Table of Contents Table of Contents Members of the Supervisory Board and the Board of Management Directors and Daimler-Benz Group Representatives To the Stockholders and Friends of our Company Report of the Board of Management Business Review The Group's Corporate Units and Divisions Mercedes-Benz Passenger Car Division Commercial Vehicle Division AEG Deutsche Aerospace (DASA) Daimler-Benz InterServices (debis) Research and Technology Employees Finance The Daimler-Benz Share Financial Statements Proposal for the Allocation of Unappropriated Profit Report of the Supervisory Board Daimler-Benz in Figures Principle Subsidiaries and Affiliated Companies Supervisory Board HERMANN J. ABS Frankfurt am Main Honorary Chairman, Deutsche Bank AG Honorary Chairman HILMAR KOPPER Frankfurt am Main Member of the Board of Management, Deutsche Bank AG Chairman KARL FEUERSTEIN*) Mannheim Chairman of the Corporate Labor Council, Daimler-Benz AG Chairman of the Joint Labor Council, Mercedes-Benz AG Deputy Chairman PROF. DR. RER. NAT. GERD BINNIG Munich Head of IBM Physics Group DIPL.-ING. RICHARD BOLLMANN*) Mannheim Senior Manager, Deputy Chairman of the Senior Managers' Committee, Mercedes-Benz AG PROF. DR.-ING. E.H. WERNER BREITSCHWERDT Stuttgart DR. RER. POL. HORST J. BURGARD Frankfurt am Main Member of the Board of Management, Deutsche Bank AG HELMUT FUNK*) Stuttgart Chairman of the Labor Council, Untertürkheim Plant and Main Office, Mercedes-Benz AG ERICH KLEMM*) Calw Member of the Labor Council, Sindelfingen Plant, Mercedes-Benz AG MARTIN KOHLHAUSSEN Frankfurt am Main Speaker for the Board of Management, Commerzbank AG (from June 26, 1991) RUDOLF KUDA*) Frankfurt am Main Departmental Manager within the Board of Management, Metal-Workers' Union HUGO LOTZE*) Reinhardshagen Chairman of the Labor Council, Kassel Plant, Mercedes-Benz AG DIPL.-ING. HANS-GEORG POHL Hamburg Chairman of the Board of Management, Deutsche Shell AG DR. RER. POL. WOLFGANG RÖLLER Frankfurt am Main Speaker for the Board of Management, Dresdner Bank AG SIEGFRIED SAUTER*) Frankfurt am Main Deputy Chairman of the Corporate Labor Council, Daimler-Benz AG Chairman of the Joint Labor Council, AEG Aktiengesellschaft DR. JUR. ROLAND SCHELLING Stuttgart Attorney at Law PETER SCHÖNFELDER*) Augsburg Member of the Labor Council, Messerschmitt-Bölkow-Blohm GmbH PROF. DR. IUR. JOHANNES SEMLER Kronberg/Taunus Member of the Board of Management, Mercedes Aktiengesellschaft Holding FRANZ STEINKÜHLER*) Frankfurt am Main First Chairman, Metal-Workers' Union HERMANN-JOSEF STRENGER Leverkusen Chairman of the Board of Management, Bayer AG BERNHARD WURL*) Mainz Departmental Manager within the Board of Management, Metal-Workers' Union Retired from the Supervisory Board: DR. IUR. WALTER SEIPP Frankfurt am Main Chairman of the Supervisory Board, Commerzbank AG (on June 26, 1991) *) Elected by the employees. Board of Management EDZARD REUTER Stuttgart Chairman PROF. DR.-ING. E.H. DR. H.C. WERNER NIEFER Stuttgart Mercedes-Benz Board of M a n a g e m e nt Deputy Chairman DR. JUR. MANFRED GENTZ Berlin/Stuttgart Daimler-Benz InterServices (debis) DR. JUR. HANS-WOLFGANG HIRSCHBRUNN Stuttgart Personnel DR. RER. POL. GERHARD LIENER Stuttgart Finance and Materials JÜRGEN E. SCHREMPP Munich Deutsche Aerospace (DASA) ERNST G. STÖCKL Frankfurt am Main AEG HELMUT WERNER Stuttgart Mercedes-Benz PROF. DR.-ING. HARTMUT WEULE Stuttgart Research and Technology Directors Daimler-Benz Group Representatives Directors/Daimler-Benz Group Representatives DR. JUR. BOY-JÜRGEN ANDRESEN Personnel and Social Policy WERNER POLLMANN Technology, Environmental Officer Daimler-Benz HANSJÖRG BAUMGART Daimler-Benz Art Possessions JÖRG SEIZER Subsidiaries and Affiliated Companies MARTIN BERGER Annual Accounts and Disclosure KONRAD STRAUB Corporate Auditing DR. RER. POL. ROLF A. HANSSEN Corporate Planning and Controlling DR. OEC. PUBL. PAUL WICK*) Finance and Taxes MATTHIAS KLEINERT*) Public Relations and Economic Policy DR. JUR. SOLMS WITTIG*) Staff Lawyer DR.-ING. MICHAEL KRÄMER (provisionally) Research 1 GERD WORIESCHECK Personnel Development for Senior Executives DR. RER. NAT. VOLKER LEHMANN Research 2 I With general power of procurement Berlin Hong Kong PETER-HANS KEILBACH Englerallee 40 D-1000 Berlin 33 Bonn ALFONS PAWELCZYK Friedrich-Ebert-Allee 26 D-5300 Bonn 1 Brüssels DR. JUR. HANNS R. GLATZ 133, Rue Froissart - Bte 29 B-l 040 Brüssels KLAUS B. BEHRENDT 6th Floor, Ruttonjee House 1 Duddell Street, Central Hong Kong Tokyo MICHAEL N. BASSERMANN SVAX TT Building 3-11-15 Toranomon Minato-Ku, Tokyo 105 Japan Washington D.C. RICHARD H. IMUS Suite 800, 1350 1 Street, N.W. Washington D.C. 20005 U.S.A. To the Stockholders and Friends of our Company Throughout the year, your com pany is exposed to the scrutiny of a critical public. This is only right and proper - so long as the scrutiny re mains objective, and for the most part this has so far been the case. We be lieve we have an active obligation to provide regular, comprehensive and open information. One might well therefore wonder what really new information, apart from columns of figures, an annual report can contain. The answer is that in our annual report, we set out to do far more than simply fulfil our legal duty. In the in terests of everyone connected in any way with Daimler-Benz, we wish to make it clear why loyalty to the com pany is worthwhile not only for the customer but also for the shareholder. The same goes for our employees: despite our endeavors to keep them permanently abreast of events, they too will find no better summary than this annual report. I stress this in view of the fact that the competitiveness of your company is closely bound up with the skills, the hard work and the enthusiasm of the people who work for us. That is why we feel particularly pleased that we are so much sought after by young men and women all over the world who are looking for a fulfilling career. We are also aware that at the higher levels of management too we must resolutely aim for internationalization if we are to maintain our ground successfully in global competition. In this context, we are particularly grateful that recent decisions by the Supervisory Boards of Daimler-Benz AG and Mercedes-Benz AG, have once again created a balanced age structure in these bodies. Besides making provision for the future, we also regard this as impres sive testimony to the broad fund of experienced management potential at our disposal. Thus it is as rewarding as ever to place one's trust in Daimler-Benz. The strength of the company, as always, derives from its ability not to gear its development primarily, let alone ex clusively, to short-term yardsticks of success. This is fully compatible however with a determination to act very promptly indeed wherever such action is called for. We have demonstrated this on many occasions recently, wher ever the restructuring of our corporate units in accordance with competitive criteria was concerned. We were particularly saddened by the conse quences of AEG's unavoidable with drawal from the office and communi cation systems sector for jobs at its lo cation in Wilhelmshaven. At the same time, these events nevertheless showed that it is also possible, when all parties concerned co-operate re sponsibly, to keep the burden on those directly concerned within acceptable bounds. Of course, the problems facing us are similar to those facing other com panies too. The relinquishing of the Of fice and Communication Systems field of activity indicates, not least, the near impossibility of manufacturing certain industrial products competitively in Germany. New requirements in envi ronmental matters, trends in traffic flows, the Single European Market, German unification, the restoration of freedom in the post-Communist coun tries, the globalization of economic activity - all of these create new tasks and new difficulties. At the same time, however, enormous new opportunities are opened up. Our competitors are as aware of this as we are. It therefore continues to be of crucial importance that we successfully implement, in our day-to day operations, the strategic path on which our company is embarked and which is entirely correct in its concep tion. In this regard, I believe that a thoroughly respectable picture again emerges when we take stock of the past year. To the Stockholders and Friends of our Company Another objective must be to en sure even more rigorously than before that your company has sufficient presence in the international markets as far as the location of operations is concerned. This applies not only to the sales organization, but also to manu facturing operations or research and development. The agreement to manu facture Mercedes-Benz engines in South Korea under license, and the related acquisition of an interest in SsangYong Motor Company is one ex ample; the founding of the Eurocopter S.A. joint venture by Deutsche Aero space and its French partner Aero spatiale is another. Proximity to the market and the endeavor to attain a strong competi tive position in the new Federal States and in the post-Communist countries of Central and Eastern Europe is the motive underlying a number of impor tant investment projects and acquisi tions about which you will learn more in this report. At the more general level, experience has shown that a broader spread of locations gives a welcome degree of cushioning against exchange rate fluctuations. In political terms, the preparations for the Single European Market have progressed far. Economically however, further adjustments will be necessary, even after January 1, 1993. This af fects a number of fields in which our company is involved. In the area of rail systems, for example, some European companies have not, by world standards, achieved a "critical mass" and have also up to now had some degree of protection in their national markets. Additionally, pioneer markets exist which are cur rently in transition to an era of high growth; as a result, international com pany structures in the fields of space, civilian aircraft and systems services are undergoing constant change. Further action is therefore re quired, worldwide, although we re main convinced that despite the global developments, Europe must remain our home market. To this end, additional expendi ture will be necessary, be it in the form of direct investment or of acquisi tions. With the same vigor, we shall also be pursuing the courses of collab oration with independent partners and the formation of strategic alliances. Helicopters have already been mentioned. We very much hope that a European solution on similar lines will soon follow in the field of regional air craft too. The worldwide success of the Airbus, in which we have a major in volvement via Deutsche Airbus, clearly shows the major opportunities which are emerging in this area. We view as extremely important the alli ance agreed last year between the French company Cap Gemini Sogeti and debis in the field of data process ing. Important too however are the joint ventures now arising on the basis of synergetic effects - now making themselves felt ever more strongly in the group. I am thinking for example of the new microelectronics company, in which the microelectronics activ ities of AEG and Deutsche Aerospace have been brought together. This is reflected above all in the fact that both our internal operating results and the net income shown in the financial statements are once again moving in an upward direction - although it should be borne in mind that we are merely coming out of a high-level plateau rather than emerg ing from a trough. There can be very few companies able to even contem plate such an ambitious re-orientation of their strategy and of their entire company structure without the associ ated costs plunging their annual results far into the red. Your company has again, despite all the burdens, successfully held its ground on the market. For some, this alone would be reason for satisfaction. We however draw satisfaction only from those achievements that go be yond the horizon of day-to-day opera tions. This applies not least to our endeavors to make further improve ments to cost structures throughout the group. Our existing targets have been fully complied with. But further substantial progress in the coming years is necessary if we are to hold our ground against the efforts which our competitors will certainly be mounting. Clearly, there are no excep tions to this among our various areas of operation. Even the longest-established structures need to be called into ques tion. We are directing a spotlight on the flexibility and efficiency of our en tire organization; these criteria must be applied by no means just at man agement level but also to the produc tion process itself. I will not conceal that following this examination it could well prove difficult, perhaps even impossible, to realize productivity improvements simply through natural wastage. This will depend not least on future eco nomic trends; the present outlook makes us take a cautious view how ever. To the Stockholders and Friends of our Company We therefore believe it right, following a number of years without movement, to propose to our share holders that the dividend for 1991 be increased to DM 13 per share. At the same time, we confirm that we are considering asking our Supervisory Board to approve implementation of part of the authorized capital increase, providing that this seems advisable taking into account the general stock market situation at the relevant time. In recent times, the media have grown increasingly accustomed to bombarding the public with ever more reports of political, economic or eco logical dangers. Certainly, this often reflects real facts and real concerns, which have a very direct bearing on our company too. Nevertheless, a somewhat unbalanced picture is presented. This picture takes no account of the fact that the task of overcoming all these problems, and others still, within a defined time frame, hold ma jor opportunities, now that the East/ West conflict has ended, to release immense growth potential throughout the world. Your company is well pre pared to play a major role in positive developments of this kind, which, we continue to believe, will bring particu lar benefits for our company. In all of this you may have become aware of one problem to which no pat ent solutions exist and which we are nevertheless addressing with care and patience. You may occasionally find it diffi cult to form a clear overview of your company. If so, this is essentially a consequence of applying standards geared to traditional industrial com panies when viewing the international breadth of activity and dynamism which are indispensable for an inte grated high-technology concern. If we wish to be successful we need, quite simply, a healthy mix of both familiar and progressive technologies, each contained in its own market- orien tated division. Since the life cycles not only of the products but also of the divisions as such inevitably differ, it has be come more difficult to give you, our investors, a detailed and accurate pre sentation. The manufacturing and service-rendering companies grouped under our one roof require different levels of stockholders' equity. An overall assessment based on average values can lead to erroneous conclu sions; I would refer here to the notes on our leasing business, which indi cate that we must elaborate appropri ate standards by which to measure ourselves. All in all, 1991 provided sufficient proof of the earning power and vitality of your company. Again it showed that we need not shrink from comparison with anyone. Barring unforeseen even tualities, you can assume that the cur rent year will see a further qualitative improvement in our consolidated statements, despite the many diffi culties. This will be achieved not solely as a result of ordinary business activity but increasingly from the advantages of the new structure of Daimler-Benz AG. Report of the Board of Management Business Review Business Review Low World Economic Growth Continues The slowdown in economic activ ity in most Western industrialized countries continued in 1991. The posi tive expectations for the United States which prevailed following the swift conclusion of the Gulf War were not fulfilled. Thus the world economy failed to receive the hoped for stimuli. The Japanese economy too lost consid erable momentum during the course of the year. In Germany's West European neighbors, demand and production ex panded only very slightly, or in some cases actually declined. In the Federal Republic of Ger many by contrast, economic growth continued; however, the exceptional boom resulting from reunification was far less dynamic than in the previous year. Following a generally favorable trend in the first six months of the year, the upward stimulus slackened off considerably in the second half of the year; tax increases and the rise in public borrowing, with negative conse quences for interest rates, exerted a damping effect. The large rises in standard wages and salaries added fuel to this trend. By contrast, support to the economy was provided by the continued high level of investment ac tivity and a rise in exports starting in the middle of the year. The high cur rent account deficit began to fall again towards the end of 1991 due to a slackening of the spending boom in the new Federal states. Although the East German economy received tang ible stimuli from state infrastructure projects and a range of private invest ment activities, industrial re-structur ing meant that no improvement took place in the labor market. Daimler-Benz: Sales of DM 95 billion In the 1991 financial year, the consolidated sales of Daimler-Benz totaled DM 95.0 billion (+ 11 %). Sales in the German market grew by 21 % to DM 44.4 billion, while in the other countries of the European Community, despite the decline in economic activ ity, sales remained at the previous year's level. Sales in the US market, at DM 12.0 billion, were only marginally below the level of 1990. By contrast, we increased our sales in the other foreign markets by 10 %. More than two thirds of consolidated sales were accounted for by the Mercedes-Benz corporate unit; AEG contributed 14 %, Deutsche Aerospace 13 % and debis 4 %. Mercedes-Benz Cars: Sales Continue at a High Level 1991 was a more difficult year for car business generally. The production of the international car industry de clined significantly for the first time following the upward trend of the previous eight years. Car demand in the USA fell appreciably once again. Though American manufacturers were particularly affected by this, the Ger man importers too suffered consider able declines, while the Japanese man ufacturers increased their sales and further expanded their market share. In Japan too, there was a fall in the number of new registrations. The West European market absorbed 13.5 mil lion cars, only slightly fewer than in the previous year; substantial declines were recorded in the British, French, Spanish and most of the Scandinavian markets. This decline was almost com pletely made up for by the positive trends in the Federal Republic of Ger many, where increased demand trig gered by reunification resulted in a re cord 4.2 million new car registrations (1990: 3.3 million). New car registra tions in the new Federal states more than doubled, to 730,000 units; every second vehicle was supplied by foreign manufacturers. European and Japanese competitors, who in some cases faced substantial contraction of their own markets, thus participated in the favorable development in the German market and at 32 % main tained their share of the total market. The Daimler-Benz Group Business Review The overall weakness in important In the USA, the slump in the mar export markets resulted in a total decline of 19 % in exports of the Ger man car industry to 2.2 million units. However, this in part reflects the fact that German manufacturers gave pri ority to serving the domestic market. The exceptional boom in the German market largely compensated for the fall in exports, with the result that ca pacity utilization remained high in the German car industry and the produc tion volume of 4.7 million cars fell only slightly short of the high level of the previous year. World sales of Mercedes-Benz in 1991 totaled 560,100 cars, almost re peating the level of the previous year. In Germany, 270,400 new Mercedes- Benz cars were registered, a rise of 10 %; increases were recorded in all model series. The diesel models were highly successful, their sales in creased by 25 %. Pleasing growth was recorded for the compact series, the S-class, the SEC coupes and the SL models. In foreign markets, however, we were unable to escape the generally negative market trend. Our sales here of 283,000 Mercedes-Benz cars were 8.6 % below the record level of 1990. In the other countries of the European Community, our sales declined by 3.3 % to 127,500 cars. Falls in the French, British and Benelux markets contrasted with double-figure growth rates in Italy and Spain. ket and the additional tax on luxury cars with a price of more than US$ 30,000 hit us sharply. In Japan how ever, although new registrations fell, the company was able to maintain its position as the best-selling imported make. Sales to the Middle East experi enced a recovery. We produced 578,000 cars (1990: 574,200) during the past year, with full utilization of our production capac ity. Increases were recorded partic ularly in the case of the SL and S-class models; the diesel share increased to 26.8 % (1990: 23.6 %) of total car production. Mercedes-Benz Commercial Vehicles: Leading Position Improved The economic downturn in nu merous industrialized countries se verely affected international commer cial vehicle business in 1991. While sales in the USA declined again, Bra zil, Argentina and Mexico absorbed more commercial vehicles. The Japa- nese market remained at the level of the previous year, while in Western Europe demand for commercial vehi cles declined considerably. In the Ger man market, the surge in demand due to reunification led to a growth in the market which benefited all European manufacturers. Mercedes-Benz further expanded its position as the world's largest pro ducer of trucks over 6 tonnes. In the West German states, our new registra tions increased by 15 % to 97,300 trucks, vans, buses and Unimogs. In the new Federal states, 24,600 Mercedes-Benz commercial vehicles were sold. Weak commercial vehicle demand in major EC volume markets resulted in an 11 % fall in sales of Mercedes-Benz commercial vehicles in other Community countries to 64,900 units. Due to the positive trend in Ger many, our total sales to all West Euro pean markets nevertheless increased by 16,500 to 199,100 commercial vehicles, so that our market share for trucks over 6 tonnes rose to 31.4 % (1990:26.3%). At our commercial vehicle factories in Germany, 188,600 units (+ 12 %) were produced. Capacity was fully utilized throughout the year. Following the sharp increase in 1990, manufacture of parts kits for produc tion abroad was cut back to 17,800 units (1990: 21,200). More than 8,300 LN1 and LN2 trucks were assembled on a commission basis during the past year at Nutzfahrzeuge Ludwigsfelde GmbH, south of Berlin. As far as our foreign commercial vehicle companies are concerned, sales of Mercedes-Benz do Brasil increased by 33 % and those of Mercedes-Benz Argentina by 23 %. Assisted by the strong growth in the Mexican commercial vehicle market, sales of Mercedes-Benz Mexico climbed by 63 %. In the USA, Freight- liner too was affected by the poor do mestic demand but was nevertheless able to further increase its market share in class 8 trucks to 23 % (1990: 19 %). Sales declined at Mercedes- Benz of South Africa (- 12 %) and Mercedes-Benz Turk (- 21 %). On the other hand, an increase was again recorded at Mercedes-Benz Espafia (+19 %). In total, our foreign commer cial vehicle companies increased their production by 19 % to 107,200 vehi cles. Worldwide, 295,800 commercial vehicles (+ 14 %) left Mercedes-Benz assembly lines; this represented a new record. Restructuring at AEG The favorable trend in the German electrical engineering industry contin ued in 1991. Business of the AEG group was characterized by more or less balanced growth both in Germany and abroad. Sales growth in Germany was particularly pronounced in the fields of Rail Systems, Automation, Electrotechnical Systems and Compo nents and Domestic Appliances. The increase in sales outside Germany was accounted for in particular by the Microelectronics, Rail Systems and Automation fields of activity. In the Microelectronics field, the first-time inclusion of Siliconix of Santa Clara, California, resulted in growth. Orders received by the AEG group during the 1991 financial year rose to DM 14.6 billion (+ 3.1 %). The domes tic increase was due particularly to good business in Domestic Appliances and in the Electrotechnical Systems and Components field of activity. Export orders also rose, especially in the Rail Systems and Microelectronics fields of activity. Given the continued poor business performance of AEG Olympia Office GmbH, AEG has decided to withdraw from office and communication sys tems; development and production activities in Germany will cease by December 31, 1992. Nevertheless, the "Olympia" marque, including the ser vice and parts business, will continue to be represented on the market, as part of our efforts to keep to a mini mum the job losses resulting from our withdrawal from this line of business. In the course of restructuring the AEG group, AEG KABEL was sold on December 31, 1991 to the French group Alcatel; prior to the sale, manu facture of cable harnesses for the vehicle industry was hived off as TELEFUNKEN Kabelsatz GmbH and grouped with the vehicle electronics activities in the Microelectronics field of activity. AEG sold its Power Tools division on December 31, 1991 to the Swedish industrial concern Atlas Copco. In November 1991, a contract was signed to acquire the track-bound vehicle activities of Lokomotivbau- Elektrotechnische Werke Hennigsdorf GmbH. Business Review New Management Structure at DASA During the year under review, the new management structure was intro duced in almost all sectors of Deutsche Aerospace (DASA). This means that across the still existing legal boundaries, the various activities are now combined in market-oriented, in dependently acting strategic business units. The structural concept for the Air craft division was implemented by hiv ing off the Laupheim and Speyer facto ries of Messerschmitt-Bölkow-Blohm on July 1, 1991 and the Neuaubing factory of Dornier Luftfahrt on Septem ber 1, 1991. The three factories were taken over by Deutsche Airbus GmbH, in which MBB has an 80 % holding. In the Defense and Civil Systems divi sion, parallel activities and overlap ping areas have been eliminated; the structural concept for the Space Sys tems division is currently being imple mented. With a view to future struc tural evolution, Daimler-Benz AG at the end of 1991 acquired the shares in MBB held by the state of Bavaria, which in exchange received shares in Deutsche Aerospace AG, thus raising our holding in MBB to 82 %. In March 1991, MTU signed an agreement with the American com pany Pratt & Whitney regarding large- scale, wide-ranging co-operation in the aero-engine sector. In addition at the end of the year the helicopter division of MBB was merged with that of the French company Aerospatiale into the newly founded Eurocopter Holding S.A. With this joint venture, we aim to consolidate and expand our position in the world helicopter market. The consolidated sales of Deutsche Aerospace remained at ap proximately the same level as those of the previous year. A substantial rise was recorded in the Aircraft division, to which a rise in sales of Airbus assemblies and services contributed. Sales of the Propulsion Systems divi sion were similar to those of 1990, while the Space Systems division re corded a fall in income due to invoic ing factors. The Defense and Civil Sys tems division increased its volume of business. The volume of incoming orders was similar to that of the previous year, totaling DM 10.4 billion (1990: 10.8 billion). The value of orders on the books at the year end, totaling DM 22.8 billion (1990: DM 25.0 billion), would theoretically ensure capacity working for some 22 months. Successful Enlargement of Daimler-Benz InterServices During the 1991 financial year, Daimler-Benz InterServices (debis) further expanded all its divisions as well as the breadth and depth of its services. At the same time, important decisions were taken with a view to improving the competitiveness of debis services in the national and in ternational markets and to embarking on new and interesting fields of activity. In its second year of operation, debis sharply boosted its total output, consisting of both sales and interest income from sales financing activities. Particularly pleasing business was re corded at Mercedes-Benz Credit Cor poration, Norwalk/USA, at Mercedes- Benz Lease Finanz, Stuttgart and at the debis Software House. With the acquisition of a 34 % holding in Sogeti S.A., the parent com pany of Cap Gemini Sogeti, which is the largest European software and sys tems company, a major step was taken towards rounding off debis' range of information technology services on an international scale. Through close, Business Review wide-ranging cooperation between the Software House and the Cap Gemini group, it is hoped to strengthen debis's leading role in IT services in Europe and to improve its market position worldwide. With the acquisition of the European Diebold companies, the range of the debis Software House was extended to include information tech nology consultancy and organizational and management consultancy. In the Financial Services division, the international presence was further improved with the founding of Mercedes-Benz Finance Japan Ltd. New financing companies for products outside the vehicle sector were foun ded in Germany and the USA. These companies do not use the name Mercedes-Benz but are called debis Finance or debis Leasing, debis and Mercedes-Benz are jointly preparing contract hire services to support commercial vehicle sales. With this scheme, the customer receives not just a vehicle but the required transport capacity for a specified period of time at a contractually agreed price. The Insurance division has made consider able progress in establishing its ser vices on the market. The Trading divi sion too substantially expanded its po sition in the fields of import trading and countertrade and opened up important markets. The Marketing Services division has now taken over almost all the domestic media budgets of the companies of the Daimler-Benz group and extended its range of ser vices in all fields of activity. In July 1991, debis, as a majority partner, together with the METRO trading company and the American telecom munications supplier NYNEX founded debitel, which will supply mobile communications services. 