  
meet regularly to approve the asset allocations, and review the  
risks and results of the major pension funds and approve the  
selection and retention of external managers of specific portfo-  
lios.  
The majority of investments are in international blue chip equities  
on the one hand and high quality government and corporate  
bonds on the other hand. To maintain a wide range of diversifica-  
tion and to improve return opportunities, up to approximately  
20% of assets are allocated to highly promising markets such as  
Private Equity, High Yield Debt, Convertibles and Emerging Mar-  
kets. Internal controlling units monitor all investments strictly  
and regularly. External depositary banks provide safekeeping of  
securities as well as reporting of transactions and assets.  
The Model Portfolio is then expanded to a Benchmark Portfolio.  
The Benchmark Portfolio matches the asset class weights in the  
Model portfolio and expands the asset classes by adding of sub-  
asset-classes with corresponding weights to implement an actual  
portfolio. By application of Modern Portfolio Theory an optimal  
one year target allocation is determined. This target allocation is  
then implemented and the performance in the current year is  
tracked against the benchmark portfolio.  
1
40  
Funded Status. The following information with respect to the  
Group’s pension plans is presented by German Plans and  
non-German Plans (principally comprised of plans in the U.S.):  
At December 31, 2004  
At December 31, 2003  
German  
Plans  
Non-German  
Plans  
German  
Plans  
Non-German  
Plans  
Total  
Total  
(
in millions of )  
Change in projected benefit obligations:  
Projected benefit obligations at beginning of year  
Foreign currency exchange rate changes  
Service cost  
32,132  
(1,351)  
681  
11,165  
20,967  
(1,351)  
425  
32,949  
(3,287)  
600  
10,941  
22,008  
(3,287)  
344  
256  
586  
256  
632  
5
Interest cost  
1,878  
67  
1,292  
67  
2,029  
657  
1,397  
652  
Plan amendments  
Actuarial losses  
2,146  
1,110  
1,036  
1,324  
(377)  
334  
124  
(361)  
94  
1,200  
(16)  
Dispositions  
Acquisitions and other  
794  
794  
240  
Settlement/curtailment loss  
Benefits paid  
192  
61  
131  
29  
1
28  
(2,091)  
34,448  
(550)  
12,628  
(1,541)  
21,820  
(2,126)  
32,132  
(527)  
11,165  
(1,599)  
20,967  
Projected benefit obligations at end of year  
Change in plan assets:  
Fair value of plan assets at beginning of year  
Foreign currency exchange rate changes  
Actual return on plan assets  
Employer contributions  
26,328  
(1,252)  
2,854  
1,649  
19  
8,183  
18,145  
(1,252)  
2,190  
1,011  
19  
24,544  
(2,692)  
4,239  
2,056  
18  
6,789  
17,755  
(2,692)  
3,256  
1,201  
18  
664  
638  
983  
855  
Plan participant contributions  
Dispositions  
(18)  
(7)  
(11)  
Acquisitions and other  
188  
188  
128  
128  
Benefits paid  
(1,982)  
27,804  
(466)  
9,019  
(1,516)  
18,785  
(1,947)  
26,328  
(437)  
8,183  
(1,510)  
18,145  
Fair value of plan assets at end of year  
A reconciliation of the funded status, which is the difference  
between the projected benefit obligations and the fair value of  
plan assets, to the amounts recognized in the consolidated  
balance sheets is as follows:  
At December 31, 2004  
At December 31, 2003  
German  
Plans  
Non-German  
Plans  
German  
Plans  
Non-German  
Plans  
Total  
Total  
(
in millions of )  
Funded status  
6,644  
3,609  
3,035  
5,804  
2,982  
2,822  
Amounts not recognized:  
Unrecognized actuarial net losses  
Unrecognized prior service cost  
Unrecognized net obligation at date of initial application  
Net assets recognized  
(11,356)  
(2,143)  
(4,166)  
(2)  
(7,190)  
(2,141)  
(10,438)  
(2,545)  
(5)  
(3,244)  
(4)  
(7,194)  
(2,541)  
(5)  
(6,855)  
(559)  
(6,296)  
(7,184)  
(266)  
(6,918)  
Amounts recognized in the consolidated balance sheets consist of:  
Prepaid pension cost  
(246)  
5,606  
2,927  
(246)  
2,679  
(260)  
4,951  
2,355  
(260)  
2,596  
Accrued pension liability  
Intangible assets  
(2,074)  
(10,141)  
(6,855)  
(2,074)  
(6,655)  
(6,296)  
(2,466)  
(9,409)  
(7,184)  
(2,466)  
(6,788)  
(6,918)  
Accumulated other comprehensive loss  
Net assets recognized  
(3,486)  
(559)  
(2,621)  
(266)  
1
41  
Assumptions. The measurement date for the Group’s pension  
plan assets and obligations is principally December 31. The mea-  
surement date for the Group’s net periodic pension cost is princi-  
pally January 1. Assumed discount rates and rates of increase in  
remuneration used in calculating the projected benefit obliga-  
tions together with long-term rates of return on plan assets vary  
according to the economic conditions of the country in which  
the pension plans are situated.  
The following weighted average assumptions were used to deter-  
mine benefit obligations:  
German Plans  
2002  
Non-German Plans  
(
in %)  
2004  
2003  
2004  
2003  
2002  
Average assumptions:  
Discount rate  
4.8  
3.0  
5.3  
3.0  
5.8  
3.0  
5.8  
4.5  
6.2  
4.5  
6.7  
5.4  
Rate of long-term compensation increase  
The following weighted average assumptions were used to deter-  
mine net periodic pension cost:  
German Plans  
2002  
Non-German Plans  
(
in %)  
2004  
2003  
2004  
2003  
2002  
Average assumptions:  
Discount rate  
5.3  
7.5  
3.0  
5.8  
7.5  
3.0  
6.0  
7.9  
3.0  
6.2  
8.5  
4.5  
6.7  
8.5  
5.4  
7.4  
10.1  
5.4  
Expected return on plan assets (at the beginning of the year)  
Rate of long-term compensation increase  
Expected Return on Plan Assets. The expected rate of return  
for U.S. plans is based on long-term actual portfolio results, his-  
torical total market returns and an assessment of the expected  
returns for the asset classes in the portfolios. The assumptions  
are based on surveys of large asset portfolio managers and peer  
group companies of future return expectations over the next ten  
years. Accordingly, negative returns during one or several years  
may not significantly change the historical long term rate of  
return such as to necessitate or warrant revision of the expected  
long term rate of return for U.S. plans.  
The expected rate of return on plan assets set for 2002 was 7.9%  
for German Plans and 10.1% for non-German Plans (primarily U.S.  
plans). During 2002, the Investment Committees of Daimler-  
Chrysler decided to gradually shift the pension fund portfolio  
asset distribution towards a mix more heavily weighted with fixed  
income assets, which by definition, would modestly lower return  
expectations. Also at that time, the Investment Committees’  
analysis of market trends caused management to believe that  
future long-term returns for equities and fixed income assets  
would be lower than the returns experienced over the previous  
2
5 years. The expected rates of return were therefore lowered  
A similar process is implemented to determine the expected rate  
of return on plan assets for German Plans. Both capital market  
surveys as well as the expertise of major banks and industry pro-  
fessionals are used to determine the expected rate of return on  
plan assets.  
to 7.5% for German Plans and 8.5% for non-German Plans as of  
January 1, 2003 which remained consistent through December  
31, 2004.  
For 2005 the expected rates of return on plan assets are the  
same as the rates applied in 2004.  
1
42  
Net Pension Cost. The components of net pension cost were for  
the years ended December 31, 2004, 2003 and 2002 as follows:  
2
004  
2003  
Non-German  
Plans  
2002  
Non-German  
Plans  
German  
Plans  
Non-German  
Plans  
German  
Plans  
German  
Plans  
Total  
Total  
Total  
(
in millions of )  
Service cost  
681  
1,878  
256  
586  
425  
1,292  
600  
2,029  
256  
632  
344  
1,397  
610  
2,251  
226  
629  
384  
1,622  
Interest cost  
Expected return on plan assets  
Amortization of:  
(2,339)  
(614)  
(1,725)  
(2,379)  
(509)  
(1,870)  
(3,287)  
(595)  
(2,692)  
Unrecognized net actuarial (gains) losses  
Unrecognized prior service cost  
Unrecognized net obligation  
Net periodic pension cost (benefit)  
Settlement/curtailment loss  
Net pension cost (benefit)  
372  
292  
141  
231  
292  
226  
287  
173  
53  
287  
77  
291  
1
74  
3
291  
1
884  
64  
369  
515  
64  
763  
74  
552  
50  
602  
211  
24  
(57)  
209  
152  
334  
1
(391)  
208  
(183)  
948  
369  
579  
837  
235  
335  
Contributions. Employer contributions to the Group’s defined  
benefit pension plans were 1,649 million and 2,056 million for  
the years ended December 31, 2004 and 2003, respectively. The  
employer contribution to the Group’s defined benefit pension  
plans is expected to approximate 1.5 billion in 2005, of which  
Accumulated Benefit Obligation. For all pension plans that  
have an accumulated benefit obligation in excess of plan assets,  
information pertaining to the accumulated benefit obligation  
and plan assets are presented as follows:  
0.5 billion is estimated to be needed to satisfy minimum funding  
At December 31, At December 31, At December 31,  
2
004  
2003  
2002  
and contractual requirements and an additional 1.0 billion is  
expected to be contributed at the Group’s discretion. The Group  
anticipates that the expected 2005 employer contribution will  
comprise 1.5 billion in cash.  
(
in millions of €)  
Projected benefit obligation  
Accumulated benefit obligation  
Plan Assets  
33,749  
32,627  
27,141  
31,487  
30,547  
25,660  
32,300  
31,206  
23,882  
Estimated Future Pension Benefit Payments. Pension benefits  
pertaining to the Group’s German and non-German plans were  
The pretax increase of the minimum pension liability in 2004  
resulted in a reduction of stockholder’s equity by 1,224 million  
and is included in other comprehensive income (loss). In 2003  
there was a pretax increase of stockholder’s equity included in  
other comprehensive income (loss) of 662 million for the  
years ended December 31, respectively.  
550 million and 1,541 million, respectively during 2004, and  
527 million and 1,599 million, respectively during 2003. The  
total estimated future pension benefits to be paid by the Group’s  
pension plans for the next 10 years approximates 23.0 billion  
and are expected to be paid as follows:  
2
010-  
2
005  
2006  
2007  
2008  
2009  
2014  
Other Postretirement Benefits  
(
in billions of €)  
German Plans  
Non-German Plans  
Total  
0.5  
1.5  
2.0  
0.6  
1.5  
2.1  
0.6  
1.5  
2.1  
0.6  
1.6  
2.2  
0.7  
1.7  
2.4  
3.7  
8.5  
Certain DaimlerChrysler operations in the U.S. and Canada pro-  
vide postretirement health and life insurance benefits to their  
employees. Upon retirement from DaimlerChrysler, the employ-  
ees may become eligible for continuation of these benefits.  
The benefits and eligibility rules may be modified.  
12.2  
1
43  
Investment Policies and Strategies. At December 31, 2004,  
plan assets were invested in diversified portfolios that consisted  
primarily of debt and equity securities. Assets and income accru-  
ing on all pension trust and relief funds are used solely to pay  
benefits and administer the plans. The Group’s other benefit plan  
asset allocation at December 31, 2004 and 2003, and target allo-  
cations for 2005 are as follows:  
Funded Status. The following information is presented with  
respect to the Group’s postretirement benefit plans:  
At December 31,  
2
004  
2003  
(in millions of )  
Change in accumulated postretirement benefit obligations:  
Accumulated postretirement benefit obligations  
at beginning of year  
14,910  
(1,053)  
255  
863  
4
15,933  
(2,553)  
278  
2
005  
2004  
2003  
Foreign currency exchange rate changes  
Service cost  
planned  
(
in % of plan assets)  
Interest cost  
983  
Equity securities  
Debt securities  
Real estate  
65  
35  
68  
32  
68  
32  
Plan amendments  
(383)  
1,242  
198  
Actuarial losses  
127  
Acquisitions and other  
Settlement/curtailment loss  
Benefits paid  
46  
11  
Asset allocation is based on a Benchmark Portfolio designed to  
diversify investments among the following primary asset classes:  
U.S. Equity, International Equity and U.S. Fixed Income. The  
objective of the Benchmark Portfolio is to achieve a reasonable  
balance between risk and return.  
(797)  
(799)  
Accumulated postretirement benefit obligations  
at end of year  
14,355  
14,910  
Change in plan assets:  
Fair value of plan assets at beginning of year  
Foreign currency exchange rate changes  
Actual gains (losses) on plan assets  
Employer contributions (withdrawals)  
Dispositions/Acquisitions  
1,531  
(132)  
160  
2,232  
(490)  
379  
The investment process is overseen by investment committees  
which consist of senior financial management and other appro-  
priate executives. The Investment Committees meet regularly to  
approve the asset allocations and review the risks and results of  
the funds and approve the selection and retention of external  
managers of specific portfolios.  
(673)  
137  
Benefits paid  
(12)  
1,547  
(54)  
Fair value of plan assets at end of year  
1,531  
The majority of investments reflect the asset classes designated  
by the Benchmark Portfolio. To maintain a wide range of diver-  
sification and improve return possibilities, a small percentage of  
assets (approximately 5%) is allocated to highly promising  
markets such as High Yield Debt and Emerging Markets. Internal  
controlling units monitor all investments strictly and regularly.  
External depositary banks provide safekeeping of securities as  
well as reporting of transactions and assets.  
A reconciliation of the funded status, which is the difference  
between the accumulated postretirement benefit obligations  
and the fair value of plan assets, to the liability recognized for  
accrued postretirement health and life insurance benefits in  
pension plans and similar obligations is as follows:  
At December 31,  
2
004  
2003  
(in millions of )  
Funded status  
12,808  
13,379  
Amounts not recognized:  
Unrecognized actuarial net losses  
Unrecognized prior service cost  
Net liabilitiy recognized  
(4,721)  
(66)  
(5,114)  
(62)  
8,021  
8,203  
1
44  
Impact of the Medicare Act. In the U.S., the Medicare Pre-  
scription Drug, Improvement and Modernization Act of 2003  
The weighted average assumptions used to determine the net  
periodic postretirement benefit cost of the Group’s postretire-  
ment benefit plans were as follows (in %):  
(
“Medicare Act”) resulted in an overall reduction of the accumu-  
lated postretirement benefit obligation for postretirement health  
and life insurance benefits to 997 million as of January 1, 2004.  
The impact of the remeasurement of the accumulated postretire-  
ment benefit obligation is being amortized over the average  
service period of employees eligible for postretirement benefits  
beginning January 1, 2004. Consequently, the net periodic postre-  
tirement benefit cost for 2004 has been reduced by 148 million.  
2
004  
2003  
2002  
Average assumptions:  
Discount rate  
6.3  
8.5  
6.8  
8.5  
7.4  
Expected return on plan assets  
(at the beginning of the year)  
10.5  
Health care inflation rate in following  
(or “base”) year  
8.0  
5.0  
10.0  
5.0  
6.9  
5.0  
Ultimate health care inflation rate (2008)  
Estimated Future Subsidies due to Medicare Act. The total  
estimated future subsidies due to Medicare Act for the next 10  
years approximate 460 million and are expected to be received  
as follows:  
U.S. postretirement benefit plan assets utilize an asset allocation  
substantially similar to that of the pension assets so the expect-  
ed rate of return is the same for both pension and postretirement  
benefit plan asset portfolios. Accordingly, the information about  
the expected rate of return on pension plan assets described  
above also applies to postretirement plan assets.  
