<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of July, 1998
DAIMLER-BENZ CORPORATION
(Translation of registrant's name into English)
EPPLESTRASSE 225, 70567 STUTTGART, GERMANY
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
------- -------
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
------ -------
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______________________]
THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE IN THE REGISTRATION
STATEMENT ON FORM F-4 OF DAIMLERCHRYSLER AG, AS SUCCESSOR CORPORATION TO
DAIMLER-BENZ AKTIENGESELLSCHAFT.
<PAGE>
DAIMLER-BENZ AKTIENGESELLSCHAFT
-------------------------------
FORM 6-K: TABLE OF CONTENTS
1. Unaudited Interim Condensed Consolidated Financial Statements of
Daimler-Benz Aktiengesellschaft as of June 30, 1998 and for the six-month
period then ended
2. Consolidated Interim Report to Stockholders for the period January 1 to
June 30, 1998, dated July 1998 (English version)
<PAGE>
DAIMLER-BENZ AG
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in millions, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
1998
(Note 1) 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 37,550 DM 67,714 DM 55,892
Cost of sales (29,839) (53,809) (44,919)
----------- ----------- -----------
GROSS MARGIN 7,711 13,905 10,973
Selling, administrative and other expenses (4,732) (8,534) (7,517)
Research and development (1,732) (3,123) (2,867)
Other income 621 1,120 733
----------- ----------- -----------
INCOME BEFORE FINANCIAL INCOME AND INCOME TAXES 1,868 3,368 1,322
Financial income (expense), net 300 542 (111)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 2,168 3,910 1,211
Income taxes (1,019) (1,838) (263)
Minority interest (34) (62) 44
----------- ----------- -----------
NET INCOME 1,115 2,010 992
=========== =========== ===========
EARNINGS PER SHARE
Basic earnings per share 2.11 3.81 1.89
=========== =========== ===========
Diluted earnings per share 2.04 3.68 1.88
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Unaudited
Interim Condensed Consolidated Financial Statements
F-1
<PAGE>
DAIMLER-BENZ AG
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
<TABLE>
<CAPTION>
At June 30, At December 31,
-------------------------- -----------
1998
(Note 1) 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Intangible assets $ 1,051 DM 1,895 DM 1,915
Property, plant and equipment 11,938 21,528 20,656
Investments and long term financial assets 2,216 3,996 3,453
Equipment on operating leases 9,128 16,461 14,931
----------- ----------- -----------
FIXED ASSETS 24,333 43,880 40,955
----------- ----------- -----------
Inventories 8,839 15,940 14,390
Receivables
Receivables from financial services 16,111 29,053 25,924
Trade and other receivables and other assets 11,700 21,099 24,257
Securities 10,042 18,109 14,687
Cash and cash equivalents 2,329 4,199 5,833
----------- ----------- -----------
CURRENT ASSETS 49,021 88,400 85,091
----------- ----------- -----------
DEFERRED TAXES AND PREPAID EXPENSES 5,387 9,714 11,053
----------- ----------- -----------
TOTAL ASSETS 78,741 141,994 137,099
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY $ 18,725 DM 33,767 DM 35,085
----------- ----------- -----------
MINORITY INTEREST 586 1,057 1,170
----------- ----------- -----------
Accrued liabilities for retirement plans 9,803 17,677 17,200
Other accrued liabilities 11,199 20,196 19,418
----------- ----------- -----------
ACCRUED LIABILITIES 21,002 37,873 36,618
----------- ----------- -----------
Financial liabilities 23,048 41,563 39,302
Trade and other liabilities 13,466 24,282 21,195
----------- ----------- -----------
LIABILITIES 36,514 65,845 60,497
----------- ----------- -----------
DEFERRED TAXES AND INCOME 1,914 3,452 3,729
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 78,741 141,994 137,099
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Unaudited
Interim Condensed Consolidated Financial Statements
F-2
<PAGE>
DAIMLER-BENZ AG
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in millions)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
1998
(Note 1) 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income $ 1,115 DM 2,010 DM 992
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of fixed assets
(including amounts related to equipment on operating
leases of DM 1,169 ($ 648) and DM 1,178 in 1998
and 1997, respectively) 2,076 3,744 3,309
Increase (decrease) in accrued liabilities 728 1,312 838
Changes in other operating assets and liabilities 879 1,586 118
Other (79) (142) (576)
----------- ----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES 4,719 8,510 4,681
----------- ----------- -----------
Purchase of fixed assets (2,294) (4,136) (2,747)
Increase in equipment on operating leases (2,489) (4,488) (3,513)
Proceeds from disposal of fixed assets (including
equipment on operating leases of DM 2,169
($ 1,203) and DM 1,661 in 1998 and 1997,
respectively) 1,326 2,391 2,212
Acquisition of businesses (377) (680) (269)
Proceeds from disposal of businesses 613 1,106 1,017
Increase in receivables from financial services, net (1,825) (3,291) (2,519)
Sales (Acquisitions) of securities (other
than trading), net (1,315) (2,372) (707)
Change in other cash (880) (1,587) 404
----------- ----------- -----------
CASH USED FOR INVESTING ACTIVITIES (7,241) (13,057) (6,122)
----------- ----------- -----------
Change in commercial paper borrowings, net (308) (556) 25
Change in financial liabilities (including
amounts for financial services, net of
DM 2,320 ($ 1,287) and DM 2,392 in 1998
and 1997, respectively) 1,519 2,739 3,042
Dividends paid (6,260) (11,288) (591)
Proceeds from capital increases 4,222 7,613 37
Proceeds from special distribution tax refund 1,613 2,908 -
Other (89) (160) -
----------- ----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 697 1,256 2,513
----------- ----------- -----------
Effect of foreign exchange rate changes on cash
and cash equivalents (up to 3 months) 93 167 229
Net increase (decrease) in cash and cash equivalents
(up to 3 months) (1,732) (3,124) 1,301
Cash and cash equivalents (up to 3 months)
at beginning of period 3,045 5,491 3,220
----------- ----------- -----------
CASH AND CASH EQUIVALENTS (UP TO 3 MONTHS)
AT END OF PERIOD 1,313 2,367 4,521
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Unaudited
Interim Condensed Consolidated Financial Statements
F-3
<PAGE>
DAIMLER-BENZ AG
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN MILLIONS)
1. PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements of Daimler-Benz
Aktiengesellschaft and subsidiaries ("Daimler-Benz" or the "Group") are
unaudited and have been prepared in accordance with United States generally
accepted accounting principles, except that the Group has accounted for certain
joint ventures in accordance with the proportionate method of accounting (see
Note 3). All amounts herein are shown in millions of Deutsche Marks ("DM") and
for the six months ended June 30, 1998 are also presented in U.S. dollars, the
latter solely for the convenience of the reader, at the rate of DM 1.8033 = U.S.