379,000 Employees in the Daimler-Benz Group At the end of 1991, the Daimler- Benz group employed 379,252 people worldwide (1990: 376,785), 305,295 in Germany and 73,957 abroad. Of the total workforce, 17,233 (1990: 17,565) young people were apprentices or trainees. As far as the individual corporate units are concerned, Mercedes-Benz employed 237,442 people at the end of the year, AEG 76,338, DASA 56,465 and debis 6,203. Daimler-Benz AG, in cluding its holding companies abroad and the central research activities, employed 2,804 people. The number of employees at Mercedes-Benz AG increased, partic ularly at the vehicle plants in Ger many, as did the number of employees at debis. The workforce of DASA on the other hand declined by 4,800 people, largely due to the hiving off of three plants to Deutsche Airbus GmbH, which is not consolidated. At AEG, the number of employees fell slightly due to the sale of AEG Mobile Communication; the employees, as well as sales and incoming orders, of AEG KABEL and the AEG Power Tools division, which were sold at the end of the year under review, are still con tained in the year-end figures. Almost all the production and assembly com panies in the vehicle sector are repre sented in the slight rise in the number of employees abroad. Further Rise in Group Purchasing Volume The Daimler-Benz group pur chased goods and services to the value of DM 55.4 billion (1990: DM 50.4 billion) in 1991. Mercedes-Benz accounted for almost three quarters of this, AEG for 13.6 %, Deutsche Aero space for 11.1 % and debis for 1.6 %. Despite the fall in raw materials prices during the year under review, high pay settlements led to a considerable rise in prices. Particularly affected were foundry and processed plastic products as well as capital goods. We countered the rise in prices by co ordinating group-wide purchasing pol icy, by single sourcing and by conclud ing agreements with several years' validity. In the steel industry, falls in demand in important export markets, excess capacity and increased pres sure from imports led to price reduc tions. In order to make better use of worldwide purchasing opportunities for the group, we extended our global sourcing activities. The first ever conference with potential suppliers was held in the United Kingdom and served to prepare the way for new business relationships. The cost reduc tions already achieved confirm the need to use world market oppor tunities more extensively. We also expect additional stimuli from the Single European Market in 1993. By extending the scope of outside sourcing and giving suppliers com plete responsibility for complex sys tems and components, we have inten sified our collaboration with the sup ply industy. In view of the worldwide intensification of competition, the strategies and programs for reducing costs were further refined, in co operation with our suppliers. We con centrated particularly on the flows of materials and information and the cor responding transport and storage sys tems. Ever-increasing priority is given in our purchasing decisions to the en vironmental compatibility of products and production processes and the re- cyclability of externally sourced parts. We sharply increased our pur chases from the new Federal German states during the year under review. We also expect co-operation agree ments and joint ventures by our sup pliers with firms in this region and in the countries of Eastern Europe to offer new opportunities. We would like to thank all supply, transport and service-rendering com panies for their trust and co-operation. Business Review Further Increase in Investment During the year under review, the companies of the Daimler-Benz group once again invested large sums of money to safeguard future operations. Despite high capacity utilization at almost all production locations, our investment program proceeded smoothly and on schedule. Additions to fixed assets totaled DM 6.5 billion (1990: DM 5.7 billion) in the year under review. Intangible assets rose by DM 0.6 billion, which represents, above all, the goodwill capitalized upon acquisition of a 40 % holding in Eurocopter Holding S.A. Two thirds of the large rise in addi tions to financial assets of DM 2.3 bil lion related to the acquisition of a 34 % holding in Sogeti S.A., the parent com pany of the French software and con sultancy company Cap Gemini Sogeti; the remainder represents the 10 % holding in Metallgesellschaft and capi tal increases and acquisitions in the corporate units. The investment in fixed assets and intangible assets together was fully covered by the cash flow of DM 7.8 billion (1990: DM 6.7 billion); the acquisitions were financed from abundant liquid resources. DM 4.1 billion (1990: DM 3.5 bil lion) of the fixed assets investments of the group was accounted for by Mercedes-Benz. As in previous years, the emphasis of investment activity was on the Passenger Car division. DM 2.6 billion - 28 % more than in 1990 - was invested during the year under review in efficient, innovative and economical production facilities, in new products and in preparations for future tasks. A total of DM 1.1 bil lion was invested in the Commercial Vehicle division, 51 % of this at our plants and central departments in Ger many and 49 % at our foreign produc tion companies. Additions to fixed as sets totaled DM 0.9 billion at AEG, DM 1.0 billion at DASA and DM 0.3 billion at debis. Investment in these corporate units was primarily geared to product renewal, modernization of production capacity and achieving increased productivity. Investment in the vehicle leasing activities of debis increased further from DM 3.6 billion to DM 4.2 billion; this is financed by depreciation and disposal charges and by sequential additions to liabilities. Borrowing to finance the leasing and sales financing companies totaled DM 8.1 billion (1990: DM 6.6 billion). DM 8.4 billion spent on Research and Development DM 8.4 billion (1990: DM 8.2 bil lion) was spent in the Daimler-Benz group in 1991 on research and devel opment. Self-financed projects ac counted for 58 % of this; commissioned research and development work is more or less confined to Deutsche Aerospace. Worldwide, more than 34,000 employees work in the research, development and testing sectors. "Research" at Daimler-Benz is a task which transcends the individual corporate units and is the respon sibility of the executive holding com pany, which employs some 1,500 peo ple in this division. The "Technology" sector ensures that research findings from within and outside the group are collated, assessed and efficiently translated in development and produc tion into new products and fields of activity. Joint research fields at the group-wide level are concerned with questions of transport technology, materials, information technology, pro duction research, the environment and the inter-relationship between technol ogy and society. Mercedes-Benz spent a total of DM 3.2 billion (1990: DM 3.1 billion) on research and development in the Passenger Car and Commercial Vehicle divisions in 1991. Business Review In March 1991, the Passenger Car Research and development expen diture at AEG during the year under review totaled DM 767 million (1990: DM 782 million), or 5.5 % of the con solidated sales of AEG. Research work concentrated on drive systems and au tomation, systems and software tech nology, microelectronics, integrated high-performance power breakers, pattern recognition, high-temperature superconductors and electronic connec tion and mounting technology. In 1991, AEG was again involved in a range of national and international research projects, chiefly in its Micro electronics, Automation and Rail Sys tems fields of activity. During the year under review, the companies of the DASA group spent DM 4.3 billion (1990: DM 4.2 billion), or 35 % of their sales, on research and development. As in the previous year, externally commissioned projects accounted for DM 3.5 billion of this while DM 0.8 billion was spent on the company's own projects. In the Air craft division, focal activities were the Dornier 328 regional aircraft and the EFA European Fighter Aircraft. The principal activities in the Space Systems division were the Columbus, Hermes and Ariane 5 programs, the ERS-2 remote sensing satellite and the Cluster solar research satellites. In the Defense and Civil Systems division, work centered on the Pars 3 anti-tank system, radio reconnaissance and sur veillance systems and radio and televi sion transmitters. In Propulsion Sys tems, work focused on the European Fighter Aircraft engine and the MTR 390 helicopter engine. Development of the new generation of diesel engines proceeded according to schedule. division presented the new S-class to the public at the Geneva Motor Show; this completely new vehicle concep tion sets the standards in the luxury segment of the car market. At the Frankfurt International Motor Show in September, 1991, we presented the 300 CE-24 convertible, an open Mercedes-Benz four-seater in which we have realized the highest stand ards of occupant protection thanks to innovative technical solutions. The 350 GD Turbo with 3.5 litre 6-cylinder diesel engine was also shown for the first time in Frankfurt. The new S-class coupes (500 SEC and 600 SEC) presented in January 1992 at the De troit International Auto Show offer the same high standards of comfort, han dling, safety and performance as the S-class sedans. Our car range as a whole has been made even more attractive, particularly in the field of safety, with a large range of new and improved equipment. New products and further product improvements were introduced in the Commercial Vehicle division too. The new LEV (Low Emission Vehicle) en gines already comply with the stricter emission limits imposed by Euro 1. With these engines we aim not only to achieve our environmental targets but also to further enhance the economy, durability and performance of our commercial vehicles. The Mercedes- Benz truck range now includes the new 3548 S heavy-duty tractor. The year under review also saw the pro duction start and market launch of the new 0 404 touring coach. At our foreign subsidiaries too, nu merous new models went into produc tion. At the Frankfurt International Motor Show, Mercedes-Benz Espana presented the completely revised MB 100 D van series. Our American sub sidiary Freightliner's existing range of Class 8 heavy-duty trucks was joined by medium-heavy distribution trucks in Classes 6 and 7 (permissible gvw 8.8 to 15 tonnes). With the new COE series, Mercedes-Benz do Brasil concluded the complete modernization of its product range. Consolidated Net Income Increases to DM 1.9 Billion The consolidated income state ment of the Daimler-Benz group for 1991 shows a net income of DM 1.9 billion. When comparing this with the net income of the previous year it must be borne in mind that the tax bill for the year under review is drastically reduced, since it was for the first time possible to use substantial losses assumed from AEG and Dornier to re duce taxable profit. On the other hand, the 1991 statement contains extraordi nary expenditure of DM 0.5 billion arising from structural streamlining at AEG. At DM 4.0 billion, the results from ordinary business activities were 4.6 % below the corresponding figure for the previous year; this fall was due to extensive provisions against future contingencies which are reflected in the increased cash flow. The vehicle sector continues to underpin the pleasing general trend in the results of the Daimler-Benz group. The very strong domestic demand for cars and commercial vehicles, which ensured full capacity utilization, was a primary contributor to these results. Further stimulus was provided by a more favorable model mix and cost- reduction programs, while damping ef fects were exerted by the fall in sales in foreign markets, the low value of the US dollar and preparations for the production launch of new models. Business Review The negative contribution of the AEG group was primarily accounted for by provisions made for AEG's with drawal from office and communication systems. The extraordinary expendi ture was partially absorbed by the profit arising from the sale of AEG KA- BEL. As far as the company's other fields of activity are concerned, sub stantial improvements in results were achieved, particularly in Automation and Domestic Appliances. However, these positive results did not suffice to compensate for the losses. Due to gratifying results at Deu tsche Airbus GmbH, which although not consolidated is included in the re sults as an affiliated company in accor dance with the equity method, the con solidated statements of DASA showed a positive result; in 1991 however, owing to the use of additional, optional accounting procedures, the results of Deutsche Airbus are not yet reflected in a positive contribution to the net in come of Daimler-Benz. Earnings were adversely affected by high expenditure at Dornier Luftfahrt GmbH for the development of the Dornier 328 and restructuring measures at Dornier Medizintechnik. The increased contribution made by debis is especially attributable to the again favorable development in the Financial Services division. In the non-operating sector, net in terest income fell by DM 0.4 billion to DM 0.6 billion. A small increase in in come from interest and securities con trasted with a substantial rise in inter est expenses, due to higher liabilities for leasing and sales financing activ ities. The monetary adjustment made to the financial statements of subsid iaries in high-inflation countries is also included in the consolidated state ments of Daimler-Benz and goes some way towards eliminating "apparent" profits. Sound Balance Sheet Structures Unchanged The increase in the volume of business led to a rise of DM 8.4 billion in the balance sheet total to DM 75.7 billion. The sharp expansion in leasing business and the substantial rise in fixed and financial assets meant that the assets side of the balance sheet now contains a higher proportion of long-term assets. Current assets rose by DM 2.4 billion and now account for 59 % (1990: 63 %) of total assets. The equity ratio is unchanged at around 30 %. Due to the very high investment in fixed and financial assets, the cov erage of non-current assets by stock holders' equity fell from 102 % to 89 %. The finance service business financed by borrowing was not included in the calculation of these two key figures. Taking into account medium and long- term provisions, particularly pension provisions, the share of long and medium-term capital in the consoli dated balance sheet total amounts to 62 %. Both non-current assets and inventories are fully covered by this. Allocation of Earnings The net income of Daimler-Benz AG increased by 6.6 % to DM 1,194 million. Making use of Section 58 of the German Stock Corporation Law, the company again transferred half of its net income to the retained earnings of the holding company. By far the largest contribution was made by Mercedes-Benz AG, which again trans ferred its entire earnings, amounting to DM 1,100 million. Deutsche Aero space AG contributed DM 30 million. On the basis of control and profit and loss transfer agreements, losses of DM 451 million were assumed from AEG Aktiengesellschaft and DM 15 million from Daimler-Benz InterServices AG. Business Review At our Annual General Meeting on June 24, 1992, we shall propose that a dividend raised from DM 12 to DM 13 be paid per share of DM 50 par value. The total dividend amount will thus increase from DM 557 million to DM 605 million. Outlook At the beginning of 1992, most of the Western industrialized countries continue to face a difficult economic situation. There is no indication that a significant recovery will take place in the remaining months of the year. In the Federal Republic of Germany too, the conditions for further growth in demand and production are not as favorable as in 1991. The German car industry expects a decrease in sales in its domestic market in 1992 due to a slowdown in economic activity. In the other West European countries and in the USA, the recovery in demand will be grad ual. The Japanese market will probably absorb more vehicles than in the past year. Despite the uncertain overall economic environment, Mercedes- Benz expects to be able to repeat its sales of 1991, thanks to its attractive car range. As far as commercial vehicles are concerned, the German manufacturers expect a general decline in domestic sales. Even in the event of a recovery in the other European commercial vehicle markets, this would not fully compensate for the drop in demand in Germany. Thus the battle for market share and the mergers already taking place in the European commercial ve hicle industry will continue unabated. For the present financial year, Mercedes-Benz is nevertheless prepar ing for a further increase in worldwide sales of its commercial vehicles. The hoped for economic upturn in the United States and improved market conditions in South Africa and Turkey offer a promising basis for this. Uncer tainties remain in Brazil and Argen tina. Our Mexican subsidiary on the other hand will be able to continue its expansion. If we want to fully utilize the opportunities arising in the East Euro pean markets, we will have to estab lish production facilities in these coun tries too. To this end, we are holding talks with Czech commercial vehicle manufacturers. At AEG, the sale of the cable busi ness and the Power Tools division and the withdrawal from office and com munication systems will mean that sales and incoming orders will fall from the 1991 level. An increase in business is expected particularly in Rail Systems, Power Transmission and Distribution and at TELEFUNKEN elec tronic. In Germany, we expect a slight rise in sales, while export business will be stimulated by the expected economic recovery in important West ern markets. AEG intends to further increase the international competitive ness of its products; this will include appropriate forms of co-operation with other companies, ranging from busi ness alliances to the take-over of further companies. Within the Daimler-Benz group, AEG and Deutsche Aerospace will be combining their microelectronics ac tivities in a joint venture. The loca tions of AEG in the new Federal states offer a basis with promising prospects not least as far as business with East European countries is concerned. For the current financial year, Deutsche Aerospace expects a rise in sales, supported chiefly by higher income from the Propulsion Systems and the Defence and Civil Systems divisions. Intensified co-operation with Pratt & Whitney is leading to in creased business, not least in civilian aero-engines; in the defense sector, the start of deliveries for the Stinger program is contributing to growth. In the Aircraft division, the hiving off of several factories and reduced invoic ing for the European Fighter Aircraft and Tornado programs mean that we will not be able to equal last year's level of business. The decision of the German government, promised for the middle of the year, regarding the pur chase of the European Fighter Aircraft, will have a substantial impact on the further course of business. The volume of sales in the Space Systems division will remain un changed from the 1991 level; one focus will be the invoicing of the re trievable carrier Eureca; in the Ariane program, increased income is ex pected. Future developments in the field of space remain uncertain, since no final decision has yet been taken regarding the long-term future of the Hermes and Columbus space pro grams. An important target for 1992 is the further development of the DASA company structure; the next step will be to integrate the MBB and TST com panies into Deutsche Aerospace. In the coming years, Daimler-Benz InterServices will expand its business particularly with customers outside the group. An important task of the debis Software House will be to extend its partnership with Cap Gemini Sogeti. The Financial Services division will continue to support sales of Mercedes-Benz vehicles and at the same time provide similar services for Business Review products of AEG, Deutsche Aerospace and also the debis Software House. In the Insurance division, business with external industrial clients and with private customers will be further ex panded. The Trading and Marketing Services divisions will be adding further services to their range. We plan to make major strides in the coming years with regard to the restructuring of Daimler-Benz into an international high-technology concern. We will be channeling our technologi cal potential and the knowledge and skills of our employees into develop ing the products and services of the future. The plans to combine the microelectronics activities of AEG and Deutsche Aerospace already provide an example of the promising possi bilities which exist for integration. Further scope is to be found in the fields of transport and traffic manage ment systems; for this purpose we have founded a new company, Inter- traffic GmbH, into which know-how from every area of the group will flow. In order to maintain our success ful performance in international com petition in the years to come, we shall continue to implement the cost reduc tion programs already underway. Given the high wage and salary levels in the Federal Republic of Germany, reductions in the scope of in-house manufacture are an increasingly im portant consideration. Leaner person nel structures and reduction in the number of hierarchical levels will assist in this respect; at the same time, such measures will provide an impor tant motivation for our employees to identify more closely with their particu lar tasks. At the present point in time, we expect a further increase in sales and operating results for the current year. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Mercedes-Benz The wide-ranging investment program was continued. Global fixed asset investment by Mercedes-Benz totaled DM 4.1 billion (1990: DM 3.5 billion), of which Germany accounted for DM 3.3 billion (1990: DM 2.8 billion). As in previous years, the emphasis was on the Passenger Car division; DM 2.6 billion (+ 28 %) was invested during the year under review in effi cient, innovative and economical pro duction facilities, in new products and in preparations for future tasks. A to tal of DM 1.1 billion was invested in the Commercial Vehicle division; 51 % of this was spent at our plants in Ger many, where the focus was on the introduction of new technologies and additions to the product range while at the foreign production companies, the emphasis was again on updating vehi cle ranges and expansion and modern ization measures. Mercedes-Benz spent over DM 300 million on strengthening its worldwide sales or ganization and preparing it for fiercer competition; some DM 125 million was invested in vehicle preparation centres and parts stores in Germany and Japan alone. Expenditure on research and development increased in 1991 to DM 3.2 billion (1990: DM 3.1 billion). In the Passenger Car division, we expect to be able to repeat our sales of 1991 in the current year, thanks to the attractiveness of our range. As far as commercial vehicles are concerned, we expect further worldwide growth in sales, despite the slackening of demand in Germany. In 1991, Mercedes-Benz main tained the upward trend of the preced ing years. Consolidated sales rose 12 % to DM 67.1 billion; at DM 1,548 million, the year-end results were ap proximately equal to their high level of the previous year. Sales of the Pas senger Car division rose 11 % to DM 39.5 billion, while those of the Com mercial Vehicle division increased by 14 % to DM 27.6 billion. Once again, cars contributed 59 % and commercial vehicles 41 % to the total volume of business. Sales of Mercedes-Benz in the Eu ropean Community increased by 18 % to DM 43.6 billion, which represented 65 % (1990: 62 %) of total sales. The largest portion of this, DM 30.8 billion, was achieved in the Federal Republic of Germany, an increase of 27 %. De spite the poor demand in some impor tant markets, income from outside the EC amounted to DM 23.5 billion (+ 3.0 %). Sales of Mercedes-Benz AG alone totaled DM 54.9 billion (1990: DM 48.6 billion). The total workforce of this corpo rate unit at the end of 1991 had in creased to 237,442 (1990: 230,974), including 11,104 apprentices and trainees (1990: 11,288). In Germany, the number of employees increased by 3.4 % to 185,154. Our companies abroad increased their workforce to 52,288(1990: 51,854). Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Passenger Car Division Downturn in Important Markets The slowdown in the international car market which began in 1990, gathered pace during the year under review. The high sales volume of 1990 was therefore not repeated; world production fell by 4.6 % to 34.7 million vehicles. A crucial factor in the down turn was the poor state of the US econ omy. The car industry was particularly affected by this. After substantial increases in the previous three years, sales in Japan fell by 4.6 % to 4.9 mil lion cars. In Western Europe, new registrations were only slightly below those for 1990 at 13.5 million cars. This reflects the exceptional boom in Germany; in the rest of Western Europe, car demand fell by some 8 % overall. Production in Western Europe was cut back to 13.2 million cars (- 4.3 %). Their share in world produc tion continues to stand at more than 37 %. almost all of them destined for East European countries, left the assembly lines compared with 152,500 in 1990; assembly of West German makes of car on the other hand rose from 4,100 to 59,300 units. Mercedes-Benz: High Number of Registrations in the German Market Assisted by buoyant demand in the German market, 270,400 Merce des-Benz cars were newly registered during the past year (+10 %). Sales of diesels alone totalled 89,200 units (+ 25 %). The demand for our compact series was particularly gratifying, with 96,100 new registrations in 1991 (+ 12 %). New registrations of our mid- series also increased, from 138,800 to 145,500 saloons, coupes and T-models. New registrations of the S-class totaled 20,100 (1990: 14,100) during the year under review; this suc cess was largely attributable to the in troduction of our new models. Demand remained high for our SL roadsters of which 7,500 (1990: 4,700) were sup plied to customers in Germany. 7,700 Mercedes-Benz cars were newly regis tered in the new German states in 1991. Decline in Foreign Sales Sales of 283,000 Mercedes-Benz cars abroad in 1991 were 8.6 % below the previous year's record level. In the European Community outside Ger many, we sold 127,500 cars (- 3.3 %). In Italy, where 43,400 Mercedes-Benz cars (+11%) were sold, we further im proved our market position. On the other hand, sales of 26,400 cars in France were 8.0 % below the level of 1990. Due to the sharp decline in the German Unity the Driving Force in Car Demand The demand for cars resulting from German reunification and the favorable general trend in the German economy during 1991 were sufficient to help the German vehicle industry make up for the poor export demand. In former West Germany, new car reg istrations with 3.4 million cars, were 13 % above the record level of the pre vious year, while in the new German states, 730,000 new registrations were recorded. Foreign manufacturers maintained their 32 % share of the German car market; in the new Ger man states their share was around 52 %. The increase in sales of Japanese makes in Germany was below the average however and their share of the West German market fell from 15.8 to 14.5%. In 1991, the market again over whelmingly favored environment- friendly vehicles. In former West Ger many, 96.4 % of all newly registered cars fell into the category defined in German law as "pollutant-reduced"; of the petrol-engined cars, 96 % were equipped with a closed-loop three-way catalytic converter. The diesel share of the total car market increased to 13 % (1990: 11%). Exports of German cars were af fected by the generally difficult eco nomic situation in important volume markets. In other Western European countries, the USA and Japan, sales were in some cases well below the level of the previous year. Exports de clined by 19 % to 2.2 million cars, al though it should be noted that various manufacturers gave priority to serving the high demand from the domestic market and that the total figure is in fluenced by the sharp drop in exports from the new Federal states. In the for mer West German states, the previous year's record volume of 4.7 million cars built was repeated despite the decline in exports and the production start of new models. In the new Ger man states however, only 17,200 cars, United Kingdom car market as a whole (- 21 %), Mercedes-Benz sales too fell by some 5,900 to 21,400 units. In Austria, our sales of 10,100 cars (+ 5.6 %) once more surpassed the good results of the previous year; a new record volume of 9,600 cars was sold in Switzerland (+ 4.3 %). Despite the difficult economic situation, the United States of America remained our largest export market, although our car sales there fell during the year under review to 58,900 (- 25 %). In Japan, the slowdown in the vehicle market had an effect on de mand for our cars. Nevertheless, al though new registrations of Mercedes- Benz cars declined by 12 % to 34,100 vehicles, we were able to maintain our previous year's position as the best- selling imported make; the fall was so lely in the grey market, whereas sales via the authorized Mercedes-Benz dealer organization increased further. In the 1991 financial year, Mercedes-Benz maintained its overall position as the world's largest manu facturer of particularly high-quality passenger cars, with production of 578,000 units (1990: 574,200). As a result of a substantial rise in demand during the year under review, the pro portion of diesel cars built rose from 23.6 % to 26.8 %. 