2
010-  
2
005  
2006  
40  
2007  
43  
2008  
45  
2009  
48  
2014  
(
in billions of )  
Medicare Act  
284  
The assumptions have a significant effect on the amounts report-  
ed for the Group’s health care plans. The following schedule pre-  
sents the effects of a one-percentage-point change in assumed  
ultimate health care cost inflation rates as from 2011:  
Contributions. DaimlerChrysler did not make any contributions  
to its other postretirement plans in 2004 or 2003 and does not  
plan to make any contributions in 2005.  
Assumptions. Assumed discount rates and rates of increase in  
remuneration used in calculating the accumulated postretirement  
benefit obligations together with long-term rates of return on  
plan assets vary according to the economic conditions of the  
country in which the plans are situated.  
1
-Percentage-  
1-Percentage-  
Point Decrease  
Point Increase  
(
in millions of )  
Effect on total of service and interest  
cost components  
156  
(126)  
Effect on accumulated postretirement benefit  
obligations  
1,720  
(1,422)  
The weighted average assumptions used to determine the  
benefit obligations of the Group’s postretirement benefit plans at  
December 31 were as follows (in %):  
For 2005 the expected rate of return on plan assets is the same  
as the rate applied in 2004.  
2
004  
2003  
2002  
Average assumptions:  
Discount rate  
6.0  
8.0  
5.0  
6.3  
8.0  
5.0  
6.8  
10.0  
5.0  
Health care inflation rate in following  
(
or “base”) year  
Ultimate health care inflation rate  
2011/2008/2008)  
(
1
45  
Net Postretirement Benefit Cost. The components of net peri-  
b) Other Accrued Liabilities  
odic postretirement benefit cost for the years ended December  
31, 2004, 2003 and 2002 were as follows:  
Other accrued liabilities consisted of the following:  
2
004  
2003  
2002  
At December 31,  
2
004  
2003  
(
in millions of )  
(
in millions of )  
Service cost  
255  
863  
278  
983  
262  
1,062  
(345)  
Product guarantees  
10,877  
4,680  
2,784  
250  
9,230  
5,119  
2,282  
410  
Interest cost  
Accrued sales incentives  
Accrued personnel and social costs  
Restructuring measures  
Other  
Expected return on plan assets  
Amortization of:  
(159)  
(217)  
Unrecognized net actuarial (gains) losses  
Unrecognized prior service cost  
Net periodic postretirement benefit cost  
Settlement/curtailment loss  
Net postretirement benefit cost  
208  
3
220  
24  
38  
76  
5,918  
5,870  
22,911  
2
4,509  
1,170  
3
1,288  
2
1,093  
26  
The Group issues various types of product guarantees under which  
it generally guarantees the performance of products delivered  
and services rendered for a certain period or term (see Note 32).  
The accrued liability for these product guarantees covers expected  
costs for legally and contractually obligated warranties as well  
as expected costs for policy coverage, recall campaigns and buy-  
back commitments. The liability for buyback commitments  
represents the expected costs related to the Group’s obligation,  
under certain conditions, to repurchase a vehicle from a customer.  
Buybacks may occur for a number of reasons including litigation,  
compliance with laws and regulations in a particular region and  
customer satisfaction issues.  
1,173  
1,290  
1,119  
The components of the reduction of net periodic postretirement  
benefit cost in 2004 resulting from the Medicare Act were as  
follows:  
2
004  
(
in millions of )  
Service cost  
19  
62  
67  
Interest cost  
Amortization of unrecognized net actuarial losses  
Total reduction  
148  
The changes in provisions for those product guarantees are  
summarized as follows:  
Estimated Future Postretirement Benefit Payments.  
Postretirement benefits paid pertaining to the Group’s plans were  
797 million and 799 million during 2004 and 2003, respectively.  
The total estimated future postretirement benefits to be paid by  
the Group’s plans for the next 10 years approximate 9.2 billion  
and are expected to be paid as follows:  
(
in millions of )  
Balance at January 1, 2003  
9,353  
(776)  
Currency change  
Utilizations  
(4,581)  
5,364  
(130)  
Product guarantees issued in 2003  
Other changes from product guarantees issued in prior periods  
Balance at December 31, 2003  
2
010-  
9,230  
334  
2
005  
0.7  
2006  
0. 8  
2007  
0.9  
2008  
0.9  
2009  
0.9  
2014  
Currency change and change in consolidated companies  
Utilizations  
(
in billions of )  
(4,712)  
4,807  
1,218  
10,877  
Other postretirement  
benefits  
Product guarantees issued in 2004  
Other changes from product guarantees issued in prior periods  
Balance at December 31, 2004  
5.0  
Prepaid Employee Benefits. In 1996 DaimlerChrysler estab-  
lished a Voluntary Employees’ Beneficiary Association (“VEBA”)  
trust for payment of non-pension employee benefits. At Decem-  
ber 31, 2004 and 2003, the VEBA trust had a balance of 2,023  
million and 2,017 million, respectively, of which 1,474 million  
and 1,433 million, respectively, were designated and restricted  
for the payment of postretirement health care benefits. No con-  
tributions to the VEBA trust were made in 2004, 2003 and 2002.  
DaimlerChrysler does not expect to make any contributions to  
the VEBA trust in 2005.  
1
46  
The amount included in the line item “product guarantees issued  
in 2003 respective 2004” represents the additions to the accruals  
for product guarantees recognized in the corresponding year for  
products sold in this year.  
Additions to accruals for termination benefits in 2004 amounted  
to 156 million (2003: 226 million; 2002: 323 million). The  
amount recorded in 2004 was primarily related to the Chrysler  
Group’s turnaround plan, which was initiated in 2001.  
The Group also offers customers the opportunity to purchase  
separately priced extended warranty and maintenance contracts.  
The revenue from these contracts is deferred at the inception of  
the contract and recognized into income over the contract period  
in proportion to the costs expected to be incurred based on  
historical information. Included in “Deferred income” on the  
Consolidated Balance Sheets, the deferred revenue from these  
contracts is summarized as follows:  
Termination benefits of 127 million were paid in 2004 (2003:  
229 million; 2002: 431 million). These termination benefits  
were completely charged against previously established liabilities  
(2003: 228 million; 2002: 359 million).  
In connection with its restructuring efforts in 2004, workforce  
reductions impacted approximately 6,180 employees (2003:  
4,410; 2002: 11,500). At December 31, 2004, the Group had  
liabilities for estimated future terminations of approximately  
1,120 employees.  
(
in millions of )  
Balance at January 1, 2003  
Currency change  
1,061  
(170)  
693  
Additions to the accruals for exit costs of 27 million in 2003 and  
most of the accruals for exit costs in 2002 (302 million) were  
related to supplier contract cancellation and facility deactivation  
costs in connection with the termination of production activities  
and product programs within the Chrysler Group (see Note 7).  
The Commercial Vehicles segment accrued 62 million in exit  
costs in 2002, which were primarily related to costs associated  
with dealer contract terminations in the U.S. and France. Minor  
amounts accrued in 2002 were related to several restructuring  
programs within the Other Activities segment.  
Deferred revenue current year  
Earned revenue current year  
Balance at December 31, 2003  
Currency change  
(455)  
1,129  
(74)  
Deferred revenue current year  
Earned revenue current year  
Balance at December 31, 2004  
538  
(478)  
1,115  
Accruals for restructuring measures comprise certain employee  
termination benefits and other costs that are directly associated  
with plans to exit specified activities. The changes in these  
provisions are summarized as follows:  
The payments for exit costs amounted to 107 million in 2004  
(2003: 174 million; 2002: 288 million), of which 101 million  
(2003: 167 million; 2002: 258 million) were charged against  
previously established liabilities.  
Termination  
benefits  
Exit  
costs  
Total  
liabilities  
(
in millions of )  
Balance at January 1, 2002  
Utilizations, transfers and currency change  
Reductions  
573  
(461)  
(57)  
617  
(358)  
(39)  
160  
380  
(209)  
(27)  
27  
1,190  
(819)  
(96)  
483  
Additions  
323  
Balance at December 31, 2002  
Utilizations, transfers and currency change  
Reductions  
378  
758  
(355)  
(10)  
(564)  
(37)  
Additions  
226  
253  
Balance at December 31, 2003  
Utilizations, transfers and currency change  
Reductions  
239  
171  
(39)  
(54)  
1
410  
(200)  
(24)  
156  
(239)  
(78)  
157  
Additions  
Balance at December 31, 2004  
171  
79  
250  
In connection with the Group’s restructuring measures, provi-  
sions were recorded in 2004, 2003 and 2002 principally within  
Chrysler Group (see Note 7). In addition, accruals for restructur-  
ing measures were recorded in 2002 within Commercial  
Vehicles.  
1
47  
2
6. Financial Liabilities  
Commercial papers are primarily denominated in euros and  
U.S. dollars and include accrued interest. Liabilities to financial  
institutions are partly secured by mortgage conveyance, liens  
and assignment of receivables of approximately 2,232 million  
At December 31,  
2
004  
2003  
(
in millions of )  
(2003: 1,714 million).  
Short-term:  
Notes/Bonds  
11,122  
6,824  
10,254  
438  
9,975  
7,048  
6,183  
344  
DaimlerChrysler Corporation (“DCC”) maintains a Trade Payables  
Agreement with General Electric Capital Corporation (“GECC”) to  
provide financial flexibility to DCC and its suppliers. GECC  
pays participating suppliers on accelerated payment terms for  
a discount on the invoiced amount. DCC then pays GECC under  
the terms of the original invoice from the supplier. To the extent  
GECC can realize favorable economics from the transactions,  
they are shared with DCC. The program will terminate in the first  
half of 2005. The outstanding balance due GECC at December  
Commercial paper  
Liabilities to financial institutions  
Liabilities to affiliated companies  
Deposits from direct banking business  
Loans, other financial liabilities  
Liabilities from capital lease and residual value guarantees  
Short-term financial liabilities (due within one year)  
2,945  
1,123  
3,041  
475  
1,422  
34,128  
1,189  
28,255  
Long-term:  
Maturities  
Notes/Bonds  
of which due in more than five years  
2006-  
2097  
31, 2004 and 2003 was 410 million and 416 million, respec-  
tively, shown within other short term financial liabilities in the  
table above.  
10,492 (2003: 11,213)  
33,919  
6,807  
179  
37,802  
7,911  
97  
Liabilities to financial institutions  
of which due in more than five years  
2006-  
2019  
1,264 (2003: 1,812)  
Aggregate nominal amounts of financial liabilities maturing during  
the next five years and thereafter are as follows:  
Deposits from direct banking business  
of which due in more than five years  
9 (2003: 22)  
there-  
Loans, other financial liabilities  
2005  
2006  
2007  
2008  
2009  
after  
of which due in more than five years  
(in millions of )  
2 (2003: 13)  
145  
400  
Financial liabilities  
34,459 14,095  
8,681  
4,478  
3,051 11,226  
Liabilities from capital lease and residual value guarantees  
of which due in more than five years  
210 (2003: 207)  
1,442  
1,225  
47,435  
75,690  
At December 31, 2004, the Group had unused short-term credit  
lines of 9,278 million (2003: 10,700 million) and unused  
long-term credit lines of 8,981 million (2003: 10,441 million).  
The credit lines include an $18 billion revolving credit facility  
with a syndicate of international banks. The credit agreement is  
comprised of a multi-currency revolving credit facility which  
allows DaimlerChrysler AG to borrow up to $5 billion until 2009, an  
U.S. dollar revolving credit facility which allows DaimlerChrysler  
North America Holding Corporation, a wholly-owned subsidiary of  
DaimlerChrysler AG, to borrow up to $6 billion available until  
Long-term financial liabilities  
42,492  
76,620  
Weighted average interest rates for notes/bonds, commercial  
paper, liabilities to financial institutions and deposits from direct  
banking business are 5.22%, 2.66%, 4.47% and 2.35%, respec-  
tively, at December 31, 2004.  
2005, and a multi-currency revolving credit facility for working  
capital purposes which allows DaimlerChrysler AG and several  
subsidiaries to borrow up to $7 billion until 2008. A part of the $18  
billion facility serves as back-up for commercial paper drawings.  
1
48  
27. Trade Liabilities  
At December 31, 2004  
Due after  
At December 31, 2003  
Due after  
one and  
before  
five years  
one and  
before  
five years  
Due after  
five years  
Due after  
five years  
Total  
Total  
(
in millions of )  
Trade liabilities  
12,914  
2
11,583  
1
2
8. Other Liabilities  
At December 31, 2004  
Due after  
At December 31, 2003  
Due after  
one and  
before  
five years  
one and  
before  
five years  
Due after  
five years  
Due after  
five years  
Total  
Total  
(
in millions of )  
Liabilities to affiliated companies  
Liabilities to related companies  
Other liabilities  
354  
77  
10  
316  
131  
10  
8,276  
542  
552  
166  
166  
8,358  
8,805  
699  
709  
315  
315  
8
,707  
As of December 31, 2004, other liabilities include tax liabilities  
of 803 million (2003: 682 million) and social benefits due of  
774 million (2003: 753 million).  
2
9. Deferred Income  
As of December 31, 2004, 2,088 million of the total deferred  
income is to be recognized after more than one year (2003:  
1,836 million).  
1
49  
Notes to Consolidated  
Other Notes  
Statements of Cash Flows  
30. Consolidated Statements of Cash Flows  
31. Legal Proceedings  
The following cash flows represent supplemental information  
with respect to net cash provided by operating activities:  
Various legal proceedings are pending against the Group.  
DaimlerChrysler believes that such proceedings in the main con-  
stitute ordinary routine litigation incidental to its business.  
Year ended December 31,  
2
004  
2003  
2002  
In November 2003, the official receiver of Garage Bernard  
Tutrice, S.A., France, a former customer of DaimlerChrysler’s  
French subsidiary, filed a lawsuit against DaimlerChrysler France  
S.A.S. in the commercial court of Versailles claiming damages  
alleged to have resulted from tax fraud committed by the former  
Chairman of Tutrice S.A. In October 2004, the receiver amended  
its claim and now demands payment of 455 million, which it  
claims is the equivalent of the total of the unsecured liabilities of  
Tutrice S.A. The receiver alleges that DaimlerChrysler France  
did not forward information to the tax authorities necessary to  
uncover the tax fraud and therefore had contributed to Tutrice  
S.A.’s insolvency. DaimlerChrysler France had filed proof of debt  
in Tutrice S.A.’s insolvency proceedings. The former chairman of  
Tutrice S.A. was convicted of tax fraud in April, 2001. Daimler-  
Chrysler France was a joint plaintiff in the criminal proceedings  
resulting in the conviction. The criminal court found, that the  
fraud committed by Tutrice’s former chairman also caused dam-  
age to DaimlerChrysler France. DaimlerChrysler intends to  
defend itself against this claim vigorously.  
(
in millions of )  
Interest paid  
3,092  
1,373  
3,207  
937  
3,615  
Income taxes paid (refunded)  
(1,178)  
For the year ended December 31, 2004, net cash provided by  
financing activities included proceeds of early terminated cross  
currency hedges, related to financial liabilities, of 1,304 million  
(
2003: 556 million; 2002: 117 million).  
DaimlerChrysler Australia/Pacific Pty. Ltd. (“DCAuP”) is subject to  
a potentially large claim arising out of the financial failure of a  
customer. The customer, one of DCAuP’s largest private clients for  
buses, had purchased and paid for some 200 buses over the  
period 1999 to 2000. In April 2003, the customer was placed in  
receivership and subsequently in liquidation. The customer  
had obtained finance by purporting to sell to financiers and lease  
back buses which, in many cases, were either non-existent or  
already under finance to a third party. Criminal charges are being  
brought against the directors of the customer. Civil actions  
claiming damages were issued out of the Supreme Court of New  
South Wales against DCAuP in April 2004 by the customer’s  
major creditor (National Australia Bank Limited) and in June 2004  
by the liquidator. The actions allege that DCAuP, by reason of  
the conduct of one of its then employees, vicariously engaged in  
misleading and deceptive conduct which resulted in loss to the  
1
50  
plaintiffs. The allegations are that the employee had furnished to  
the customer a number of letters on DCAuP letterhead which falsely  
asserted that the customer had purchased and paid for buses  
which purported to be identified by either commission numbers  
or chassis numbers. Many of the buses proved to be fictitious.  