$ 1, the Noon Buying Rate of the Federal Reserve Bank of New York on June 30,
1998.
The information included in the condensed consolidated financial statements
is unaudited but reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. The condensed
consolidated financial statements should be read in conjunction with the
December 31, 1997 consolidated financial statements and notes included in the
Group's 1997 Annual Report on Form 20-F.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, REPORTING COMPREHENSIVE INCOME, effective January 1, 1998. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in financial statements. In connection with the adoption of SFAS 130
for these interim condensed financial statements, the "other equity" component
of stockholders' equity (see Note 6) was renamed "accumulated other
comprehensive income." Total comprehensive income of the Company for the
six-month periods ended June 30, 1998 and 1997 (consisting of net income,
changes in foreign currency translation adjustments and unrealized gains and
losses on available-for-sale securities) was DM 2,391 and DM 2,053,
respectively.
2. MERGER WITH CHRYSLER CORPORATION
On May 7, 1998 the Company and Chrysler Corporation entered into a Business
Combination Agreement to merge their respective businesses. In connection with
the business combination, holders of Daimler-Benz AG Ordinary Shares will be
offered to exchange their Ordinary Shares for Ordinary Shares of a newly formed
company, DaimlerChrysler Aktiengesellschaft ("DaimlerChrysler AG") and holders
of Chrysler common stock will be offered to convert into Ordinary Shares of
DaimlerChrysler AG at the exchange ratio of 0.6235 of an Ordinary Share of
DaimlerChrysler AG for each share of common stock of Chrysler Corporation.
Consummation of the merger is subject to various conditions, including among
others, approval of the U.S. antitrust authority and the receipt of Chrysler
Corporation and Daimler-Benz AG stockholder approval. In July, 1998 the European
antitrust authority approved of the merger. The companies anticipate the merger
to be completed prior to December 31, 1998.
3. JOINT VENTURE
Daimler-Benz accounts for its investment in Adtranz using the proportionate
method of consolidation. Accordingly, the consolidated financial statements of
Daimler-Benz include as of June 30, 1998 and December 31, 1997 and for the six
months ended June 30, 1998 and 1997 Daimler-Benz' 50 % proportionate interest in
the assets and liabilities and results of operations and cash flows of Adtranz.
Under U.S. GAAP, Daimler-Benz' investment in Adtranz is required to be accounted
for using the equity method of accounting. The differences in accounting
treatment between the proportionate and equity methods would not effect
reported shareholders' equity or net income of Daimler-Benz. Under the
equity
F-4
<PAGE>
DAIMLER-BENZ AG
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN MILLIONS)
method of accounting, Daimler-Benz' net investment in Adtranz would be included
within investments in the balance sheet and its share of the net loss of Adtranz
together with the amortization of the excess of the cost of its investment over
its share of the investment's net assets would be reported as a net amount in
financial income, net in the Group's income statement. Additionally, under the
equity method, Adtranz' only impact on the Group's cash flow statement would
have been an investing cash outflow of approximately DM 300 in 1998 resulting
from a capital contribution by Daimler-Benz.
Summarized financial information for Adtranz follows:
BALANCE SHEET INFORMATION At June 30, At December 31,
1998 1997
----------- -----------
Fixed assets*) DM 1,465 DM 1,581
Current assets 1,874 1,840
----------- -----------
TOTAL ASSETS 3,339 3,421
=========== ===========
Stockholders' equity DM 1,265 DM 1,393
Minority interest 12 12
Accrued liabilities 967 970
Liabilities 1,095 1,046
----------- -----------
STOCKHOLDERS'EQUITY AND LIABILITIES 3,339 3,421
=========== ===========
(*) Includes net goodwill resulting from the formation of Adtranz of DM 701 and
DM 850 at June 30, 1998 and December 31, 1997, respectively.
Six Months Ended June 30,
-------------------------------
1998 1997
----------- -----------
STATEMENT OF OPERATIONS INFORMATION
Revenues DM 1,499 DM 1,317
Operating loss*) (134) (27)
Net loss (128) (38)
(*) The operating loss includes an impairment charge on goodwill (1998: DM 125)
and interest on advance payments received on long-term contracts
(1998: DM 57; 1997: DM 43).
CASH FLOW INFORMATION
Cash flows from:
Operating activities DM (160) DM (89)
Investing activities (232) 30
Financing activities 450 49
Effect of foreign exchange rate
changes on cash - -
----------- -----------
Change in cash (up to three months) 58 (10)
Cash (up to three months) at beginning
of period 304 285
----------- -----------
Cash (up to three months) at
end of period 362 275
=========== ===========
F-5
<PAGE>
DAIMLER-BENZ AG
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN MILLIONS)
4. INVENTORIES
At June 30, At December 31,
1998 1997
----------- -----------
Raw materials and manufacturing supplies DM 3,577 DM 3,233
Work in process 7,369 6,515
Finished goods, parts and products
held for resale 10,174 8,978
Advance payments to suppliers 661 659
----------- -----------
21,781 19,385
Less: Advance payments received (5,841) (4,995)
----------- -----------
15,940 14,390
=========== ===========
5. CASH AND CASH EQUIVALENTS
As of June 30, 1998 and December 31, 1997 cash and cash equivalents include
DM 1,832 and DM 342, respectively, of deposits with original maturities of more
than three months.