7,200 cross-country vehicles (- 6.7 %) were manufactured on a commission basis for Mercedes- Benz by Steyr-Daimler-Puch AG in Graz, Austria, during the past year. Additions to the Model Range In March, we presented the new S-class to the public at the Geneva Motor Show. These vehicles set new standards in the luxury vehicle cate gory. Proven technologies and many innovations offer our customers a high degree of perfection. One of many fundamental innovations is the net working of the electronic control units via a fast data bus. The appointments of the new models meet the highest standards. We presented further new fea tures at the Frankfurt International Motor Show in September 1991. The 300 CE-24 convertible is the first open Mercedes-Benz four-seater in the range for more than 20 years. The 350 GD TURBO is now the new top model in the cross-country vehicle range. The 400 E, presented in October at the International Motor Show in Tokyo rounds off the upper end of our mid- series. In January 1992, we presented the new S-class coupes, the 500 SEC and 600 SEC, at the Detroit International Auto Show. Innovations in the Field of Safety The high Mercedes active and pas sive safety standards have been raised further by means of various new fea tures. Innovations in occupant protec tion such as the automatic safety sys tem in our new four-seater convertible are further milestones in automotive manufacture. More than 3 million ABS systems, 8 million belt-tensioners and more than 900,000 airbags that have been fitted in our passenger cars under score the pioneering role of Mercedes- Benz in the field of active and passive safety. High Investment to Safeguard the Future DM 2.6 billion was invested in the Passenger Car division in 1991 to develop new products and production facilities and to prepare for the tasks of the future; this sum was some 28 % more than in the previous year. By using the latest production technologies, we not only safeguard the quality of our products, we also ensure humane workplaces and effec tive environmental protection. Our investment focused on the production start of the new S-class, the new four- valve engines and development work on the four-seater mid-series convert ibles and the S-class coupes. In spring 1992, the four-seater mid-series con vertible went into production. In 1991, preparation at the Sindelfingen factory for production of the S-class coupes proceeded at full speed; the coupes will go into production in summer, 1992. Work on the Rastatt car assem bly plant, a central element of our investment for the future, progressed rapidly; the first stage of construction was largely completed during the year under review. Preparations for the next stages are proceeding according to schedule. Further Progress Towards Shorter Development Times Mercedes-Benz has set itself the task of shortening development times without prejudicing the maturity of new models going into production. To meet these challenges, the develop ment time frame had to be reduced by restructuring and by an expansion and modernization of facilities. During the past year, new engine test benches went into operation and the emission testing centre was ex panded. To cut down time-consuming trial drives with test engines, we have set up two high-performance test benches with which all the demands made on an engine during operation can be precisely simulated. For testing under special climatic conditions a new heat tunnel is used. In conjunction with a roller dyna mometer, the heat tunnel allows us to test and improve engine cooling and air-conditioning systems quickly, in the vehicle itself. New development methods also include stereolithography, whereby a three-dimensional plastic model can be created in just a few hours using a CAD data record, without the need for a tool. the most successful marque in the 1991 German Touring Car season - eloquent proof of the sporting capa bilities of the 190 model. For strategic reasons, we have decided to make changes in our motor sport activities. We see little future scope for our company in Group C. We do not wish to take part in Formula 1 since we are firmly convinced that it is not of primary importance for a vehi cle manufacturer such as Mercedes- Benz to compete in this racing cate gory. The focus of Formula 1 racing is solely on the drivers' championship and not on competition between marques. We shall continue however to take part in the attractive German Touring Car Championships and shall be urging a Europeanization of this series. Outlook In the western part of Germany, new car registrations in 1992 are likely to stabilize at a lower level than in the record year of 1991 due to a slowing down in the economy. In the eastern part of Germany too, the 1991 market volume, which resulted from an enormous demand backlog, is un likely to be repeated. In view of relaxation in monetary and credit policy, our expectation for the neighboring West European coun tries and - at least in the second half of the year - for the USA is for a moderate upturn in vehicle demand in 1992. A slight increase in sales in Japan is expected. In 1992, despite the more difficult market conditions, Mercedes-Benz sees good possibilities of repeating the sales level achieved in the year under review. We expect the new S-class in particular to impart further stimulus to our sales. Intensive Co-operation with the Supply Industry Changes in the international eco nomic environment have created new and challenging tasks both for the automotive supply industry and for Mercedes-Benz itself. The most impor tant of these concern technological de velopment and environmental protec tion, quality standards and cost effi ciency. Our purchasing department is in creasingly working with suppliers of complete systems. These suppliers take comprehensive responsibility for supplying complete vehicle sub systems; this applies to costs as well as to engineering. We also intend to step up the co-operation between our suppliers and the Mercedes-Benz de velopment department. A further pri ority on the purchasing front has been to expand our relations with competi tive foreign suppliers. Motor Sport: Twofold Success in the German Touring Car Championships Mercedes-Benz announced that it would be regarding 1991 as an "ap prenticeship" year in the World Sports Car Championship, which for the first time specified prototypes with 3.5 litre naturally aspirated engine, since we entered with a vehicle which was com pletely new, including its engine and transmission. After some severe set backs in the middle of the season, our drivers concluded the season in style, as in 1988, 1989 and 1990. A victory for Mercedes-Benz junior drivers Michael Schumacher and Karl Wend- linger in Autopolis, Japan, brought to a close the Silver Arrows' three years in the World Sports Car Championship. 1991 was our best year in the Ger man Touring Car Championships since the start of the works-supported activ ities in 1985. Of four championship placings, two went to Mercedes-Benz: the marque and the team champion ship. In the German Touring Car drivers' placing and the international touring car racing association (ITR)'s drivers' cup, Klaus Ludwig took sec ond place. Mercedes-Benz was thus Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Commercial Vehicle Division Slow Down in Important Commercial Vehicle Markets International commercial vehicle business was affected in 1991 by the difficult macro-economic conditions in many industrial countries. Of the large markets in Western Europe, only the Federal Republic of Germany achieved sales greater than in 1990 for com mercial vehicles. In the world as a whole, commercial vehicle production declined by 5.0 % to 11.9 million units. In the USA, sales decreased by 10 % to 4.3 million commercial vehicles, as a result of the stagnating economy. The Category 8 heavy-duty trucks alone suffered a slump of 19 % to 98,800 units. American manufac turers as a whole had to reduce their production by 9.4 % to 3.4 million units. In Mexico and Argentina, the consistent stabilization and liberaliza tion policy had a favorable effect on commercial vehicle business. Despite the economic climate in Brazil being marked by uncertainty, the commer cial vehicle market was able to re cover. New registrations of commer cial vehicles in Japan stabilized at the level of 1990, at 2.7 million units, after a two-year downward trend. Ex ports of domestic producers fell again, following a period of persistent de cline, by 3.4 % to 1.3 million commer cial vehicles. Production at 3.5 million commercial vehicles was therefore 1.3 % below the level of 1990; how ever, the share in world production rose to 29% (1990: 28 %). After the long boom period in the second half of the eighties, the difficult economic climate in most countries of Western Europe led to a decline in demand. In the European Community, new registrations of commercial vehi cles dropped by 4.7 % to 1.6 million. Production dropped to 1.6 million com mercial vehicles (- 11 %); in the case of trucks over 6 tonnes, it remained at the level of 1990 with 245,000 vehicles. Special German Market Special economic conditions pre vailed in Germany due to increased demand resulting from reunification. This was to the benefit of all European manufacturers. Demand for commer cial vehicles rose for the seventh year in succession in the Federal Republic of Germany. This was particularly due to the extensive need in the new Fed eral states for more technically up-to- date vehicles. In the old Federal states, the lively commercial vehicle business of 1990 continued due to the favorable macro-economic conditions. Total new registrations of 332,300 commercial vehicles in Germany exceeded the already high level of 1990 by 48 %. Ex ports by German commercial vehicle manufacturers declined from 191,900 to 162,400 units. Despite the lower demand abroad, the domestic commer cial vehicle industry was producing at full capacity over an extended period. Recording a growth level of 2.3 %, to 357,800 commercial vehicles, it reached its highest manufacture level so far; in the old Federal states alone, production rose by 13 % to 355,500 units. Mercedes-Benz: Further Expansion of Market Position in the West European Countries Our position as the world's largest producer of trucks over 6 tonnes was further extended in important Euro pean markets. In the old Federal states, new reg istrations increased by 15 % to 97,300 Mercedes-Benz commercial vehicles. For vans from 2 to 6 tonnes, which are mainly used in regional distribution, new registrations increased by 17 % to 47,700 units. New registrations of our trucks over 6 tonnes climbed by 15 % to 45,500 vehicles. In the new Federal states, 24,600 Mercedes-Benz com mercial vehicles were newly regis tered. As in 1990, the sharp decline in demand on the larger West European markets also had an adverse effect on the commercial vehicle business of Mercedes-Benz. Our exports of prod ucts made in Germany therefore fell by 8.0 % to 80,100 units. Vans and medium-heavy trucks were partic ularly affected. With sales of 23,100 heavy-duty trucks over 16 tonnes, we sold 3.9 % fewer units abroad than in 1990. Our sales figure of 64,900 com mercial vehicles in the countries of the European Community excluding Ger many were 11 % lower than in 1990. In France, our largest West European market outside Germany, sales of Mercedes-Benz commercial vehicles decreased by 14 % to 17,500 units. An even greater decline was seen in com mercial vehicle business in the United Kingdom due to poor economic condi tions; here we sold only 10,300 units (- 35 %). Mercedes-Benz also saw a re duction in sales in Italy, to 8,400 com mercial vehicles (- 7.0 %). Altogether though, the highly favorable develop ment in Germany compensated for the weak demand in the rest of Western Europe. In the countries of Eastern Eu rope, we sold 2,800 commercial vehi cles (+74 %) in the year under review. The principal market activity was in Yugoslavia and Poland. For Europe as a whole, including Germany, our sales rose by 9.0 % to 204,000 commercial vehicles. Rise in our International Bus Production Commercial Vehicle Production at the German Plants at a Record Level Mercedes-Benz was not fully able to meet demand for buses, even at full capacity. Despite a rise in new registrations by 2.1 % to over 1,500 vehicles, our market share dropped to 36.3 % (1990: 37.1 %). Mercedes-Benz began preparations in 1991 at our Mannheim plant for the changeover in production from the 0 303 to the 0 404 touring coach. We exported 3,100 Mercedes-Benz busses and bus chassis from our German plants (- 15 %) For the world as a whole, the manufacture of Mercedes-Benz buses and bus chassis rose by 30 % to 28,600 units. In 1991, our German plants achieved the highest production vol ume since 1981, with a rise of 12 % to 188,600 commercial vehicles. Produc tion was at full capacity throughout the year due to increased production targets. In our plants at Mannheim, Worth, Gaggenau, Düsseldorf and Kassel, no supply difficulties occurred despite the boom in demand. The addi tional capacity required was covered by overtime. Another important factor was changes in shifts. We are in debted to our employees for making it possible for us to fulfil our ambitious production programmes. Lively Domestic Business with the Unimog Production in the New Federal States Sales of Unimogs were, at 4,100 units, at the same level for the year under review as in 1990. While the weak demand for commercial vehicles led to a clear decline in exports on important markets abroad, sales in Germany increased by 18 % to 2,400 units. The MB-trac, production of which ceased at the end of 1991 as planned, achieved a sales volume of around 2,000 units. Shift in Demand to More Powerful Industrial Engines The poor economic conditions in most European countries also had an effect on the purchasers of industrial engines, which have a high proportion of exports in the harvester and heavy- duty vehicle crane sector. Neverthe less, with sales of over 15,100 indus trial engines, it was possible to main tain approximately the level of the pre vious year. Demand clearly shifted to more powerful and thus more expen sive engines. In Brazil, sales of locally produced industrial engines, at some 9,100 units, maintained the level of 1990, despite the particularly difficult economic situation in the construction industry and agriculture. Nutzfahrzeuge Ludwigsfelde GmbH was created at the beginning of January 1991, and as early as the 8th of February 1991 it produced on a commission basis the first Mercedes- Benz truck within the new Federal states. On 1st January 1992 Mercedes- Benz AG acquired a first 25 % stake in the company via a holding company. In the medium term we intend to build a completely new commercial vehicle plant at Ahrensdorf, near Ludwigs felde, and it will become a fully integrated part of our European pro duction network. In the year under review, over 8,300 Mercedes-Benz trucks and vans were assembled. Positive Development of our Foreign Production Companies Our foreign commercial vehicle production companies increased their manufacture by 19 % to 107,200 vehi cles in the year under review. A deci sive aspect was the higher production at our companies in Mexico, Brazil, as well as in Spain. By contrast, our com panies in South Africa and Turkey had to reduce production due to the serious economic situation on their do mestic markets. The group's manufac ture for the world as a whole rose by 14 % to 295,800 commercial vehicles and thus achieved the highest volume in its history. Mercedes-Benz do Brasil suc ceeded in increasing its sales by an impressive 33 % to 40,700 vehicles, al though the high inflation rate in Brazil led to restrictive anti-inflation meas ures at the beginning of the year, which only began to be removed in the second half of 1991. The market share rose for trucks over 6 tonnes to 44 % (1990: 34 %), and for busses to 79 % (1990: 75 %). Production rose as a whole to 41,500 (1990: 31,200) units. Mercedes-Benz Argentina raised its sales to 3,300 commercial vehicles (+ 23 %), assisted by a considerable revival in domestic demand. Spurred by the strong growth on the Mexican commercial vehicle market, the sales of Mercedes-Benz Mexico increased by 63 % to 9,600 vehicles. Against the background of the continued economic stagnation in the USA, which has left its mark in the form of a strong decline in Category 8 (over 15 tonnes GVW), our subsidiary Freightliner emerged favorably in this category with sales of 22,600 trucks (1990: 23,000), and further raised its market share to 23 % (1990: 19 %). In the year under review, a total of 25,000 trucks (1990: 24,800) were manufactured in the USA and Canada. As a result of a continued poor economic climate and customers' reticence to purchase due to political uncertainties, Mercedes-Benz of South Africa sold only 2,300 commercial vehicles, 12 % less than in 1990. Mercedes-Benz Espafia produced and sold 28,000 vans in the year under review. Our Spanish subsidiary benefited from the higher sales to the new Federal German states as well as in some western- and above all eastern- european markets. Our Turkish subsidiary Mercedes- Benz Turk A.S. suffered considerably as a result of the Gulf War, with a strongly declining market as a whole. In contrast to a very good previous year, only 2,200 commercial vehicles were sold (-21 %). Developments at the Associated Companies The Indonesian affiliates of P.T. German Motor Manufacturing and P.T. Star Engines Indonesia, Wanaherang, and P.T. Star Motors Indonesia, Jakarta increased their sales to 2,800 (1990: 2,300) commercial vehicles, despite the decline in the market caused by lower demand in the vehicle sector. The manufacture volume of NAW Nutzfahrzeuggesellschaft Arbon & Wetzikon AG, Switzerland, which con verts and assembles Mercedes-Benz commercial vehicles, among other activities, declined slightly, to 1,600 vehicles (1990: 1,700). New Products and Product Improvements In 1991 Mercedes-Benz comple mented its commercial vehicle range with new products, and introduced further improvements. The aim is to continue to supply environmentally compatible, economical and individual transport models. In the Commercial Vehicle division, the major part of investment of DM 1.1 billion for the world as a whole was for this purpose. With the new LEV engines (Low Emission Vehicle) OM 366 LA, OM 401 LA, OM 402 LA, OM 441 LA and OM 442 LA today we already fulfil the more stringent emission limits (Euro 1) which will come into force in October 1993. This new generation of engines emphasizes the expertise of Mercedes-Benz in environmental tech nology. We have not only achieved all of our aims in this area, but have also paid particular attention to the criteria of fuel economy, longevity and power development. The new heavy-duty 3548 S en gine completes the Mercedes-Benz range for transport by road of very heavy, large or indivisible loads such as transformers, large containers or bridge girders. In the bus sector, the year under review was characterized by commen cement of production and market introduction of the newly developed O 404 coach. This series, which was elected "Coach of the Year" at the 11th International Bus Show in Kortrjik, Belgium, replaces the 0 303. A further product innovation in the bus sector is the low-floor articulated 0 405 GN, which we presented to the public for the first time at the International Com mercial Vehicle Show in Geneva in January 1992. Our foreign subsidiaries also presented many product innovations. From Mercedes-Benz Espana we presented the completely remodeled MB 100 D at the International Motor Show in Frankfurt am Main in the fall of 1991. Mercedes-Benz Turk pre sented a Mercedes-Benz truck spe cially tailored to the Turkish market with the 2517 model. Our American subsidiary Freightliner developed with Mercedes-Benz AG its first medium- heavy truck, the Business Class. Mercedes-Benz do Brasil and Mercedes-Benz Mexico expanded their production ranges with conventional heavy-duty vehicles. Environmental Protection as an Important Corporate Objective The environmental compatibility of products and production is a fore most development aim alongside greater vehicle economy and safety. Around a third of the entire research and development expenditure of the Commercial Vehicle division is for environmental protection measures. We have made an equally impor tant contribution to relieving stress on the environment in developing the low-pollutant commercial vehicle en gines (LEV). Emission values for town busses and municipal vehicles, which are often in stop-go traffic, can be reduced by more than 80 % using a particulate trap system. On the basis of results available to date, we are confi dent that we will be able to develop a standardized particulate trap system, suitable for use in different new vehi cle models and for retrofitting older vehicles. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. In the year under review, we were able to supply the first Mercedes-Benz commercial vehicles with a CFC-free air conditioning system. All air condi tioning systems incorporated in Mercedes-Benz vehicles will gradually be converted to this environmentally compatible technology. In addition, we have fitted all branches with suction and regeneration equipment so that maintenance or scrapping work on old vehicles does not involve the release of any CFC's into the atmosphere. Challenges in Materials Purchase and Procurement Logistics We intend to counter the increas ing competition in the commercial ve hicle sector through still closer cooper ation with our suppliers. We consider global sourcing to be an important ap proach in developing the international ization of our purchasing activities, and in cushioning the repercussions of exchange rate fluctuations on sales and earnings through measures on the procurement side. In fixing the scope of supplies for new models and in changing existing parts, our aim in the future is increas ingly to purchase complete systems, enter into long-term relationships for development and parts supply, and also to optimize the costs of the entire value creation chain. In accordance with our long-term purchasing strat egy, we will implement this aim to gether with our suppliers, and achieve considerable cost advantages for both parties. The most important tasks in our procurement logistics in 1991 were meeting our ambitious production tar gets and improving our international manufacturing network. In addition, our commitment in the new Federal states also had to be covered from the procurement side. In order to further reduce the logistics costs, just-in-time deliveries have been used to an increased extent. We have also begun to use area haulage for improved average truck capacity utilization. Environmental protection, recy cling, optimized packaging and a reduction in the quantity of transport are tasks which we have been dealing with for years in cooperation with our suppliers, and which we will be taking even more into consideration in the future in our procurement decisions. Cooperation Projects Mercedes-Benz signed a coopera tion agreement with the South Korean SsangYong Motor Company (SYMC), which provides for the manufacture under license of MB 100 vans and die- sel engines. In addition, discussions are being held with SYMC regarding the manufacture of other components. This is an important step in the ongo ing expansion of our international production network. Mercedes-Benz heavy-duty trucks are assembled by our Chinese cooper ation partner, the mechanical engi neering group China North Industries Corporation (Norinco), and series pro duction is planned for 1992. Over the next few years, 15,000 production parts sets are to be delivered to China. The factory will be designed for an annual production of 6,000 vehicles. Due to the political changes in the for mer USSR, the project for manufacture under license of the 0 303 coach in Golicyno, Russia, was delayed. The agreement became effective at the end of 1991 with the signing of the indi vidual contracts. As early as 1991 the test production run of the first buses was made. Outlook Forecasts regarding the demand for commercial vehicles in the neigh boring West European countries sug gest that it should slowly recover in 1992. We are nevertheless expecting a drop in the German market from the level achieved in 1991 due to special factors. The East European markets, which offer considerable potential in the long term, do not yet have the necessary purchasing power. In 1992 the development in the commercial vehicle industry will again be characterized by intensive competi tion and a continuing concentration process. Commercial vehicle manufac turers in Eastern Europe in particular are increasingly working towards cooperation with Western partners in order to strengthen their international competitiveness both with respect to products and markets and the manu facturing processes used. If we intend to fully use the chances offered in Eastern Europe, we must also estab lish a production base there. We are holding discussions with Czechoslova- kian commercial vehicle manufac turers to this end. In 1992 we are aiming at contin ued growth in sales for the world as a whole. We are assuming an economic revival in the United States and recov ery on the South American and South African markets. The ambitious re lated aim is to repeat the record pro duction of 1991. We thereby intend to consolidate our leading position on the world market for trucks over 6 tonnes. Technological product improve ments to reduce stress on the environ ment and a further increase in the economy of our commercial vehicles are at the center of our development activities. The first International Motor Show for commercial vehicles in Hano ver in May 1992 is entitled "The Com mercial Vehicle - Performance and Responsibility". It provides Mercedes- Benz with the opportunity of display ing its high standards in vehicle engi neering with the company's entire range of commercial vehicles, and of supporting our claim to leadership also from an environmental point of view with the LEV vehicle generation. However, we also wish to face up to our public responsibility as a vehicle manufacturer and together with the other corporate units in the Daimler- Benz group provide solutions which lead to demand-oriented further devel opment of transport systems using the commercial vehicle as an indispens able component. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Office and Communication Systems field of activity. In contrast to this, sig nificant progress was made in improv ing the results of the other fields of activity, in particular Automation and Domestic Appliances, and an extraor dinary profit was made on the sale of AEG KABEL. However, these positive factors only partially counteracted the negative influences, so that the results show a net loss of DM 624 million. Orders totaling DM 14.6 billion were received during the 1991 finan cial year, an increase of 3.1 % on 1990. Domestic orders had a particular im pact on this increase, rising by 3.6 % to DM 8.2 billion. Export orders were 2.3 % up on the previous year. At the year-end, the AEG group - including for the last time AEG KABEL and AEG Elektrowerkzeuge - employed 76,338 people, 56,338 of them in Germany and 20,000 abroad. The slight decline in the total work force (- 0.8 %) is attributable to the sale of AEG Mobile Communication. Expenditure geared to future oper ations was once again high. AEG in vested a total of approximately DM 1.9 billion (1990: DM 1.8 billion) in intan gible assets, fixed and financial assets, research and development and training. Including the non-current assets taken over from newly acquired com panies, investment totaled DM 943 million in 1991 (1990: DM 1,040 mil lion). This figure includes DM 872 mil lion (1990: DM 774 million) for addi tions to fixed assets; DM 43 million (1990: DM 215 million) was invested in related companies. Investment ac tivity centred on the completion of the integrated technology centre and of the medium-voltage switchgear factory in Regensburg as well as on the new plant in Essen. Further activities included construction at the Sickin- genstraße site in Berlin and modern ization and expansion at the factories of AEG Hausgerate and TELEFUNKEN electronic. Business in the West German electrical engineering industry was spurred by an increase of 7.3 % in sales of electrotechnical capital goods. This increase came almost entirely from the German market and was pri marily attributable to information elec tronics and capital goods for the power sector. The adverse trend in the Ger man mechanical engineering industry exerted a damping effect on the auto mation and drive systems sectors and on electrotechnical components, where production in some cases actu ally fell. The continuing strong de mand from the new Federal states for consumer goods led to an increase of 8.9 % in the production of domestic appliances. More or less balanced growth both in Germany and abroad characterized the trend in business of the AEG group. Despite the difficult environ ment, we achieved even higher rates of growth in the foreign markets than the industry as a whole. Sales of the AEG group increased by 6.5 % to DM 14.0 billion. Sales in the German market increased by 7.2 % to DM 7.9 billion, while exports rose by 5.6 %. The rise in Germany was partic ularly pronounced in the fields of Rail Systems, Automation, Electrotechnical Systems and Components and Domes tic Appliances. The increase in sales outside Germany was accounted for in particular by the Microelectronics, Rail Systems and Automation fields of activity. The results of the AEG group were influenced by the business trend at AEG Olympia Office and the extraordi nary expenses in connection with the restructuring and relinquishing of the Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Research and development expen diture for the year under review to taled DM 767 million (1990: DM 782 million), equal to 5.5 % of the sales of the group. Important areas of research work were drive and automation sys tems, systems and software technol ogy, microelectronics, integrated high- performance power breakers, pattern recognition, high-temperature super conductors and electronic mounting and connecting technology. In the Microelectronics, Automation and Rail Systems fields, AEG was again in volved in numerous national and inter national research projects in 1991. Business at AEG Olympia Office GmbH, active in the field of office sys tems and communication, continued to deteriorate during the year under review; worldwide, sales and orders were below the previous year's level. The continuing fierce competition in the office sector led to a further fall in operating results. The competitive pressures in the international markets are such as to rule out any hope of a change in the loss-making operation of AEG Olympia Office. Our intensive en deavors to find a co-operation partner either for AEG Olympia Office in its entirety or for some substantial part of it were unsuccessful. It was therefore decided at the end of 1991 that AEG should effect a gradual withdrawal from office and communication sys tems. From January 1, 1992, AEG will no longer classify its operations in this area as a field of activity; AEG Olym pia Office will cease its development and production activities in Germany by December 31, 1992. The sale of the cables business and the Power Tools division and our withdrawal from office and communi cation systems will mean that incom ing orders and sales of the AEG group for 1992 will be below the level of 1991. We expect to expand our volume of business in Rail Systems, Power Transmission and Distribution and at TELEFUNKEN electronic. A further focus in the Automation field of activity is environmental technology, where our range includes an automatic pipeline leak location system. In October 1991, a fully auto mated control and monitoring system built by AEG went into service at a water treatment plant. In the area of Postal Automation, AEG Electrocom (AEC) again supplied a range of address-reading and letter distribution machinery and systems in 1991, thus expanding worldwide its position as market leader. AEC letter sorting and distribution systems are now in use in all continents of the world. With a view to further globaliz ation of business, AEC concluded license agreements with Martin Marietta Information and Communi cation Systems and the Westinghouse Electronic Systems Group; these com panies will market our products in the USA. The founding of AEG Post- automation GmbH, with its registered office in Berlin-Marzahn, marked a fur ther stage in the strengthening of our activities in the new Federal states. We expect to see a further growth in sales in the 1992 financial year. Electrotechnical Systems and Components: A Pleasing Trend in Business The Electrotechnical Systems and Components field of activity comprises the divisions Power Transmission and Distribution, Components and - up to December 31, 1991 - AEG KABEL Ak- tiengesellschaft. Despite the economic slowdown in some important markets, the volume of business increased. A substantial contribution was made by the Power Transmission and Distribu tion division. Sales, and incoming orders particularly, increased substan tially once again. Notable domestic and export orders were received for gas-insulated high-voltage switchgear. The Automation field of activity comprises Industrial Automation - with its three divisions Products and Basic Systems, Systems Technology and Support and Industrial Systems - and Postal Automation. Sales rose substantially once again in 1991. In Industrial Automation, the Geamatics range of products, systems and solutions was further extended. In Europe, America and the Far East, the scope of local services was increased. Co-operation between the American and European sectors resulted in a sub stantial expansion of automation busi ness, particularly in the USA. The Products and Basic Systems division strengthened its position in important sales regions. Despite the continuing recession, MODICON Inc. was able to increase its market share in the USA and brought a number of new products onto the market. In the field of servo drives, we brought out a newly devel oped series of modular servo boosters and, matched to this, two motor series for trapezoid or sinusoid application. In the area of sensor systems, diverse projects for the vehicle sector were undertaken. In the Geamatics program, ser vices are of increasing importance, for example advice, training and systems and software technology. We have therefore considerably expanded our training program. Customer training was carried out at more than 80 loca tions around the world. We further strengthened our international com petitiveness in the Industrial Systems division, where business expanded at a rate well above the growth in the market. In the basic materials and pro cessing industries, our activities were concentrated on modernization pro jects. In the process engineering in dustry, we completed an order for the centralized control and monitoring of a 900 km gas pipeline system running from Emden through Reckrod near Bad Hersfeld to Ludwigshafen am Rhein. At AEG KABEL, the positive busi ness performance continued in most areas. The growth was mainly domes tically generated, by local telephone cables in the telecommunications sec tor and by power cables in the high- voltage sector. For reasons of corpo rate policy, AEG KABEL was sold to the French group ALCATEL on Decem ber 31, 1991. The cable harness busi ness at the Miilheim and Rheindahlen/ Monchengladbach factories was not included in the sale; these activities were hived off as TELEFUNKEN Kabel- satz GmbH and grouped with the vehicle electronics activities in the Microelectronics field of activity. By means of acquisitions and co operation agreements, we intend in 1992 to prepare the Electrotechnical Systems and Components field of activity, and in particular its Power Transmission and Distribution divi sion, for the Single European Market. Rail Systems: Extended Spectrum of Activities The Rail Systems field of activity comprises the companies AEG West inghouse Transport-Systeme GmbH, Berlin, AEG Westinghouse Transporta tion Systems, Inc., Pittsburgh/Pennsyl vania, and MAN GHH Schienenver- kehrstechnik GmbH, Nuremberg. Sales again rose sharply from the level of the previous year. In November 1991, we signed a contract to acquire the track-bound vehicle activities of Lokomotivbau-Elektrotechnische Werke Hennigsdorf GmbH; the com pany will be taken over as AEG Schie- nenfahrzeuge GmbH in 1992. This acquisition extends AEG's spectrum of activities to include the building of complete locomotives and drive coaches. A gratifying trend in business in the first year of co-operation was recorded at our subsidiary AEG Stark- stromanlagen Dresden, which is active in the field of conventional switchgear. With a view to the further expansion of business in the new Federal states, we founded AEG Leitungs- und Netzbau GmbH in Potsdam. In the field of high-voltage systems, we expanded our range of 3rd generation SF6-insulated high-performance power- breakers. The modernization work of the past four years at our high-voltage switchgear factory in Kassel was con cluded. In the field of networks, a new range of numerical network protection systems was successfully launched on the market. In the medium-voltage field, the new product range made a substantial contribution to the in creased volume of business. With the acquisition of a minority holding in one of the leading Italian manufac turers of medium-voltage switchgear and circuit-breakers, VEI electric sys tems S.p.A., Piacenza, Milan, AEG has further consolidated its competitive position. In September, the new inte grated technology centre for medium- voltage switchgear and circuit breakers in Regensburg went into service on schedule, at a total cost of approx imately DM 100 million. The Components division, and particularly the fields of low-voltage switchgear and motors, was affected by low activity in Germany and impor tant European export countries. Nevertheless, the volume of business increased once again. Following the foundation in the previous year of AEG EAW Zahler GmbH, in Berlin-Treptow, AEG took over EWS-Stromversor- gungsgerate GmbH in Sornewitz near Meißen at the beginning of 1991. In the low-voltage field, we are increas ingly offering new electronic solutions. During the year under review, we star ted to bring onto the market new se lective miniature circuit breakers with an extremely high breaking capacity. We expect a positive market response for the new series of low-voltage mo tors. The asynchronous high-voltage generator series now introduced on the market features considerably reduced noise levels. With our development services and products both for the ICE high speed trains and for the stationary installations on new and modernized tracks, we made an important contri bution to this new flagship of the Ger man Federal Railways. AEG will also be a supplier for the envisaged expan sion of the high-speed network. In Bremen and Munich, positive experience has been gained with the new low-floor streetcars of MAN GHH Schienenverkehrstechnik now in oper ation. Interest in this user-friendly concept has also been expressed by other German and European cities. AEG Westinghouse is supervising an American consortium which will be in stalling an automated elevated street car system in Honolulu, Hawaii. With the order to install a people mover system at Honolulu airport, the leading position of AEG Westinghouse Trans portation Systems in the field of auto mated people mover systems was further consolidated too. Approval under German pas senger transport regulations of the M-Bahn magnetic levitation railway, which has already demonstrated its efficiency on the Berlin trial track, has now paved the way for use of this innovative system in Germany, partic ularly for local passenger transport. At the new traffic technology centre in Braunschweig we are carrying out further development work on the M-Bahn. In addition to the take-over of the track-bound vehicle activities of Lokomotivbau-Elektrotechnische Werke Hennigsdorf GmbH, other co operative ventures in the Rail Systems field of activity are also being pre pared, initially in the core markets of Europe and North America. These measures are further steps in our move to become suppliers of complete systems in this field. During the year under review, the Domestic Appliances field of activity consisted of the Domestic Appliances and the Power Tools divisions, both managed by AEG Hausgerate AG, which was founded in 1990. Sales of this field of activity increased once again. In the Domestic Appliances division growth was spurred mainly by domestic business. Virtually all prod uct sectors contributed to the increase in sales, which was particularly nota ble in the segment of high-quality washing machines and built-in ap pliances. Here, a large part was played by innovations in the new Competence cooker series and further development of the front-loader washing machine series; economic and environmental aspects were given particular atten tion. The water-softening system de veloped by AEG is just one of the fea tures meeting with a positive response from the trade and consumers. Exports exceeded the corresponding figure for the previous year; the increase of 5.0 % was above the average for the industry. For reasons of corporate policy, AEG sold its Power Tools division on December 31, 1991 to the Swedish industrial concern Atlas Copco. We expect to do successful busi ness in the Domestic Appliances field of activity in 1992. We will be helped in this by the market launch of a new range of floor vacuum cleaners and the presentation of new microwave equip ment. The Microelectronics field of activ ity comprises TELEFUNKEN electronic GmbH and the Opto- and Vacuum Electronics division. TELEFUNKEN electronic accounted for most of the growth in sales, with all product lines making a contribution. In addition, the company Siliconix of Santa Clara/ California was for the first time in cluded in the accounts. Above-average increases were recorded in sales of ve hicle assemblies and modules. With a share of over 51 % in the total sales of TELEFUNKEN electronic, a gratifying trend was recorded in export business, particularly in the USA and the Far East. Work on development projects for the vehicle sector was stepped up further. In the framework of interna tional projects, development of new technologies and systems in the field of integrated circuits proceeded apace. In the Opto- and Vacuum Elec tronics division, business in the year under review was influenced by a sub stantial change in the structure of the range, the aim of which is to compen sate for declining business in the mili tary sector by a shift towards products for civilian applications. The commen cement of volume production in the fields of multifunction indicators and of identification systems, a new prod uct area, were important milestones towards this goal. Despite these struc tural changes however, overall sales were maintained at the previous year's level. In the course of strategic reorganization of AEG and with the aim of increasing the competitiveness of the Daimler-Benz group, we shall be combining the microelectronics activ ities of AEG with those of Deutsche Aerospace (DASA) in a joint venture. This joint venture will offer products and services ranging from vehicle electronics and electronics for the aerospace sector to industrial and con sumer electronics. This will provide the basis for supplying all the com panies within the Daimler-Benz group, and above all the external market, with the technologies relevant in this sector. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Deutsche Aerospace (DASA) joint venture. Negotiations with Aerospatiale and Alenia regarding co-operation in the development of a regional aircraft seating 80 - 130 passengers were intensified. In the space sector, DASA, Aero spatiale, Alenia and Dassault Aviation founded Euro-Hermespace S.A. at the beginning of 1992. In the satellite sec tor, DASA intends to form an alliance with its partners Aerospatiale, Alcatel and Alenia. In the new Federal states, DASA and Jenoptik Carl Zeiss Jena GmbH founded the space enterprise Jena-Optronik GmbH. Onluly 1, 1991, MTU took over the aero-engine servic ing company LTL-Luftfahrttechnik Ludwigsfelde GmbH. At DM 12.3 billion (1990: DM 12.5 billion), the consolidated sales of Deutsche Aerospace remained at ap proximately the same level as in 1990. The year-end result reached DM 50 million (1990: DM -135 million) Deu tsche Airbus GmbH, which is included in accordance with the equity method, made an important contribution to this positive development. The volume of incoming orders was similar to that of the previous year, totaling DM 10.4 billion (1990: 10.8 billion). During the year under review, we invested DM 986 million in fixed as sets (1990: 938 million). DM 4.3 bil lion (1990: DM 4.2 billion), represent ing 35 % of sales, was spent on research and development work, of which externally commissioned projects again accounted for DM 3.5 billion. At the end of 1991, DASA em ployed a total of 56,465 people (1990: 61,276). The reduction was primarily due to the hiving off of several plants. For the current financial year, DASA expects a rise in sales, sup ported chiefly by higher income from the Propulsion Systems and the De fense and Civil Systems divisions. The decision of the German government regarding the purchase of the Euro pean Fighter Aircraft and the long- term plans of the ESA with regard to the Hermes and Columbus space pro grams will have a substantial impact on the further course of business. In line with the on-going restructuring we intend to integrate the MBB and TST companies into Deutsche Aero space AG in 1992. During the year under review, Deutsche Aerospace introduced its new management structure in almost all sectors of the group. Across the still existing legal boundaries, the var ious activities within our concern are now combined in market-oriented, in dependently acting strategic business units which in turn are assigned to the divisions Aircraft, Space Systems, De fense and Civil Systems and Propul sion Systems. In the Aircraft division the Laupheim and Speyer plants of Messerschmitt-Bölkow-Blohm and the Neuabing plant of Dornier Luftfahrt were hived off to Deutsche Airbus GmbH. In the Defense and Civil Sys tems division, parallel activities and areas of overlap have been eliminated; the structural concept for the Space Systems division is currently being implemented. In future, we shall report on developments at the DASA divisions without reference to the particular companies to which the activities are assigned. A joint venture to which the mi croelectronics and vehicle electronics sectors of DASA are being transferred was founded with AEG at the begin ning of 1992. With a view to future structural changes in the DASA group, we increased our stake in MBB to 82 % after the state of Bavaria exchanged its shares in MBB for shares in Deutsche Aerospace AG. A control and profit and loss transfer agreement was concluded with Dornier GmbH. In March 1991, MTU signed an agreement with Pratt & Whitney (P&W) regarding large-scale, wide- ranging co-operation in the aero engine sector. At the year end we merged the helicopter activities of MBB with those of Aerospatiale in the newly founded Eurocopter Holding S.A.; MBB holds a share of 40 % in this Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Within the Polar Platform project, Dornier, as the prime contractor to ESA, is responsible for defining the mission tasks of various European research projects and for the selection and development of the corresponding instruments. With a number of experiment fa cilities Dornier makes a significant contribution to Germany's second Spacelab mission. For the Ariane 5 program, Dornier develops and manu factures the tank bulkheads and the payload carrier assembly Speltra. In the Defense and Civil Systems division, efforts continued to concen trate on the CL289 reconnaissance system. Further mobile, extendible an tenna mast groups which are also suit able for civil applications were deliv ered for the Patriot air defense system. Under the license production of Stinger in Europe, the preparations for mass production are under way. For the Tornado aircraft work focused on the Olmos On-board Life Monitoring System which records data on the wear and tear of working parts in the engine and of various aircraft components. In the civilian sector Dor nier develops the data communication system Dakos for the Federal Adminis tration of Air Navigation Services. In 1991 Dornier Medizintechnik was granted approval for its lithotrip- ter models MFL 5000 and MPL 9000 as well as the laser lithotripter Impact in the U.S. The MFL 5000 Lithotripter was the principal contributor to sales. In research and development, activ ities focus on the three-dimensional display of ultrasonic images. Further areas of work within the other activ ities were automotive electronics as well as information and environment protection technology. In 1992 Dornier awaits a business recovery. Above all we expect higher sales in the Stinger program, from the Bell UH-1D helicopter program and in the medical systems sector. As op posed to this, sales in the space sector will decline. The sales volume of the Dornier Group remained below the extraordi narily high level of the previous year which had been marked by the final invoicing of two large-scale projects. During the year under review the Aircraft division delivered 18 (1990 : 15) Dornier 228 aircraft which raised the total sales of this aircraft to 197. Up until the end of 1991 the Indian licensee Hindustan Aeronautics Ltd., Bangalore, had delivered a total of 30 Dornier 228's, eight thereof in the reporting year. The successful maiden flight of the Dornier 328 on December 6, 1991 marked an important milestone in the preparation of the production stage of this newly developed 30-seat regional airliner. Delivery of the first planes are scheduled for 1993. At the end of the year under review, a total of 45 orders and 29 options had been placed for the Dornier 328. Under contract to Deutsche Airbus GmbH, Dornier develops and manufac tures various assemblies for the A320/ A321 and A330/A340 models. Work on the European Fighter Aircraft (EFA) progressed on schedule. In the aircraft support sector, the service life extension program for the light transport helicopter Bell UH-1D significantly contributed to capacity utilization. As the prime contractor we serviced the E-3A fleet of early warn ing aircraft (Awacs) for Nato. In the Space Systems division work concentrated on the development of the remote sensing satellite ERS-2 and the solar exploration satellites Cluster. In both programs, Dornier is responsible for the construction of major subsystems of the scientific pay- load and for the spacecraft integration. Other projects concerned the infrared experiment Isophot and a high-resolu tion stereo camera for the Russian satellite Mars 94. With an sharp increase in the volume of business, Messerschmitt- Bölkow-Blohm (MBB) was able to nearly offset the decline in sales that occurred the previous year as a result of reorganization. In the Aircraft division the Tor nado program continues to account for the largest sales. This employment- intensive project came to an end with the delivery of the last Tornado air craft to the Bundeswehr in early 1992. In 1991 we developed and built an increased scope of assemblies for the Airbus family on behalf of Deutsche Airbus. The first assemblies for the A321 and A330 have already been de livered. In the European Fighter Air craft program the final assembly of the first prototype is running according to plan. The maiden flight is scheduled for the second half of 1992. Within the framework of the German-American X-31A experimental program we an alyse the technological requirements for improved maneuverability of future high-performance aircraft. In June 1991 the BK 117 helicop ter which we sell mainly in the U.S. market, was approved by the British Civil Aviation Authority (CAA). The BO 105 multi-purpose civilian helicopter continued to assert itself in the areas of police and rescue operations. Test ing of the second prototype of the suc cessor model BO 108 commenced in June 1991. The maiden flight of the Franco-German Tiger anti-tank and es cort helicopter took place as planned on April 27, 1991. In the meantime we transferred our activities in the heli copter sector to the newly founded joint venture Eurocopter. The Space Systems division in cluding Erno in Bremen had a major share in seven satellites which were put into service during the year under review. The third German DFS Koper- nikus communications satellite was prepared for a mid-1992 launch by a US rocket. Our work on the sub systems of the European communica tions satellite system Eutelsat II and the Japanese Superbird were nearly finished. Systems for the DFH-3 Chinese communications satellite, the Eureca space platform and the D2 mission were completed. For the third stage of the Euro pean Ariane 4, we have so far deliv ered over 60 thrust chambers for the HM7 engine. In the Ariane 5 program MBB is developing and manufacturing the thrust chamber system of the middle-stage Vulcain engine and the L-7 upper stage propulsion system. The integration work for the free- flying retrievable carrier Eureca was concluded. A major source of sales in the De fense and Civil Systems division were the Pars-3 anti-tank systems and the Roland weapon system. The 1000th Patriot missile produced under license in Europe was delivered. At the end of 1991 MBB concluded a series contract with the German Army for the Kor- moran 2 missile. Dual-use activities in the area of military microelectronics, which have been expanded in recent years, have led to more than 30 development or ders being placed with subsequent se ries production in the fields of vehicle and industrial electronics. We stepped up our activities in systems for the disposal munitions, explosives and other military material as well as special and toxic substances. Within the other activities we work in the fields energy and indus trial technology, production and auto mation technology as well as control and data technology. The 1992 sales of the MBB Group will most likely exceed the previous year's level. The Tornado and EFA will record lower returns whereas we again expect large amounts to be invoiced in the Airbus, Ariane, Columbus and Pars 3 programs. MTU Munich develops and manu factures jet engines and turboshaft en gines as well as gas turbines for civil ian and military applications; MTU Friedrichshafen produces mainly high speed diesel engines. Sales of the MTU Group were at the level of 1990. In the Propulsion Systems Aircraft strategic business unit the RBI99 aero-engine program was the mainstay of sales. With regard to the aero engine programs for commercial and executive aircraft, sales rose espe cially thanks to greater demand for spare parts, increased deliveries of en gines and a more favourable exchange rate of the dollar. As part of its collaboration with Pratt & Whitney, MTU has a 12.5 % share in the high-power PW4084 en gine, which is intended for use in the Boeing 777 commercial airliner. We have been able to increase our share in the production of the PW2000 fam ily of engines from 11.2 to 21.2 %. In addition, the agreements concluded with P&W offer us the possibility of taking over systems management of the engine for the planned regional aircraft. The PW300 engine which we de veloped in cooperation with P&W Can ada, has received its approval from the Federal Aviation Administration (FAA) in the U.S.A. For the V2500 engine de velopment work for the upgraded ver sion A5, planned also for the Airbus A321, is underway. By far the largest development project at MTU is the EI200 engine for the European Fighter Aircraft (EFA). In the year under review the flight maturity standard was attained. The MTR390 turboshaft engine for the Tiger anti-tank and escort helicopter is presently being tested in the first prototype. MTU Maintenance GmbH, which maintains, repairs and tests high- power engines for commercial aircraft, records its major source of sales at present with the CF6-50 engine. The repair of the CF6-80, PW2000, V2500 and LM5000 has been newly included in the scope of services. In Ludwigs- felde near Berlin we mainly service small aero-engines and auxiliary gas turbines. In the Propulsion Systems Land/ Marine Applications strategic business unit the greatest amount of sales were again achieved with the universal series 396 engines. For rail traction drive systems we have sold a total of 500 series 183 and series 396 en gines. We received orders from the Korean National Railroad to equip additional push-pull trains and from the Federal German Railway for series 183 engines for "Pendolino" trains and railcars 628. MTU won an order from lapan to deliver engines for diesel locomotives. In marine propulsion systems we started to execute the long-term orders for propulsion engines and engines for the operation of gensets for mine sweepers of the Norwegian Navy and for ten frigates from the Australian and the New Zealand navies. Our en gines are also used for emergency power gensets for hospitals and indus try as well as for nuclear and similar safety-sensitive facilities. The engine of the new, environ ment-friendly 595 series, externally tested on the ocean ferry Deutschland, chalked up 5,000 successful hours of operation in the year under review. In its production of turbochargers, the company Aktiengesellschaft Kühnle, Kopp und Kausch in Frankenthal fell just below the manufacturing volume of the previous year. For L'Orange GmbH, Stuttgart, which de velops and manufactures fuel-injection systems for large diesel engines, the positive business trend continued. For 1992 overall, MTU expects a slight increase in sales, with there be ing a further shift from the military to the civilian sector in the field of aero engines. With regard to diesel engines, a positive impact can be expected from the realization of the Single European Market. Activities at Telefunken System- technik GmbH (TST) and its subsid iaries focus on electronic systems for defense technology. Sales remained at the 1990 level. In the Radar and Radio Systems strategic business unit the final units of the TRM-S three dimensional radar system and the TRM-L two dimensio nal radar system were delivered. In the electronic warfare sector (EW), TST was commissioned with the fur ther development of FL 1800, the na val EW system, to be integrated in the SI43A fast patrol boats and the Class F122 and F123 frigates of the Federal German Navy. Delivery in series of the APG-65 airborne radar system began for the retrofitting of the German Armed Forces' Phantom F-4F aircraft. We continued development work on the airborne radar for the European Fighter Aircraft according to plan. The Situation Awareness System (SAS) which records and displays the situation in the air was developed by TST especially for regional airports. In the succeeding states of the former Soviet Union we are participating on the planned modernization of the entire air traffic control system within the framework of an international cooperation. Business in the radio systems sec tor focussed on the HF/VHF Comint EW system for the German Armed Forces. The fast adaptive radio com munications system Farcos, for civil aviation purposes, was developed fur ther. In addition, TST handed over six broadcasting transmitters to several Arabian customers; major orders were received from the Middle East. In the Energy and Systems Tech nology strategic business unit, one of the world's largest and most modern runway lighting systems is being in stalled on the major Munich 2 airport. Another major airport project which was concluded in early 1992 was the renewal of the lighting system for run way 1 at the Berlin-Schonefeld airport. TST chalked up a first by partici pating in a U.S. project with electrical control drives for tanks. In the tri lateral Pov 3 program the first stabiliz ation platform prototype was com pleted for Osiris, the high-performance sight. On the North Sea island of Pell- worm we have begun to expand our hybrid installation for both solar and wind energy exploitation. In power supply systems for orbital applica tions, TST has been commissioned to design solar generators for the Euro pean remote-sensing satellite ERS-2. Our subsidiary, Elekluft, is a sys tems and project company in the fields of communication and electronic data processing. Its activities in the contin ued education and training sector were considerably expanded in East Germany. In the Defense and Protection stra tegic business unit, business concen trated on the delivery of electronic as semblies for the Awacs airborne warn ing and control system as well as on the development of a distance warning radar for motor vehicles. Our subsid iary, Eltro, concentrated its activities on thermal imagers and laser range finders. For the year 1992, TST expects a sales figure that is at the same level of magnitude as the previous year. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Daimler-Benz InterServices (debis) Services division, in particular. Invest ment in fixed assets (mainly data pro cessing equipment) amounted to DM 265 million, and in leased equipment to DM 4,894 million. Additions to financial assets amounted to DM 59 million. At year-end 1991, debis had a workforce of 6,203 (1990: 4,879) worldwide; of this total, 5,377 were employed in Germany and 826 abroad. In 1992, Daimler-Benz InterSer vices will above all endeavor to further expand business with customers outside the Daimler-Benz group. Software House - Expansion of Information Technology Services The comprehensive information technology (IT) services rendered by debis Software House are not only important for the other corporate units within the Daimler-Benz group but also represent an independent, market-oriented field of activity of debis. In the year under review, debis Software House continued to expand its activities and increased its total output from DM 657 million to DM 1,182 million. In 1991, we agreed on a strategic alliance with Cap Gemini Sogeti, an in ternational software group. As a result, debis Software House is not only able to render its services at more than 50 locations in Germany but also has con tacts in all the important European countries as well as in North America. Also in 1991, the range of manage ment consultancy, organizational con sultancy and technology consultancy services was expanded by the acquisi tion of a majority holding in the Euro pean Diebold companies. The Computer and Communica tion Services subdivision, operating as of 1992 under the name "debis Sys- temhaus CCS Computer-Communica tion Services GmbH", offers its cus tomers a complete range of services, which in the year under review were also made available in the new Federal States. One of the largest European outsourcing projects in information technology to date was successfully continued: of the 40 or so domestic computer centers of the Daimler-Benz group previously in operation, more than half have already been re-organized into ten large regional computer centers, and networked. In the year under review, Daimler- Benz InterServices further expanded all its divisions as well as its range of services in terms of scope and com plexity. At the same time, we took important decisions geared towards increasing the competitiveness of our services in the national and interna tional market and creating new, promising fields of activity. debis generated a total worldwide output of DM 6.0 billion (1990: DM 4.0 billion). Sales revenue accounted for DM 5.5 billion of this total, interest income from the Financial Services division's sales financing to DM 0.5 billion. The increase in total output is due partly to the acquisitions made in 1991, and partly to the marked inter nal expansion of our divisions and their growing acceptance in the market-place. Of the total output, 51 % was accounted for by the domestic market, 12 % by other EC countries and 31 % by the US market. A share of 77 % of the total output resulted from business with customers outside the Daimler-Benz group, and this is mainly attributable to the financing companies, which have been operating very successfully in the market for many years. However, in the year under review, the other divisions also succeeded in markedly increasing sales to customers other than the Daimler-Benz group and its corporate units. The consolidated net income of Daimler-Benz InterServices amounted to DM 123 million (1990: DM 50 mil lion) in the year under review. The significant increase over the previous year reflects the once again gratifying trend in the results of the Financial Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. The Commercial Systems and Pro jects sub-division successfully ex tended its activities to the market out side the group. The range of services, including "Finance and Business Man agement", "Personnel", "Sales" and "Leasing" was extended by the addi tion of applications for "Point-of-sales Systems (POS)" and modern "Manage ment Information Systems". The Industrial Systems and Pro jects subdivision has strengthened its position in the market with tried-and- tested, practical software services, the spectrum of which comprises the com plete process of industrial manufac ture. This includes production plan ning and control systems, production engineering and automation systems as well as operating data recording, maintenance and quality assurance. In the year under review, the Training subdivision provided training on the Software House's own projects as well as on topical subjects of infor mation technology. Basic courses on operating systems and programming languages were as much in demand as seminars on project management, soft ware engineering and CIM (Computer Integrated Manufacturing). We are confident that the divi sion's new structure introduced in 1992 has created favorable conditions for establishing debis Software House as the leading supplier of complete information technology services in the German market as well as for expand ing our position in the European IT service market together with Cap Gemini. business rose to DM 3.2 billion; the value of the total number of contracts rose by over 20 % to DM 6.8 billion. The leasing and financing companies in Germany's Western European neighboring countries also recorded highly gratifying business trends in 1991. After the foundation of Mercedes-Benz Finance Co. Ltd. in Japan at the end of 1991, the Financial Services division is now offering its services in a market which is becom ing increasingly important for the Daimler-Benz group. In close co-operation with the sales organizations of the Daimler- Benz group's industrial corporate units, we are set to consolidate and expand our position as the leading sup plier of qualitatively high-ranking financial services. In addition to devel oping new services, we will establish ourselves in further regions of this world. Insurance - Improved Market Presence With a view to the opening-up of the insurance market within the Euro pean Community, the Insurance divi sion (debis Assekuranz Vermittlungs GmbH) re-structured its activities in the year under review. In order to comply with the specific wishes of our customers, we have grouped together the industrial business of our services to customers in the corporate units and external clients; in this field, we have expanded our activities in the new Federal States. Our private cus tomers mainly comprise the group's employees. The collaboration which we have already been carrying out for many years in some sectors with Marsh & McLennan, the world's larg est insurance broker, and its German subsidiary Gradmann & Holler is to be reinforced by means of a new coopera tive agreement. The range of services of debis Risk Consult, a subdivision of the Insurance division, is gaining particular signifi cance for our customers. The company provides risk analysis and evaluation as well as consultancy in overcoming Financial Services - Expanded Spectrum of Services In 1991, the Financial Services division consolidated and expanded its leading role as a supplier of efficient leasing and financing schemes for Mercedes-Benz vehicles in the impor tant markets of Europe, North America and lapan. Also, the range of services was complemented by additional ser vice elements, providing for integrated business activities. Examples are con tract hire for commercial vehicles (Mercedes-Benz CharterWay), which we will offer together with Mercedes- Benz, and fleet management for pas senger cars. Today, debis offers finan cial services through 17 leasing and financing companies in 11 European and North American countries and, since the end of 1991, in Japan as well. The range of product-related and customer-oriented financial services for the corporate units AEG, DASA as well as debis itself continued to be expanded in the year under review. The gratifying trend in important sales markets, for instance Germany, the USA and the United Kingdom, al lowed newly acquired business to rise to 125,000 units - about 17 % up on the previous year. Some 70 % of new contracts applied to passenger cars. This means that every sixth new Mer cedes-Benz vehicle sold in the markets in which we have leasing and financ ing companies was marketed through the relevant debis companies. The contracts concluded in the year under review had a value of DM 7.7 billion (1990: DM 6.4 billion), representing an increase of some 20 %. The total number of contracts rose to more than 297,000 units, with a value of over DM 13.6 billion. Total output (includ ing interest income from sales financ ing) rose 38 % to DM 4.5 billion. In Germany, Mercedes-Benz Lease Finanz significantly increased newly acquired business by 50,000 contracts representing a value of DM 2.7 billion. The value of the total number of con tracts thus rose from DM 2.8 billion to DM 3.6 billion. Mercedes-Benz Credit Corp. (MBCC) has a penetration rate of 45 % and is thus the market leader in the financing of Mercedes-Benz pas senger cars in the USA. In the year under review, MBCC's newly acquired and managing risk in matters of the environment, fire protection and prod uct safety. Especially once environ mental liability legislation comes into force, these risks will become even more acute for all companies. With an overall brokered premium volume of some DM 420 million, the division with its 236 employees earned commissions of DM 35 million during the 1991 financial year. We expect to achieve further growth in premium volume in 1992. New Prospects in Countertrading The Daimler-Benz group's exper tise in the field of countertrading is united in the Trading division. This field of activity has been considerably gaining in significance in international trade, especially following the opening of eastern Europe. The Trading divi sion successfully extended its activ ities during the year under review. More than DM 200 million was gener ated to offset foreign exchange obliga tions resulting from exports; the previous year's figure was exceeded by more than 70 %. Industriehandel GmbH, which advises all corporate units of the Daimler-Benz group in their counter- trading projects, is active above all in the markets of Africa and the Middle East, debis International Trading, es tablished in 1990, commenced opera tions in March 1991. Its main respon sibility lies in opening up the markets of eastern Europe for countertrading - especially the new republics of the Commonwealth of Independent States (CIS). Selected target markets in Asia and Latin America are also being taken care of. We intend in future to continue to make specific use of the possibilities available from combining countertrad ing and product trading, in order to further promote the bilateral flow of international trade. Marketing Services - A Major Step Forward debis Marketing Services GmbH attained high growth in all fields of ac tivity over the past year. Total output rose in this division's first full finan cial year to DM 199 million (1990: DM 109 million). Activities were extended not only to all corporate units of the Daimler-Benz group, but to an increas ing extent also to external customers. The Marketing Consulting subdivi sion expanded its consultancy services for internal and external customers from the capital goods sector. In the course of 1991, the corporate units of the Daimler-Benz group transferred almost all their German advertising placement budgets to the Media subdi vision. The latter carries out the orders of customers for placing advertise ments in the printed media, television and radio and is also responsible for the coordination of prices and dis counts in all media work for the entire Daimler-Benz group. In the Marketing Communication and Sales Promotion subdivision, we provided services for solving diverse problems in communication consul tancy and design. The Trade Fairs and Exhibitions subdivision staged some 200 events throughout the world in the year under review. The Marketing Services division will continue to expand its activities in all fields. We are expecting consider able further growth for our division in 1992. debitel - Favorable Prospects for Mobile Radio Systems On July 1, 1991, debitel Kommuni- kationstechnik GmbH & Co. KG, a sub sidiary of debis, was founded; further interests are held by the METRO trad ing company and the American tele communications company NYNEX. With the entry into service of the Dl and D2 networks, we shall be offering all the GSM services available for these networks. We will provide indi vidually tailored answers to communi cations requirements by giving our customers access to further services such as channel groups, paging, satel lite communication and the Personal Communications Network (PCN) as soon as they become available. Research and Technology Integrated Research and Development Management We extended the restructuring of Research and Technology, initiated in the previous year, to the entire Research and Development division in 1991. The objectives of this process were firstly to adapt the topics and ac tivities more appropriately to the indi vidual requirements of the corporate units, and secondly to provide a cre ative environment in which new ideas for new products and fields of activity evolve from medium and long-term research concepts. This is achieved by means of a matrix-like structure comprising de centralized research institutes work ing for the individual corporate units, with joint research fields concentrated on fundamental research topics rele vant to several corporate units simul taneously. In order to make more rapid and efficient use of know-how from both within and outside the group and to incorporate it effectively into development and manufacture, we have established a new "Technology" sector, dealing with technology and in formation management. Added to this, it has its own research objectives and the special function of supporting the group's environmental officer. Collaboration between research and the various development sectors is managed by joint research commit tees. Matters of overriding significance are dealt with by a corporate research committee consisting of members of the Board of Management. Research Institutes for AEG and DASA For AEG, DASA/Dornier and DASA/MBB, three further research institutes were established in 1991 along the lines of the "Mercedes-Benz Research Institute" established the previous year. The institute directed towards AEG has been part of Daimler- Benz's central Research and Technol ogy division since 1989. The two insti tutes working for DASA have been in tegrated from the point of view of their research programs since the year under review. Our researchers from the joint research fields investigate matters of transport technology, materials, infor mation technology, production technol ogy and the environment and the interaction between technology and society. Technology Management The field of technology manage ment observes and assesses world wide technological developments, devises corporate technological strate gies in consultation with the strategies of the various sectors and supports their implementation, especially by means of so-called innovation projects and active technology transfer. To acquire the information re quired for these activities, we extended our international information network in 1991 with the addition of significant locations. In Japan, for instance, a branch was established which has already made valuable con tributions. The liaison program with the MIT (Massachusetts Institute of Technology, Cambridge, USA) is a further example of our contacts with renowned institutes throughout the world. Transport Technology for the Alleviation of Traffic Congestion New approaches to transport technology are acquiring a key role in Daimler-Benz research. Within the framework of the European transport projects PROMETHEUS and DRIVE, we are working together with partners from the automotive and electrical industries on important fundamentals for traffic guidance and information technology in passenger and goods transport. Current developments in the PROMETHEUS research project were presented in Turin in September 1991. The presentation of a functional, indi vidualized traffic guidance system at tracted a great deal of attention on this occasion; it combines the advantages of route selection on board the vehicle and drawing up routes in advance at traffic guidance headquarters. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. A control system for goods trans Emission Reduction port fleets demonstrated how effi ciently a haulage headquarters can be networked with commercial vehicles operating throughout Europe. Earth- based radio data transmission systems and satellite communications technol ogy are integrated into an overall mod ern mobile communications system. A series of PROMETHEUS research findings will be incorporated into the STORM traffic management project, in the framework of which an industrial consortium, coordinated by us, is working towards establishing regionally effective traffic guidance and information technologies in the Stuttgart region by 1995. Further scientific studies and sce narios are directed towards developing transport, the transport environment and transport systems. Under the title of "Optimized Transport", for example, we have defined a program for the in vestigation of theoretical and technol ogical fundamentals for new transport techniques. Two further projects, "European Transport Infrastructure and Goods Transport Flow" and "Goods Transport 2000", have also been initiated. Electronics on Board the Vehicle Mercedes-Benz's introduction of a data bus - the CAN bus - into series manufacture for the first time in the new S-class opened up entirely new opportunities in the application of on-board electronics. In order to make use of this technological potential, concepts have been developed at the "Mercedes-Benz Research Institute" whereby in an open system architec ture, the individual functions of elec tronic components are coordinated. On-board electrical functions are increasingly switched electronically. With "Smart Power" technology, the actual power switches are combined on a single chip with "intelligent" digital and analog functions. We are carrying out intensive co operative work in this field with the US semiconductor manufacturer Sil- iconix, which forms part of our micro electronics activities and in which Daimler-Benz has a majority holding. The reduction of both exhaust and noise emissions is a prime objective in the continuing development of drive systems technology. Opportunites for optimizing mixture formation and reducing emissions have been investi gated using special laser-optical mea suring techniques, which determine the spatial and temporal distribution of fuel in the petrol engine. The distri bution of fuel in the form of vapor or droplets at the injection nozzles can be precisely measured by this means. Increased Driving Safety Especially at night, the dispersion of light on the windscreen of a vehicle can often present a considerable haz ard. We have developed a form of glazing which reduces dazzle, thus enhancing road safety in critical situations. A method of producing glass that automatically reacts to ambient bright ness by means of "intelligent" pig ments and glazing technologies has also been developed. This glass darkens under the influence of intense light, thus also preventing the interior from heating up excessively. In mod erate daylight conditions or at night, the glazing resumes its normal transparency. Individual Wheel Drive in Rail Systems Technology Individually driven wheels not only increase the level of comfort of a vehicle, but also reduce its weight and the wear to which it is subjected thanks to their non-frictional track- holding. Synergy effects between road and rail vehicles could be put to effec tive use here with the simultaneous development and centralized produc tion of assemblies for sub-systems and components with similar functional re quirements. Before costly test vehicles are constructed and tested on track, we carry out computer-simulated test drives. In the field of small tractive power, research is concentrated on non-conventional systems and is in vestigating their advantages over clas sical electromagnetic drive systems. On the basis of the so-called reluc tance principle, improved drive sys tems have been developed for large- series application. The complex func tions of control and monitoring have been systematically translated into "smart power" technology. Software Systems In the field of systems engineering and software technology, we are in volved in both technical and commer cial applications with new approaches to the use of software. On the basis of an expert system shell, we have devel oped a tool for the configuration of modular technical systems. A proto type for a software test has been sup plied to several divisions, where it has been successfully tested. We have provided the Mercedes- Benz Bus Division with an informa tion-based sales personnel advisory system. This new system, to be intro duced throughout the Federal Republic of Germany by the end of 1992, is installed on a portable PC to replace voluminous printed information media. In addition to facilitating access to information on all available model variants for sales personnel and customers, it can carry out economy and driving parameter calculations. The Quest for Quality in Software Computer programs are having an increasing influence on the efficiency of work in practically all areas of the group. It is therefore all the more important to assess the quality of soft ware according to meaningful criteria. Together with the debis Software House and Mercedes-Benz, we have developed a computer-supported as sessment process with which the user can independently evaluate completed projects. This is based on a standard questionnaire relating to user-relevant quality criteria such as suitability for the specific workplace or error frequency. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. A mechanical method has been developed for the objective quality control of user programs. This is capa ble of presenting in particular oppor tunities for software maintenance and extension. A first prototype is already in use at the debis Software House. Communicating by Means of Images and Speech In order to synthetically construct realistic image sequences, the scenes to be depicted must be encoded in the computer as effectively as possible. Research is being carried out into appropriate methods of automatically generating symbolic descriptions of natural scenes. These can be used for example in image production for flight and driving simulators, as well as in new types of sales systems and image communication via radio channels. In order to use speech as a basis of communication between man and machines, research is being carried out into speech operation for those functions which easily distract the driver from his task of controlling the vehicle. This extends to such functions as window operation, air conditioner adjustment and dialling the car tele phone. A further field of application is accessing automatic information ser vices by means of normal speech on the telephone. We are also analyzing the utility value of speech recognition in collaboration with the Ulm Univer sity Clinic at the workplace of a doc tor, who records his diagnoses, for example in an ultrasonic examination, simply by means of speech. He can thus better concentrate on the exam ination itself, without having to subse quently rely on his memory when recording the results. Complex Structures in Automation Technology The complex process structures of automation technology require meshed control systems which must be mastered in their entirety. In addi tion to designing high-performance control structures, research thus also entails the design of a decentrally or ganized overall system and definition of the various hierarchical levels and communication processes connecting the functional units. These research activities are incorporated in the strat egies for the continuing development of AEG's Geamatics automation system. Technology Data Base The Research and Development division has established a pilot project in the form of a data base on produc tion technologies, which provides the research and development sectors of the group with the potential available in all the production development departments of the corporate units. We have thus created an important basis for technology transfer, while at the same time making a contribution towards the integration of all research and development activities. New Materials At Stuttgart-Untertürkheim, Ulm and Ottobrunn, our researchers from the newly established joint research field "Materials" are developing new materials for application in the various sectors of the group. In the field of structural materials, the main emphasis of research lies in fiber-reinforced plastics for assem blies, running gear and bodies, high- tensile ceramics for engine and assem bly components, and new metal alloys. Brake systems made from fiber- reinforced plastics, for instance, weigh only half as much as the conventional steel components. In the field of "functional mate rials", the work groups initially distrib uted between Stuttgart and Ulm are now almost all located at the Ulm Re search Centre. Whilst the "layer struc tures" research field is temporarily located in laboratories in the first stage of the Research Centre, the auxiliary site in Ulm/Böfingen is occupied by the fields of functional ceramics and polymers. The second stage of the Research Centre at Oberer Eselsberg, Ulm, will be ready for use at the be ginning of 1993. Research work into diamond coat ings and ion-conductive ceramics has been commenced in collaboration with the University of Ulm and the Solar Energy and Hydrogen Research Cen tre. In the field of high-temperature superconductors, thin layers of these materials have been produced for the first time, using a new technology. High-Frequency Components with Superconductors The new high-temperature super conductors with zero-loss conductance promise considerable advantages in high-frequency technology. Several of the component structures currently under development, for example coplanar wave-guides in various geo metrical forms, microstrip ring resona tors and antenna elements, were demonstrated during the year under review. The double-sided and large- surface coating technologies required for the manufacture of these compo nent structures are now a matter of routine. Microelectronics: Fast and Smart We have set new performance standards in our microelectronic high- frequency components. Our gallium- arsenide "hetero field effect transis tors", for instance, have reached a fre quency limit of 230 GHz. With silicon- germanium hetero bipolar transistors, currents can be amplified by a factor of up to 5,000. These techniques are of interest to us for two reasons: firstly, we are developing monolithically integrated microwave circuits on the basis of gallium-arsenide for use in cost- efficient EHF radar systems or short- range transmission, and secondly, we are investigating customer-specific cir cuits with extended options for mono lithic integration into silicon-based rapid bipolar circuits. Advances in control technology now call for self-monitoring and self- protecting high-power components capable of being addressed and diag nosed. In order to achieve these char acteristics, new systems and integra tion technologies have been investi gated. The technological standards reached are incorporated into proto types and applications for vehicle elec tronics and for drive and automation technology. Environmental Compatibility at Daimler-Benz The continuously increasing bur den on the environment is making it absolutely necessary for the manufac turers of industrial products to give more attention to the protection of the environment and natural resources. Inter-disciplinary projects have been initiated to cover the internal know- how requirements within the group, while at the same time extending external activities. They are concerned with such matters as the disposal of residual materials, recycling, monitor ing