The letters were produced by the customer to the financier as  
part of the customer’s proof of its title to the identified buses in  
order to procure funding. The claims are yet to be finally quantified.  
DaimlerChrysler is vigorously defending both claims.  
Three purported class action lawsuits are pending in various U.S.  
courts that allege that the paint applied to 1982–1997 model  
year Chrysler, Plymouth, Jeep and Dodge vehicles delaminates,  
®
peels or chips as the result of defective paint, paint primer, or  
application processes. Plaintiffs seek compensatory and punitive  
damages, costs of repair or replacement, attorneys’ fees and  
costs. Seven other previously reported class action lawsuits  
regarding paint delamination have been dismissed.  
In November 2004, a jury awarded $3.75 million in compensato-  
ry damages and $98 million in punitive damages against Daimler-  
Chrysler Corporation in Flax v. DaimlerChrysler Corporation,  
a case filed in Davidson County Circuit Court in the state of  
Tennessee. The complaint alleged that the seat back in a 1998  
Dodge Grand Caravan was defective and collapsed when the  
Caravan was struck by another vehicle resulting in the death of  
an occupant. DaimlerChrysler Corporation has filed motions  
challenging the verdict and the damage awards. DaimlerChrysler  
Corporation is defending approximately 25 other complaints  
involving vehicle seat back strength, including the appeal of a  
judgment against DaimlerChrysler Corporation in November  
2003 for $3.75 million in compensatory damages and $50 million  
in punitive damages in Douglas v. DaimlerChrysler Corporation,  
a case filed in Superior Court in Maricopa County, Arizona.  
DaimlerChrysler believes it has strong grounds for appealing  
these verdicts and having the punitive damage awards stricken.  
DaimlerChrysler AG in its capacity as successor of Daimler-Benz  
AG is a party to a valuation proceeding (Spruchstellenverfahren)  
relating to a subordination and profit transfer agreement that  
existed between Daimler-Benz AG and the former AEG AG  
(
“AEG”). In 1988, former AEG shareholders filed a petition to the  
regional court in Frankfurt claiming that the consideration and  
compensation stipulated in the agreement was inadequate. In  
1994, a court-appointed valuation expert concluded that the con-  
sideration provided for in the agreement was adequate. Following  
a Federal Constitutional Court decision in an unrelated case, the  
Frankfurt court in 1999 instructed the expert to employ a market  
value approach in its valuation analysis rather than the capital-  
ized earnings value approach previously used. The court also  
instructed the expert in 2004 to take into account additional find-  
ings of the Federal Supreme Court elaborating further on the  
valuation issue addressed by the Federal Constitutional Court. In  
September 2004, the expert delivered the requested valuation  
opinion. If the new opinion were to be followed by the Frankfurt  
court, the valuation ratio would increase significantly in favour of  
the AEG shareholders. DaimlerChrysler believes the original  
consideration and compensation to be adequate and the second  
valuation opinion to be unwarranted. DaimlerChrysler intends  
to defend itself vigorously against the claims in this proceeding.  
Like other companies in the automotive industry, DaimlerChrysler  
(primarily DaimlerChrysler Corporation) have experienced a grow-  
ing number of lawsuits which seek compensatory and punitive  
damages for illnesses alleged to have resulted from direct and  
indirect exposure to asbestos used in some vehicle components  
(principally brake pads). Typically, these suits name many other  
corporate defendants and may also include claims of exposure to  
a variety of non-automotive asbestos products. A single lawsuit  
may include claims by multiple plaintiffs alleging illness in the  
form of asbestosis, mesothelioma or other cancer or illness. The  
number of claims in these lawsuits increased from approximately  
14,000 at the end of 2001 to approximately 29,000 at the end of  
2004. In the majority of these cases, plaintiffs do not specify  
their alleged illness and provide little detail about their alleged  
exposure to components in DaimlerChrysler’s vehicles. Some  
plaintiffs do not exhibit current illness, but seek recovery based on  
potential future illness. DaimlerChrysler believes that many of these  
lawsuits involve unsubstantiated illnesses or assert only tenuous  
connections with components in its vehicles, and that there is  
credible scientific evidence to support the dismissal of many of  
these claims. Although DaimlerChrysler’s expenditures to date  
in connection with such claims have not been material to its  
financial condition, it is possible that the number of these lawsuits  
will continue to grow, especially those alleging life-threatening  
illness, and that the company could incur significant costs in the  
future in resolving these lawsuits.  
As previously reported, various legal proceedings are pending  
against DaimlerChrysler or its subsidiaries alleging defects in var-  
ious components (including occupant restraint systems, seats,  
brake systems, tires, ball joints, engines and fuel systems) in sev-  
eral different vehicle models or allege design defects relating to  
vehicle stability (rollover propensity), pedal misapplication (sud-  
den acceleration), brake transmission shift interlock, or crash-  
worthiness. Some of these proceedings are filed as class action  
lawsuits that seek repair or replacement of the vehicles or com-  
pensation for their alleged reduction in value, while others seek  
recovery for personal injuries. Adverse decisions in one or more  
proceedings could require DaimlerChrysler or its subsidiaries  
to pay partially substantial compensatory and punitive damages,  
or undertake service actions, recall campaigns or other costly  
actions.  
1
51  
As previously reported, the Antitrust Division of the U.S. Depart-  
ment of Justice, New York Regional Office, opened a criminal  
investigation in connection with the allegations made in a lawsuit  
filed in 2002 in the United States District Court for the District of  
New Jersey against DaimlerChrysler’s subsidiary Mercedes-Benz  
USA, LLC (“MBUSA”), and its wholly-owned subsidiary Mercedes-  
Benz Manhattan, Inc. The Department of Justice advised those  
companies in the third quarter of 2003 that it had closed the  
investigation and will take no further action. The lawsuit, certified  
as a class action in 2003, alleges that those companies partici-  
pated in a price fixing conspiracy among Mercedes-Benz dealers.  
MBUSA and Mercedes-Benz Manhattan will continue to defend  
themselves vigorously.  
As previously reported, DaimlerChrysler’s subsidiary, Daimler-  
Chrysler Services North America LLC (“DCSNA”) is subject  
to various legal proceedings in federal and state courts, some of  
which allege violations of state and federal laws in connection  
with financing motor vehicles. Some of these proceedings seek  
class action status, and may ask for compensatory, punitive  
or treble damages and attorneys’ fees. In October 2003, the Civil  
Rights Division of the Department of Justice and the United  
States Attorney’s Office for the Northern District of Illinois  
advised that they are initiating an investigation of DCSNA’s credit  
practices that focuses on DCSNA’s Chicago Zone Office. The  
investigation follows a lawsuit filed in February, 2003, against  
DCSNA in Chicago with the United States District Court for the  
Northern District of Illinois that alleges that the DCSNA Chicago  
Zone Office engaged in racially discriminatory credit and collec-  
tion practices in violation of federal and state laws. In that  
lawsuit, initially six individuals filed a purported class action  
complaint on behalf of African-Americans in the region alleging  
that they were denied vehicle financing based on race. They seek  
compensatory and punitive damages, and injunctive relief barring  
discriminatory practices. The lawsuit was later amended to  
include Hispanic-Americans. DCSNA believes that its practices  
are fair and not discriminatory. DCSNA intends to defend itself  
vigorously against these claims.  
As previously reported, DaimlerChrysler received a “statement  
of objections” from the European Commission on April 1, 1999,  
which alleged that the Group violated EU competition rules by  
impeding cross-border sales of Mercedes-Benz passenger cars to  
final customers in the European Economic Area. In October 2001,  
the European Commission found that DaimlerChrysler infringed  
EU competition rules and imposed a fine of approximately 72  
million. DaimlerChrysler’s appeal against this decision is still  
pending before the European Court of Justice.  
As previously reported, in 2003 approximately 80 purported  
class action lawsuits alleging violations of antitrust law were filed  
against DaimlerChrysler and several of its U.S. subsidiaries, six  
other motor vehicle manufacturers, operating subsidiaries of  
those companies in both the United States and Canada, the  
National Automobile Dealers Association and the Canadian Auto-  
mobile Dealers Association. Some complaints were filed in feder-  
al courts in various states and others were filed in state courts.  
The complaints allege that the defendants conspired to prevent  
the sale to U.S. consumers of vehicles sold by dealers in Canada  
in order to maintain new car prices at artificially high levels in the  
U.S. They seek treble damages on behalf of everyone who bought  
or leased a new vehicle in the U.S. since January 1, 2001.  
DaimlerChrysler believes the complaints against it are without  
merit and plans to defend itself against them vigorously.  
The Federal Republic of Germany has initiated arbitration pro-  
ceedings against DaimlerChrysler Services AG, Deutsche  
Telekom AG and the consortium an introductory writ (see also  
Notes 3 and 32). The Federal Republic of Germany is seeking  
damages, including contractual penalties and reimbursement of  
lost revenues, which allegedly arose from delays in the operabili-  
ty of the toll collection system. Specifically, the Federal Republic  
of Germany is claiming lost revenues of 3.56 billion plus interest  
for the period September 1, 2003 through December 31, 2004,  
and contractual penalties of approximately 1.03 billion plus  
interest through July 31, 2004. Since some of the contractual  
penalties are depending on time, the amount claimed as contrac-  
tual penalties may increase. DaimlerChrysler believes the claims  
of the Federal Republic of Germany are without merit and intends  
to defend itself vigorously against these claims.  
1
52  
As previously reported, Freightliner LLC, DaimlerChrysler’s North  
American commercial vehicles subsidiary, acquired in September  
As previously reported, in the fourth quarter of 2000, Tracinda  
Corporation filed a lawsuit in the United States District Court for  
the District of Delaware against DaimlerChrysler AG and some of  
the members of its Supervisory Board and Board of Management  
(Messrs. Kopper, Prof. Schrempp and Dr. Gentz). Shortly there-  
after, other plaintiffs filed a number of actions against the same  
defendants, making claims similar to those in the Tracinda com-  
plaint. Two individual lawsuits and one consolidated class action  
lawsuit were originally pending. The plaintiffs, current or former  
DaimlerChrysler shareholders, alleged that the defendants violat-  
ed U.S. securities law and committed fraud in obtaining approval  
from Chrysler stockholders of the business combination between  
Chrysler and Daimler-Benz in 1998. In March 2003, the Court  
granted Mr. Kopper’s motion to dismiss each of the complaints  
against him on the ground that the Court lacked jurisdiction over  
him. In August 2003, DaimlerChrysler agreed to settle the  
consolidated class action case for $300 million (approximately  
2
000 Western Star Trucks Holdings Ltd., a Canadian company  
engaged in the design, assembly, and distribution of heavy duty  
trucks and transit buses. Prior to its acquisition by Freightliner,  
Western Star had completed the sale of ERF (Holdings) plc, a  
company organized in England and Wales and engaged in the  
assembly and sale of heavy duty trucks, to MAN AG and MAN  
Nutzfahrzeuge AG for CAD195 million. In September 2002, MAN  
filed a claim against Freightliner Ltd. (formerly Western Star) with  
the London Commercial Court for breach of representations and  
warranties in the share purchase agreement, alleging that ERF’s  
accounts and financial statements were misstated. MAN seeks  
damages in excess of GBP300 million. Freightliner Ltd. intends to  
defend itself vigorously against such claims and has filed a  
contribution claim against Ernst & Young, ERF’s auditors, with  
the London Commercial Court in the second quarter of 2003.  
230 million adjusted for currency effects), and shortly there-  
As previously reported, DaimlerChrysler sold DaimlerChrysler  
Rail Systems GmbH (“Adtranz”), to Bombardier Inc., on April 30,  
after, DaimlerChrysler concluded a settlement with Glickenhaus,  
one of the two individual plaintiffs. On February 5, 2004, the  
Court issued a final order approving the settlement of the consol-  
idated class action case and ordering its dismissal. The settle-  
ments did not affect the case brought by Tracinda, which claims  
to have suffered damages of approximately $1.35 billion. The  
Tracinda trial was completed on February 11, 2004. There can be  
no assurance as to the timing of a decision by the court. In  
addition, a purported class action was filed against Daimler-  
Chrysler AG and some members of its Board of Management in  
2004 in the same court on behalf of current or former Daimler-  
Chrysler shareholders who are not citizens or residents of the  
United States, and who acquired their DaimlerChrysler shares  
on or through a foreign stock exchange. The Court had previously  
excluded such persons from the consolidated class action due  
to practical difficulties in maintaining a class comprising such  
persons. The complaint contains allegations similar to those in  
the Tracinda and prior class action complaints.  
2
001 for $725 million. In connection with the sale, Daimler-  
Chrysler deferred 300 million of the gain due to uncertainties  
related to the final purchase price. In July 2002, Bombardier filed  
a request for arbitration with the International Chamber of Com-  
merce in Paris, and asserted claims for sales price adjustments  
under the terms of the sale and purchase agreement as well as  
claims for alleged breaches of contract and misrepresentations.  
Bombardier sought total damages of approximately 960 million.  
The original sales agreement limited the amount of such price  
adjustments to 150 million and, to the extent legally permissi-  
ble, the amount of other claims to an additional 150 million. On  
September 28, 2004, DaimlerChrysler and Bombardier conclud-  
ed a settlement agreement with respect to all claims asserted by  
Bombardier in connection with the sale of Adtranz. The settle-  
ment agreement provided for a purchase price adjustment of  
170 million to be paid to Bombardier and the cancellation of all  
remaining claims and allegations asserted by Bombardier.  
DaimlerChrysler paid the settlement amount on October 1, 2004.  
DaimlerChrysler recognized the remaining deferred gain in 2004,  
which was partially offset by expenses incurred. The 120 million  
net amount recognized is classified as “Other income” in the  
consolidated statements of income and is included in operating  
profit of the Other Activities segment.  
1
53  
In 2002, several lawsuits were filed asserting claims relating to  
the practice of apartheid in South Africa during different time  
periods before 1994: On November 11, 2002, the Khulumani Sup-  
port Group (which purports to represent 32,700 individuals) and  
several individual plaintiffs filed a lawsuit captioned Khulumani v.  
Barclays National Bank Ltd., Civ. A. No. 02-5952 (E.D.N.Y.) in the  
United States District Court for the Eastern District of New York  
against 22 American, European, and Japanese companies, includ-  
ing DaimlerChrysler AG and AEG Daimler-Benz Industrie. On  
November 19, 2002, a putative class action lawsuit, Ntsebeza v.  
Holcim Ltd., No. 02-74604 (RWS) (E.D. Mich.), was filed in the  
United States District Court for the Eastern District of Michigan  
against four American and European companies, including Daim-  
lerChrysler Corporation. Both cases were consolidated for pretri-  
al purposes with several other putative class action lawsuits,  
including Digwamaje v. Bank of America, No. 02-CV-6218 (RCC)  
Litigation is subject to many uncertainties and DaimlerChrysler  
cannot predict the outcome of individual matters with assurance.  
It is reasonably possible that the final resolution of some of these  
matters could require the Group to make expenditures, in excess  
of established reserves, over an extended period of time and  
in a range of amounts that DaimlerChrysler cannot reasonably  
estimate. Although the final resolution of any such matters could  
have a material effect on the Group’s consolidated operating  
results for a particular reporting period, DaimlerChrysler believes  
that it should not materially affect its consolidated financial  
position.  