6. STOCKHOLDERS' EQUITY
The changes in stockholders' equity for the six-months ended June 30, 1998
follow:
<TABLE>
<CAPTION>
Accumulated other
comprehensive income
-------------------------
Additional Cumulative Available-
Capital paid-in Retained translation for-sale Treasury
in millions of DM stock capital earnings adjustment securities stock Total
- ----------------- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 2,584 5,247 26,508 236 510 - 35,085
Comprehensive income:
Net income - - 2,010 - - - 2,010
Other comprehensive income - - - (70) 451 - 381
--------
Total comprehensive income 2,391
Dividends paid - - (827) - - - (827)
Special distribution - - (10,335) - - - (10,335)
Issuance of capital stock 263 7,350 - - - - 7,613
Treasury stock - - - - - (160) (160)
------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1998 2,847 12,597 17,356 166 961 (160) 33,767
====================================================================================
</TABLE>
On May 27, 1998 the Daimler-Benz shareholders approved, and on June 15,
1998 Daimler-Benz paid, a special distribution of DM 20.00 (DM 19.63 after
adjustment to reflect the approximately 20 % discount to market value at which
the Daimler-Benz Ordinary Shares and ADS were sold in the rights offering) per
Ordinary Share/ADS.
F-6
<PAGE>
DAIMLER-BENZ AG
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN MILLIONS)
In June, 1998, Daimler-Benz issued to holders of Daimler-Benz Ordinary
Shares and ADS's and convertible debt securities, rights to acquire up to an
aggregate of 52.4 million newly issued Daimler-Benz Ordinary Shares and on June
25, 1998 Daimler-Benz issued and sold 52.4 million Ordinary Shares for net
proceeds of DM 7,485 million. The rights issued by Daimler-Benz entitled the
holders to purchase Daimler-Benz Ordinary Shares at an approximately 20%
discount to the market price of Daimler-Benz Ordinary Shares. Basic and diluted
earnings per Ordinary Share have been restated to reflect the dilutive effect
resulting from the discount to market value at which the Daimler-Benz Ordinary
Shares were sold in the rights offering.
During the six months ended June 30, 1998 Daimler-Benz purchased
approximately 1.0 million of its Ordinary Shares for resale to its employees in
October, 1998.
Based on the shareholders' approvals of 1996 and 1997, Daimler-Benz
established the Stock Option Plan 1998 of the Daimler-Benz Group (the "Plan")
which provides for the granting to certain members of management of options for
the purchase of Daimler-Benz Ordinary Shares. The options granted under the Plan
will be evidenced by non-transferable 4.4 % convertible bonds due in July 2008
with a principal amount of DM 1,000 per bond (the "Convertible Bonds").
Daimler-Benz has reserved up to DM 110 of contingent authorized nominal capital
for the issuance of new Ordinary Shares under the Plan. Each Convertible Bond
entitles the holder thereof to convert the bond into Ordinary Shares with an
aggregate nominal value of DM 1,000, after a 24 month waiting period, during
certain specified periods each year, if the market price per Ordinary Share on
the day of conversion is at least 15 % higher than the predetermined conversion
price (the "Conversion Price").
Daimler-Benz offered, beginning June 22, 1998, to certain members of
management the right to subscribe to these Convertible Bonds. The Conversion
Price equals to DM 183.90/share, the market price of Daimler-Benz shares on May
28, 1998. The subscription period ended July 10, 1998. Effective July 24, 1998
the Group issued Convertible Bonds in the amount of DM 41.
7. OPERATING PROFIT
A reconciliation of income before financial income and taxes to operating
profit for the six-month periods ended June 30, 1998 and 1997 follows:
1998 1997
----------- -----------
Income before financial income and taxes DM 3,368 DM 1,322
Interest on advance payments received on
long-term contracts 145 126
Earnings from Airbus Industrie - 173
Corporate research of Daimler-Benz AG 260 220
Items not allocable to segments (10) 8
----------- -----------
Operating profit 3,763 1,849
=========== ===========
During the first half of 1998 the Group`s semiconductor business was sold
to the American company Vishay Intertechnology, Inc. for a gain of approximately
DM 300 and the Group sold two real-estate-project-companies to Berliner
Volksbank for a gain of approximately DM 100; during the first half of 1997 the
Group sold its interests in AEG Electrocom GmbH and AEG/ElectroCom
International, Inc., the Group`s recognition and sorting systems business, to
Siemens for a gain of approximately DM 200.
F-7
<PAGE>
DAIMLER-BENZ AG
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN MILLIONS)
8. EARNINGS PER SHARE
The earnings per share are determined as follows:
in millions of DM or millions of June 30, June 30,
shares except earnings per share 1998 1997
- -------------------------------- ----------- -----------
Basic earnings per share:
Net income 2,010 992
----------- -----------
Weighted average number of shares outstanding 527.5 525.2
----------- -----------
3.81 1.89
=========== ===========
Diluted earnings per share:
Net income 2,010 992
Interest expense on convertible bonds
and notes (net of tax) 24 14
----------- -----------
2,034 1,006
----------- -----------
Weighted average number of shares outstanding 527.5 525.2
Dilutive convertible bonds and notes 24.9 8.8
----------- -----------
552.4 534.0
----------- -----------
3.68 1.88
=========== ===========
The weighted average number of shares outstanding have been retroactively
adjusted to give effect to the rights offering (see Note 6).
9. SUMMARIZED FINANCIAL INFORMATION - DAIMLER-BENZ NORTH AMERICA
Summarized financial information for Daimler-Benz North America, a
wholly-owned subsidiary of Daimler-Benz AG, prepared under U.S. GAAP, is set
forth below:
June 30, December 31,
1998 1997
----------- -----------
Receivables $ 8,416 $ 7,070
Equipment on operating leases 5,589 5,075
Property, plant and equipment 1,537 1,363
Other assets 2,631 2,447
----------- -----------
TOTAL ASSETS 18,173 15,955
=========== ===========
Current liabilities 9,541 8,597
Non-current liabilities 5,319 4,299
Stockholders' equity 3,313 3,059
----------- -----------
STOCKHOLDERS' EQUITY AND LIABILITIES 18,173 15,955
=========== ===========
F-8
<PAGE>
DAIMLER-BENZ AG
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN MILLIONS)
June 30, June 30,
1998 1997
----------- -----------
Revenues:
Net sales of products $ 7,696 $ 5,547
Finance and lease income 956 808
Operating costs 7,779 5,889
Net income 348 138
F-9
<PAGE>
DAIMLER BENZ
--------------------
AKTIENGESELLSCHAFT
[PHOTO OMITTED]
-------------------------------------
Consolidated Interim Report
January 1 Through June 30, 1998
-------------------------------------
-------------------------------------
Operating Profit doubled
-------------------------------------
Business expansion in all divisions
-------------------------------------
Above-average growth in the USA
-------------------------------------
Revenues for entire year
expected to top DM 140 billion
-------------------------------------
<PAGE>
LADIES AND GENTLEMEN,
DEAR SHAREHOLDERS,
In early May we announced our intention to merge our activities with those of
Chrysler and form DaimlerChrysler. In so doing, we want to lay the groundwork
for long-term profitable growth.