emissions from industrial facili ties, treating exhaust gas from station ary engines and developing water-free production processes. In some pro jects, we have already achieved results which surpass the current state of the art and set new standards in environmental protection. Recycling Composite Materials High-quality recycling normally requires the sorting of materials prior to processing. Until now, this has not been possible, since many components consist of composite materials. In Ulm, we are therefore working on methods of breaking up such materials and sorting them accordingly. The example of the passenger car cockpit has shown that even materials previously regarded as inseparable can be broken up and separated by selective granula tion with a combination of processing methods. This work at the same time pro vides us with a basis for designing future products in a manner suitable for recycling right from the start. Natural Materials in Automotive Manufacture In northern Brazil, Daimler-Benz has started a project which will develop environmentally friendly prod ucts as well as improving the social, ecological and economic conditions of the region and recultivating the tropi cal rain forest. This "Para Project" is closely linked with the UNICEF project "Poverty and Environment in the Ama zon - a Municipal Approach to Sus tainable Development". Together with the University of Para, natural prod ucts of the region are being investi gated for application in automotive production under the heading "Technology is Life". Special research is to be carried out into the suitability of vegetable oils as lubricants, the production of extra- pure pigments for the manufacture of natural paints, the use of natural fibers, for instance for seat frames or insulating material, and the improved production of caoutchouc for rubber automotive components using state- of-the-art microwave and vacuum tech niques. This research is centred on the question as to whether it might be possible to produce bio-degradable lubricants and paints or alternatives to some difficult-to-recycle composite materials containing synthetic fibres. Associated with these projects is an afforestation program for the tropi cal rain forest. At the same time, the research projects contribute to the advancement of an economic area in the Amazon region oriented towards the natural environment. Employees The employment situation in Ger many was on the whole satisfactory. Short-time work was only necessary in certain sectors. AEG Olympia in Wilhelmshaven and DASA's Eiweiler plant were affected by serious problems of capacity underutilization which have given us cause to discon tinue activities at these locations. At year's end, 73,957 (1990: 73,381) persons were employed abroad. Strategic Guidelines of Personnel Policy We regard the continuous training of our employees as the prime objec tive of our personnel policy. Only with well qualified, motivated personnel and competent management can we secure our position in international competition in the long term. In the 1991 business year, we concentrated on developing strategic guidelines in the personnel depart ments of the Daimler-Benz group. Areas of overriding significance which will determine the future direction of our work were defined at group level and throughout the individual corpo rate units. At group level, due atten tion was also given to projects which foster the integration of the individual corporate units and the international ization of the workforce. By means of such a comprehen The domestic plants of Mercedes- sive personnel policy devised for the long term, we intend to give our support to the various divisions and corporate units throughout the group, taking into account the social respon sibility of the company while at the same time opening up new perspec tives for our employees. Employment Situation and Developments At the end of 1991, the Daimler- Benz group employed a workforce of 379,252 (1990: 376,785), including 305,295 (1990: 303,404) employees in Germany. This increase over the pre vious year's figure can be attributed to changes in the number of companies included in the consolidation at AEG and debis, and is also due to new ap pointments at Mercedes-Benz. In the new Federal German states, some 8,600 persons were employed at the end of 1991 in companies which are in the process of being taken over or have already been incorporated into our group. Benz AG operated to full capacity throughout the year under review; their workforce increased by 6,300. At some foreign production and assembly plants of the Mercedes-Benz group, on the other hand, personnel had to be laid off in view of unfavorable economic conditions. Pleasing develop ments were registered once more at Mercedes-Benz Mexico, where the upturn on the Mexican commercial vehicle market made new appointments possible. With the exception of AEG Olympia Office, where problems are continuing to be experienced, employ ment at AEG was generally charac terized by good capacity utilization. This particularly applies to the Domes tic Appliances and Rail Systems divi sions and to AEG Electrocom. On the other hand, the Electrotechnical Sys tems and Components division, which is closely dependent on the mechani cal engineering sector, showed signs Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Employees of a slowdown towards the end of the year. The number of employees in Germany fell slightly, especially as a result of the hiving off of AEG Mobile Communication; abroad, numbers increased somewhat owing to the first- time consolidation of Siliconix, Santa Clara/California. To facilitate compari son, the workforces of AEG KABEL and AEG Elektrowerkzeuge, which were sold at the end of the year under review, are still included in this figure - as are their sales. At Deutsche Aerospace, employ ment declined slightly in 1991. Per sonnel capacity was adjusted through natural wastage. In the Defense and Civil Systems division, however, further personnel measures will be unavoidable. The decrease in DASA's workforce during the year under review was a result of the hiving off of plants to Deutsche Airbus GmbH, which is not included in the consolida tion. The rise in employment at debis is due to acquisitions throughout all divi sions. The companies included in the Software House represent the largest division, with a workforce of 4,443. Most of the workforce abroad is em ployed in the financing and leasing companies. Employment Structure The stucture of the workforce in the German companies of the Daimler- Benz group remained almost unaltered as against the previous year. At Mercedes-Benz, AEG and DASA, just under 5 % of the overall workforce con sisted of apprentices and trainees. The proportion was considerably lower at debis and Daimler-Benz AG, since Mercedes-Benz has taken over most of the training function at these com panies. Due to the nature of activities, Mercedes-Benz and AEG have a 50 % proportion of wage-earners, whilst at DASA (over 65 %) and debis (almost 100 %) salaried employees are in the majority. 17 % of our employees in Germany are women. Foreign employees consti tute 13 % of the workforce (20 % of all wage-earners and 3 % of salaried staff). Employees come from some 60 coun tries, first and foremost Turkey, Jugo slavia, Italy and Greece. Although the foreign proportion of our workforce has steadily declined over the past few years, we will remain dependent on the support of our foreign employees in future. At the end of 1991, the Daimler- Benz group employed 13,800 severely handicapped people in Germany. The legally prescribed employment quota of 6 % was not attained; as in previous years, however, a considerable number of orders were awarded to out side workshops for the handicapped. Collective Agreements for 1991 In the old Federal German states, the collective bargaining round brought an increase of some 6.7 % in standard wages and salaries for the employees of the metal-working and electrical industries effective June 1, 1991; a lump-sum payment was agreed on for the months of April and May. Remuneration in the lower wage categories increased dispropor tionately. In companies with a large number of employees in the lower wage categories, this led to an overall burden in excess of 6.7 %. In the new Federal German states, long-term agreements were concluded for the regulation of all significant col lective bargaining matters concerning standard wages and salaries. On April 1, 1991, wages and salaries were raised to 60 % of the west German rates on average. By April 1, 1994, wages and salaries are to be increased in stages to 100 % of the level of the old Federal German states. Additional payments such as vacation allowances will be introduced in stages from 1994 onwards. Special remuneration is to be successively raised to 50 % of monthly payment by 1995. Annual leave will also be extended in stages until 1996. The standard working week, currently 40 hours, will be reduced to 39 hours on April 1, 1994 and to 38 hours on October 1, 1996. Personnel Expenditure The Daimler-Benz group's person nel expenditure rose worldwide by 9 % to DM 29.4 billion. In the domestic plants, this increase was due primarily to rises in standard wages, salaries and social welfare contributions. Company Pensions Company pensions continue to constitute the nucleus of social bene fits throughout all corporate units of the Daimler-Benz group. Together with state pensions and individual personal savings, they help assure financial security for our retired employees. As part of their company pension scheme, Daimler-Benz AG and Mercedes-Benz AG paid a total of DM 296 million to approximately 47,800 pensioners, widows and children. In order to cover future payments, DM 643 million calculated on the basis of a notional interest rate of 3.5 % was allocated to pension provisions at Daimler-Benz AG and Mercedes-Benz AG. A sum of DM 204 million was also allocated to Daimler-Benz-Unterstüt- zungskasse GmbH. AEG disbursed some DM 136 million to some 42,500 pensioners, widows and children during the year under review. Corresponding pay ments made by the companies of Deut sche Aerospace amounted to DM 89 million for some 17,100 recipients. The Daimler-Benz group allocated DM 1.5 billion overall to company pen sion schemes during the year under review. Assistance in the Formation of Private Capital 1991 In accordance with the 5th Capital Formation Law, our employees at the domestic plants were once more given the opportunity in 1991 of purchasing Daimler-Benz AG shares for a prefer ential price and at a reduced tax rate. The employees of Daimler-Benz, Mer cedes-Benz and debis were also given the option of purchasing shares in Mercedes Aktiengesellschaft Holding. In all, 140,247 employees made use of this offer. The employees of Daimler- Benz and Mercedes-Benz were also allowed to put DM 312 into company debt certificates at an annual interest rate of 10%. A total of 28,434 employees took up this offer. Residential Property Subsidies Most of the group's member companies supported their employees once more in the building and acquisition of apartments and houses. Interest-free and reduced-interest loans totaling more than DM 97 million were granted for 3,726 houses and apartments. Managerial Development and Planning The implementation of corporate strategies are influenced to a large extent by the development, training and specific utilization of current and future management potential. With the instruments introduced to all corpo rate units, we are effectively support ing the long-term process of manage rial development and planning. In the year under review, the plan ning round was concluded with the assessment of demand and evolution at senior level. The analysis and evalua tion of this situation in significant fields further improved conditions for the optimal utilization of available managerial potential throughout the group and broadened the opportunities for employee development. We are supporting the group's strongly growing global activities, joint ventures and alliances through reinforced internationalization of managerial development, for instance by means of an international junior management group. Employees Vocational Training At the end of 1991, 15,243 young people were undergoing vocational training within the Daimler-Benz group. 20 % of these were women; in the business professions, women constituted almost two-thirds of the trainees. In the year under review, 4,160 young men and women began training courses, including 3,225 in the techni cal trades and 935 in business profes sions. Of the 4,397 who completed their courses, 85 % commenced work within the group. The corporate units in Germany offer training in a total of over 50 technical trades and 10 busi ness professions. This training is sup plemented by 15 special programs for school leavers, above all at the profes sional academy; these programs are continuing to prove very popular. As part of our training scheme for young specialist personnel, we have assisted a large number of students and further extended our program for their care and counseling by means of training placements, opportunities for writing theses and seminars to supple ment their courses of study. Advanced Training Advanced training is provided at all levels throughout the Daimler-Benz group. The corporate units offer a comprehensive program to suit the requirements of the individual fields of activity. The senior managerial staff training scheme was further extended in 1991; it provides an effective contri bution towards a common understand ing for the development of the group and its strategy and towards personal dialog amongst managerial staff. Some 177,500 employees partici pated in advanced training programs during working hours. Our courses in new technologies and information pro cessing and our special sector devel opment programs again attracted a large number of participants. We have intensified advanced training activities for our workers, especially with regard to new production methods such as group work. The costs due to advanced training amounted to DM 326 million during the year under review. The Involvement of Employees in Problem-Solving With a total of 38,600 (1990: 34,000) suggestions for improvement submitted, the employees of the var ious corporate units continued to show great interest in their work. We rewarded our employees' suggestions with premiums amounting to DM 14.1 million (1990: DM 11 million). These encouraging figures reflect the creativity of our employees and their commitment to the objectives of our company. Thanks to Our Workforce We would like to express our gratitude to all our employees for their commitment and hard work in a year in which the market once more pre sented us with major challenges, while at the same time the adaptation of cost structures had to be carried out ener getically. Our thanks are also due to the representatives on the various labor councils and committees at all levels of our group for their trust and cooperation. Employees New Forms of Work Structure Preventive Health Care In view of intensified worldwide competition, with higher requirements on versatility and quality, we have car ried out a thorough investigation into new and modified approaches to pro duction. Under the heading "lean man agement", endeavors have been under way for some time in all corporate units to realize modern, integral forms of work structure. A significant factor here is the transfer of planning, executive and monitoring activities to one and the same person or working group. At almost all Mercedes-Benz plants, various forms of group work are being tested in pilot projects. The prime consideration is how group work must be designed in order to contribute towards increased economy in production and improved working conditions. AEG reorganized its production sector with the construction of its new Medium-Voltage Systems factory in Regensburg. Each and every employee in production, in addition to his or her principal activity, assumes respon sibility in quality assurance, control, the provision of equipment and mate rials and the transport of material. The employees in the assembly sector regularly exchange activities, in order to extend their knowledge and working opportunities. The medical services of the var ious corporate units employed a staff of more than 250, including some 50 company doctors. Particularly at small locations, this staff was supported by a large number of part-time company doctors. The main emphasis of preven tive health care was concerned with carrying out preventive check-ups, offering advice and giving courses on topics such as nutrition and addictive and dangerous substances; a further significant activity was collaboration in workplace design. Safety at Work Throughout the group in Germany, 200 full-time safety experts are em ployed to make work safer for all employees. Their main responsibilities extend to advising managerial staff, holding lectures and training courses and implementing technical and orga nizational measures for the prevention of industrial accidents. The success of this work is re flected in the further reduction in the number of industrial accidents. Com pared with the previous year, both the frequency of accidents and the result ant number of days absent have been further reduced. The main objectives in the year under review were to improve the training of managerial staff and safety experts and to develop data processing systems for the registration of infor mation on hazardous substances. In the course of work systems design, modern findings on safety at work and ergonomics have been incorporated into the planning stage. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Finance Finance Net Income Higher Despite Extraordinary Expenses The 1991 financial statements clearly demonstrate the continued financial strength of the Daimler-Benz Group and, at the same time, consti tute a solid foundation for us to suc cessfully accomplish the tasks still ahead of us. The given figures are not only indicative of the still further increasing business volume, but also of a number of special factors which are explained in the following. The figures in the statement of income comprise the income and expense items of AEG companies who left the circle of consolidated com panies only at the end of the year but who are no longer included in the con solidated balance sheet. In contrast thereto, Eurocopter Holding S.A., which was founded on December 31, 1991, is included pro rata in the consolidated balance sheet with 40 %, while the helicopter activities of MBB are still reflected in the income ac counts. Total sales revenue of the Daimler-Benz group rose 11 % to DM 95 billion as a result of lively demand for vehicles in Germany. The stronger advance in total output, by 12 % to DM 98.6 billion, was largely due to strong growth in the leasing business and to increases in inventories, particularly at the Mercedes-Benz corporate divi sion. The caption 'cost of materials' trended parallel to total output; its ratio in terms of total output amounts to 50.2 % (1990: 50.3 %). Within person nel expenses, whose ratio in terms of total output remained practically un changed at 29.8 %, both salaries and wages but also expenses for old-age pensions rose; in order to increase the capital base of the group provident funds, we remitted DM 0.2 billion. The disproportional 15 % increase to DM 6.1 billion in depreciation allowances was once again due to higher invest ments in fixed assets and leased equipment. Other operating income of DM 3.5 billion was about the same as last year. The noticeable increase in operating expenses, from DM 12.0 bil lion to DM 13.8 billion, is largely in connection with additions to provi sions for risks inherent in business activities. In the non-operational area, net interest income for the group is shown at DM 0.6 billion. The strong decline versus last year has contrary reasons: On the one hand, interest income and earnings from securities rose slightly despite lower liquidity; on the other hand, a substantial rise in interest expenses is shown which was due to business related higher borrowing needs for our leasing and sales finance companies. The interest expenses from the financing of the leasing activ ities are offset income amounts which are reflected in the leasing rates and in sales revenue, respectively. Exclud ing the interest expenses for the refinancing of the financial service business, interest income for the group amounts to DM 1.1 billion (1990: DM 1.3 billion). As in previous years, we have again reduced the interest income earned in high-inflation countries by the relevant inflationary profits. The results from ordinary busi ness activities declined from DM 4.2 billion to DM 4.0 billion; higher contributions from the operational area have nearly offset the declining net interest income results. The non- operational result, which adversely affected income by DM 0.5 billion, is due to two extraordinary events, namely the expenses for AEG Olympia and the profit from the sale of AEG KABEL. If net income for the year, nevertheless, rose by 8 % to DM 1.9 billion, much is due to the fact that the substantial losses of AEG Aktien- gesellschaft and of Dornier GmbH could be used for the first time in con solidation to reduce the corporate in come tax expense, on account of profit and loss transfer agreements made in 1991. Balance Sheet Ratios of the Group Influenced by the Financial Services Sector The balance sheet of the group is more strongly influenced by the vigor ously expanding leasing and financing business than by the consolidated statement of income. Our leasing con tracts are generally structured in such a way that the underlying assets are kept on the books of the lessor; leased vehicles are valued at acquisition or manufacturing costs less scheduled depreciation allowances. They are sep arately shown on the balance sheet under long-term assets. The deferred taxes resulting from the elimination of intra-group profits are shown on the asset side of the balance sheet under prepaid expenses and deferred taxes. Finance The sales financing business is strictly a credit business which adds to the balance sheet total because it simultaneously increases both receiv ables from customers and liabilitites from the refinancing of such activities. Moreover, deferred leasing rates and exceptional rental payments are shown under deferred income. If the financial services business would be carried out outside the Daimler-Benz group, the above- mentioned items would not appear on the consolidated balance sheet and the total would be correspondingly lower. Moreover, net equity of the group would have to be corrected by the amounts of inter-company profit elim inations and deferred taxes, as well as the profits earned by the financial services companies. On the other hand, the funds made available internally to the financial services companies could be used for the repayment of liabilities. The Influence of the Financial Services Business on the Consolidated Balance Sheet Finance Unchanged, Solid Balance Sheet Ratios Consolidated Statement of Changes in Financial Position 1991 (In millions of DM) The group's balance sheet total Sources of Funds from Business Activities again increased, by 12 % to DM 75.7 billion, as a result of the greater sales volume. Long-term assets includ ing leased equipment rose DM 5.8 bil lion to DM 29.2 billion. Within intang ible assets, goodwill rose DM 0.5 bil lion, largely due to the inclusion of the helicopter business of Messerschmitt- Bölkow-Blohm into the Eurocopter group, and to the pro rata inclusion of the new joint venture company. Fixed asset additions of DM 6.5 billion were offset by depreciation of DM 4.1 billion and disposals of DM 0.9 billion, re spectively. The DM 2.2 billion increase in financial assets largely reflects the acquisition of a 34 % stake in Sogeti S.A. and of a 10 % stake in Metallgesell- schaft AG. Analogous to last year, the balance sheet amount for leased equipment increased dispropor tionately, by DM 1.6 billion to DM 8.1 billion; it thus represents 11 % of total assets. Excluding leased equip ment, the ratio of fixed assets to total assets increased from 25.1 % to 27.9 % on account of substantial investments. Of other assets, which increased by DM 0.8 billion to DM 9.8 billion, DM 4.3 billion (1990: DM 3.2 billion) per tain to the sales financing business. Inventories, which rose DM 1.9 billion over the previous year, were financed through advance payments from cus tomers to the tune of nearly 30 %; the ratio of net inventories to total assets of 19.7 % was nearly unchanged from the previous year's 19.5 %. In order to finance the acquisitions of companies, which were made for strategic reasons, we used our liquid funds; liquidity thus fell by DM 3.1 billion to DM 10.6 billion, and now amounts to 13.9 % (1990: 20.3 %) of total assets. On the liability side of the balance sheet, shareholders' equity - exclud ing the amount set aside for dividend payments (unappropriated profit) - rose by DM 1.6 billion to DM 18.8 bil lion. Since we allocated DM 1.3 billion from net income to retained earnings, the ratio of net equity to total asset fell slightly from 25.6 % to 24.9 %. Exclud ing the financial services companies the ratio of net equity to total assets amounts to 29.9 % (1990: 30.1 %). The coverage of long-term assets (exclud ing leased equipment) by equity capital fell, however, to 89 % (1990: 102%). The liabilities of our financial ser vices companies rose to DM 8.1 billion (1990: 6.6 billion). This change repre sented 25 % of the increase of total liabilities which amounts to DM 27.7 billion (1990: DM 21.8 billion). The increase also includes DM 0.7 bil lion in liabilities to related companies which have been set up at AEG Aktiengesellschaft for AEG Olympia, a company no longer included in consol idation. Even though provisions rose by DM 0.7 billion to DM 28.0 billion, their share in terms of total assets, however, fell to 37,0 % (1990: 40.6 %) because of the strong rise in liabilities. Both long-term assets (excluding leased vehicles) and net inventories are fully covered by equity capital and long- and medium-term provisions. Strong Increase in Cash Flow In 1991, cash flow continued to rise, namely from DM 6.7 billion to DM 7.8 billion. Because of the excep tionally large additions to financial assets, the funds generated from ordi nary business activities were not suffi cient, however, to finance all long- term investments. Although more than twice the resources than the previous year were available from other financ ing activities, such as short-, medium- and long-term borrowings, we have at the same time made use of our own liquidity in order to meet the enor mously increased funding needs for both long-term assets and current assets. Finance Also for the following years we are taking it for granted that the use of funds within the Daimler-Benz group will remain at a high level. Partic ularly the continued expansion of the leasing and financing activities will make additional borrowings neces sary. Moreover, the authority given for the issuance of stock offers the oppor tunity to raise equity capital when stock market conditions are favorable. Activities of the Group Treasury With the growth in business vol ume, demands on the group treasury increased, and with it calls on the ca pacity of banking partners and capital markets. The central finance depart ment of Daimler-Benz AG makes all strategic financial decisions; at the same time and with the support of re gional holding and finance companies, it excercises its function with respect to operational liquidity-, finance- and risk management, and assures that a common banking policy is followed by the group. We let ourselves be guided by liquidity, safety and profitability criteria as well as balanced maturity structures and sound financial ratios. In the process of the ongoing transformation and development of the central management department, we updated our domestic cash-concentra tion program to state-of-the-art elec tronic banking and took over, step by step, the foreign exchange dealings of our domestic companies. In order to improve our financial flexibility, we have made use of the rapidly growing commercial paper market in Germany, increasing our commercial paper program by DM 1.5 billion to DM 2.0 billion. It is the responsibility of Central Asset Management to invest all the liquidity, which amounted to DM 10.6 billion at year end, in such a way that all financial requirements derived from the business activities of the group can be met on a short-term basis, always keeping profitability in mind. Through active portfolio man agement we invest longer-term funds in securities. This portfolio is largely Finance Key Figures of Major Subsidiaries of Daimler-Benz AG Owner- shipi) in % Net Equity 2) in Millions of DM Net Income 2) 1991 in 1990 in Millions Millions Sales 3) 1991 in 1990 in Millions Millions of DM of DM of DM of DM Employment at Year-End 1990 1991 i) Relating to the respective Parent company. 2) Net equity and net income respectively, net income before income transfer from national financial statements; foreign financial statements converted at applicable year-end exchange rates. 3) Converted at applicable average exchange rates. 4) Preconsolidated financial statements. 5) Included in the consolidated financial statements of the holding company of the respective country. 6) For reasons of comporability the previous years figure was adjusted by the new inflation index. 7) Turn over included in AEG Aktiengesellschaft up to May, 31,1990. 