32. Contingent Obligations and Commercial Commitments  
Contingent Obligations. Obligations from issuing guarantees as  
(
S.D.N.Y.), which had been previously filed in the United States  
a guarantor (excluding product warranties) are as follows:  
District Court for the Southern District of New York. The Digwa-  
maje plaintiffs originally named DaimlerChrysler AG as a defen-  
dant, but later voluntarily dismissed DaimlerChrysler from the  
suit. Khulumani and Ntsebeza allege, in essence, that the defen-  
dants knew about or participated in human rights violations and  
other abuses of the South African apartheid regime, cooperated  
with the apartheid government during the relevant periods, and  
benefited financially from such cooperation. The plaintiffs seek  
monetary and other relief, but do not quantify damages. On  
November 29, 2004, the Court granted a motion to dismiss filed  
by a group of defendants, including DaimlerChrysler. Plaintiffs  
have filed notices of appeal of the Court’s decision. In order to  
address certain procedural matters, plaintiffs and the moving  
defendants have agreed to withdraw the appeals with the expec-  
tation that the notices of appeal would be refiled.  
At December 31,  
Maximum potential  
future obligations  
At December 31,  
Amount recognized  
as a liability  
2
004  
2003  
2004  
2003  
(
in millions of )  
Guarantees for third party liabilities  
2,334  
1,646  
2,647  
1,957  
207  
536  
355  
583  
Guarantees under buy-back  
commitments  
Performance guarantees and  
environmental risks  
464  
128  
513  
118  
360  
97  
352  
109  
Other  
4
,572  
5,235  
1,200  
1,399  
Guarantees for third party liabilities principally represent guaran-  
tees of indebtedness of non-consolidated affiliated companies  
and third parties and commitments by Group companies as to  
contractual performance by joint venture companies and certain  
non-incorporated companies, partnerships, and project groups.  
The term under these arrangements generally covers the range of  
the related indebtedness of the non-consolidated affiliated com-  
panies and third parties or the contractual performance period of  
joint venture companies, non-incorporated companies, partner-  
ships, and project groups. The parent company of the Group  
(DaimlerChrysler AG) provides guarantees for certain obligations  
of its consolidated subsidiaries towards third parties. At Decem-  
ber 31, 2004, these guarantees amounted to 48.4 billion.  
To a lesser extent, consolidated subsidiaries provide guarantees  
to third parties of obligations of other consolidated subsidiaries.  
All intercompany guarantees are eliminated in consolidation and  
therefore are not reflected in the above table.  
In August 2004, the Securities and Exchange Commission  
(
“SEC”) notified DaimlerChrysler AG that it has opened an investi-  
gation relating to our compliance with the U.S. Foreign Corrupt  
Practices Act. The investigation follows the filing of a “whistle-  
blower” complaint with the U.S. Department of Labor (“DOL”)  
under the Sarbanes-Oxley Act by a former employee of our whol-  
ly-owned subsidiary DaimlerChrysler Corporation whose employ-  
ment was terminated in 2004. The terminated employee filed a  
lawsuit against DaimlerChrysler Corporation in the U.S. District  
Court for the Eastern District of Michigan in September 2004  
which contains substantially the same allegations as in the DOL  
complaint and additional allegations relating to other federal and  
state law claims arising from the termination. In November, the  
DOL dismissed the complaint because it found no reasonable  
cause to believe that the employee was terminated in violation of  
the Sarbanes-Oxley Act. DaimlerChrysler is providing information  
to the SEC in cooperation with its investigation. In addition, in  
response to an informal request from the SEC, DaimlerChrysler is  
also voluntarily providing information regarding its implementa-  
tion of various provisions of the Sarbanes-Oxley Act, including  
those relating to the process for reporting information to the  
Audit Committee. This request follows the filing of another  
whistleblower complaint with the DOL by a former employee of  
DaimlerChrysler Corporation. The terminated employee filed a  
lawsuit against DaimlerChrysler Corporation in the U.S. District  
Court for the Eastern District of Michigan in November 2004  
which contains substantially the same allegations as in the DOL  
complaint.  
1
54  
Guarantees under buy-back commitments principally represent  
arrangements whereby the Group guarantees specified trade-in or  
resale values for assets or products sold to non-consolidated  
affiliated companies and third parties. Such guarantees provide the  
holder with the right to return purchased assets or products back  
to the Group in connection with a future purchase of products or  
services. The table above excludes residual value guarantees  
related to arrangements for which revenue recognition is precluded  
due to the Group’s obligation to repurchase assets sold to unre-  
lated guaranteed parties.  
On March 11, 2003, DaimlerChrysler signed an agreement with  
the City of Hamburg, Germany, a holder of approximately 6% of  
the common shares of DaimlerChrysler Luft- und Raumfahrt  
Holding Aktiengesellschaft (“DCLRH”), a majority-owned sub-  
sidiary of the Group. Pursuant to the terms of the agreement and  
upon execution of the agreement, DaimlerChrysler will have a call  
option and the City of Hamburg will have a put option which,  
upon exercise by either party will require the shares of DCLRH  
held by the City of Hamburg to be transferred to DaimlerChrysler.  
In consideration for these shares, DaimlerChrysler was obliged to  
pay the City of Hamburg a minimum of 450 million in cash or  
shares of the EADS or a combination of both. The agreement was  
approved by the Parliament of the Free and Hanseatic City of  
Hamburg on May 21, 2003. DaimlerChrysler’s call option would  
become exercisable at January 1, 2005. The City of Hamburg’s  
put option would become exercisable at the earlier of October 1,  
2007, or upon the occurrence of certain events which are solely  
within the control of DaimlerChrysler. DaimlerChrysler believes  
the likelihood that these certain events will occur is remote.  
Performance guarantees principally represent pledges or indem-  
nifications related to the quality or timing of performance by third  
parties or participations in performance guarantees of consor-  
tiums. Performance guarantees typically provide the purchaser of  
goods or services with the right to be reimbursed for losses  
incurred or other penalties if the third party or the consortium  
fails to perform. Amounts accrued under performance guaran-  
tees reflect estimates of probable losses resulting from a third  
party’s failure to perform under obligating agreements.  
In accordance with FIN 45, the obligations associated with prod-  
uct warranties are not reflected in the above table. See Note 25b  
for accruals relating to such obligations.  
DaimlerChrysler AG and its wholly owned subsidiary Daimler-  
Chrysler Services AG have provided various guarantees towards  
third parties with respect to the investment in Toll Collect. See  
Note 3 for detailed information regarding Toll Collect including  
the guarantees issued. Of the guarantees mentioned in Note 3,  
only the 600 million guarantee for the bank loan is reflected in  
the above table in the line “Guarantees for third party liabilities”.  
The other guarantees are not reflected in the above table since  
the maximum potential future obligation resulting from the  
remaining guarantees cannot be accurately estimated. Accruals  
established in this regard are also not included in the above  
table.  
Commercial Commitments. In addition to the above guaran-  
tees and warranties, in connection with certain production pro-  
grams, the Group has committed to purchase various levels of  
outsourced manufactured parts and components over extended  
periods at market prices. The Group has also committed to pur-  
chase or invest in the construction and maintenance of various  
production facilities. Amounts under these guarantees represent  
commitments to purchase plant or equipment at market prices in  
the future. As of December 31, 2004, commitments to purchase  
outsourced manufactured parts and components or to invest  
in plant and equipment are approximately 5.7 billion. These  
amounts are not reflected in the above table.  
The Group is subject to potential liability under certain govern-  
ment regulations and various claims and legal actions that are  
pending or may be asserted against DaimlerChrysler concerning  
environmental matters. The maximum potential future obligation  
related to certain environmental guarantees cannot be estimated  
due to numerous uncertainties including the enactment of new  
laws and regulations, the development and application of new  
technologies, the identification of new sites for which the Group  
may have remediation responsibility and the apportionment  
and collectibility of remediation costs when other parties are  
involved.  
When circumstances indicate that payment is probable and the  
amount is reasonably estimable, guarantees made by the Group  
are recognized as a liability in the consolidated balance sheet in  
accordance with SFAS 5 “Accounting for Contingencies”, with an  
offsetting amount recorded as an expense (contingent obliga-  
tion). For guarantees issued or modified after December 31,  
2
002, the Group records guarantees at fair value, unless a higher  
amount must be accrued for in accordance with SFAS 5 (non-  
contingent obligations). Both contingent obligations and non-con-  
tingent obligations are included in the column “Amount recog-  
nized as a liability” in the table above.  
1
55  
The Group also enters into noncancellable operating leases for  
facilities, plant and equipment. Total rentals under operating  
leases charged to expense in 2004 in the statement of income  
The contract volumes at December 31 of derivative financial  
instruments used for hedging currency- and interest rate risks  
are shown in the table below. The contract or notional amounts  
do not always represent amounts exchanged by the parties and,  
thus, are not necessarily a measure for the exposure of Daimler-  
Chrysler through its use of derivatives.  
(
loss) amounted to 902 million (2003: 747 million; 2002: 737  
million). Future minimum lease payments under noncancellable  
lease agreements as of December 31, 2004 are as follows:  
there-  
after  
At December 31,  
2
005  
2006  
425  
2007  
343  
2008  
286  
2009  
254  
2
004  
2003  
(
in millions of )  
(in millions of )  
Operating leases  
583  
1,099  
Currency contracts  
20,226  
38,313  
25,366  
31,577  
Interest rate contracts  
33. Information About Financial Instruments and Derivatives  
b) Fair Value of Financial Instruments  
a) Use of Financial Instruments  
The fair value of a financial instrument is the price at which one  
party would assume the rights and/or duties of another party.  
Fair values of financial instruments have been determined with  
reference to available market information at the balance sheet  
date and the valuation methodologies discussed below. Consider-  
ing the variability of their value-determining factors, the fair  
values presented herein are only an indication of the amounts  
that the Group could realize under current market conditions.  
The Group conducts business on a global basis in numerous  
major international currencies and is, therefore, exposed to  
adverse movements in foreign currency exchange rates. The  
Group uses among others bonds, medium-term-notes, commer-  
cial paper and bank loans in various currencies. As a conse-  
quence of using these types of financial instruments, the Group  
is exposed to risks from changes in interest and foreign currency  
exchange rates. DaimlerChrysler holds financial instruments,  
such as financial investments, variable- and fixed-interest bearing  
securities and to a lesser extent equity securities that subject the  
Group to risks from changes in interest rates and market prices.  
DaimlerChrysler manages the various types of market risks  
by using among others derivative financial instruments. Without  
these instruments the Group’s market risks would be higher.  
DaimlerChrysler does not use derivative financial instruments for  
purposes other than risk management.  
The carrying amounts and fair values of the Group’s financial  
instruments are as follows:  
At December 31,  
At December 31,  
2003  
2
004  
Fair  
Carrying  
amount  
Carrying  
Fair  
value  
amount  
value  
(in millions of )  
Financial instruments  
(
other than derivative instruments):  
Assets:  
Based on regulations issued by regulatory authorities for financial  
institutions, the Group has established guidelines for risk con-  
trolling procedures and for the use of financial instruments,  
including a clear segregation of duties with regard to operating  
financial activities, settlement, accounting and controlling.  
Financial assets  
1,610  
1,610  
1,631  
1,631  
Receivables from  
financial services  
56,785  
3,884  
7,771  
57,558  
3,884  
7,771  
52,638  
3,268  
11,017  
53,919  
3,268  
11,017  
Securities  
Cash and cash equivalents  
Liabilities:  
Market risks are quantified according to the “value-at-risk”  
method which is commonly used among banks. Using historical  
variability of market data, potential changes in value resulting  
from changes of market prices are calculated on the basis of  
statistical methods.  
Financial liabilities  
76,620  
78,594  
75,690  
77,993  
Derivative instruments:  
Assets:  
Currency contracts  
Interest rate contracts  
Liabilities:  
1,287  
2,667  
1,287  
2,667  
2,380  
3,695  
2,380  
3,695  
DaimlerChrysler is also exposed to market price risks associated  
with the purchase of commodities. To a minor degree, Daimler-  
Chrysler uses derivative instruments to reduce market price  
risks. The risk resulting from derivative commodity instruments is  
not significant to the Group.  
Currency contracts  
Interest rate contracts  
152  
196  
152  
196  
267  
163  
267  
163  
The fair value of derivative instruments classified as assets are  
included in other assets (see Note 19). The fair value of  
derivative instruments classified as liabilities are included in  
other accrued liabilities (see Note 25b).  
The methods and assumptions used to determine the fair values  
of financial instruments are summarized below:  
1
56  
Financial Assets and Securities. The fair values of securities  
were estimated using quoted market prices. The Group has cer-  
tain equity investments in related and affiliated companies not  
presented in the table, as these investments are not publicly  
traded and determination of fair values is impracticable.  
d) Accounting for and Reporting of Financial Instruments  
(Other than Derivative Instruments)  
The income or expense of the Group’s financial instruments (other  
than derivative instruments), with the exception of receivables  
from financial services and financial liabilities related to leasing  
and sales financing activities, is recognized in financial income, net.  
Interest income on receivables from financial services and gains  
and losses from sales of receivables are recognized as revenues.  
Interest expense on financial liabilities related to leasing and  
sales financing activities are recognized as cost of sales. The  
carrying amounts of the financial instruments (other than derivative  
instruments) are included in the consolidated balance sheets  
under their related captions.  
Receivables from Financial Services. The carrying amounts of  
variable rate finance receivables were estimated to approximate  
their fair values since the contract rates of those receivables  
approximate current market rates. The fair values of fixed rate  
finance receivables were estimated by discounting expected cash  
flows using the current interest rates at which comparable loans  
with identical maturity would be made as of December 31, 2004  
and 2003.  
e) Accounting for and Reporting of Derivative Instruments  
and Hedging Activities  
Cash and Other assets. The carrying amounts of Cash and  
Other assets approximate fair values due to the short-term matu-  
rities of these instruments.  
Foreign Currency Risk Management. As a consequence of the  
global nature of DaimlerChrysler’s businesses, its operations and  
its reported financial results and cash flows are exposed to the  
risks associated with fluctuations in the exchange rates of the  
U.S. dollar, the euro and other world currencies. The Group’s  
businesses are exposed to transaction risk whenever revenues of  
a business are denominated in a currency other than the curren-  
cy in which the business incurs the costs relating to those rev-  
enues. This risk exposure primarily affects the Mercedes Car  
Group segment. The Mercedes Car Group segment generates its  
revenues mainly in the currencies of the countries in which cars  
are sold, but it incurs manufacturing costs primarily in euros. The  
Commercial Vehicles segment is subject to transaction risk, to a  
lesser extent, because of its global production network. At  
Chrysler Group revenues and costs are principally generated in  
U.S. dollars, resulting in a relatively low transaction risk for this  
segment. The Other Activities segment was exposed to a low  
transaction risk resulting primarily from the U.S. dollar exposure  
of the aircraft engine business, which DaimlerChrysler conducts  
through MTU Aero Engines. Effective December 31, 2003  
Financial Liabilities. The fair value of publicly traded debt was  
estimated using quoted market prices. The fair values of other  
long-term bonds were estimated by discounting future cash flows  
using market interest rates over the remaining term. The carrying  
amounts of commercial paper and borrowings under revolving  
credit facilities were assumed to approximate fair value due to  
their short maturities.  
Currency Contracts. The fair values of forward foreign exchange  
contracts were based on European Central Bank reference  
exchange rates adjusted for the respective interest rate differen-  
tials (premiums or discounts). Currency options were valued  
on the basis of quoted market prices or on estimates based on  
option pricing models.  
Interest Rate Contracts. The fair values of existing instruments  
to hedge interest rate risks (e. g. interest rate swap agreements,  
cross currency interest rate swap agreements) were estimated  
by discounting expected cash flows using market interest rates  
over the remaining term of the instrument. Interest rate options  
are valued on the basis of quoted market prices or on estimates  
based on option pricing models.  
DaimlerChrysler sold all its equity interests in MTU Aero Engines.  