Today already, we are able to report that the course of business has been
extraordinarily positive at Daimler-Benz in the first six months of 1998.
- - Consolidated revenues increased by 21% to DM 67.7 billion, and all of the
divisions achieved double-digit growth rates.
- - On the basis of the favorable course of business, we have further improved
the earning power of Daimler-Benz. The operating profit was doubled to DM
3.8 billion. This means we will probably exceed the minimum return on
capital employed of 12% originally targeted for 1999 as early as this year.
- - The fact that nearly all of our business units have continued to expand
their earnings is especially pleasing.
Overall, we achieved record figures for sales, revenues, and earnings in the
history of the Company in the first six months of 1998. Once again, we have come
an important step closer to our aim to be among the best in the world in all of
our fields of activity. As in the past, significant factors in achieving this
success included our innovative products and the expertise and motivation of our
employees, but strict cost management and the progressively global alignment of
our activities were important as well.
As a consequence, our growth was significantly more pronounced than the
markets on the whole, above all in the passenger car business. Our new models,
such as the A- and M-Class and the CLK coupe and cabriolet, have been received
very favorably in the market. Moreover, we have continued the strategic
development of our portfolio in order to strengthen the business units we
consider well-suited for profitable growth over the long term. We are expanding
our position in defense technology with the acquisition of the Siemens Defense
Electronics activities; its product range sensibly complements our existing
line. Our partnership with the British-French Matra BAe Dynamics (MBD), which
holds a 30% stake in our subsidiary LFK-Lenkflugkoerper, has opened up new
possibilities for joint strategies. We sold TEMIC's semiconductor business
effective February 28, 1998.
In the North American market for heavy trucks we have been offering a
second brand alongside Freightliner since May 1998. The new Sterling evolved
from Ford's heavy truck sector, which we acquired in 1997. The market response
is exceeding our most optimistic expectations. In the midrange future, we plan
to increase our market share from approximately 30% to over 35% with the new
nameplate.
In consideration of the fact that the earnings situation of our rail
joint-venture Adtranz is still less than satisfactory, we have decided together
with our partner ABB to expand the restructuring program already introduced in
the previous year with additional measures to boost productivity.
The merger of Daimler-Benz and Chrysler brings together two companies whose
strengths complement each other in an almost ideal way. Our joint expertise in
research, development, and production as well as our strong purchasing position
and the global presence will make it possible to realize new earnings potentials
in the very near future. As our shareholders, you will participate in these
prospects.
At extraordinary meetings scheduled for September 18, the shareholders of
both companies will reach a decision regarding the merger. We will be sending
you additional information on the details of the planned measures in the next
few days. For this alliance with the Chrysler Corporation we ask for your
confidence and your approval.
Sincerely,
/s/ Juergen E. Schrempp /s/ Dr. Manfred Gentz
Juergen E. Schrempp Dr. Manfred Gentz
2
<PAGE>
- ---------------------------------------------------------------------------
DAIMLER-BENZ GROUP IN FIGURES
DM amounts in millions 1. half 1998 1. half 1997 Change
- ---------------------------------------------------------------------------
Operating profit 3,763 1,849 + 104%
Net income 2,010 992 + 103%
Basic earnings per share DM 3.81 DM 1.89 + 102%
Revenues 67,714 55,892 + 21%
EU market 38,850 32,907 + 18%
Germany 21,252 18,532 + 15%
EU excluding Germany 17,598 14,375 + 22%
USA 15,949 11,163 + 43%
Other markets 12,915 11,822 + 9%
- ---------------------------------------------------------------------------
Employees (6/30) 303,347 291,025 + 4%
Germany 228,614 221,923 + 3%
Foreign 74,733 69,102 + 8%
- ---------------------------------------------------------------------------
DAIMLER-BENZ GROUP
For Daimler-Benz the first half of 1998 was the best ever in the history of the
Company. The Group's operating profit reached DM 3.8 billion and thus more than
doubled as compared to the value achieved in the same period in the previous
year.
Revenues rose by 21% to DM 67.7 billion. At 43%, the growth in business
volume was especially pronounced in the USA. While we recorded a drop in
revenues in certain Asian countries as a result of the financial crisis there,
we achieved significant increases in all of the other regions. All of the
divisions as well as the Directly Managed Businesses contributed to the
continued expansion of business. The largest share in revenues came from
Passenger Cars and Commercial Vehicles at 43% and 30% respectively. The
Aerospace division generated 11%, Services 12%, and the Directly Managed
Businesses (Rail Systems, Automotive Electronics, and MTU/Diesel Engines) 4% of
consolidated revenues.
At June 30, 1998, the Daimler-Benz Group employed 303,347 persons
worldwide. The figure for the same period in 1997 (291,025 persons) included
some 7,000 employees of the semiconductor unit, which has since been sold. The
number of employees increased in all segments of the Group in the course of the
expansion of business. Additional jobs were created in the divisions Passenger
Cars, Commercial Vehicles, and Services above all. The headcount in the
Aerospace division grew also due to the first-time inclusion of the Defense
Electronics unit acquired from Siemens (some 1,150 persons).
In the statement of income, the two major cost elements - cost of sales as
well as selling, administrative and other expenses - decreased in relation to
revenues from 94% to 92%. The funds expended for Company research and
development projects rose from DM 2.9 billion to DM 3.1 billion, while their
share in revenues remained unchanged at some 5%.