8) Short business year. 1 Finance Sales and Project Financing The worldwide sale of our prod ucts increasingly requires complex fi nancing solutions, specifically tailored to the individual buyer. In addition to the needs of developing and under developed countries, a considerable volume from industrial countries has been added in 1991, particularly as regards all means of transportation offered by the group. With the continu ing stabilization in eastern Europe, demand for sales and project financing will increase. Overall, the higher financing needs of our customers is met, how ever, by a lessening willingness of third parties to assume risks. Govern ments can no longer keep pace with the rising demands for the insurance of export risks and the financing of in frastructures. International banks also see difficulties in providing needed funds. The financing through interna tional organizations is a stabilizing element, but only for certain products deemed economically promotable. In view of this development, it is clear that the structuring of individual financing must become our central focal point to assure the sale of our products. Also in the future, we wish to avoid financing risks in connection with the sale of our products and, at the same time, to keep all the financ ing options open. In 1991, our business policy at home and abroad again conformed with the "OECD-Guidelines for Multi national Companies". Our intercom pany pricing policy is based on the "dealing-at-arms-length" principle. composed of fixed-interest instru ments, denominated in D-Marks, of first-class issuers, and to a lesser degree of stocks. Through various rear rangements, we were able to raise the average return of the portfolio to the prevailing higher capital market rates available at the end of the year. We have further increased our refinancing activities, particularly in view of the strong growth of our leas ing and sales financing business. The downward interest trend on interna tional money and capital markets, which in the U.S.A. led to a historically low level, has caused us to restructure parts of the existing short-term lia bilities and thus assure a more cost effective, longer-term availability of funds for the group. This is the reason why we expanded our emission vol ume of public Euro-bonds, and through capital markets, placed financial in struments denominated in ECU, CAD, ITL, GBP, CHF and USD with a total volume of approximately DM 2.8 billion. In addition to Daimler-Benz Inter national Finance B.V., we established two more companies, Daimler-Benz North America Corp. and Daimler- Benz U.K. plc, as locations for such emissions. In 1991, it was again the central foreign exchange management's goal to restrict and cushion the currency risks, particularly with regard to the USD, JPY, GBP, CHF and ESP, through foreign exchange hedging measures within the confines of the delivery vol ume. The currency hedging strategies are based on continuously updated market expectations with respect to individual currencies and business segments. In order to make the financial risks of the company manageable, we make use of specifically targeted de rivative capital market instruments. In asset management, they improve the risk/return ratio; in liability manage ment, they lower respectively limit borrowing costs and interest-change risks. The Daimler-Benz Share The Daimler-Benz Share Statistics per Commmon Share *) excl. minority interests During the course of the year, the Daimler-Benz share moved parallel to the overall market except that, begin ning in June, the price of our stock trended more favorably than the DAX- index. Towards the end of the year, the price of the Daimler-Benz share rose more strongly than the DAX- index and, with a market price of DM 743.70 at year end, was 35 % higher than the previous year. In con trast, the DAX-index only rose 13 % during the same period of time. This disparity has again declined during the first quarter of 1992. Again in 1991, our stock belonged to the most frequently traded instru ments on the German stock ex changes. Altogether, Daimler-Benz shares, with a market value of DM 125 billion, changed hands. This accounted for 10 % of the turnover of all domestic shares. On the German option exchange, Daimler-Benz op tions belonged to the most actively traded issues. Market Price of the Daimler-Benz Share Dividend Increase to DM 13 For the business year 1991, an in creased dividend over last year, from DM 12 to DM 13 for each eligible share of DM 50 par value, will be pro posed to the annual general meeting taking place on June 24, 1992; for shareholders subject to income taxes in Germany the gross dividend thus amounts to DM 20.31 The total divi dend payout is increased from DM 557 million to DM 605 million over last year. With an increase in the dividend to DM 13, we pay due regard to the earnings trend of the Daimler-Benz group. We thus underscore once again the policy pursued for years, whereby we gear the dividend payout to the longer-term profit trend of the corpora tion. Daimler-Benz Shares are a Good Long-Term Investment The volatility of the international equity markets in the last few years has clearly shown that an investment in stocks offers both opportunity and risk. Through the combination of divi dends and market appreciation, stocks offer long-term returns that cannot be achieved with fixed-income securities. However, stocks may, through tempor ary market setbacks, show negative returns. A three-year investment in Daimler-Benz stock shows an average return of 3.2 % per annum. In contrast, the return over a six-year period be comes negative, due to the high mar ket price in 1986. A longer-term in vestment, as is typical for Daimler- Benz shareholders, of 12 years for ex ample, shows a positive return of 16.0 % per year. In this calculation we have assumed that the proceeds from rights issues and cash dividends were re-invested in Daimler-Benz stocks, and that no additional payments were made by shareholders. Stable Shareholder Structure With three large shareholders, which together hold more than two- thirds of our capital stock, Daimler- Benz AG has a manageable and reli able shareholder structure. One third of our share capital is relatively broadly held. Deutsche Bank, which holds 28 % of our share capital, has been a large shareholder of Daimler- Benz since the late twenties. The Mer cedes Aktiengesellschaft Holding (MAH), Frankfurt am Main, has held a 25.23 % stake since it was founded in 1975. The special ownership structure The Daimler-Benz Share Investment in Daimler-Benz Shares; Investment Amount DM 10,000 at MAH assures that no shareholder can obtain a dominant influence. Stern Automobil-Beteiligungsgesellschaft and Stella Automobil-Beteiligungsge- sellschaft each hold a 25 % stake in MAH. Stern and Stella enjoy an insti tutional following who consider their investments on a long-term basis. The remaining 50 % of the MAH shares are broadly distributed and belong to about 50,000 shareholders. The third largest shareholder since the mid-seventies is the govern ment of Kuwait, whose equity stake amounts to about 14 %. The remaining 33 % of our share capital is widely held by about 400,000 investors both at home and abroad. Moverover, if the scattered ownership of MAH is taken into account as well, nearly half of our share capital is then, directly or indi rectly, broadly distributed. Listing on Foreign Stock Exchanges Aside from the German stock ex changes, the Daimler-Benz stock has been listed since 1976 on the Swiss stock exchanges in Basel, Geneva and Zurich. With the listing of our stock in Tokyo and London in 1990, and in Vienna and Paris last year, we have paid due regard to the increasingly international orientation of our com pany. Concomitant thereto, we are thus better able to utilize the increas ingly global markets also in raising capital. In Tokyo, with over one mil lion shares traded in 1991, Daimler- Benz shares attained a notable vol ume. On the international stock ex change in London, trading in Daimler- Benz shares was extremely active, with more than 16 million shares changing hands. In the medium term, we are en deavoring to have our shares listed on the world's most important stock ex change; that is, the New York stock exchange. However, the demands of the American Securities and Exchange Commission (SEC) are up to now con trary to our wish; either to publish fi nancial statements in compliance with U. S. generally accepted accounting principles, or to carry out a reconcilia tion with our financial statements that are prepared in accordance with Ger man law. Such practice would result in dissimilar balance sheets and profit and loss statements, since we would have to publish such financial state ments in addition to our own. In view of this, we see no practicable solution and we shall, however, stay in touch with the SEC regarding a listing of our stock in New York, without having to deviate from the financial statements drawn up according to German ac counting. Investor Relations Activities The increasing presence of our company on important foreign stock exchanges has led to increased inter est from local and international inves tors in the integrated technology con glomerate Daimler-Benz. In order fo fulfill the increasing demand for infor mation connected herewith we further expanded our investor relations activ- ites during the year. We address all our investors through the annual gen eral meeting, the annual reports and regular interim reports. In addition we organize corporate presentations in the worlds major financial centers for institutional investors and financial analysts. Last year, we presented the company in Zurich, Tokyo, New York, Boston, London and Edinburgh, as well as on the occasion of the stock ex change listings in Vienna and Paris. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen. Es wurde in der PDF-Datei weggelassen, um eine nutzerfreundliche Dateigröße zu erreichen. Here was a product or mood picture without text or figures. It was omitted in the pdffile to improve the usability of the file size. Consolidated Balance Sheet Financial Statements Consolidated Balance Sheet ASSETS Notes December 31,1991 In Millions of DM December 31,1990 In Millions of DM Consolidated Statement of Income Consolidated Statement of Income Consolidated Statement of Non-Current Assets Consolidated Statement of Non-Current Assets Consolidated Statement of Non-Current Assets Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Principles and Methods The consolidated financial state ments have been prepared in accor dance with regulations set forth in the Commercial Code; the amounts are shown in millions of D-marks. The items, which are summarized in the balance sheet and the statement of income, are separately shown in the notes and, where necessary, ex plained. Accounting Principles and Valuation Methods During the year under review, we have continued to apply the same accounting principles and valuation methods. Provisions for pensions have been calculated at the tax- allowable interest rate of 6 %; in this respect there exists a variance against the accounts of the parent company, which bases its provisions computation on an interest rate of 3.5 %. Assets and liabilities presented in the consolidated balance sheet - in identical group circumstances - are uniformly valued. In 1991, as in pre vious years, provisions for approved conversion, reconstruction and main tenance projects have been set up, or have been systematically continued. Intangible assets are valued at ac quisition costs and written off over the respective useful lives. Goodwill resulting from the capital consolida tion, if derived from the extension of the group, is in principle amortized over five years; goodwill relating to the restructuring of the group is charged to retained earnings. Goodwill which, for the first time in the year under review, arose from the creation of stra tegic alliances, is split. The portion relating to the group's expansion is written off over the relevant useful life, the one relating to the restructuring is charged to retained earnings. Fixed assets are valued at acquisi tion or manufacturing costs. The self- constructed facilities comprise direct costs and applicable material and manufacturing overheads, including depreciation allowances. The acquisition costs/manufactur ing costs for fixed assets are reduced by scheduled depreciation charges. The opportunities for special tax- deductible depreciation allowances were fully utilized, i.e. in connection with Section 7d of the Income Tax Act and Section 82d of the Income Tax Regulations (environmental protection, and research and development invest ments), Section 14 of the Berlin Devel opment Law, Section 3 of the Zone Border Area Development Law, Section 6b of the Income Tax Act and Subsection 35 of the Income Tax Guidelines. Scheduled fixed asset depreciation allowances are calculated generally using the following useful lives: 17 to 50 years for buildings, 8 to 20 years for site improvements, 3 to 20 years for technical facilities and machinery, and 2 to 10 years for other facilities and factory and office equipment. Fa cilities used for multi-shift operations are depreciated using correspondingly lower useful lives. Buildings are depre ciated using straight-line depreciation rates - and where allowable under the Tax Codes - declining rates. Movable property with a useful life of four years or more is depreciated using the declining-balance-method. For mov able property, we change from the declining-balance method to the straight-line method of calculating de preciation allowances when the equal distribution of the remaining net book value over the remaining useful life leads to higher depreciation amounts. Depreciation allowances on additions during the first and second half of the year are calculated using the full year or half-year rates, respectively. Low- value items are expensed in the year of acquisition. Investments in related companies, and in other long-term financial assets are valued at the lower of cost or market; non-interest bearing or low- interest bearing receivables are shown at their present value. Major invest ments in associated companies are valued according to the book value method at equity. Notes to the Consolidated Financial Statements Companies Included in Consolidation The companies included in consol idation encompass, apart from Daimler-Benz AG, 255 (1990: 269) domestic and foreign subsidiaries and 7 joint venture companies. During the reporting year, 33 companies have, for the first time, been added to consolidation. More over, 7 joint venture companies were included pro rata, for the first time, pursuant to Section 310 of the Com mercial Code. A total of 47 subsid iaries were deleted from consolidation. The profit and loss accounts of 8 domestic and 19 foreign companies, which were deleted from the circle of consolidated companies at the end of the year, were still included in the consolidated statement of income. The deletions from consolidation, resulting from the sale of AEG Kabel Aktiengesellschaft, of AEG Elektro- werkzeuge GmbH and their sub sidiaries, as well as the withdrawal from the office and communicaion field, do have consequences in the consolidated balance sheet. The material consequences are explained under the relevant balance sheet captions. In contrast, there are nearly no consequences in the consolidated statement of income because the expenses and income items of the above companies are still included. Not included are 199 subsidiaries, whose effect on the consolidated finan cial statements is not material (their total sales volume is less than 1 % of consolidated sales) and 11 companies administering pension funds whose assets are subject to restrictions. In accordance with Section 296, Subsection 1, No. 1 of the Commercial Code, Deutsche Airbus GmbH is not consolidated because Messerschmitt- Bölkow-Blohm GmbH, in its relation ship with this company, is restricted in exercising its rights, on account of agreements with the Federal Republic of Germany and of rules in the bylaws with regard to resolutions. At the end of 1991, the helicopter activities of MBB and of the French Aerospatiale were merged into the newly-founded Eurocopter group in or der to form a strategic alliance. MBB holds 40 % of the share capital in the new joint venture company Eurocopter Holding S.A., Paris. Because of the rel atively short group affiliation, only the consolidated balance sheets, but not the statements of income of Eurocop ter Holding S.A., and its subsidiaries, are included pro rata. The income and expenses for 1991 derived from the German helicopter activities are still included in the income statement of MBB. Comparability of the consoli dated accounts against the previous year has not been impaired. Principles of Consolidation Capital consolidation was effected according to the book value method where the parent's acquisition costs are eliminated against the relevant share capital and retained earnings at the time of acquisition or first-time inclusion in consolidation. This applies analogously to the joint venture com panies that are included pro rata. The differences resulting from the capital consolidation (debit balance) are, as far as possible, allocated to the relevant balance sheet items and are written off to income over their useful lives. For the treatment of the remain ing differences (goodwill), see our ex planations under "accounting princi ples and valuation methods". The DM 275 million goodwill resulting from the addition of the joint venture com panies of the Eurocopter group is shown under "intangible assets". Be ginning in 1992, the portion applica ble to the group's expansion will, anal ogously to the acquired goodwill in the individual financials, be written off to income over a useful life of 10 years. The remaining portion will be charged to retained earnings in 1992, without affecting income. Leased equipment is valued at ac quisition or manufacturing costs, and is depreciated using the declining- balance method. We change from the declining-balance-method to the straight-line method of calculating de preciation allowances when the equal distribution of the remaining net book value over the remaining useful life leads to higher depreciation amounts. The option to exercise tax-deductible depreciation, as per Section 14 of the Berlin Development Law, was used. Raw materials and supplies as well as goods purchased for resale are valued at the lower of cost or market. Finished goods are valued at manufacturing costs which comprise, apart from direct material and direct labor, applicable manufacturing over heads including depreciation charges. To the extent that inventory risks are determinable, i.e. for reduced usability after prolonged storage or after design changes, reasonable deductions are made, which are calculated based on a free-of-loss-valuation. Receivables and other assets - if non-interest bearing - are reduced to their present value at the balance sheet date, and are valued taking into ac count all known risks. A lump-sum allowance for doubtful accounts on a country-specific scale is deducted from the receivables in recognition of the general risk inherent in receivables. Treasury stock is valued at the ex pected selling price to employees of the Daimler-Benz group. Securities are valued at the lower of cost or market value at the balance sheet date. Provisions for old-age pensions and similar obligations are actuarially de termined on the basis of an assumed interest rate of 6 % using the Entry Age Actuarial Cost Method. The regu lations of the 1992 Pension Reform Act have been taken into account in calculating the provision amount. Provisions for taxes and other provi sions are determined on the basis of fair and reasonable business judge ments. The obligations in the person nel and social area are reflected in the financial statements at non-discounted values expected to be paid in the future as benefits are vested. Liabilities are shown at their repayment amounts. Expense and income items are es sentially translated at average annual exchange rates. To the extent that they relate to fixed assets (fixed asset depreciation, profit or loss from dis posal of fixed assets), they are trans lated at historical costs. Net income, additions to retained earnings, and the unappropriated profit are translated at year-end rates. The difference result ing from the translation of annual net income, between annual average rates and the exchange rates at the balance sheet date, is reflected in other operat ing expenses. The adjustments made in the income statements by our subsidiaries in Brazil for monetary devaluations have been retained in the consolidated statement of income without change, effectively preventing reflection of inflationary profits. The income taxes, which were al ready geared to the balance sheet date in the national financial statements, have been translated at year-end rates. Items from inflation-adjusted income statements of our Argentinian companies are translated at year-end exchange rates. Fictitious profits/ losses resulting from the divergence between the inflationary trend and the changes in the currency's value have been eliminated. A difference (credit balance) re sulting from the capital consolidation is shown under the balance sheet caption "other provisions" earmarked as "difference from capital consolida tion with reserve characteristics". Profits earned by subsidiaries after the date of acquisition are added to consolidated retained earnings. The unappropriated profit, as shown both in the separate financial statements of Daimler-Benz AG and in the consoli dated financial statements, is the same. In connection hereto, we have charged the income-affecting consol idation adjustments and the profits earned by our subsidiaries to consoli dated retained earnings. The consolidated financial statements include 116 associated companies. At year-end, twelve associated companies as well as our subsidiary Deutsche Airbus GmbH, Hamburg, have been included in our consoli dated financial statements according to the book value method at equity. Goodwill of DM 107 million, resulting from the purchase of additional shares of MBB, is charged to retained earn ings, because it is connected with the restructuring of the group. In December 1991 we acquired a 34 % stake in Sogeti S.A., Grenoble. On account of the short affiliation, we have included this investment at acquisition cost under the caption "investments in related companies". Beginning in 1992, Sogeti will be accounted for under the equity method of accounting. Notes to the Consolidated Financial Statements The remaining associated com panies are shown under investments in affiliated companies at acquisition cost and in some instances less write downs, as they are not material to the consolidated balance sheet, financial position and results of operations. Intercompany receivables and payables have been eliminated; the differences resulting from debt consol idation have been charged or credited to income. All material intercompany profits resulting from the intercompany sales of goods and services have been elimi nated, except items of minor impor tance. This also applies to sales of goods and services by associated companies to companies included in consolidation. Intercompany sales and other in tercompany earnings have been elimi nated against the relevant costs, or reclassified to "capitalized in-house output" or to "increase in inventories", respectively. Deferred taxes (debit balance) shown in the consolidated balance sheet result from income-affecting consolidation adjustments. Curreny Translation Foreign curreny receivables are translated in the individual financial statements at the bid price on the day they are recorded or at the spot rate on the balance sheet date if lower. For eign currency payables are translated at the asked price on the day they are recorded or the spot rate on the balance sheet date if higher. The accounts of all foreign com panies are translated to D-marks on the basis of historical exchange rates for non-current assets, and at year-end exchange rates for current assets, lia bilities and unappropriated profit. Stockholders' equity in D-marks is the remaining difference between trans lated assets less translated liabilities and unappropriated profit. The differ ence resulting from the translation of balance sheet items is recorded in con solidated retained earnings. Notes to the Consolidated Financial Statements Notes to the Consolidated Balance Sheet Intangible assets, amounting to DM 774 million (1990: DM 304 mil lion) comprise goodwill arising from the capital consolidation and from in dividual company financial state ments, acquired EDP software, patents and, to a lesser extent, advance pay- ments made. The increase against the previous year is largely due to the first-time pro rata inclusion of the Eu- rocopter group and relates to goodwill. The increase in property, plant and equipment by DM 1,517 million to DM 16,574 million is derived from invest ments of DM 6,518 millions reduced by reclassifications of DM 11 million, disposals of DM 914 million, and de preciation of DM 4,076 million. The change in the circle of consolidated companies altogether reduced fixed assets by approx. DM 160 million. Special tax-deductible depreciation allowances amount to DM 77 million (1990: DM 95 million); depreciation in excess of scheduled depreciation amounts to DM 39 million (1990: DM 2 million). The increase in financial assets by DM 2,189 million to DM 3,758 million is largely due to the purchase of shares in Sogeti S.A., Grenoble, and Metall- gesellschaft AG, Frankfurt am Main. A complete listing of our stock ownership will be filed with the com mercial registry office at the county court house in Stuttgart under the number HRB 173. Investments in long-term securi ties totaling DM 529 million (1990: DM 208 million) are mostly accounted for by Daimler-Benz AG. Unscheduled write-downs, largely of investments in affiliated companies, of investments in associated companies, of investments in related companies and of other long-term receivables, totaling DM 115 million (1990: DM 110 million), had to be made. Because of increased market values, investments in non-current as sets should have been written up by DM 6 million in accordance with the value appreciation doctrine (Section 280 of the Commercial Code). How ever, such a write-up was omitted for tax reasons. The increase in leased equipment - almost exclusively vehicles - by DM 1,574 million to DM 8,092 million, pertains largely to Mercedes-Benz Credit Corporation, Norwalk, U.S.A., and to Mercedes-Benz Leasing GmbH, Stuttgart. About 86 % of the balance sheet total pertains to these two com panies. Special tax-deductible depre ciation allowances amount to DM 10 million (1990: DM 9 million). Notes to the Consolidated Financial Statements AEG and Deutsche Aerospace account for nearly 50 % of the consoli dated inventories. The increase over last year is with DM 1,500 million derived from the Mercedes-Benz corporate division, particularly at Mercedes-Benz AG and its foreign sales companies, and with DM 800 million from the DASA corporate divi sion, here almost exclusively through the first-time pro rata inclusion of the balance sheets of the Eurocopter group. The change in the circle of con solidated companies has reduced in ventories by about DM 500 million. Advance payments received amounting to DM 5,827 million (1990: DM 5,727 million) were almost exclu sively for projects and long-term con tracts at AEG, Dornier, MTU and MBB; they were deducted from inventories. Approx. DM 0.3 billion (1990: DM 0.9 billion) of the receivables from related companies pertain mainly to fixed-interest debt instruments and securities. Other assets include investments of liquid funds in debt instruments not traded on stock exchanges. They amount to DM 2,563 million (1990: DM 3,866 million). Also shown here are receivables derived from the business activities of finance and leasing companies totaling DM 4.3 billion (1990: DM 3.2 billion). Notes to the Consolidated Financial Statements During the year under review, we purchased 116,457 common shares (par value DM 5.8 million = 0.25 % of total outstanding share capital) at an average price of DM 665 a share. In October of 1991, we sold 184,754 shares to our employees (par value DM 9.2 million = 0.4 % of total outstanding share capital) at a prefer ential price of DM 371 for each share (in the event that one share was pur chased) or DM 412.50 for each share (in the event that two shares were pur chased). On the balance sheet date, we held 42,766 ordinary shares (par value DM 2.1 million = 0.09 % of total out standing capital stock). They were all purchased during the year under review. Other securities pertain mainly to fixed-interest-bearing debt instru ments. Within current assets, DM 26 mil lion should have been written up ac cording to the value appreciation doc trine, but such write-up was omitted for tax reasons. Cash amounting to DM 2,010 mil lion (1990: DM 3,786 million) consists of deposits in financial institutions, cash on hand, deposits at the Bundes bank (German Federal Bank), in post office accounts, and checks on hand. Liquid funds, shown among var ious balance sheet captions, total DM 10.6 billion (1990: DM 13.7 billion). Deferred taxes on income- affecting elimination entries amount to DM 1,596 million (1990:1,363 mil lion). Deferred taxes - a debit balance overall - as shown in the consolidated individual balance sheets - are not included. The changes in stockholders' equity are as follows: Capital stock and paid-in capital pertain to Daimler-Benz AG. Notes to the Consolidated Financial Statements Retained earnings comprise re tained earnings allocated under stat ute of DM 160 million, retained earn ings allocated for treasury stock of DM 30 million, and other retained earn ings of DM 8,469 million of Daimler- Benz AG. Also reflected here are the company's share in the retained earn ings and results of operations of con solidated subsidiaries, insofar as they have been earned by them since be longing to the group. Additionally, this caption takes into account the cumula tive results from the elimination of intercompany earnings and from debt consolidation, as well as the difference arising from currency translations. The stock ownership of outside third parties in the subsidiaries in cluded in consolidation pertain mostly to DASA AG, MBB, AEG, Mercedes- Benz of South Africa, Dornier and MTU. The increase against the pre vious year is largely due to the first time pro rata inclusion of the Eurocop- ter group. 16 Provisions for Old-Age Pensions and Similar Obligations The pension provisions are un changed from last year and amount to DM 10.8 billion. The change in the cir cle of consolidated companies has re duced pension provisions by DM 690 million. When the assets of the provi dent funds are added to the provisions for old-age pensions, the company's pension obligations are fully covered. The provisions for taxes include DM 645 million (1990: 1,139 million) which pertain, to a large extent, to Daimler-Benz AG for open years awaiting final assessment. The difference amount with reserve characteristics resulting from the capital consolidation originates from the first-time consolidation of one subsidiary; this amount will be avail able to offset potential additional ex penses during the start-up years. Apart from existing wordwide warranty obligations, other provisions take into account, above all, obliga tions in the personnel and social area, risks for losses inherent in pending business transactions, and risks arising from contractual liabilities and pending litigation. Additional provisions exist for expenditures which are based on approved change-over, alteration and some development projects, for possi ble additional costs in connection with completed contracts, and for mainte nance which had been planned for the year under review but had to be de ferred until the following year. In addi tion, provisions have been recorded for future obligations in connection with restructuring activities. Notes to the Consolidated Financial Statements Of the liabilities to related com panies, DM 430 million (1990: DM 270 million) pertain to liabilities to fi nancial institutions. In addition, they pertain mainly to obligations due to project companies, incurred by MBB. Debentures pertain to commercial paper issued in D-marks and U.S. dol lars; they are shown at the issue price plus accrued interest up to December 31, 1991. In the previous year, U.S. dollar-denominated commercial paper of DM 2,283 million was shown under notes payable. The amount was re classified for the purpose of compara bility. The increase in liabilities to affili ated companies is largely due to the take-over of the 1991 loss of AEG Olympia Office GmbH by AEG Ak- tiengesellschaft. Miscellaneous liabilities largely comprise December 1991 accruals for wages and salaries as well as tax liabilities. Total other liabilities include approx. DM 8.1 billion in connection with the refinancing of the strongly expanding leasing and sales financing activities for cars and commercial vehicles. Liabilities to financial institutions, notes payable, liabilities to affiliated and related companies, miscellaneous liabilities, and advance payments received from customers (directly deducted from inventories) are mate rially secured, in the amount of DM 1,308 million (1990: DM 1,223 mil lion) by mortgage conveyance or by assignment of receivables. Notes to the Consolidated Financial Statements In addition, we are liable for non- estimable compensatory payments, guaranteed by Deutsche Aerospace for 1992 and future years. For outside shareholders of AEG and of Deutsche Aerospace, there exist claims for non- estimable compensatory payments. Moreover, there exist contractual performance guarantees that could not reasonably be estimated. Other financial obligations arising from rental, property lease and leasing contracts average approx. DM 502 mil lion annually; the average contract duration is 10 years. For companies not included in consolidation, we have other financial obligations amounting to DM 36 million; the average contract duration is 15 years. The remaining fi nancial obligations, particularly pur chase order commitments for capital investments, are within the scope of normal business activities. The obliga tion arising from stock subscriptions and from capital subscriptions in close corporations pursuant to Section 24 of the GmbH Act, amount to DM 11 mil lion. We are jointly and severally liable for certain non-incorporated com panies, partnerships and joint venture work groups. In addition, there exist performance contracts and miscella neous guarantees in connection with ongoing business transactions. Notes to the Consolidated Financial Statements Notes to the Consolidated Statement of Income The income amount included in this caption for the reversal of pro visions totals DM 893 million. (1990: DM 792 million). Additional income is derived from exchange profits in con nection with ongoing purchase and payment transactions, mostly earned abroad; exchange losses against such income are shown under other operat ing expenses. In addition, income is derived from costs charged to third parties, from security sales, and from rentals and leases. DM 1,571 million of other operat ing income is attributable to prior years. In relation to a total output of DM 98,566 million (1990: DM 88,340 mil lion), the ratio to the cost of goods and services is unchanged at 50 % Notes to the Consolidated Financial Statements Both the increased average num ber of employees and the collective- bargaining wage and salary increases were the main reasons for the higher personnel expenses. The average number of employees shown above does not yet include the employees of the Eurocopter Holding group, except for the employees of the German subsidiary. The depreciation of fixed assets pertains with more than 50 % to Mercedes-Benz AG. The in crease in depreciation of leasing equipment results from the growth of the leasing business of our domestic and foreign finance companies. This caption comprises additions to provisions, maintenance expenses, administrative and selling expenses including sales commisions, rental and lease expenses, foreign exchange losses incurred in the normal course of business, freight-out, packaging, and expenses in connection with the currency revaluation at our Brazilian subsidiary companies. Overall, DM 85 million is applicable to prior years. Notes to the Consolidated Financial Statements The extraordinary income results from the sale of AEG KABEL Aktiengesellschaft and its subsidiaries. Extraordinary expenses are in connection with the withdrawal from the office and communications tech nology business of AEG. Notes to the Consolidated Financial Statements In millions of DM Income taxes Other taxes The decline in tax expenses is largely due to the expansion of the circle of companies integrated for tax purposes, AEG Aktiengesellschaft and the Dornier companies belonging to DASA AG. 1991 1,039 502 1,541 1990 1,814 612 2,426 Consolidated net income of DM 1,942 million has predominantely been earned by the Mercedes-Benz corporate division. Special tax depreci ation of fixed assets and tax-allowable write-downs of current assets have re duced net income only slightly. Also, future charges in connection with such write-offs will not be material. Under the presumption that the proposed dividend is ratified by the shareholders at the Annual General Meeting on June 24, 1992, the remu neration paid by the Group companies to the members of the Board of Man agement and the Supervisory Board of Daimler-Benz AG amounts to DM 15,030,509 and DM 2,012,742, respectively. Disbursements to former members of the Board of the Manage ment of Daimler-Benz AG and their survivors amount to DM 10,452,288. An amount of DM 87,815,046 has been provided for on the books of Daimler-Benz AG and of Mercedes- Benz AG for pension obligations to for mer members of the Board of Manage ment and their survivors. As of December 31, 1991, advances and loans to members of the Board of Man agement of Daimler-Benz AG amount to DM 179,418. Home loans included herein are not subject to interest; other loans and advances bear interest averaging 5.5 %. During the year, DM 129,784 was repaid. The stipulated maturities are ten years for home loans, and are not to exceed one year for other loans and advances. Independent Auditors' Report Independent Auditors' Report The accounting records and the consolidated accounts, which have been audited in accordance with professional standards, comply with the legal provi sions. With due regard to the generally accepted accounting principles, the consolidated accounts give a true and fair view of the assets, liabilities, financial position and results of operations of the Daimler-Benz Group. The business review report, which summarizes the state of affairs of Daimler-Benz Aktiengesellschaft and that of the Group, is consistent with the financial statements of Daimler-Benz Aktiengesellschaft and the consolidated financial statements. Frankfurt am Main, April 14, 1992 KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft Zielke Wirtschaftsprüfer (Certified Public Accountant) Dr. Koschinsky Wirtschaftsprlifer (Certified Public Accountant) Balance Sheet of Daimler-Benz AG Statement of Income of Daimler-Benz AG Statement of Non-Current Assets of Daimler-Benz AG Statement of Non-Current Assets of Daimler-Benz AG Statement of Non-Current Assets of Daimler-Benz AG Notes to the Financial Statements of Daimler-Benz AG Notes to the Financial Statements of Daimler-Benz AG Principles and Methods The financial statements of Daimler-Benz AG have been prepared in accordance with regulations set forth in the Commercial Code. The items, which are summarized in the balance sheet and the statement of in come, are separately shown in the notes. The figures are shown in mil lions of D-marks, and are prepared taking into account the appropriation of net income. Accounting Principles and Valuation Methods During the year under review, Daimler-Benz AG continued to apply the same accounting principles and valuation methods. Intangible assets and fixed assets are valued at acquisition costs which are reduced by scheduled depreciation allowances. The opportunities for special tax-deductible depreciation allowances are fully utilized. Scheduled fixed asset depreciation allowances are calculated generally using the following useful lives: 20 to 40 years for buildings, 10 to 20 years for site improvements, 3 to 10 years for technical facilities and machinery, other facilities as well as factory and office equipment. Buildings are depreciated using straight-line depreciation rates and - where allowable under the Tax Code - declining rates. Movable property with a useful life of four years and more is depreciated using the declining- balance-method. We change from the declining-balance-method to the straight-line method of calculating de preciation when the equal distribution of the remaining net book value over the remaining useful life leads to higher depreciation amounts. Depreciation allowances on fixed asset additions during the first and second half of the year are calculated using the full year or half-year rates, respectively. Low-value items are expensed in the year of acquisition. Investments in affiliated companies, in related companies, and in other long- term financial assets are valued at the lower of cost or market; non- interest bearing or low-interest bear ing long-term receivables are valued at their present value. Receivables - if non-interest bear ing - are reduced to their present value at the balance sheet date, taking into account all known risks. An allowance for doubtful accounts on a country-specific basis is deducted from the receivables in recognition of the general credit risks inherent in receivables. Treasury stocks are valued at the estimated selling price to employees of Daimler-Benz AG or corporate divi sions, respectively. Other securities are valued at the lower of cost or market value at the balance sheet date. Provisions for old-age pensions and similar obligations have, in accordance with the drop-down and capital contri bution agreements between Daimler- Benz AG and Mercedes-Benz AG, been made for pension claims of eligible employees and for pensioners retiring on or after July 1, 1989, of both com panies. The obligations for old-age pension benefits are actuarially deter mined using the Entry Age Actuarial Cost Method on the basis of an inter est rate assumption of 3,5 %. In com puting the provision for old-age pen sion benefits, we have included all eli gible employees, taking into account company-specific fluctuation proba bilities. Pension accrual starts with entry age and ends with the earliest possible age of retirement as defined in the Pension Reform Act 1992. Provisions for taxes and other provi sions are determined on the basis of reasonable business judgement. Liabilities are shown at their repayment amounts. Currency Translation Foreign currency receivables are translated in the financial statements at the bid price on the day they are recorded, or at the spot rate on the balance sheet date if lower; foreign currency payables are translated at the asked price on the day they are recorded, or at the spot rate on the balance sheet date if higher. Notes to the Financial Statements of Daimler-Benz AG Notes to the Balance Sheet of Daimler-Benz AG Intangible assets are unchanged at DM 7 million, and comprise mostly acquired EDP software. Fixed assets totaling DM 825 mil lion (1990: DM 811 million) pertain largely to the research centers in Ulm and Frankfurt am Main, the Daimler- Benz head office building in Stuttgart- Mohringen, the parcel of land on the Potsdamer Platz in Berlin, and the Lammerbuckel training center situ ated in the hills of the Schwabische Alb. Scheduled depreciation and spe cial tax depreciation amount to DM 130 million and DM 29 million, respectively (pursuant to Section 6 b of the Income Tax Act). The investments in affiliated and related companies amount to DM 17,602 million. Additions of DM 2,607 million pertain most of all to the purchase of shares in Sogeti S.A., Grenoble, and Metallgesellschaft AG, Frankfurt am Main, as well as to the capital stock increase at Daimler-Benz Coordination Center, Brussels. The equity investments in Bayerisch-Ham- burgische Beteiligungsgesellschaft mbH, Hamburg, and in Messerschmidt- Bolkow-Blohm GmbH, Ottobrunn, are offset by an equity disposal of like amount in Deutsche Aerospace AG, Munchen. In effect it concerns an exchange of a share in MBB against a share in DASA. The listing of the shareholdings of Daimler-Benz AG will be filed with the registry office at the county court house in Stuttgart under the number HRB 173. Because of increased market values, investments in securities should have been written up by DM 5 million in accordance with the value appreciation doctrine (Section 280, of the Commercial Code), but was omitted for tax reasons. Unscheduled write-downs of finan cial assets, amounting to DM 23 mil lion, pertain largely to write-downs of investments in affiliated companies. Notes to the Financial Statements of Daimler-Benz AG Receivables from affiliated companies mostly pertain to loans extended to domestic subsidiaries in the ordinary course of business. Receivables from related com panies pertain nearly exclusively to securities and fixed income debt instruments. Other assets include investments of liquid funds in debt instruments not traded on stock exchanges; they amount to DM 1,749 million. Also shown here are interest receivables and tax refund claims. For eventual sale to employees of Daimler-Benz AG and its corporate divisions, we purchased 116,457 com mon shares (par value DM 5.8 million = 0.25 % of total outstanding share capital) at an average purchase price of DM 665 a share during the year under review, that is to say 36,500 shares in January, 3,500 shares in April, 11,505 in May, 36,000 in July, 3,000 shares in August, 6,000 shares in September, and 19,952 shares in October. In October 1991, Daimler-Benz and its corporate divisions sold 184,754 shares to employees (par value DM 9.2 million = 0.4 % of total outstanding share capital) at a prefer ential price of DM 371 for each share (in the event that one share was pur chased) or DM 412.50 for each share (in the event that two shares were pur chased). On the balance sheet date, we held 42,766 common shares (par value DM 2.1 million = 0.09 % of total out standing capital stock), all of which were purchased during the year under review. Other securities largely pertain to fixed-interest-bearing debt instru ments. Because of increased market values they should have been written up by DM 2 million in accordance with the value appreciation doctrine, but were omitted for tax reasons. Cash amounting to DM 660 mil lion (1990: DM 1,714 million) consists almost exclusively of deposits in finan cial institutions; in addition, we held small amounts of cash on hand, deposits at the Bundesbank (German Federal Bank) and in post office accounts. Together with the liquidity invest ments that are shown in "other receiv ables and other assets" (under item 5), in "other securities" (under item 6), and in cash, Daimler-Benz AG's liq uidity totals DM 7,024 million (1990: DM 8,967 million). Notes to the Financial Statements of Daimler-Benz AG The capital stock is unchanged from last year. The Annual General Meeting of the 26th June 1991 decided on an authorized capital of DM 600 million, which can be made use of until June 30, 1996. It replaces the residual amount of DM 112 million left over from the previously authorized capital of DM 500 million. According to the information received by us under Section 20, Sub-Section 1 of the Company Act "Deutsche Bank Aktiengesellschaft", Frankfurt am Main, and "Mercedes Aktiengesellschaft Holding", Frankfurt am Main, each own more than 25 % of our capital stock. Paid-in Capital includes the "agio" (net proceeds in excess of par value) from previous capital stock increases, and from rights issues not taken up by shareholders. 11 Provisions for Old-Age Pensions and Similar Obligations The direct and indirect pension obligations of Daimler-Benz AG and of Mercedes-Benz AG are actuarially computed on the basis of an interest rate of 3.5 %. The pension provisions of both companies rose to DM 9.6 billion (1990: DM 9.3 billion). The assets of the Daimler-Benz Unterstiitzungs- kasse GmbH (Provident Fund) increased to DM 3.4 billion (1990: DM 3.1 billion). The combined total of DM 13.0 billion (1990: DM 12.4 billion) fully cover the pension obligations of Daimler-Benz AG and Mercedes-Benz AG. Notes to the Financial Statements of Daimler-Benz AG The provisions for taxes pertain largely to open years pending final assessment. The other provisions take into account, above all, risks arising from equity investments (including compensatory payments to outside shareholders), from contractual liabilities and pending litigation, from obligations in the personnel and social benefit area, as well as from antici pated losses arising from ongoing business transactions. In addition, provisions were made for maintenance expenditure planned for the year under review, but which cannot be carried out until the following year, as well as for expenditure for approved change-over, alteration and mainte nance projects. The liabilities to affiliated companies pertain to our domestic subsidiaries. They are largely due to liquidity transfers and intercompany financial transactions within the framework of centralized finance and liquidity management. D-mark commercial paper, issued for the first time, is shown under debentures at the issue price plus accrued interest up to the balance sheet date. Notes to the Financial Statements of Daimler-Benz AG Liabilities to financial institutions Miscellaneous liabilities pertain - and to related companies increased only due to invoicing. Long-term bor rowings declined to DM 16 million through scheduled repayments. In 1992, repayments will amount to DM 4 million. apart from obligations arising from amounts withheld from employees for income taxes and social security - mostly to loans extended by em ployees to the company in connection with the capital-formation program, and to interest accruals. We are liable for non-estimable compensatory payments, guaranteed by Deutsche Aerospace AG in favor of co-owners of Dornier GmbH for 1992 and future years. Non-estimable com pensatory dividends are also due in favor of outside shareholders of AEG Aktiengesellschaft and of Deutsche Aerospace AG. These obligations total DM 1,262 million; those to affiliated companies DM 652 million. The purchase order obligations for capital investments are within the scope of normal business activities. We are jointly and severally liable for two non-incorporated companies which have profit and loss transfer agreements with controlling entities, and for one partnership. Notes to the Financial Statements of Daimler-Benz AG The expenditures for taking over the loss of DM 451 of AEG Aktien gesellschaft is inclusive of a DM 10 million provision for outside AEG shareholders who have been granted annual compensatory payments by Daimler-Benz AG. The income remit tance of DASA AG amounts to DM 36 million; the provision for compensa tory payments of DM 6 million to DASA shareholders has been deducted from this. Within nearly unchanged net interest results, interest income rose, particularly from loans to affiliated companies. Interest expenses comprise credits to domestic subsidiaries in the amount of DM 840 million (1990: DM 730 million), particularly for their liquidity transfers to Daimler-Benz AG within the framework of the central ized finance and liquidity manage ment. Notes to the Financial Statements of Daimler-Benz AG 17 Other Operating Income This summary caption comprises, above all, income from charges for intercompany services and contract billings for completed research and development work. Also included herein is income from the reversal of provisions (DM 27 million) and profits from the sale of securities. Altogether, DM 117 million is attributable to prior years. The 1991 personnel expenses re flect, on the one hand, the continuing transfer of employees to other group companies, and on the other hand, the 6,7 % union-negotiated wage and sal ary increase. The decline in expenses for old-age pensions (before charges to Mercedes-Benz AG) is due to both, the non-repetition of special events in the previous years (consequences of the 1992 Pension Reform Act), and the re duction of previously established pen sion provisions which are connected with the 1991 increase of the fund assets of the Daimler-Benz Unterstiit- zungskasse GmbH (Daimler-Benz Providend Fund). The 1991 old-age pension expenses total DM 851 mil lion, including DM 818 million shown at Mercedes-Benz AG under this caption. 19 Amortization of Intangible Assets and Depreciation of Fixed Assets Depreciation allowances of DM 162 million (1990: DM 142 million) pertain with DM 22 million to fixed asset additions during the year under review. The write-downs of DM 38 million (1990: DM 30 million) are attributable with one half to the write-downs of equity investments, and with the other half to falling securities prices. This summary caption comprises, above all, administrative and mainte nance expenses, supplies, light and power, as well as expenses from inter company billings. Furthermore, this caption comprises additions to other provisions, and the interest portion from the allocation of pension ex penses to Mercedes-Benz AG, for which pension provisions are main tained at Daimler-Benz AG. Altogether, DM 25 million is at tributable to prior years. Notes to the Financial Statements of Daimler-Benz AG Daimler-Benz AG, as the control ling entity, is also liable for taxes of its affiliated companies with whom it has management and profit and loss trans fer agreements. These are mainly Mercedes-Benz AG, Deutsche Aero space AG, Daimler-Benz InterServices (debis) AG, and AEG Aktiengesell- schaft, which for the first time during the year under review, was included in the interlocking relationship with respect to corporate income taxes. The decline in income tax ex penses to DM 1,040 million (1990: DM 1,937 million) is largely due to the expansion of the circle of companies integrated for tax purposes by AEG Aktiengesellschaft, and by Dornier companies belonging to DASA AG. Net income for 1991 of DM 1,194 million is distributed one half to retained earnings and the other half to unappropriated profit. We shall pro pose, at the Annual General Meeting, to pay out, from the DM 605.4 million unappropriated profit (including DM 8.4 million profit brought forward) an amount of DM 604.6 million to share holders and to carry-forward DM 0.8 million to 1992. Tax-allowable depreciation of fixed assets does not materially affect net income. Moreover, future negative effects on net income will not be material. Under the presumption that the proposed dividend is ratified by the shareholders at the Annual General Meeting on June 24, 1992, the remu neration paid to the Board of Manage ment and the Supervisory Board amounts to DM 7,634,964 and DM 1,655,538, respectively. Disburse ments to former members of the Board of Management and their survivors to tal DM 10,452,288. For pension oblig ations to former members of the Board of Mangement and their survivors an amount of DM 87,815,046 has been provided for i.e. - in accordance with the drop-down and capital contribution agreement - largely at Mercedes-Benz AG. The names of the members of the Supervisory Board and the Board of Management are listed on pages 2 and 3. Proposal for the Allocation of Unappropriated Profit Proposal for the Allocation of Unappropriated Profit The annual financial statements of DaimlerBenz AG as of December 31, 1991, show an unappropriated profit of DM 605,449,144. It will be proposed to the Annual General Meeting that this amount be applied as follows: Independent Auditors' Report Independent Auditors' Report The accounting records, which have been audited in accordance with professional standards, comply with the legal provisions. With due regard to the generally accepted accounting principles, the financial statements give a true and fair view of the assets, liabilities, financial position and results of oper ations of Daimler-Benz Aktiengesellschaft. The business review report, which summarizes the state of affairs of Daimler-Benz Aktiengesellschaft and that of the Group, is consistent with the financial statements of Daimler-Benz Ak tiengesellschaft and the consolidated financial statements. Frankfurt am Main, April 14, 1992 KPMG Deutsche Treuhand Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft Dr. Muller Wirtschaftspriifer (Certified Public Accountant) Dr. Koschinsky Wirtschaftspriifer (Certified Public Accountant) Report of the Supervisory Board In the four Supervisory Board meet ings held last year and by means of written and verbal reports, we were informed in detail about the state of the corporation and principal matters of corporate policy, and discussed these issues with the Board of Man agement. In particular, discussions centered on questions in connection with the development of the company into an integrated technology group, as well as on trends in employment and results. Furthermore, we dis cussed important individual business transactions and made business decisions which, by law or company bylaws, had to be submitted to us for approval. We examined the financial state ments and the business review report compiled for both Daimler-Benz AG and the group, as well as the proposal for the application of unappropriated profit. The financial statements of Daimler-Benz AG and of the group as at December 31, 1991, including the business review report and the accounting principles used, were veri fied by KPMG Deutsche Treuhand- Gesellschaft AG, Wirtschaftspriifungs- gesellschaft, Frankfurt am Main, and found to be in accordance with the books and with the pertinent legal requirements. The Supervisory Board, in a joint meeting with the Board of Management on April 29, 1992, noted the result of the audit with approval. The result of the examinations made by the Supervisory Board and the auditors gave no cause for ques tioning. We approved the financial statements of Daimler-Benz AG as pre pared by the Board of Management; they are hereby ratified. We concur with the proposal of the Board of Man agement regarding the application of the unappropriated profit. The finan cial statements, the business review report and the external auditors' re port were available to the Supervisory Board. With the conclusion of the Annual General Meeting on June 26, 1991, Dr. Walter Seipp retired from the Super visory Board of Daimler-Benz AG, of which he had been a member since July 1981. During this time, important decisions were made concerning the re-structuring of the company from a motor manufacturer into an integrated technology group. His experience and perspicacious advice have been very valuable to us. We would like to take this opportunity to express our grati tude to Dr. Seipp. At the Annual Gen eral Meeting on June 26, 1991, Mr. Martin Kohlhaussen, Frankfurt am Main, was elected a member of the Supervisory Board to replace Dr. Seipp. At its meeting on November 6, 1991, the Supervisory Board of Daimler-Benz AG appointed Dr. Hans- Wolfgang Hirschbrunn, Mr. Ernst G. Stöckl and Prof. Dr. Hartmut Weule, previously deputy members of the Board of Management, as members of the Board of Management with effect from January 1, 1992. Dr.-Ing. E.h. Wilhelm Langheck died on March 20, 1992. He was a member of the Board of Management of Daimler-Benz AG from 1952 to 1976. With exemplary commitment, entrepreneurial acumen and deter mination, the deceased decisively con tributed to the rapid re-construction of the plants after the war as well as to the further development of the com pany. The high standards he set him self have always served as an example to us. We are deeply indebted to him. Stuttgart-Möhringen April 1992 The Supervisory Board Chairman Daimler-Benz in Figures Daimler-Benz in Figures Principal Subsidiaries of Daimler-Benz AG Principal Subsidiaries of Daimler-Benz AG Annual General Meeting: June 24, 1992 10.00 o'clock International Congress Center (ICC) Berlin Daimler-Benz AG BPA Postfach 80 02 30 D-7000 Stuttgart 80 Phone number 0711-1 79 22 87 Telefax number 0711-1 79 41 16 The inner pages of this report have been printed on environment- friendly paper bleached without the use of chlorine.