In order to mitigate the impact of currency exchange rate fluctua-  
tions, DaimlerChrysler continually assesses its exposure to cur-  
rency risks and hedges a portion of those risks through the use  
of derivative financial instruments. Responsibility for managing  
DaimlerChrysler’s currency exposures and use of currency deriv-  
atives is centralized within the Group’s Currency Committee.  
Until the disposition of MTU Aero Engines, effective December  
31, 2003, the Currency Committee consisted of two separate  
subgroups, one for the Group’s vehicle businesses and one for  
MTU Aero Engines. Each subgroup consisted of members of  
senior management from each of the respective businesses as  
well as from Corporate Treasury and Risk Controlling. Since  
January 1, 2004, the Currency Committee consists exclusively of  
those members who previously formed the subgroup responsible  
for the vehicle business. Corporate Treasury implements deci-  
sions concerning foreign currency hedging taken by the Currency  
Committee. Risk Controlling regularly informs the Board of  
Management of the actions of Corporate Treasury based on the  
decisions of the Currency Committee.  
c) Credit Risk  
The Group is exposed to credit-related losses in the event of non-  
performance by counterparties to financial instruments. Daimler-  
Chrysler manages the credit risk exposure to financial institu-  
tions through diversification of counterparties and review of each  
counterparties’ financial strength. DaimlerChrysler does not have  
a significant exposure to any individual counterparty, based on  
the rating of the counterparties performed by established rating  
agencies. DaimlerChrysler Services has established detailed  
guidelines for the risk management process related to the expo-  
sure to financial services customers. Additional information with  
respect to receivables from financial services and allowance for  
doubtful accounts is included in Note 18.  
1
57  
Interest Rate and Equity Price Risk Management. Daimler-  
Chrysler holds a variety of interest rate sensitive assets and lia-  
bilities to manage the liquidity and cash needs of its day-to-day  
operations. In addition a substantial volume of interest rate sen-  
sitive assets and liabilities is related to the leasing and sales  
financing business which is operated by DaimlerChrysler Ser-  
vices. In particular, the Group’s leasing and sales financing busi-  
ness enters into transactions with customers, primarily resulting  
in fixed rate receivables. DaimlerChrysler’s general policy is to  
match funding in terms of maturities and interest rates. However,  
for a limited portion of the receivables portfolio funding does not  
match in terms of maturities and interest rates. As a result,  
DaimlerChrysler is exposed to risks due to changes in interest  
rates. DaimlerChrysler coordinates funding activities of the  
industrial business and financial services on the Group level. The  
Group uses interest rate derivative instruments such as interest  
rate swaps, forward rate agreements, swaptions, caps and floors  
to achieve the desired interest rate maturities and asset/liability  
structures.  
Information with Respect to Cash Flow Hedges. Changes in  
the value of forward foreign currency exchange contracts and  
currency options designated and qualifying as cash flow hedges  
are reported in accumulated other comprehensive loss. These  
amounts are subsequently reclassified into operating income, in  
the same period as the underlying transactions affect operating  
income. Changes in the fair value of derivative hedging instru-  
ments designated as hedges of variability of cash flows associat-  
ed with variable-rate long-term debt are also reported in accumu-  
lated other comprehensive loss. These amounts are subsequently  
reclassified into financial income, net, as a yield adjustment in  
the same period in which the related interest on the floating-rate  
debt obligations affect earnings.  
For the year ended December 31, 2004, 7 million losses (2003:  
11 million), representing principally the component of the deriv-  
ative instruments’ gain/loss excluded from the assessment  
of the hedge effectiveness and the amount of hedge ineffective-  
ness, were recognized in operating and financial income, net.  
The Group assesses interest rate risk by continually identifying  
and monitoring changes in interest rate exposures that may  
adversely impact expected future cash flows and by evaluating  
hedging opportunities. The Group maintains risk management  
control systems independent of Corporate Treasury to monitor  
interest rate risk attributable to DaimlerChrysler’s outstanding  
interest rate exposures as well as its offsetting hedge positions.  
The risk management control systems involve the use of analyti-  
cal techniques, including value-at-risk analyses, to estimate  
the expected impact of changes in interest rates on the Group’s  
future cash flows.  
For the year ended December 31, 2004 and 2003, no gains or  
losses had to be reclassified from accumulated other compre-  
hensive loss into earnings as a result of the discontinuance of  
cash flow hedges.  
It is anticipated that 1,578 million of net gains included in accu-  
mulated other comprehensive loss at December 31, 2004, will be  
reclassified into earnings during the next year.  
As of December 31, 2004, DaimlerChrysler held derivative finan-  
cial instruments with a maximum maturity of 32 months to hedge  
its exposure to the variability in future cash flows from foreign  
currency forecasted transactions.  
The investments in equity securities and the corresponding risks  
of derivative financial hedging instruments for equities were not  
material to the Group in the displayed reporting periods.  
Information with Respect to Hedges of the Net Investment  
in a Foreign Operation. In specific circumstances, Daimler-  
Chrysler seeks to hedge the currency risk inherent in certain of  
its long-term investments, where the functional currency is other  
than the euro, through the use of derivative and non-derivative  
financial instruments. For the year ended December 31, 2004,  
net gains of 120 million from hedging the Group’s net invest-  
ment in MMC were reclassified into the income statement. For  
further information see also the discussion in Note 3. In addition,  
net losses of 8 million (in 2003 net gains of 48 million) from  
hedging the Group’s net investments in foreign operations were  
included in the cumulative transition adjustment without affect-  
ing DaimlerChrysler’s net income in 2004.  
Information with Respect to Fair Value Hedges. Gains and  
losses in fair value of recognized assets and liabilities and firm  
commitments of operating transactions as well as gains and loss-  
es on derivative financial instruments designated as fair value  
hedges of these recognized assets and liabilities and firm com-  
mitments are recognized currently in revenues or cost of sales,  
as the transactions being hedged involve sales or production of  
the Group’s products. Net gains and losses in fair value of both  
recognized financial assets and liabilities and derivative financial  
instruments designated as fair value hedges of these financial  
assets and liabilities are recognized currently in financial income,  
net.  
For the year ended December 31, 2004, net losses of 49 million  
(
2003: 57 million) were recognized in operating and financial  
income, net, representing principally the component of the deriv-  
ative instruments’ gain or loss excluded from the assessment of  
hedge effectiveness and the amount of hedging ineffectiveness.  
1
58  
3
4. Retained Interests in Sold Receivables and Sales of  
Actual and projected credit losses for receivables securitized  
were as follows:  
Finance Receivables  
The fair value of retained interests in sold receivables was as  
follows:  
Receivables securitized in  
2
001  
2002  
2003  
2004  
Actual and projected credit losses  
Percentages as of  
At December 31,  
December 31, 2004  
December 31, 2003  
December 31, 2002  
December 31, 2001  
2.2%  
2.5%  
2.4%  
2.4%  
1.9%  
2.4%  
2.6%  
2.0%  
2.5%  
2.3%  
2
004  
2003  
(
in millions of )  
Fair value of estimated residual cash flows,  
net of prepayments, from sold receivables,  
before expected future net credit losses  
2,190  
(369)  
2,960  
(508)  
Expected future net credit losses on sold receivables  
Static pool losses are calculated by summing the actual and  
Fair value of net residual cash flows from sold  
receivables  
1,821  
379  
2
2,452  
703  
2
projected future credit losses and dividing them by the original  
balance of each pool of assets. The amount shown above for  
each year is a weighted average for all securitizations during that  
year and outstanding at December 31, 2004. Certain cash flows  
received and paid to securitization trusts were as follows:  
Retained subordinated securities  
Other retained interests  
Retained interests in sold receivables, at fair value  
2,202  
3,157  
At December 31, 2004, the significant assumptions used in  
2
004  
2003  
estimating the residual cash flows from sold receivables and the  
sensitivity of the current fair value to immediate 10% and 20%  
adverse changes are as follows:  
(in millions of €)  
Proceeds from new securitizations  
11,360  
35,393  
10,018  
46,623  
Proceeds from collections reinvested in  
previous wholesale securitizations  
Impact on fair value  
based on adverse  
Amounts reinvested in previous  
wholesale securitizations  
(35,414)  
183  
(46,678)  
219  
Assumption  
percentage  
10%  
20%  
change  
change  
Servicing fees received  
(
in millions of )  
Receipt of cash flow on retained interest in  
securitized receivables  
686  
718  
Prepayment speed, monthly  
1.5%  
(14)  
(32)  
Expected remaining net credit losses as a  
percentage of receivables sold  
1.1%  
(34)  
(16)  
(69)  
(32)  
Residual cash flow discount rate, annualized  
12.0%  
The effect of a 10% and 20% adverse change in the discount rate  
used to compute the fair value of the retained subordinated secu-  
rities would be a decrease of 4 million and 7 million, respec-  
tively. Similar changes to the monthly prepayment speed and the  
expected remaining net credit losses as a percentage of receiv-  
ables sold for the retained subordinated securities would have no  
adverse effect on the fair value of the retained subordinated  
securities.  
These sensitivities are hypothetical and should be used with cau-  
tion. The effect of a variation in a particular assumption on the  
fair value of the retained interests is calculated without changing  
any other assumption; in reality, changes in one assumption may  
result in changes in another, which might magnify or counteract  
the sensitivities.  
1
59  
The outstanding balance, delinquencies and net credit losses of  
sold receivables and other receivables, of those companies that  
sell receivables, as of and for the years ended December 31,  
2
004 and 2003, respectively, were as follows:  
Outstanding  
balance at  
2003  
Delinquencies  
> 60 days at  
2003  
Net credit losses  
for the year ended  
2
004  
2004  
2004  
2003  
(
in millions of )  
Retail receivables  
38,963  
15,142  
44,190  
15,246  
59,436  
(22,154)  
37,282  
116  
6
201  
1
390  
3
478  
13  
Wholesale receivables  
Total receivables managed  
Less: receivables sold  
Receivables held in portfolio  
54,105  
(20,167)  
33,938  
122  
(24)  
98  
202  
(35)  
167  
393  
(144)  
249  
491  
(216)  
275  
DaimlerChrysler sells mainly automotive finance receivables in  
the ordinary course of the business to trusts that are considered  
Qualifying Special Purpose Entities under SFAS 140 (“QSPEs”) as  
well as selling to trusts that are multi-seller and multi-collateral-  
ized bank conduits. These Trusts are considered to be variable  
interest entities (“VIEs”). A bank conduit generally receives sub-  
stantially all of its funding from issuing asset-backed securities  
that are cross-collateralized by the assets held by the entity.  
Although its interest in these VIE’s is significant, DaimlerChrysler  
has concluded that it is not the primary beneficiary of these bank  
conduits and therefore is not required to consolidate them under  
FIN 46R.  
During the year ended December 31, 2004, DaimlerChrysler sold  
9,329 million (2003: 9,557 million) and 35,414 million (2003:  
46,678 million) of retail and wholesale receivables, respectively.  
From these transactions, the Group recognized gains of 79  
million (2003: 249 million) and 157 million (2003: 196 million)  
on sales of retail and wholesale receivables, respectively.  
In addition to the receivables sold as described above, the Group  
sells automotive finance receivables for which the group does  
not retain any residual beneficial interest or credit risk (“whole  
loan sales”). During the year ended December 31, 2004, the  
Group sold 965 million of retail receivables in whole loan sales  
and recognized gains of 14 million. The outstanding balance  
of receivables serviced in connection with whole loan sales was  
1,361 million as of December 31, 2004.  
DaimlerChrysler generally remains as servicer. The Group retains  
a residual beneficial interest in the receivables sold which is  
designed to absorb substantially all of the credit, prepayment,  
and interest-rate risk of the receivables transferred to the trusts.  
This retained interest balance represents the group’s maximum  
exposure to loss as a result of its involvement with these entities.  
The following summarizes the outstanding balance of the receiv-  
ables sold to the QSPEs and VIEs and the corresponding retained  
interest balances as of December 31, 2004:  
Significant assumptions used in measuring the residual interest  
resulting from the sale of retail and wholesale receivables were  
as follows (weighted average rates for securitizations completed  
during the year) at December 31, 2004 and 2003:  
Retail  
2003  
Wholesale  
2003  
2
004  
2004  
Prepayment speed assumption  
monthly rate)  
1
1
(
1.5%  
2.3%  
1.5%  
2.5%  
Retained  
interest  
in sold  
Estimated lifetime net credit losses  
(an average percentage of sold receivables)  
Receivables  
sold  
0.0%  
0.0%  
receivables  
Residual cash flows discount rate  
(
in millions of )  
(
annual rate)  
12.0%  
12.0%  
12.0%  
12.0%  
Variable interest entities  
3,409  
516  
1,686  
2,202  
1
For the calculation of wholesale gains, the Group estimated the average wholesale  
loan liquidated in 210 days.  
Qualifying special purpose entities  
16,758  
20,167  
During the year ended December 31, 2004, the fair value of  
servicing liabilities on sold receivables was 15 million (2003:  
18 million), and the fair value of servicing assets was 1 million.  
These values were determined by discounting expected cash  
flows at current market rates. During the year ended December  
31, 2004, the Group recognized servicing liabilities of 8 million  
(
(
2003: 10 million) and related amortization of 11 million  
2003: 2 million). The Group also recognized servicing assets of  
1 million and related amortization of 2 million.  
1
60  
To support the Group’s asset-backed commercial paper program  
in North America, a group of financial institutions has provided  
contractually committed liquidity facilities aggregating $5.2 bil-  
lion which expire in October 2005, and are subject to annual  
renewal. These liquidity facilities can only be drawn upon by the  
special purpose entity to which the Group’s North American  
financial services companies will sell receivables under this pro-  
gram. As of December 31, 2004, none of the liquidity facilities  
have been utilized.  
Other Activities. This segment comprises businesses, opera-  
tions and investments not allocated to one of DaimlerChrysler’s  
other business segments. It includes the Group’s equity method  
investment EADS, the business unit DC Off-Highway, the real  
estate and corporate research activities, the holding companies  
and financing subsidiaries through which the Group refinances  
the capital needs of the operating businesses in the capital mar-  
kets. Effective January 1, 2004, the business unit DC Off-Highway  
was allocated to the Other Acitivities segment. Prior period  
amounts have been adjusted accordingly. (See the discussion  
above under Commercial Vehicles). The Group’s equity invest-  
ment in MMC is included in this segment using the equity  
method of accounting through June 29, 2004, and thereafter as  
an investment in related companies, accounted for at fair value.  
Through December 31, 2003, this segment includes the MTU  
Aero Engines business unit. Through April 2002, this segment  
includes the Group’s 40% equity interest in the Automotive Elec-  
tronic activities (Conti Temic Microelectronic) using the equity  
method of accounting as well as the gain on the sale of that  
investment.  
3
5. Segment Reporting  
Information with respect to the Group’s reportable segments fol-  
lows:  
Mercedes Car Group. This segment includes activities related  
mainly to the development, design, manufacture, assembly and  
sale of passenger cars and off-road vehicles under the brand  
names Mercedes-Benz, smart and Maybach as well as related  
parts and accessories.  
Management Reporting and Controlling Systems. The  
Group’s management reporting and controlling systems use  
accounting policies that are substantially the same as those  
described in Note 1 in the summary of significant accounting  
policies (U.S. GAAP), except for revenue recognition between the  
automotive business segments and the Services segment in cer-  
tain markets.  
Chrysler Group. This segment includes the development, design,  
manufacture, assembly and sale of cars and trucks under the  
brand names Chrysler, Jeep and Dodge and related automotive  
®
parts and accessories.  