Operating profit derived from income before financial income and income
taxes increased by almost DM 2 billion to DM 3.8 billion. However, in comparing
with the previous year's value, non-recurring income and expenses arising in
both periods have to be taken into consideration. While income in the amount of
DM 0.2 billion had been generated from the sale of the sorting and recognition
systems activities in the first half of 1997, the operating profit for the first
six months of this year include non-recurring income of
Figures for the revenues chart
Revenues Jan. to June 1997 Jan. to June 1998
- -------------------------------------------------------------------
Daimler-Benz 55,892 67,714
- -------------------------------------------------------------------
Germany 18,532 21,252
- -------------------------------------------------------------------
EU excluding Germany 14,375 17,598
- -------------------------------------------------------------------
USA 11,163 15,949
- -------------------------------------------------------------------
Other markets 11,822 12,915
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Passenger Cars 24,980 30,648
- -------------------------------------------------------------------
Commercial Vehicles 17,846 21,685
- -------------------------------------------------------------------
Aerospace 6,679 7,558
- -------------------------------------------------------------------
Services 7,166 8,718
- -------------------------------------------------------------------
Directly Managed Businesses 2,480 2,956
- -------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEVELOPMENT OF THE DAIMLER-BENZ SHARE
High and Low Share Price in DM (Frankfurt Spot Rate per Share of DM 5)
High Low
6/1997 142.25 133.70
7/1997 158.30 142.35
8/1997 149.45 133.00
9/1997 145.80 128.00
10/1997 145.40 112.70
11/1997 126.10 109.70
12/1997 129.70 118.00
1/1998 134.70 119.20
2/1998 148.30 128.35
3/1998 174.10 150.30
4/1998 197.20 170.60
5/1998 207.00 179.50
6/1998 183.20 165.00
- --------------------------------------------------------------------------------
*) Note: For the existing, unadjusted rates a deduction in the amount of DM
20.00 should be taken into consideration for the special distribution as of
May 28, 1998 and, as of June 12, 1998, a reduction of approximately DM 3.00
for the subscription rights issued in connection with the subsequent
capital increase.
3
<PAGE>
Half-Year Financial Statements of the Daimler-Benz Group
(According to U.S. GAAP, Amounts in Millions of DM)
STATEMENT
OF INCOME 1. half 1998 1. half 1997
- --------------------------------------------------------------------------------
Revenues 67,714 55,892
Cost of sales (53,809) (44,919)
- --------------------------------------------------------------------------------
Gross margin 13,905 10,973
- --------------------------------------------------------------------------------
Selling, administrative and
other expenses (8,534) (7,517)
Research and development (3,123) (2,867)
Other income 1,120 733
- --------------------------------------------------------------------------------
Income before financial income
and income taxes 3,368 1,322
- --------------------------------------------------------------------------------
Financial income (expense), net 542 (111)
- --------------------------------------------------------------------------------
Income before income taxes 3,910 1,211
- --------------------------------------------------------------------------------
Income taxes (1,838) (263)
Minority interest (62) 44
- --------------------------------------------------------------------------------
Net income 2,010 992
- --------------------------------------------------------------------------------
Basic earnings per share (in DM) 3.81 1.89
- --------------------------------------------------------------------------------
Diluted earnings per share (in DM) 3.68 1.88
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Balance Sheet 6/30/98 12/31/97
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Intangible assets 1,895 1,915
Property, plant and equipment 21,528 20,656
Investments and long-term
financial assets 3,996 3,453
Equipment on operating leases 16,461 14,931
- --------------------------------------------------------------------------------
FIXED ASSETS 43,880 40,955
- --------------------------------------------------------------------------------
Inventories 15,940 14,390
Receivables from financial services 29,053 25,924
Trade and other receivables and
other assets 21,099 24,257
Securities 18,109 14,687
Cash and cash equivalents 4,199 5,833
- --------------------------------------------------------------------------------
CURRENT ASSETS 88,400 85,091
- --------------------------------------------------------------------------------
DEFERRED TAXES AND
PREPAID EXPENSES 9,714 11,053
- --------------------------------------------------------------------------------
TOTAL ASSETS 141,994 137,099
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Stockholders' equity 33,767 35,085
Minority interest 1,057 1,170
- --------------------------------------------------------------------------------
Accrued liabilities for retirement plans 17,677 17,200
Other accrued liabilities 20,196 19,418
- --------------------------------------------------------------------------------
ACCRUED LIABILITIES 37,873 36,618
- --------------------------------------------------------------------------------
Financial liabilities 41,563 39,302
Trade and other liabilities 24,282 21,195
- --------------------------------------------------------------------------------
LIABILITIES 65,845 60,497
- --------------------------------------------------------------------------------
Deferred taxes and income 3,452 3,729
- --------------------------------------------------------------------------------
Total liabilities and
stockholders' equity 141,994 137,099
- --------------------------------------------------------------------------------
Contribution to
Operating Profit 1. half 1998 1. half 1997
- --------------------------------------------------------------------------------
Passenger Cars 2,071 1,547
Commercial Vehicles 870 (9)
Aerospace 346 74
Services 358 220
Directly Managed Businesses 156 134
Eliminations/Others (38) (117)
- --------------------------------------------------------------------------------
DAIMLER-BENZ GROUP 3,763 1,849
- --------------------------------------------------------------------------------
RECONCILIATION TO
OPERATING PROFIT 1. half 1998 1. half 1997
- --------------------------------------------------------------------------------
Income before financial income
and income taxes 3,368 1,322
Interest on advance payments
received for long-term contracts 145 126
Earnings from Airbus Industrie 0 173
Corporate research of Daimler-Benz AG 260 220
Items not allocable to segments (10) 8
- --------------------------------------------------------------------------------
OPERATING PROFIT 3,763 1,849
- --------------------------------------------------------------------------------
Cash Flow Statement 1. half 1998 1. half 1997
- --------------------------------------------------------------------------------
Net income 2,010 992
Depreciation and amortization
of fixed assets 3,744 3,309