Commercial Vehicles. This segment is involved in the develop-  
ment, design, manufacture, assembly and sale of vans, trucks,  
buses and Unimogs as well as related parts and accessories. The  
products are sold mainly under the brand names Mercedes-Benz,  
Setra, Freightliner, and Mitsubishi and Fuso. Effective January 1,  
The Group measures the performance of its operating segments  
through “operating profit.” DaimlerChrysler’s consolidated oper-  
ating profit (loss) is the sum of the operating profits and losses of  
its reportable segments adjusted for consolidation and elimina-  
tion entries. Segment operating profit (loss) is computed starting  
with income (loss) before income taxes, minority interests, dis-  
continued operations, and the cumulative effect of changes in  
accounting principles, and then adjusting that amount to 1)  
exclude pension and postretirement benefit income or expenses,  
other than current and prior year service costs and settlement/  
curtailment losses, 2) exclude impairment of investment in EADS  
in 2003, 3) exclude interest and similar income and interest and  
similar expenses, 4) exclude other financial income (loss), net  
and 5) include or exclude certain miscellaneous items. In addi-  
tion, this result is further adjusted to a) include pre-tax income  
(loss) from discontinued operations, adjusted to exclude or  
include the reconciling items 1 to 5 described above, b) include  
pre-tax gain (loss) on the disposal of discontinued operations,  
and c) include the Group’s share of all of the above reconciling  
items included in the net earnings (losses) of investments  
accounted for at equity.  
2
004, the off-highway activities of the Commercial Vehicles  
segment, which consist of MTU Friedrichshafen Group, the off-  
highway activities of Detroit Diesel Group and the 49% interest in  
VM-Motori S.p.A., have been allocated to the Other Activities  
segment. Prior period amounts have been adjusted accordingly.  
Services. The activities in this segment extend to the marketing  
of services related to financial services (principally retail and  
lease financing for vehicles and dealer financing), insurance bro-  
kerage and trading. This Segment also owns, or holds invest-  
ments in several companies which provide services in the areas  
of mobility management, including traffic management, telemat-  
ics products and toll collection. Through March 2002, this seg-  
ment includes the Group’s equity investment in T-Systems ITS  
using the equity method of accounting as well as the gain from  
the sale of that investment.  
Intersegment sales and revenues are generally recorded at  
values that approximate third-party selling prices.  
1
61  
Revenues are allocated to countries based on the location of the  
customer. Long-lived assets are disclosed according to the physi-  
cal location of these assets.  
Capital expenditures represent the purchase of property, plant  
and equipment.  
Segment information as of and for the years ended December 31,  
2
004, 2003 and 2002 follows:  
Discontinued  
Mercedes  
Car Group  
Chrysler  
Group  
Commercial  
Vehicles  
Other  
Activities  
Total  
Segments  
Operations/  
Eliminations Consolidated  
Services  
(
in millions of )  
2004  
Revenues  
46,082  
3,548  
49,630  
1,666  
49,485  
13  
32,940  
1,824  
34,764  
1,332  
20,100  
1,184  
11,646  
2,293  
13,939  
1,250  
88,036  
91  
1,906  
294  
142,059  
7,972  
_
(7,972)  
(7,972)  
(377)  
142,059  
Intersegment sales  
Total revenues  
49,498  
1,427  
45,869  
2,647  
3,368  
2,200  
456  
150,031  
6,131  
142,059  
5,754  
182,696  
6,386  
11,112  
Operating Profit  
Identifiable segment assets  
Capital expenditures  
Depreciation and amortization  
26,907  
2,343  
1,854  
26,444  
134  
207,356  
6,399  
(24,660)  
(13)  
1,058  
4,976  
164  
11,420  
(308)  
2
003  
Revenues  
48,025  
3,421  
51,446  
3,126  
49,321  
25,304  
1,502  
26,806  
811  
11,997  
2,040  
14,037  
1,240  
83,239  
76  
3,723  
361  
138,370  
7,324  
(1,933)  
(7,324)  
(9,257)  
(314)  
136,437  
Intersegment sales  
Total revenues  
49,321  
(506)  
47,147  
2,487  
3,927  
4,084  
1,329  
31,139  
169  
145,694  
6,000  
136,437  
5,686  
178,268  
6,614  
Operating Profit (Loss)  
Identifiable segment assets  
Capital expenditures  
Depreciation and amortization  
24,161  
2,939  
1,789  
14,657  
958  
200,343  
6,629  
(22,075)  
(15)  
890  
5,087  
196  
11,889  
(290)  
11,599  
2
002  
Revenues  
46,796  
3,374  
59,716  
465  
25,370  
1,396  
26,766  
(392)  
13,765  
1,934  
15,699  
3,060  
87,833  
95  
3,936  
422  
149,583  
7,591  
(2,215)  
(7,591)  
(9,806)  
(395)  
147,368  
Intersegment sales  
Total revenues  
50,170  
3,020  
22,103  
2,495  
1,652  
60,181  
609  
4,358  
952  
157,174  
7,249  
147,368  
6,854  
187,327  
7,145  
Operating Profit (Loss)  
Identifiable segment assets  
Capital expenditures  
Depreciation and amortization  
52,807  
3,155  
4,276  
13,839  
1,186  
35,400  
214  
211,982  
7,145  
(24,655)  
1,159  
6,804  
208  
14,099  
(255)  
13,844  
Mercedes Car Group. In 2003, operating profit of the Mercedes  
Car Group includes a non-cash impairment charge amounting to  
In 2003, the Chrysler Group and Services segments agreed to an  
arrangement regarding the sharing of risks associated with the  
residual values of certain leased vehicles. In addition, the  
Chrysler Group and Services segments negotiated reduced pricing  
on certain retail financing programs offered by the Chrysler  
Group as sales incentives in 2003. The adjusted pricing reflects  
the current favorable funding environment as well as Services  
becoming the exclusive provider of selected discount consumer  
financing for the Chrysler Group. Both arrangements resulted  
in a favorable impact of 244 million on the 2003 operating profit  
of the Chrysler Group, and a corresponding decrease of 244  
million on the 2003 operating profit of Services. Neither arrange-  
ment had any effect on the Group's consolidated operating  
results.  
77 million related to certain long-lived assets (primarily proper-  
ty, plant and equipment) at a production facility in Brazil.  
Chrysler Group. In 2004, 2003, and 2002, the Chrysler Group  
recorded charges of 145 million, 469 million and 694 million,  
respectively, for the Chrysler Group turnaround plan (see Note 7).  
Additionally, the Chrysler Group recorded 138 million for early  
retirement incentives and other workforce reductions in 2004.  
Chrysler Group operating results for 2004 were favourably  
impacted by an adjustment of 95 million to correct the calcula-  
tion of an advertising accrual to more accurately reflect expected  
payments.  
1
62  
Commercial Vehicles. As discussed in Note 4, on March 18,  
004, DaimlerChrysler acquired an additional 22% interest in  
With respect to two agreements entered into in 2003 with the  
Chrysler Group segment, the 2003 operating profit of Services  
were unfavorably impacted by 244 million. See discussion  
at Chrysler Group above.  
2
MFTBC from MMC for 394 million in cash, thereby increasing  
the Group’s ownership interest in MFTBC to a controlling 65%. As  
a result of the acquisition and first time consolidation of MFTBC  
in March 2004, the identifiable segment assets of the Commer-  
cial Vehicles segment increased by 4.3 billion.  
In 2002, operating profit of the Services segment includes 10  
million from the equity investment in T-Systems ITS, representing  
the Group’s percentage share of the operating profit of T-Sys-  
tems ITS through March 2002, as well as a gain of 2,484 million  
from the sale of that investment. In 2002, operating profit of the  
Services segment also includes impairment charges of 537  
million, which primarily relate to equipment on operating leases  
and receivables from financial services.  
Subsequent to the acquisition of the controlling interest in MFTBC,  
a number of quality problems of MFTBC vehicles that were  
produced before DaimlerChrysler first acquired a stake in MFTBC  
were identified (See Note 4 for additional information). Daimler-  
Chrysler is still in the process of investigating these quality prob-  
lems and evaluating the extent to which the announced product  
recalls will have to be accounted for. As of December 31, 2004,  
DaimlerChrysler made a true-up based on the preliminary evalua-  
tion of the probable costs associated with the quality measures  
and recall campaigns at MFTBC which substantially confirmed  
the estimates made in the third quarter 2004. Total expenses  
arising from the recall issues reduced 2004 operating profit of  
the Commercial Vehicle segment by 475 million. The reduction  
in operating profit consisted of 70 million classified as financial  
income (expense), net, in the Group’s 2004 statement of opera-  
tions and 735 million classified as cost of sales, net of 330  
million attributed to the minority interests’ share in those costs.  
As expenses attributed to minority interests are not allocated to  
operating profit, they are included in the line “Miscellaneous  
items, net” in the reconciliation of total segment operating profit  
to consolidated income before income taxes, minority interests,  
and discontinued operations.  
Other Activities. In 2004, 2003 and 2002, operating profit of  
the Other Activities segment includes primarily the Group’s share  
in the gains and losses of the significant investments in EADS  
and MMC amounting to 548 million (2003: 278 million; 2002:  
778 million). 2004 also includes the results from the dilution of  
the Group’s interest in MMC (loss of 135 million) and related  
currency hedging effects (gain of 195 million). Due to the loss of  
significant influence on MMC at June 29, 2004, the Group’s share  
in the losses of MMC is only included for the corresponding  
period. (See Note 3 for additional information). At December 31,  
2004, 2003 and 2002, the identifiable assets of the Other Activi-  
ties segment include 4,313 million, 4,542 million and 5,712  
million, respectively, related to the carrying values of the invest-  
ments in EADS and MMC.  
In connection with the sale of Adtranz in 2001, a settlement  
agreement with Bombardier was reached in 2004 with respect to  
all claims asserted. This settlement resulted in a favorable impact  
of 120 million on the 2004 operating profit of the Other Activi-  
ties segment (See Note 31 for additional information).  
The operating loss of the Commercial Vehicles segment for the  
year ended December 31, 2002, includes 256 million of non-  
cash impairment charges on fixed assets, 161 million of non-  
cash turnaround plan and other charges, other than depreciation  
and amortization.  
In addition, the operating profit of 2004 of the Other Activities  
segment includes non-cash impairment charges of 70 million  
associated with the investment made in dAF.  
Services. In 2004 and 2003, the Services segment recorded  
charges of 472 million and 241 million related to the participa-  
tion in Toll Collect. The charges in 2004 were mainly the result of  
revaluing the system’s total costs and extra operating expenses  
required to guarantee the start of the system on January 1, 2005.  
The 2003 operating profit of Other Activities includes a gain of  
1,031 million from the sale of MTU Aero Engines. Following the  
sale transaction, effective December 31, 2003, MTU Aero  
Engines’ assets and liabilities were deconsolidated. Revenues,  
operating profit, capital expenditures, and depreciation and  
amortization of the Other Activities segment include MTU Aero  
Engines through December 31, 2003 (see also Notes 4 and 10).  
In 2004, the operating profit of the services segment includes  
non-cash impairment charges of 102 million associated with the  
investment made in dAF.  
Capital expenditures for equipment on operating leases for 2004,  
2
003 and 2002 for the Services segment amounted to 13,850  
million, 11,631 million and 12,862 million, respectively.  
1
63  
The reconciliation of total segment operating profit (loss) to con-  
solidated income (loss) before income taxes, minority interests,  
discontinued operations and cumulative effects of changes in  
accounting principles is as follows:  
2
004  
2003  
2002  
(
in millions of )  
Total segment operating profit  
Elimination and consolidation amounts  
Total Group operating profit  
6,131  
(377)  
5,754  
6,000  
(314)  
7,249  
(395)  
6,854  
5,686  
Pension and postretirement benefit  
income (expenses), other than current  
and prior service costs and settlement/  
curtailment losses  
(845)  
(870)  
257  
Impairment of investment in EADS  
(1,960)  
Gain from the sale of the 10.5% stake  
in HMC  
252  
490  
521  
720  
Interest and similar income  
Interest and similar expenses  
Other financial income (loss), net  
Miscellaneous items, net  
(790)  
(171)  
(384)  
(911)  
35  
(1,040)  
(112)  
(308)  
(102)  
Pre-tax income from discontinued  
operations, adjusted to exclude or  
include the above reconciling items  
(84)  
(153)  
Pre-tax income on disposal  
of discontinued operations  
(1,031)  
The Group’s share of the above recon-  
ciling items included in the net losses  
of investments accounted for at equity  
(771)  
(482)  
596  
(499)  
5,925  
Consolidated income before income  
taxes, minority interests, cumulative  
effects of changes in accounting  
principles and discontinued operations  
3,535  
Revenues from external customers presented by geographic  
region are as follows:  
Other  
American  
countries  
European  
Union1 United States  
Other Discontinued  
countries operations Consolidated  
Germany  
Asia  
(
in millions of )  
2
2
2
004  
003  
002  
22,315  
24,182  
23,121  
25,079  
24,314  
23,425  
64,232  
64,757  
77,686  
11,295  
10,399  
12,104  
10,093  
6,786  
6,284  
9,045  
(1,933)  
(2,215)  
142,059  
136,437  
147,368  
7,932  
6,963  
1
Excluding Germany  
Germany accounts for 21,209 million of long-lived assets (2003:  
21,164 million; 2002: 19,627 million), the United States for  
35,250 million (2003: 36,430 million; 2002: 44,758 million)  
and other countries for 15,970 million (2003: 13,091 million;  
002: 14,344 million).  
2
1
64  
36. Earnings (Loss) per Share  
37. Related Party Transactions  
The computation of basic and diluted earnings (loss) per share  
for “Income (loss) from continuing operations” is as follows:  
The Group purchases materials, supplies and services from  
numerous suppliers throughout the world in the ordinary course  
of its business. These suppliers include companies in which the  
Group holds an ownership interest and companies that are affili-  
ated with some members of DaimlerChrysler AG’s Supervisory  
Board or Board of Management.  
Year ended December 31,  
2
004  
2003  
2002  
(
in millions of € or millions of shares,  
except earnings (loss) per share)  
Income (loss) from continuing operations –  
basic  
2,466  
(418)  
4,795  
12  
Mitsubishi Motor Manufacturing of America Inc., a subsidiary of  
MMC, produces the Dodge Stratus and Chrysler Sebring coupes,  
and NedCar B.V., another subsidiary of MMC, produces the smart  
forfour for the Group. As discussed in Note 3, MMC was an equi-  
ty method investee of DaimlerChrysler.  
Interest expense on convertible  
bonds and notes (net of tax)  
Income (loss) from continuing operations –  
diluted  
2,466  
(418)  
4,807  
Weighted average number of shares  
outstanding – basic  
DaimlerChrysler has an agreement with McLaren Cars Ltd., a  
wholly owned subsidiary of McLaren Group Ltd., for the produc-  
tion of the Mercedes McLaren super sports car, which Daimler-  
Chrysler launched into the markets in 2004. The Group owns a  
1,012.8  
1.7  
1,012.7  
1,008.3  
5.6  
Dilutive effect of stock options in 2004 and  
convertible bonds and notes in 2002  
Weighted average number of shares  
outstanding – diluted  
1,014.5  
1,012.7  
1,013.9  
40% equity interest in McLaren Group Ltd.  
Earnings (loss) per share from continuing  
operations  
DaimlerChrysler increased its stake in the Formula 1 engine man-  
ufacturer Ilmor Engineering Ltd. from 25% to 55% in the year  
Basic  
2.43  
2.43  
(0.41)  
(0.41)  
4.76  
4.74  
2002 and has agreed to gradually acquire the remaining shares  
Diluted  
by 2005. At December 31, 2004, DaimlerChrysler hold an equity  
stake of 85%. The company has been renamed Mercedes-Ilmor  
Ldt. Mercedes-Ilmor Ltd. and DaimlerChrysler have been respon-  
sible for the development, design and production of Mercedes-  
Benz Formula 1 engines since 1993, which DaimlerChrysler sup-  
plies to the West McLaren Mercedes team in support of motor  
sport activities under the Mercedes-Benz brand. DaimlerChrysler  
has consolidated Mercedes-Ilmor Ltd. since January 1, 2003.  
See Note 23 for shares issued upon conversion of bonds and  
notes.  
Because the Group reported a loss from continuing operations  
for the year ended December 31, 2003 the diluted loss per share  
does not include the antidilutive effects of convertible bonds and  
notes. Had the Group reported income from continuing opera-  
tions for the year ended December 31, 2003 the weighted aver-  
age number of shares outstanding would have potentially been  
diluted by 0.5 million shares resulting from the conversion of  
bonds and notes.  
In May 2002, DCC sold its Dayton Thermal Products Plant to Behr  
Dayton, a joint venture company with Behr America Inc. As of May  
1, 2004, DCC sold its remaining minority interest in the joint ven-  
ture to Behr America Inc. DCC is required to purchase products  
from the joint venture at competitively-based prices under a supply  
agreement entered into in connection with the sale.  
The supply agreement is valid from April 2002 through April 2008.  
Product pricing was based on the existing cost structure of the  
Dayton Thermal Products Plant and was comparable to pricing in  
effect prior to the transaction.  
Stock options to acquire 67.1 million, 71.6 million and 53.1 million  
DaimlerChrysler Ordinary Shares that were issued in connection  
with the 2000 Stock Option Plan were not included in the compu-  
tation of diluted earnings (loss) per share for 2004, 2003 and  
2
002, respectively, because the options’ underlying exercise  
prices were higher than the average market prices of Daimler-  
Chrysler Ordinary Shares in these periods.  
1
65  
Through some of its subsidiaries, DaimlerChrysler granted a  
series of loans to dAF. Through DaimlerChrysler’s subsidiaries  
DaimlerChrysler Services AG and DaimlerChrysler Aerospace AG,  
the Group holds a 45% non-controlling interest in dAF. The total  
book value of these loans as of December 31, 2004, was 291  
million, the highest aggregate amount outstanding during 2004  
was 530 million. The interest rates are partially fixed, partially  
based on Libor.  
38. Compensation and Share Ownership of the Members of  
the Board of Management and the Supervisory Board and  
Further Additional Information Concerning German Corporate  
Governance Code  
Compensation. The total compensation paid by Group related  
companies to the members of the Board of Management of  
DaimlerChrysler AG is calculated from the amount of compensa-  
tion paid in cash and from the non-cash benefits in kind. The  
total compensation in 2004 for the members of the Board of  
Management of DaimlerChrysler AG amounted to 31.6 million,  
of which 11.8 million is fixed and 19.8 million is short-term  
and mid-term incentive compensation components.  
The Group purchases products and services from T-Systems ITS,  
an information technology company. As discussed in Note 4, the  
Group beneficially owned a 49.9% equity interest in T-Systems  
ITS until March 2002. The Group continues to purchase products  
from T-Systems ITS.  
In 2004, 1.265 million stock options from the Stock Option Plan  
2000 were granted to the members of the Board of Management  
as a long-term compensation component. Also in 2004, 395,000  
performance-based awards were granted to the members of the  
Board of Management based on a 3 year performance plan. For  
detailed information on stock-based compensation programs, see  
Note 24.  
As discussed in Note 4, in April 2002, DaimlerChrysler exercised  
its option to sell its 40% interest in Conti Temic microelectronic  
GmbH to Continental AG. The Group continues to purchase prod-  
ucts from Conti Temic microelectronic GmbH.  
As described in more detail in Note 3, DaimlerChrysler provides a  
number of guarantees with respect to Toll Collect, a joint venture  
in which DaimlerChrysler holds an equity interest of 45%.  
The compensation paid in 2004 to the members of the Supervi-  
sory Board of DaimlerChrysler AG for services in all capacities to  
the Group amounted to 2.0 million. The individual compensation  
paid to the members of the Supervisory Board comprises as  
follows:  
In 2004, Dr. Mark Wössner, a member of DaimlerChrysler’s  
Supervisory Board, received payments for the rental of premises  
to Westfalia Van Conversion GmbH, a wholly owned subsidiary of  
DaimlerChrysler AG, in the amount of 1 million.  
2
004 total  
The following represent transactions with shareholders.  
in €  
DaimlerChrysler incurred expenses of approximately $595,000 in  
Name  
Capacity  
2
004 for advertising and related marketing activities with a U.S.  
Hilmar Kopper  
Erich Klemm 1  
Chairman of the Supervisory Board  
Deputy Chairman of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
245,900  
170,900  
82,700  
79,400  
80,500  
82,700  
magazine. Earl G. Graves, member of DaimlerChrysler’s Supervi-  
sory Board and shareholder of DaimlerChrysler AG, is the Chair-  
man, Chief Executive Officer and sole stockholder of the maga-  
zine’s ultimate parent company.  
Heinrich Flegel  
Nate Gooden 2  
Earl G. Graves  
Victor Halberstadt  
Deutsche Bank AG and its subsidiaries provide the Group with  
various financial and other services for which they were paid rea-  
sonable and customary fees. Additionally, DaimlerChrysler pro-  
vides a 651 million guarantee to Deutsche Bank AG for the com-  
pany’s operation of DaimlerChrysler’s corporate credit card  
program for corporate travel expenses. The guarantee covers the  
obligations of the company’s employees towards Deutsche Bank  
AG arising from that program in case of employee’s default.  
DaimlerChrysler so far has not incurred any major payments to  
Deutsche Bank AG from that guarantee.  
Thomas Klebe 1  
Member of the Supervisory Board  
and of the Presidential Committee  
111,800  
82,700  
80,500  
82,700  
80,500  
81,600  
82,700  
82,700  
82,700  
1
Jürgen Langer  
Robert J. Lanigan  
Helmut Lense  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
Member of the Supervisory Board  
1
Peter A. Magowan  
William A. Owens  
Gerd Rheude 1  
Udo Richter 1  
Wolf Jürgen Röder 1  
Manfred Schneider  
Stefan Schwaab 1  
Bernhard Walter  
Member of the Supervisory Board  
and of the Presidential Committee  
On July 7, 2004, DaimlerChrysler entered into a securities lending  
agreement with Deutsche Bank AG concerning 22,227,478 of  
its shares in EADS (2.8% of the voting stock). As collateral,  
DaimlerChrysler received a lien on a securities account of equiva-  
lent value as the shares loaned by DaimlerChrysler.  
109,600  
111,800  
Member of the Supervisory Board  
and of the Audit Committee  
Member of the Supervisory Board  
and Chairman of the Audit Committee  
(
since April 7, 2004)  
149,286  
81,600  
81,600  
Lynton R. Wilson 3  
Mark Wössner  
Member of the Supervisory Board  
Member of the Supervisory Board  
1
The members representing the employees have stated that their compensation should be paid  
to the Hans-Böckler Foundation, in accordance with the guidelines of the German Trade Union  
Federation.  
2
3
Mr. Gooden abstained from his compensation and meeting fees. At his request, these amounts  
were transferred to the Hans-Böckler Foundation.  
Mr. Wilson also receives €5,258 for his activity as a member of the Supervisory Board of  
DaimlerChrysler Canada Inc.  
1
66  
In 2004, disbursements to former members of the Board of Man-  
agement of DaimlerChrysler AG and their survivors amounted to  
Share Ownership. As of December 31, 2004, the current mem-  
bers of the Board of Management as a group owned 10.4 million  
Ordinary Shares, options or stock appreciation rights of Daimler-  
Chrysler AG (1.027% of all outstanding shares) and the current  
members of the Supervisory Board as a group owned 0.1 million  
Ordinary Shares, options or stock appreciation rights of Daimler-  
Chrysler AG (0.012% of all outstanding shares).  
17.4 million. An amount of 203.8 million has been accrued for  
pension obligations to former members of the Board of Manage-  
ment and their survivors. As of December 31, 2004, no advances  
or loans existed to members of the Board of Management or  
Supervisory Board of DaimlerChrysler AG.  
Directors’ Dealings. Pursuant to § 15a of the German Securities  
Trading Act, members of the Board of Management and the  
Supervisory Board as well as persons who are in close relation-  
ship to them are legally required to disclose significant purchases  
or sales of Ordinary Shares, options or derivatives of Daimler-  
Chrysler AG and Group related companies (in 2004: EADS). In  
the fiscal year just ended, the following transaction by members  
of the Supervisory Board or Board of Management was reported:  
Transactions with Related Parties. For transactions with  
related parties, which are shareholders of DaimlerChrysler AG,  
see the last paragraph of Note 37.  
Name  
Type  
ISIN  
Date  
Number  
2,000  
Price  
Uebber, Bodo  
Purchase DE000710000 May 4, 2004  
€37.65  
1
67  
DaimlerChrysler Worldwide  
Europe  
South America  
Production  
locations  
Sales  
outlets  
Revenues in  
millions of €  
Production  
locations  
Sales  
outlets  
Revenues in  
millions of €  
Employees  
95,029  
257  
Employees  
1,130  
Mercedes Car Group  
Chrysler Group  
10  
31,317  
3,079  
Mercedes Car Group  
Chrysler Group  
1
2
3
206  
379  
568  
Commercial Vehicles  
17  
16,339  
55,515  
Commercial Vehicles  
1,509  
12,719  
Sales Organization  
Sales Organization  
Automotive Businesses  
3
5,053  
83  
5,787  
1,294  
42,480  
4,663  
Automotive Businesses  
606  
9
101  
52  
274  
Services  
Services  
Other Activities  
185  
17,034  
Other Activities  
57  
NAFTA  
Africa  
Production  
locations  
Sales  
outlets  
Revenues in  
millions of €  
Production  
locations  
Sales  
outlets  
Revenues in  
millions of €  
Employees  
3,409  
Employees  
5,945  
Mercedes Car Group  
Chrysler Group  
1
29  
17  
11,381  
45,183  
10,471  
Mercedes Car Group  
Chrysler Group  
1
1
1
1,234  
293  
83,542  
26,297  
Commercial Vehicles  
Commercial Vehicles  
1,222  
1,144  
Sales Organization  
Sales Organization  
Automotive Businesses  
2
5,061  
42  
7,581  
351  
2,731  
5,379  
2,640  
Automotive Businesses  
234  
3
215  
21  
495  
Services  
Services  
Other Activities  
563  
Other Activities  
39  
1
68  
Asia  
Australia /Oceania  
Production  
locations  
Sales  
outlets  
Revenues in  
millions of €  
Production  
locations  
Sales  
outlets  
Revenues in  
millions of €  
Employees  
344  
Employees  
Mercedes Car Group  
Chrysler Group  
3
1
9
4,778  
370  
Mercedes Car Group  
Chrysler Group  
708  
194  
606  
8
Commercial Vehicles  
4,528  
18,893  
Commercial Vehicles  
34  
Sales Organization  
Sales Organization  
Automotive Businesses  
1,132  
10  
114  
333  
1,961  
176  
Automotive Businesses  
235  
4
141  
149  
857  
237  
550  
Services  
Services  
Other Activities  
158  
412  
Other Activities  
53  
Note: Unconsolidated revenues of each division (segment revenues).  
1
69  
Major Subsidiaries  
Ownership 1  
in %  
Stockholders’  
equity  
Revenues in million  
Employees at year-end  
in million  
2
004  
2003  
2004  
2003  
Mercedes Car Group  
smart GmbH, Böblingen  
100.0  
100.0  
100.0  
100.0  
76  
267  
56  
1,490  
2,066  
78  
1,143  
2,410  
68  
1,497  
3,409  
344  
1,460  
2,191  
352  
Mercedes-Benz U.S. International, Inc., Tuscaloosa  
DaimlerChrysler India Private Limited, Poona  
DaimlerChrysler South Africa (Pty.) Ltd., Pretoria 2  
487  
2,932  
2,497  
5,945  
5,868  
Chrysler Group  
DaimlerChrysler Motors Company L.L.C., Auburn Hills 2  
DaimlerChrysler Canada Inc., Windsor  
DaimlerChrysler de México S.A. de C.V., Mexico City  
100.0  
100.0  
100.0  
8,114  
49,498  
12,676  
6,770  
49,321  
11,475  
6,635  
86,718  
11,529  
6,948  
95,388  
11,163  
7,139  
3
3
Commercial Vehicles  
EvoBus GmbH, Stuttgart 2  
DaimlerChrysler España S.A., Madrid 2  
Detroit Diesel Corporation, Detroit 2  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
66.9  
321  
217  
239  
776  
117  
276  
49  
2,392  
4,066  
1,929  
9,235  
644  
2,186  
3,159  
1,795  
7,910  
515  
10,604  
5,697  
5,013  
10,142  
6,178  
4,724  
14,003  
1,910  
10,106  
896  
Freightliner L.L.C., Portland 2  
17,813  
2,391  
11,649  
1,050  
1,029  
4,347  
18,456  
DaimlerChrysler Comercial Vehicles México S.A. de C.V., Mexico City 2  
DaimlerChrysler do Brasil Ltda., São Bernardo do Campo 2  
DaimlerChrysler Argentina S.A., Buenos Aires 2  
P.T. DaimlerChrysler Indonesia, Jakarta 2  
Mercedes-Benz Türk A.S., Istanbul 2  
1,794  
380  
1,427  
193  
66  
114  
136  
1,044  
3,946  
16,876  
282  
1,114  
1,208  
3,670  
884  
Mitsubishi Fuso Truck and Bus Corporation, Tokyo 2  
65.0  
3,310  
1
70  
Ownership 1  
in %  
Stockholders’  
equity  
Revenues in million  
Employees at year-end  
in million  
2
004  
2003  
2004  
2003  
Vehicles Sales Organization  
Mercedes-Benz USA, L.L.C., Montvale 2  
DaimlerChrysler France S.A.S, Le Chesnay 2  
DaimlerChrysler Belgium Luxembourg S.A., Brussels 2  
DaimlerChrysler Nederland B.V., Utrecht 2  
DaimlerChrysler UK Ltd., Milton Keynes 2  
DaimlerChrysler Danmark AS, Copenhagen 2  
DaimlerChrysler Sverige AB, Malmo  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
324  
197  
37  
9,594  
3,559  
1,167  
1,081  
5,833  
308  
10,166  
3,399  
1,128  
1,060  
5,833  
274  
1,774  
3,196  
1,224  
681  
1,793  
3,068  
685  
47  
773  
194  
23  
3,364  
481  
3,340  
489  
19  
491  
465  
481  
467  
DaimlerChrysler Italia S.p.A., Rome 2  
302  
81  
3,899  
918  
3,698  
830  
1,735  
443  
1,514  
425  
DaimlerChrysler Schweiz AG, Zurich  
Mercedes-Benz Hellas S.A., Athens  
29  
349  
290  
198  
189  
DaimlerChrysler Japan Co., Ltd., Tokyo  
DaimlerChrysler Australia/Pacific Pty. Ltd., Mulgrave 2  
119  
247  
2,133  
1,243  
2,264  
1,236  
652  
664  
857  
783  
Services  
DaimlerChrysler Services AG, Berlin  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
100.0  
1,139  
846  
36  
0
435  
0
411  
557  
1,213  
0
559  
1,173  
0
DaimlerChrysler Bank AG, Stuttgart  
DaimlerChrysler Services Leasing GmbH, Stuttgart  
DaimlerChrysler Services North America L.L.C., Farmington Hills  
DaimlerChrysler Insurance Company, Farmington Hills  
DaimlerChrysler Services Canada Inc., Windsor  
DaimlerChrysler Services de Mexico S.A. de C.V., Mexico City  
DaimlerChrysler Services UK Ltd., Milton Keynes  
1,054  
6,202  
116  
1,005  
6,429  
133  
4,904  
163  
799  
4,935  
49  
4,662  
54  
970  
1,011  
226  
451  
277  
298  
425  
294  
240  
137  
199  
317  
430  
511  
Other Activities  
MTU Friedrichshafen GmbH, Friedrichshafen 2  
88.4  
418  
1,121  
1,292  
6,727  
6,684  
European Aeronautic Defence and Space Company EADS,  
4
N.V., Amsterdam  
33.0  
19.7  
15,505  
2,075  
21,459  
12,024  
18,536  
13,876  
109,765  
43,624  
108,288  
44,400  
Mitsubishi Motors Corporation, Tokyo 5  
1
2
3
Relating to the respective parent company.  