Increase in accrued liabilities 1,312 838
Changes in other operating assets
and liabilities 1,586 118
Other (142) (576)
- --------------------------------------------------------------------------------
CASH PROVIDED BY
OPERATING ACTIVITIES 8,510 4,681
- --------------------------------------------------------------------------------
Purchase of fixed assets (4,136) (2,747)
Increase in equipment on
operating leases (4,488) (3,513)
Proceeds from disposal of fixed assets 2,391 2,212
Acquisition of businesses (680) (269)
Proceeds from disposal of businesses 1,106 1,017
Increase in receivables from
financial services, net (3,291) (2,519)
Sales (Acquisitions) of securities
(other than trading), net (2,372) (707)
Change in other cash (1,587) 404
- --------------------------------------------------------------------------------
CASH USED FOR
INVESTING ACTIVITIES (13,057) (6,122)
- --------------------------------------------------------------------------------
Change in commercial paper
borrowings, net (556) 25
Change in financial liabilities 2,739 3,042
Dividends paid (11,288) (591)
Proceeds from capital increases 7,613 37
Proceeds from special distribution
tax refund 2,908 -
Other (160) -
- --------------------------------------------------------------------------------
CASH PROVIDED BY
FINANCING ACTIVITIES 1,256 2,513
- --------------------------------------------------------------------------------
Effect of foreign exchange rate changes
on cash and cash equivalents
(up to 3 months) 167 229
Net increase (decrease) in cash and
cash equivalents (up to 3 months) (3,124) 1,301
Cash and cash equivalents (up to
3 months) at beginning of period 5,491 3,220
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS (UP TO
3 MONTHS) AT END OF PERIOD 2,367 4,521
- --------------------------------------------------------------------------------
4
<PAGE>
about DM 0.6 billion. The latter resulted from the sale of the Semiconductors
unit, the sale of shares in LFK-Lenkflugkorper GmbH and buildings C2 and C3 on
Potsdamer Platz, and a share swap between debitel and Metro AG. An impairment
charge of Adtranz's goodwill in the amount of approximately DM 0.1 billion had
the opposite effect; it was undertaken on account of the reduction in
anticipated future cash flows.
At DM 2.1 billion, Passenger Cars once again made the largest contribution
to the Group's operating profit. Despite substantial start-up costs related to
the imminent model change in the S-Class and the market introduction of the
Smart, earnings rose by approximately DM 0.5 billion. The most pronounced
improvement in earnings (DM 0.9 billion) was achieved by Commercial Vehicles,
where both the expansion of business and the measures to boost profitability had
a noticeable effect. The Aerospace division improved its contribution to the
Group's operating profit as well to more than DM 0.3 billion (1997: DM 0.1
billion), primarily due to the Defense and Civil Systems and Aeroengines units.
The Services division further increased its contribution to nearly DM 0.4
billion; the largest share came from the Financial Services/Insurance Brokerage
unit. Among the Directly Managed Businesses, Automotive Electronics and
MTU/Diesel Engines further improved earnings, while Rail Systems still reported
a loss.
The financial results improved by just under DM 0.7 billion to more than DM
0.5 billion. The most important factor in this development was that unlike in
the previous year no charges arose from the evaluation and settlement of
exchange rate hedge transactions. Accordingly, the income before income taxes
rose by DM 2.7 billion to DM 3.9 billion. At the same time, however, income
taxes were DM 1.6 billion higher and reached DM 1.8 billion. Approximately one
half of the taxes concerned actual tax expenses, especially for the foreign
Mercedes-Benz companies, while the other half were expenses related to deferred
taxes. Net income thus doubled in comparison to the same period in 1997 from DM
1.0 billion to DM 2.0 billion.
The growth in the balance sheet total by DM 4.9 billion since December 31,
1997 to DM 142.0 billion is above all a result of the expansion in leasing and
sales financing and the increased business volume in Passenger Cars and
Commercial Vehicles. Consequently, the greatest increases on the assets side
were recorded under the items equipment on operating leases, inventories, and
receivables from financial services. In the case of securities, the higher
market prices also had an influence. The largest increase on the liabilities
side was recorded under financial liabilities. The DM 1.3 billion reduction in
stockholders' equity is primarily due to the fact that the capital increase
successfully implemented in June 1998 did not cover the reduction in corporate
income tax of DM 2.9 billion which was paid out to our shareholders in
connection with the special distribution. However, as of December 31, 1997, it
was included in stockholders' equity as a transitory item.
Cash flow from operating activities rose by DM 3.8 billion to DM 8.5
billion. Cash used for investing activities increased even stronger by DM 6.9
billion to DM 13.1 billion. It was not possible to offset the difference between
cash flow from operating activities and cash used for investing activities by
cash provided by financing activities totaling DM 1.3 billion, which means that
cash decreased to DM 2.4 billion (June 30, 1997: DM 4.5 billion). At June 30,
1998 we recorded liquid funds totaling DM 22.8 billion (June 30, 1997: DM 17.1
billion).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1. half of 1998 Year ended December 31, 1997
ANALYSIS OF THE Nominal value Number Nominal value Number
STOCK OPTIONS ISSUED of convertible of stock of convertible of stock
TO MANAGEMENT bonds options bonds options
DM in millions DM in millions
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period 37.5 7,509,600 1.0 198,000
Bonds sold - - 37.1 7,429,600
Converted (0.2) (35,000) (0.5) (100,000)
Repayment (0.2) (52,000) (0.1) (18,000)
- ---------------------------------------------------------------------------------------------------------
Outstanding at end of period 37.1 7,422,600 37.5 7,509,600
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Exercisable at end of period 0.3 63,000 0.5 98,000
- ---------------------------------------------------------------------------------------------------------
INFORMATION TO OWN SHARES:
At June 30, 1998, 1,000,170 own shares were held by Daimler-Benz AG, exclusively purchased for the
distribution to employees. All shares were purchased in June 1998 at an average rate of DM 171.00; they
correspond to 0.2% of capital stock.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
PASSENGER CARS
- -------------------------------------------------------------------
DM amounts in millions 1. half 1998 1. half 1997
- -------------------------------------------------------------------
Revenues 30,648 24,980
Production (units) 433,122 336,560
Sales (units) 427,715 335,794
Employees (6/30)*) 94,388 88,049
- -------------------------------------------------------------------
*) Excluding 30,484 (6/30/97: 29,089) employees for the joint
Sales and Marketing activities of Passenger Cars and
Commercial Vehicles.
- -------------------------------------------------------------------
Passenger Cars achieved record highs in production, sales, and revenues in the
first six months of 1998. With 427,700 vehicles sold (+27%), the threshold of
400,000 units in a six-month period was exceeded for the first time. Revenues
grew by 23% to DM 30.6 billion.
Business was especially gratifying in the USA, where our sales increased by
68% to 87,500 vehicles, predominantly due to the tremendous demand for the
M-Class. But we also recorded strong growth in sales in Germany (+20%) and
Western Europe outside of Germany (+32%). We were therefore able to more than
compensate for reductions in Japan (-5.5% to 21,200 passenger cars) and the
countries of Southeast Asia as a result of the Asian crisis. On the whole, the
lost sales in Asia were lower for Mercedes-Benz Passenger Cars than for our
competitors.
The very favorable sales figures in Europe and the USA mainly reflect the
popularity of our new products. Business was spurred by the A-Class in
particular, with 42,000 units sold, as well as by the M-Class (29,000 units) and
the SLK roadster (28,000 units). The CLK coupe was highly successful as well; we
sold 25,000 units in the first six months of the year. We have also been
offering a convertible version in Europe since June 1998. Our classic
Mercedes-Benz models have performed well, too. As an example, we sold over
22,000 S-Class sedans and coupes, even though they are reaching the end of their
product life cycle.
In response to high demand, we boosted production by 29% in comparison to
the same period in the previous year to 433,100 units.
COMMERCIAL VEHICLES
DM amounts in millions 1. half 1998 1. half 1997
- ------------------------------------------------------------------------
Revenues 21,685 17,846
Production (units) 244,978 202,007
Sales (units) 228,940 191,994
Employees (6/30)*) 87,869 81,064
- ------------------------------------------------------------------------
*) Excluding 30,484 (6/30/97: 29,089) employees for the joint Sales
and Marketing activities of Passenger Cars and Commercial Vehicles.
- ------------------------------------------------------------------------
Nearly all of the business units in the Commercial Vehicle division were able to
achieve significant growth in revenues and sales in the first half of 1998.
Worldwide, we sold more than 230,000 commercial vehicles, which represents a 19%
increase.
The Trucks Europe unit improved its sales by 18% to 40,600 units while its
revenues were 13% higher at DM 5.7 billion. The highly successful Actros
vehicles contributed to this growth, as did the Atego, a light truck that was
introduced in the second quarter of the year and has been received extremely
well in the market.
The Vans Europe unit sold 93,800 vehicles (+9%). Its revenues rose 15% to
DM 4.7 billion. With a market share of 18.2%, 0.6% higher than in the previous
year, we are the market leader in the segment of 2 to 6 ton gross vehicle weight
vans in Western Europe.
The Buses Europe unit recorded a 19% increase in revenues. As a result of
above-average growth in sales, it was able to expand its market share in Western
Europe (including Turkey) by 2.5% to nearly 28%.
In the Commercial Vehicles NAFTA unit, production capacities were ramped up
once again in response to continuing high demand. Sales were up 33% to 55,300
units. Freightliner launched the new heavy cabover truck Argosy to the market at
the beginning of the year. The production of Sterling trucks, our second brand
in the North American market, started up in May; some 1,100 vehicles had already
rolled off the assembly line in June.
Sales and revenues have been developing as planned in the Commercial
Vehicles Latin America unit. Reductions in exports due to the Asian crisis -
especially in Indonesia - have since been offset by growth in the primary
markets Argentina and Brazil. Revenues and sales were improved by 11% and 22%
respectively as compared to the same period in 1997.
We produced a total of 245,000 commercial vehicles, which represents a 21%
increase.
AEROSPACE
- ------------------------------------------------------------------------
DM amounts in millions 1. half 1998 1. half 1997
- ------------------------------------------------------------------------
Revenues 7,558 6,679
Incoming orders 13,351 6,493
Employees (6/30) 45,190 43,691
- ------------------------------------------------------------------------
The Aerospace division generated revenues of DM 7.6 billion. All of the business
units contributed to the 13% growth compared to the same period in the previous
year.
6
<PAGE>
Production capacities were boosted in the Civil Aircraft and Helicopters
unit; as a result, the volume of units delivered was higher and revenues were
increased by 15%. The Military Aircraft unit recorded its first revenues from
the series preparation for the Eurofighter and thus expanded its business volume
by 15% as well. As a result of the brisk development in air traffic, the
Aeroengines unit managed to continue its growth course both with new business
and with replacement parts and maintenance services; its business volume was 22%
higher than in the first six months of 1997.
At DM 13.4 billion, about twice as many orders were received at Dasa as in
the first half of the previous year. The steep rise was above all a result of
the significantly higher volume of orders in the Airbus program and the contract
for preproduction of the Eurofighter. Business was also spurred in the
Aeroengines unit; in this case both the increased demand in the aircraft market
as well as the contract for series preparation of the jet engines for the
Eurofighter contributed to the encouraging growth.
SERVICES
- ------------------------------------------------------------------------
DM amounts in millions 1. half 1998 1. half 1997
- ------------------------------------------------------------------------
Revenues 8,718 7,166
Employees (6/30) 16,756 12,952
- ------------------------------------------------------------------------
The Services division increased its revenues by 22% to DM 8.7 billion. This
improvement was a result of the highly dynamic development of business in the
Financial Services/Insurance Brokerage, IT Services, and Telecommunications and
Media Services units in particular.
In the Financial Services/Insurance Brokerage business unit, revenues were
up 19% to DM 5.4 billion. The new businesses of our automotive units in Germany
and the USA were instrumental in this success. In order to open up new markets,
new companies were established in Northern and Eastern Europe as well as in
South Africa.
IT Services increased its revenues by 34% to DM 1.8 billion. All of the
business units contributed to this positive development. Due to numerous major
contracts and the highly dynamic development of foreign business, the value of
orders on hand is about DM 6.7 billion. The internationalization strategy was
stepped up with activities in South America, the USA, Eastern Europe, and Japan.
The Telecommunications and Media Services unit continued its vigorous
business development. debitel is currently represented in five European
countries and services more than 2.5 million customers. The fixed network
business, which was newly established in the course of the liberalization of the
telecommunications market in Germany, was off to a very pleasing start; some
500,000 subscribers are already registered with debitel.
The Trading unit continued to expand its activities with new businesses in
the CIS countries and Latin America.
DIRECTLY MANAGED BUSINESSES
- ------------------------------------------------------------------------
DM amounts in millions 1. half 1998 1. half 1997
- ------------------------------------------------------------------------
Rail Systems (Adtranz at 50%)
Revenues 1,499 1,317
Incoming orders 1,993 1,781
Employees (6/30) 12,217 10,889
- ------------------------------------------------------------------------
Automotive Electronics
Revenues 699 487
Incoming orders 787 529
Employees (6/30) 4,302 3,622
- ------------------------------------------------------------------------
MTU/Diesel Engines
Revenues 758 676
Incoming orders 900 797
Employees (6/30) 5,827 5,619
- ------------------------------------------------------------------------
Rail Systems generated a 14% increase in revenues to DM 1.5 billion; delivery
delays prevented growth from being even more pronounced. The volume of incoming
orders was 12% higher than in the same period in 1997 and above all reflects
major contracts received by the companies in the USA, Sweden, Germany, and Great
Britain.
In Automotive Electronics, revenues were 44% higher than in the previous
year at DM 0.7 billion. All product sectors contributed to the significant
increase. Incoming orders rose by 49% to nearly DM 0.8 billion.
In the MTU/Diesel Engines unit, revenues were up 12% and reached just under
DM 0.8 billion; incoming orders were up 13% to DM 0.9 billion. Sales of engines
for commercial applications and injection systems were especially brisk. A
decrease in revenues in the Asian region was offset by the expansion of business
in Europe and the USA. The volume of orders was higher, above all as a result of
the marine engines ordered for commercial and military ship applications,
decentralized energy systems as well as a major order from Deutsche Bahn AG.
7
<PAGE>
OUTLOOK
From the present perspective, the favorable development of business will
continue - possibly somewhat less pronounced - in the second half of the year as
well. We therefore expect consolidated revenues for fiscal 1998 to top DM 140
billion. The growth will continue to be supported by all of our divisions.
Especially in the USA and in Europa we anticipate a continued positive
development of business.
The new CLK and A- and M-Class models will contribute significantly to the
further growth of our passenger car sales. While the C- and E-Class models will
remain our most popular cars in terms of volume, sales of the S-Class will
decline due to the model change. We will most likely sell more than 20,000 units
of the Smart city coupe before the end of the year. It will be delivered to our
customers beginning this fall.
Against the backdrop of the favorable sales situation and the expected
market development, we expect to set a new record in sales of commercial
vehicles in 1998 at around 480,000 units. The growth will predominantly be
contributed by the Commercial Vehicles NAFTA unit, among other things due to the
sales startup of our Sterling trucks. But the Trucks and Vans Europe units will
presumably also be able to sell significantly more vehicles than in 1997.
We expect the growth in revenues experienced in the first half of the year
to continue in the Aerospace division. Positive factors include the high volume
of civil aircraft orders on hand in particular, as well as the favorable ratio
between the U.S. dollar and the German mark.
The gratifying business development in Services will also continue in the
second half of the year. We expect to achieve a noticeable increase in revenues
in all business units in 1998.
Revenues and incoming orders in Rail Systems will probably be higher in
1998 than in 1997. As a result of the restructuring measures introduced,
competitiveness on an international level shall be improved. We are projecting a
significant increase in revenues in Automotive Electronics, above all as a
result of growth in the ABS, engines and chassis, and comfort sectors. In the
MTU/Diesel Engines unit individual reductions or shifts in revenues in Asia
should be compensated by higher revenues from other regions. As a consequence,
business can be expected to expand in this unit, too.
Investments in property, plant and equipment will likely top DM 9 billion
this year. Expenditures will be focused on the product start-ups at
Mercedes-Benz, the expansion of vehicle distribution net in Asia, the expansion
of the maintenance business in the Aeroengines unit, and the Potsdamer Platz
project.
Without the projects completed on behalf of third parties, we will probably
spend about DM 6.5 billion on research and development in 1998. The funds will
primarily be used for the new generation C- and E-Class and for expenses related
to the commercial vehicle sector and civil aircraft.
The positive development of earnings achieved so far in the operational
area is expected to continue in the second half of 1998. This development is
suggested by the favorable order situation and the increased productivity in the
Group, which should offset start-up expenses incurred for new products in the
passenger car sector in particular. As viewed from the present perspective, the
favorable foreign exchange ratios, above all of the U.S. dollar against the
German mark, will also have a positive effect on earnings. We expect therefore
that we will exceed the minimum return on capital employed of 12% as early as
1998.
July 1998
Daimler-Benz Aktiengesellschaft
The Board of Management
Daimler-Benz AG
RK/B
D-70546 Stuttgart
- --------------------------------------------------------------------------------
Daimler-Benz Aktiengesellschaft Registered Office: Stuttgart Registration
Court Stuttgart, Commercial Register B, No. 15350
Chairman of the Supervisory Board: Hilmar Kopper Board of Management: Juergen
E. Schrempp, Chairman Dr. rer. pol. Manfred Bischoff Dr. rer. pol. Eckhard
Cordes Dr. jur. Manfred Gentz Prof. Juergen Hubbert Dr. phil. Kurt J. Lauk
Dr. jur. Klaus Mangold Heiner Tropitzsch Klaus-Dieter Voehringer Dr.-Ing.
Dieter Zetsche
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DAIMLER-BENZ AKTIENGESELLSCHAFT
By: /s/ ppa. Hans-G. Bruns
----------------------------------
Name: Dr. Hans-Georg Bruns
Title: Senior Vice President
By: /s/ i.V. Friedrich Lauer
----------------------------------
Name: Friedrich Lauer
Title: Vice President
Date: July 30, 1998