Preconsolidated financial statements.  
Included in the consolidated financial statements of the parent company.  
4
Details based on the consolidated financial statements of September 30, 2004  
(stockholders’ equity at September 30, 2004, revenues January through September 2004/2003,  
employees at September 30, 2004/2003); on July 7, 2004, DaimlerChrysler entered into a  
securities lending agreement with Deutsche Bank AG concerning 2.8% of the voting stock.  
Details based on the consolidated financial statements of December 31, 2004, March 31, 2004,  
December 31, 2003, and September 30, 2003 (stockholders’ equity at December 31, 2004,  
revenues April through December 2004/2003, employees at March 31, 2004 and September 30,  
5
2
003). Net income as stated in national financial statements; April through December 2004:  
loss of €1,696 million, April 2003 through March 2004: loss of €1,626 million.  
1
71  
Nine-Year Summary  
1996  
1997  
1998  
1999  
2000  
2001  
2002  
2003  
2004  
Amounts in millions of €  
From the statements of income:  
Revenues  
100,233  
21,648  
17,143  
5,616  
6,212  
6.2%  
120  
116,057  
23,370  
18,656  
6,364  
6,230  
5.4%  
594  
130,122  
25,033  
19,982  
6,540  
8,593  
6.6%  
148,243  
26,158  
21,044  
7,438  
11,012  
7.4%  
160,278  
26,500  
21,836  
7,241  
9,752  
6.1%  
150,386  
25,095  
20,073  
5,848  
(1,318)  
(0.9%)  
153  
147,368  
24,163  
19,701  
5,942  
6,854  
4.7%  
136,437  
24,287  
18,897  
5,571  
5,686  
4.2%  
142,059  
24,216  
18,750  
5,658  
5,754  
4.1%  
Personnel expenses  
of which: Wages and salaries  
Research and development expenditure  
Operating profit (loss)  
Operating margin  
Financial income  
493  
278  
110  
2,206  
5,925  
5,736  
8.8%  
(2,792)  
596  
(1,077)  
3,535  
3,165  
5.6%  
Income (loss) before income taxes and extraordinary items  
Net operating income  
5,406  
5,995  
4,946  
10.9%  
6,547  
4.28 1  
4.21 1  
7,697  
5,829  
11.6%  
4,820  
5.03  
9,473  
6,552  
12.3%  
5,746  
5.73  
4,280  
8,796  
14.8%  
7,894  
7.87  
(1,654)  
263  
1,467  
2.4%  
Net operating income as % of net assets (RONA)  
Net income (loss)  
0.4%  
4,022  
4.09  
4.05  
(662)  
(0.66)  
(0.66)  
1,003  
1.00  
4,718  
4.68  
448  
2,466  
2.43  
Net income (loss) per share ()  
Diluted net income (loss) per share ()  
Cash dividend  
0.44  
4.91  
5.69  
7.80  
4.67  
0.44  
2.43  
2,356  
2.35  
2,358  
2.35  
2,358  
2.35  
1,519  
1.50  
1,519  
1.50  
1,519  
1.50  
Cash dividend per share ()  
Cash dividend including tax credit 2 per share ()  
3.36  
3.36  
3.36  
From the balance sheets:  
Property, plant and equipment  
Leased equipment  
23,111  
7,905  
54,888  
12,851  
101,294  
22,355  
2,444  
32,135  
41,672  
25,496  
114%  
28,558  
11,092  
68,244  
17,325  
124,831  
27,960  
2,391  
29,532  
14,662  
75,393  
19,073  
136,149  
30,367  
2,561  
36,434  
27,249  
93,199  
18,201  
174,667  
36,060  
2,565  
40,145  
33,714  
99,852  
12,510  
199,274  
42,422  
2,609  
41,165  
36,002  
103,389  
14,525  
207,410  
39,037  
2,609  
36,269  
28,243  
104,023  
12,428  
187,327  
35,004  
2,633  
32,917  
24,385  
103,800  
14,285  
178,268  
34,481  
2,633  
34,001  
26,711  
105,107  
11,655  
182,696  
33,541  
2,633  
Current assets  
of which: Liquid assets  
Total assets  
Stockholders’ equity  
of which: Capital stock  
Accrued liabilities  
36,007  
54,313  
34,375  
123%  
35,057  
62,527  
40,430  
133%  
38,211  
90,560  
64,488  
179%  
36,972  
109,661  
84,783  
200%  
42,161  
115,327  
91,375  
234%  
43,622  
100,297  
79,283  
226%  
39,172  
96,078  
75,690  
220%  
41,566  
98,241  
76,620  
228%  
Liabilities  
of which: Financial liabilities  
Debt-to-equity ratio  
Mid- and long-term provisions and liabilities  
Short-term provisions and liabilities  
Current ratio  
36,989  
41,950  
45,953  
50,918  
85%  
47,601  
58,181  
79%  
55,291  
83,315  
66%  
75,336  
81,516  
67%  
87,499  
80,874  
64%  
79,650  
72,673  
72%  
73,245  
70,542  
74%  
71,227  
77,928  
66%  
Net assets (annual average)  
45,252  
50,062  
53,174  
59,496  
66,139  
65,367  
59,951  
56,257  
1
72  
1996  
1997  
1998  
1999  
2000  
2001  
2002  
2003  
2004  
Amounts in millions of €  
From the statements of cash flows:  
Investments in property, plant and equipment  
Investments in leased equipment  
6,721  
4,891  
4,427  
1,159  
8,051  
7,225  
8,155  
10,245  
4,937  
9,470  
19,336  
5,655  
10,392  
19,117  
6,645  
8,896  
17,951  
7,580  
7,145  
17,704  
6,385  
6,614  
15,604  
5,841  
6,386  
17,678  
5,498  
Depreciation of property, plant and equipment  
Depreciation of leased equipment  
Cash provided by operating activities 3  
Cash used for investing activities 3  
5,683  
1,456  
1,972  
3,315  
6,487  
7,254  
7,244  
5,579  
5,445  
9,956  
(8,745)  
12,337  
(14,530)  
16,681  
(23,445)  
18,023  
(32,110)  
16,017  
(32,709)  
15,944  
(13,287)  
15,909  
(10,839)  
13,826  
(13,608)  
11,060  
(16,682)  
From the stock exchanges:  
Share price at year-end Frankfurt ()  
New York (US $)  
83.60  
96.06  
77.00  
78.25  
44.74  
41.20  
48.35  
41.67  
29.35  
30.65  
37.00  
46.22  
35.26  
48.05  
Average shares outstanding (in millions)  
981.6  
994.0  
949.3  
968.2  
959.3  
987.1  
1,002.9  
1,013.6  
1,003.2  
1,013.9  
1,003.2  
1,003.2  
1,008.3  
1,013.9  
1,012.7  
1,012.7  
1,012.8  
1,014.5  
Average dilutive shares outstanding (in millions)  
Rating:  
Credit rating, long-term  
Standard & Poor’s  
Moody’s  
A +  
A 1  
A +  
A 1  
A
A 2  
BBB+  
A 3  
BBB+  
A 3  
BBB  
A3  
BBB  
A3  
Fitch  
BBB+  
A-  
BBB+  
A-  
Dominion Bond  
Average annual number of employees  
419,758  
421,661  
433,939  
463,561  
449,594  
379,544  
370,677  
370,684  
379,019  
1
2
Excluding one-time positive tax effects, especially due to extra distribution of €10.23 per share.  
For our stockholders who are taxable in Germany. There is no tax credit from 2001 due to a  
change in the corporate income tax system.  
3
Periods before 2002 not adjusted for the effects of inventory-related receivables from Financial  
Services.  
1
73  
International Representative Offices  
Berlin  
Hanoi  
Milton Keynes  
Sofia  
Phone +49 30 2594 1100  
Phone +84 8 8958 710  
Tel.  
+44 190 8245 800  
Phone +359 2 919 8811  
Fax  
+49 30 2594 1109  
Fax  
+84 8 8958 714  
Fax  
+44 190 8245 802  
Fax  
+359 2 945 4048  
Taipei  
Abidjan  
Hong Kong  
Moscow  
Phone +886 2 2715 9696  
Phone +225 21 75 1001  
Phone +852 2594 8876  
Phone +7 095 926 4018  
Fax  
+886 2 2719 2776  
Fax  
+225 21 75 1090  
Fax  
+852 2594 8801  
Fax  
+7 095 745 2614  
Tashkent  
Abu Dhabi  
Istanbul  
New Delhi  
Phone +998 71 120 6374  
Phone +97 1 4 8833 200  
Phone +90 212 482 3520  
Phone +91 1 1410 4959  
Fax  
+998 71 120 6674  
Fax  
+97 1 4 8833 201  
Fax  
+90 212 482 3521  
Fax  
+91 1 1410 5226  
Teheran  
Bangkok  
Jakarta  
Paris  
Phone +98 21 204 6047  
Phone +66 2676 6100  
Phone +62 21 86 899 100  
Phone +33 1 39 23 5400  
Fax  
+98 21 204 6126  
Fax  
+66 2676 5550  
Fax  
+62 21 86 899 611  
Fax +33 1 39 23 5442  
Tel Aviv  
Beijing  
Kiev  
Pretoria  
Phone +972 9 957 9091  
Phone +86 10 6590 0158  
Phone +380 44 206 8080  
Phone +27 12 677 1502  
Fax  
+972 9 957 6872  
Fax  
+86 10 6590 6237  
Fax +380 44 206 8088  
Fax  
+27 12 666 8191  
Tokyo  
Brussels  
Kuala Lumpur  
Rome  
Phone +81 3 5572 7172  
Phone +32 2 23311 33  
Phone +603 2246 8811  
Phone +39 06 4144 2405  
Fax  
+81 3 5572 7126  
Fax  
+32 2 23311 80  
Fax  
+603 2246 8812  
Fax  
+39 06 4121 9097  
Warsaw  
Budapest  
Lagos  
São Paulo  
Phone +48 22 312 7200  
Phone +36 1 451 2233  
Phone +234 1 261 2088  
Phone +55 11 4178 0602  
Fax  
+48 22 312 7201  
Fax  
+36 1 451 2201  
Fax  
+234 1 461 8728  
Fax  
+55 11 4173 7118  
Washington D.C.  
Buenos Aires  
Ljubljana  
Seoul  
Phone +1 202 414 6747  
Phone +54 11 4808 8719  
Phone +386 1 5883 797  
Phone +82 2 2112 2642  
Fax  
+1 202 414 6716  
Fax  
+54 11 4808 8702  
Fax  
+386 1 5883 799  
Fax  
+82 2 2112 2644  
Windsor, Ontario  
Cairo  
Madrid  
Singapore  
Phone +1 519 973 2101  
Phone +20 2 529 9120  
Phone +34 91 484 6161  
Phone +65 6849 8321  
Fax  
+1 519 973 2226  
Fax +20 2 529 9105  
Fax  
+34 91 484 6019  
Fax  
+65 6849 8493  
Zagreb  
Caracas  
Melbourne  
Skopje  
Phone +385 1 489 1500  
Phone +58 241 613 2460  
Phone +61 39 566 9104  
Phone +385 1 489 1500  
Fax  
+385 1 489 1501  
Fax  
+58 241 613 2462  
Fax  
+61 39 566 9110  
Fax  
+385 1 489 1501  
Mexico City  
Phone +52 55 5081 7376  
Fax  
+52 55 5081 7674  
1
74  
Addresses/Information  
DaimlerChrysler AG  
Publications for our shareholders:  
– Annual Report (German, English)  
– Form 20-F (English)  
70546 Stuttgart  
Phone +49 711 17 0  
Fax  
+49 711 17 94022  
– Interim Reports for the 1st, 2nd and 3rd quarters  
(German, English)  
www.daimlerchrysler.com  
Environment Report (German, English)  
Social Responsibility Report (German, English)  
DaimlerChrysler Corporation  
Auburn Hills, MI 48326-2766  
USA  
Phone +1 248 576 5741  
www.daimlerchrysler.com  
The financial statements of DaimlerChrysler AG prepared in  
accordance with German GAAP were audited by KPMG  
Deutsche Treuhand-Gesellschaft Aktiengesellschaft, Wirtschafts-  
prüfungsgesellschaft, and an unqualified opinion was rendered  
thereon. These financial statements are published in the German  
Federal Gazette and are filed with the Commercial Registry of the  
Stuttgart District Court.  
Investor Relations  
Stuttgart  
Phone +49 711 17 92261  
The aforementioned publications can be requested from:  
+
+
49 711 17 95256  
49 711 17 95277  
DaimlerChrysler AG  
Investor Relations  
HPC 0324  
70546 Stuttgart  
Germany  
Fax  
+49 711 17 94109  
49 711 17 94075  
+
Auburn Hills  
Phone +1 248 512 2812  
Phone +1 248 512 2923  
The documents can also be ordered by phone or fax using the  
following number: +49 711 17 92287  
Fax  
+1 248 512 2912  
Internet Service: www.daimlerchrysler.com/investors  
Convenience with the interactive Annual Report. The  
interactive Annual Report is the Internet counterpart of the  
printed version. With a user-friendly navigation system and  
convenient additional features, it offers all the information  
that the hard copy contains. Furthermore, the interactive  
Annual Report offers interesting background information  
via links to other pages and videos.  
Successful start of Personal Internet Service for  
shareholders at https://register.daimlerchrysler.com  
Since March 2004, we have offered shareholders access  
to our Personal Internet Service all the year round.  
This extends our Internet service connected with the  
Annual Meeting and enables our shareholders to access  
their personal data in the share register. In 2004, some  
50,000 shareholders registered for this service. As before,  
Additional information on the Internet. Special infor-  
mation on our shares and earnings developments can be  
found in the “Investor Relations” section of our website.  
It includes the Group’s annual and interim reports, the  
company financial statements of DaimlerChrysler AG, and  
reports to the US Securities and Exchange Commission  
you can order admission tickets for the Annual Meeting  
online, or authorize voting proxies and issue voting  
instructions. In addition, you can now receive the docu-  
ments for the Annual Meeting by e-mail instead of by  
post, which is faster and more environment friendly.  
Around 35,000 shareholders will use this service for the  
2005 Annual Meeting. Another feature of the Personal  
Internet Service is that shareholders can check their  
data in the share register. If necessary, they can amend  
this data, changing an address, for example, or summari-  
zing multiple entries in the register under a single entry  
so that identical information is not sent to the same  
address several times.  
(SEC) for all the financial years since 1998. You can also  
find topical reports, presentations, an overview of various  
performance measures, information on the share price,  
and other services. For example, you can register for a free  
e-mail service sending investor relations releases and  
announcing special events.  
Your Personal Internet Service  
Unique  
Paperless  
Direct  
Convenient  
Environment friendly  
https://register.daimlerchrysler.com  
Financial Calendar 2005  
Annual Press Conference  
February 10, 2005, 10 a.m. CET  
Mercedes Event Center (MEC)  
Sindelfingen  
Analysts’ and Investors’  
Conference Call  
February 10, 2005, 2.30 p.m.  
Annual Meeting  
April 6, 2005, 10 a.m.  
Messe Berlin  
Interim Report Q1 2005  
April 28, 2005  
Interim Report Q2 2005  
July 28, 2005  
Interim Report Q3 2005  
October 26, 2005  
Rear Park Assist  
PBL Bus  
ABC  
SunDiesel  
Common Rail Diesel  
AIRMATIC 
NGT
 F
 Cell  
¯
Innov  
DaimlerChrysler  
Stuttgart, Germany  
Auburn Hills, USA  
www.daimlerchrysler.com  


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission