DAIMLERBENZ
Positioning for the future
We encounter products of the Daimler-Benz group every day.
Their identity, however, is not always as apparent as that of the
cars bearing the Mercedes star. Usually it would take a look
behind the scenes to recognise AEG Daimler-Benz Industrie's
microelectronics, rail systems, energy systems technology or
automation technology; the same applies to the products and
systems of Deutsche Aerospace and the services of debis.
We often make use of them without realizing who is behind them.
Daimler-Benz is an integrated technology group with
extensive competence in the field of transportation and traffic
systems. We are also active in fields interlinked by common
technologies and system structures. The common foundations of
the corporate units, their structures and the forms of cooperation
are part of the distinctive corporate identity of Daimler-Benz.
Similar to some of our products, our corporate units do not always
draw attention to themselves. To give you more of an insight into
"your" company than mere statistics and balance sheets can
provide and, above all, to show you how we are positioning for
the future - we have given our annual report a new look.
Contents
2 The Corporate Principles of
Daimler-Benz
3 Daimler-Benz Highlights
4 Letter to the Stockholders
and Friends of our Company
6 Board of Management
8 Report of the
Board of Management
8 Business Review
14 Operating Activities of the Group
42 Central Corporate Functions
62 The Daimler-Benz Share
65 Discussion and Analysis of the
Financial Situation
74 Financial Statements
95 Proposal for the Allocation of
Unappropriated Profit
96 Supervisory Board
98 Report of the Supervisory Board
99 Directors and Daimler-Benz Group
Representatives
100 Principal Subsidiaries and
Affiliated Companies
102 Daimler-Benz in Figures
The Corporate Principles of Daimler-Benz
Our work at Daimler-Benz serves
people and their environment.
We aim to offer the world's most
advanced products, systems and ser
vices.
This requires a continual committ
ment to technical, business, and social
innovation as well as a corporate cul
ture characterized not by compla
cency, but by creative unrest.
In a world increasingly complex,
with promising opportunities - but
also risks - even minor events can
take on consequences of major propor
tions. Therefore, we must carefully
weigh our every action.
We owe it to future generations to
use our natural resources prudently
and sparingly. This sense of respon
sibility must be reflected in all our
thoughts and activities throughout the
Group.
Our customers are the focus of
our efforts. We must strive not
just to meet their expectations, but to
exceed them. Cooperation and the
open exchange of know-how through
out all areas of our companies are cen
tral to meeting this goal.
Just as we are accountable to our
customers, we are equally responsible
to the companies' owners as well as to
the public. This means we must be
willing to provide feedback to others
and to assess ourselves openly and
honestly.
We aim to learn better and faster
than our competitors. To achieve
this, we need not only flexible organ
izational structures but also em
ployees who think entrepreneurially.
Key to our success are employees
with a sense of responsibility, inde
pendence, creativity, drive, teamwork,
and openness to new ideas. We there
fore promote every employee's per
sonal development to the best of our
abilities.
i Daimler-Benz does business in
all corners of the globe. We are
convinced of the advantages to every
one of open trade borders throughout
the world. Therefore, we view competi
tion as a welcome proving ground. The
measure of our success is the recogni
tion our work receives, and economic
success is an undeniable part of this
recognition.
Inherent to our philosophy is re
spect for other cultures. As an interna
tional company, we reject all forms of
discrimination. This principle applies,
moreover, to the filling of management
positions, where we will extend equal
opportunities to every employee
regardless of nationality.
Daimler-Benz is an integrated
technology group. This means
that our various business areas are
linked by cross cutting technologies
and system structures. We place a
special emphasis on our know-how
and experience in traffic management
systems and transportation technolo
gies.
Our core businesses include
vehicles for passenger and freight
transportation, rail systems, aerospace,
propulsion systems, defense systems,
automation, energy systems tech
nology, and information-technology
services. In these areas, Daimler-Benz
strives to be a world leader.
Furthermore, we are active in cer
tain specialized areas, such as applied
microelectronics, selected financial
services, and countertrading, where
we aim to be highly competitive. To a
great extent, these activities interlink
our core business areas.
Each of our business areas falls
under the responsibility of one of our
four corporate units. Thus, Mercedes-
Benz, AEG Daimler-Benz Industrie,
DASA, and Daimler-Benz InterServices
(debis) work together under the um
brella of Daimler-Benz, the managing
holding company of our group.
Our cooperation aims to:
Combine know-how and experi
ence to create new dimensions
- Responsibly promoting prog
ress for everyone
We are proud to continue a distin
guished tradition guided by these prin
ciples.
2 The Corporate Principles of Daimler-Benz
Daimler-Benz Highlights
Daimler-Benz Highlights 3
It is our intention to set new stand
ards in the quality and content of our
company reports. As an international
corporation, we wish to provide our
investors, customers and suppliers the
world over, as well as our employees,
with the highest possible standard of
information. Accordingly, we submit
this annual report to all those who
have links with our company and un
derscore why those links will continue
to be rewarding.
1993 was an extremely difficult
year, not only for Daimler-Benz.
Moreover, while the first signs of the
end of the deep economic recession
are beginning to appear, we cannot
expect a significant upturn in most of
our main markets before the end of
this year at the earliest. The role
which the unsatisfactory development
of wages, and monetary policy have
played in this is largely undisputed.
Conditions have not improved in
other areas as well. This also applies
to government policy on purchasing as
well as on the public sponsorship of
research and development, especially
in defense technology and the aero
space industry. This is despite the fact
that these key technologies for the fu
ture are needed more than ever if we
are to secure competitiveness - and
therefore also jobs - both in Germany
and throughout Europe.
We do, however, expect the eco
nomic recovery, which began taking
shape during the last quarter of 1993,
to continue in 1994. During the last
four years, we have built the right
foundations to benefit from this up
turn. In view of the declines suffered
in nearly all our fields of business dur
ing 1993, this may seem presump
tuous. However, my colleagues and
I are convinced that these difficult
times have confirmed just how
healthy the basic substance of
Daimler-Benz really is. We possess the
vitality and potential to assure a
healthy future for our company in
spite of the difficulties we have all
endured.
We have decided to propose the
payment of a dividend in the amount
of DM 8. Against the background of
business trends, and in view of the
considerable burdens we have placed
on our employees, many people may
consider it more appropriate not to
pay a dividend this year. However, we
believe our proposal to be appropriate
because we want our sharholders to
benefit from the long-term earnings
potential of Daimler-Benz which con
tinues to be very promising.
Productivity and efficiency in the
entire group, with regard to both labor
and capital, have increased signifi
cantly. The extensive and continuing
improvements made in all areas, espe
cially during the latter half of 1993,
have allready been reflected in sub
stantial success. We are optimistic
that this decidedly positive trend will
continue as we broaden and renew our
product ranges; particulary at the car
and commercial vehicle divisions of
Mercedes-Benz, we are very convinced
that we can, through internal growth,
reach our demanding goals using our
own resources.
This is consistent with the fact
that, like other industrial manufac
turers, we are reviewing possible
areas of cooperation with both compet
itors and suppliers in sectors periph
eral to our core production activities.
Indeed alliances, joint ventures and
new forms of cooperation will remain
on the agenda not just in this year but
also in the years to come.
Proud as we are of increasing pro
ductivity, we are not blind to the fact
that our competitors are also devoting
enormous effort, to improving effi
ciency and lowering costs. This means
that we must, and will, take further
measures. At times, these steps may
seem unconventional, and will involve
labor, and increasingly, capital. It also
means that we must continuously re
view the locations of our operations to
determine if they are compatible with
an internationally competitive produc
tion structure. The first consequences
of this scrutiny, such as the closure
and amalgamation of individual loca
tions, have already been widely
reported.
4 Letter to the Stockholders and Friends of our Company
We will resolutely continue to
globalize our activities to attain the
best positions on the world markets of
tomorrow. We shall also continue to
focus the core capabilities of our inte
grated technology group on the mo
bility of people and products. This ap
proach is exemplified by the strategic
restructuring of AEG Daimler-Benz In
dustrie. The future main focus of this
company will go well beyond electrical
and electronic engineering. Our corpo
rate unit's traditional areas of busi
ness will, in the future, be comple
mented by a Diesel Engines field of ac
tivity, uniting certain activities of MTU
Friedrichshafen and of Mercedes-Benz
AG. AEG Daimler-Benz Industrie will
also assume central responsibilities in
the area of microelectronics, which is
of paramount importance for the inte
gration of the group. In the other fields
of activity of this corporate unit, we
have built the platform to strengthen
competitiveness through industrial
partnerships and divestitures. Addi
tional details are contained in this
report.
We will continue to work reso
lutely and rapidly to ensure an optimal
alignment of our areas of operation.
This can be accomplished with a high
degree of precision, now that we have
improved and refined our internal
planning and control mechanisms.
In the future, it will enable us to
incorporate some important aspects
of the shareholder value concept.
This does not represent a break
with our long-term philosophy of re
sponsibility to our employees and to
the worldwide community. Your com
pany is strong because of its resolute
ness in pursuing its strategic goals
while at the same being able to take
quick and effective action wherever
necessary.
More changes will take place in
the future. We have taken the initial
offensive not with isolated measures,
but with a coherent, overall plan
which we are putting into effect reso
lutely, step by step. Some important
successes have already been achieved,
others will follow. This is a primary
reason why we have decided to
broaden your company's equity base
which will give us the financial
security for our further growth.
Due to a high level of non
recurrent expenditures again this
year, 1994 will not be easy. Even so,
we are expecting a significant im
provement. By 1995, we will once
again be able to speak of an overall
satisfactory trend in our earnings.
We are convinced that you, our
stockholders, will not be disappointed.
You can place your trust in this com
pany, because it is well prepared for
the future. Through our work over the
last few years, and thanks to the re
sources and motivation of the men and
women working for your company, we
have created the potential for world
wide growth, potential which others
can only envy. This is true not only of
our areas of individual activity, but
also - and increasingly - of our capa
bility to combine the knowledge at our
disposal and to provide integrated
systems solutions.
Letter to the Stockholders and Friends of our Company 5
The Board of Management of Daimler-Benz AG
EDZARD REUTER
Stuttgart
Chairman
DR. JUR.
HANS-WOLFGANG
HIRSCHBRUNN
Stuttgart
Personnel
DR. RER. POL.
GERHARD LIENER
Stuttgart
Finance and Materials
PROF. DR.-ING.
HARTMUT WEULE
Stuttgart
Research and
Technology
Retired from the
Board of Management:
(on May 26, 1993)
PROF. DR.-ING. E.H. DR. H.C.
Werner Niefer
Stuttgart,
Deputy Chairman
President and Chief Executive
Officer of Mercedes-Benz AG,
(Deceased September 12, 1993).
EDZARD REUTER
born 1928 in Berlin,
Member of the Board of Management
since 1973,
until 1979 responsible for Corporate
Planning and Organization,
from 1980 to 1987 responsible
for Finance,
since 1987 Chairman,
under contract until 1995.
DR. JUR. MANFRED GENTZ
born 1942 in Riga,
Member of the Board of Management
since 1983,
until 1990 responsible for Personnel,
since 1990 responsible for the
corporate unit Daimler-Benz
InterServices (debis),
under contract until 1995.
DR. RER. POL. GERHARD LIENER
born 1932 in Stuttgart,
Member of the Board of Management
since 1982,
until 1987 responsible for Subsidiaries
and Affiliated Companies,
since 1987 responsible for Finance
and Materials,
under contract until 1997.
JÜRGEN E. SCHREMPP
born 1944 in Freiburg,
Member of the Board
of Management since 1987,
until 1988 responsible for the
Commercial Vehicle Division,
since 1989 responsible for the
corporate unit Deutsche
Aerospace (DASA),
under contract until 1999.
DR. JUR. HANS-WOLFGANG
HIRSCHBRUNN
born 1933in Offenburg,
Member of the Board of Management
since 1990,
responsible for Personnel,
under contract until 1996.
ERNST G. STOCKL
born 1944 in Sulzburg,
Member of the Board of Management
since 1991,
responsible for the corporate unit
AEG Daimler-Benz Industrie,
under contract until 1996.
HELMUT WERNER
born 1936 in Köln,
Member of the Board of Management
since 1987,
until 1992 responsible for the
Commercial Vehicle Division,
since 1992 responsible for the
corporate unit Mercedes-Benz,
under contract until 1997.
PROF. DR.-ING. HARTMUT WEULE
born 1940 in Bitterfeld,
Member of the Board of Management
since 1990,
responsible for Research
and Technology,
under contract until 1996.
Board of Management
7
Report of the Board of Management
Business Review
Consolidated 1993 revenues of Daimler-Benz declined by 4% on a
comparable basis to DM 97.7 billion. The decrease in business was
caused by adverse world economic conditions. In all areas of the
group, action has been taken to reduce costs and improve produc
tion processes on a long-term basis. We shall continue to take this
action to ensure that the group remains profitable.
problems hindering production in Ger
many caused companies to reduce in
vestments. This also hurt economic re
construction in the new Federal states,
where both the speed and the quality
of economic growth lagged far behind
the high expectations.
Disappointing Economic Trends
Economic conditions were unfa
Daimler-Benz:
Revenues of DM 98 Billion
vorable to the Daimler-Benz group in
virtually all parts of the world in 1993.
Although modest improvements in the
USA and the United Kingdom contin
ued, hopes of an upturn in the other
Western European industrial countries
and Japan were not met. Even the
strong growth in various newly indus
trializing countries of Asia and Latin
America failed to stimulate the global
economy to any significant extent.
In Germany, the economic trend
was particularly disappointing. The
recession which began in the second
half of 1992, became worse during
1993, sparked by the low level of do
mestic demand and the decline in Ger
man exports due to adverse conditions
in major markets. Also, the strength
ening of the Deutschmark, against
most other European currencies, made
German export products more expen
sive. The reduced spending by German
consumers is attributable to the grow
ing burden of taxes and levies, cou
pled with rising unemployment. At the
same time, idle capacity and structural
The trend in business of the
Daimler-Benz group reflects the diffi
cult economic climate. Consolidated
1993 revenues totaled only DM 97.7
billion, which was 4% below 1992
when comparably calculated. Reve
nues in the European Union were also
reduced by 11 % to DM 58.4 billion,
while those in Germany also declined
by 11% to DM 38.3 billion. However,
in the US market business volume in
creased by 11 % to DM 16 billion and
in other markets by 7% to DM 23.4
billion.
Consolidated shared revenues of
the business units of Mercedes-Benz,
AEG, DASA and debis were 63%, 11 %,
19% and 7% respectively.
Mercedes-Benz Cars:
Successful Start for New C-Class
As a result of the recession pas
senger car sales declined in nearly all
Western European markets including
Japan. The positive market trend in
North America and various newly in
dustrializing countries overseas was
not able to compensate for the reces
sion, and accordingly worldwide de
mand for cars was reduced by 4%.
Note:
The Business Review is the combined audited
Business Review of Daimler-Benz AG and the
Daimler-Benz group.
8
Business Review
Even under these conditions,
passenger car sales of the Mercedes-
Benz corporate unit remained stable.
Mercedes-Benz worldwide sales of
cars in 1993 declined by just 2% to
508,100 units. The newly launched
C-class and the updated E-class, im
proved Mercedes-Benz' market condi
tions, although, as a result of the first
half of the year, annual registrations in
Germany declined by 12% to 209,900
vehicles. Foreign sales, totalling
287,400 units, remained stable.
In response to the generally unfa
vorable 1993 market situation and in
order to reduce inventory, Mercedes-
Benz reduced passenger car produc
tion by 9% to 480,600 vehicles.
Mercedes-Benz
Commercial Vehicles:
Market Position Maintained
Mercedes-Benz sold 253,900 com
mercial vehicles worldwide which was
a reduction of 8% from 1992. The de
cline is attributable to the recession in
Western Europe. Commercial vehicle
registrations in Germany declined by
25% to 82,200 units. Significant de
creases were also recorded in other
Western European markets. However,
Mercedes-Benz continues to maintain
its position as the leading manufac
turer of trucks over 6 tons, with a mar
ket share in Western Europe of more
than 30%.
Significant growth was experi
enced at Freightliner and most of the
other overseas subsidiaries, however,
even with this growth in foreign sales,
total commercial vehicle production
was reduced by 13% to 241,600
units.
New Corporate Structure for AEG
On December 8, 1993, the corpo
rate unit AEG completed its new cor
porate structure which will contribute
track-bound products and systems to
the core transportation business of the
Daimler-Benz group. It will also include
a microelectronics function, serving all
sectors of the group, along with the
traditional automation and power
transmission and distribution
business. The new structure will dis
solve activities which do not have a
strategic role within the group.
Due to the acquisition of Kiepe
Elektrik a significant increase in cus
tomer purchase orders was recorded
in the Rail Systems division.
The same development of cus
tomer purchase orders applied to the
Microelectronics field of activity and to
Postal Automation, while in Industrial
Automation and Electrotechnical Sys
tems and Components orders fell short
of 1992 levels. Overall, customer pur
chase orders rose slightly by 2% to
DM 12.1 billion.
Further Reduction in Capacity
at Deutsche Aerospace
The economic environment of the
Deutsche Aerospace corporate unit
continued to decline. Business in the
Aircraft division as well as the De
fense and Civil Systems division dete
riorated significantly due to the struc
tural crisis affecting the airlines and
the drastic cuts in spending by the
Federal Armed Forces. Incoming or
ders are insufficient to allow for full
utilization of capacity. Accordingly,
Deutsche Aerospace has initiated a
wide-range, cost-cutting and perfor
mance improvement program to create
a more efficient structure. The meas
ures include a reduction in personnel
through 1996 and also include plant
closures.
Effective January 1, 1993, the Fok-
ker group, in which a majority owner
ship was purchased on May 19, 1993,
was merged into the Aircraft division.
Incoming orders at Deutsche Aero
space, amounting to DM 15.6 billion,
were 8% below those of 1992.
debis Continues
to Increase Revenues
The debis corporate unit increased
its total output in 1993 by 20% to
DM 9.5 billion. The primary markets
were Germany and the USA.
There was a sharp increase in
business with customers outside the
Daimler-Benz group, which increased
from 79% to 83% as a proportion of
total revenue. Although further acquisi
tions were made during 1993, the in
crease in output of debis was attributa
ble to growth in existing areas of the
company. The Financial Services divi
sion experienced a substantial expan
sion in business, resulting from an
increase in international markets and
an expansion of the range of services
provided.
Difficult Employment Situation
At year-end, the Daimler-Benz
group employed 366,736 people (com
parably calculated including Fokker;
employees in 1992: 388,888). By Janu-
ary 1, 1994 the group workforce was
Business Review 9
reduced further to total 362,190. From
the end of 1993, 284,576 people
(1992: 302,464) were employed in
Germany. Mercedes-Benz employed a
total of 209,933 people at the end
1993, AEG employed 58,921, DASA
employed 86,086, and debis employed
8,812. Daimler-Benz AG employed
2,984, including 540 in group manage
ment functions, 1,274 in group re
search functions and 1,170 in service
areas for the corporate units and the
Mohringen location.
In the corporate units of the
group, the employment situation was
occasionally strained. The unsatisfac
tory market situation required reduc
tion in the size of the workforce, with
a view to safeguarding the competitive
strength of Daimler-Benz. Reductions
in personnel were necessary at the
AEG and DASA corporate units in
1993, along with reduced work shifts
in response to inconsistent production
capacities.
Purchasing Volume
at approximately DM 57 Billion
Despite reduced production in
Germany and lower investments than
in the previous year, the volume of
purchases due to the first time inclu
sion of Fokker, increased from 1992.
Worldwide purchases of goods and
services totalled DM 56.7 billion
(1992: DM 55.7 billion). Of these pur
chases, Mercedes-Benz accounted for
66%, 10% by AEG, 18% by Deutsche
Aerospace and 6% by Daimler-Benz
InterServices.
During 1993, numerous cost re
duction projects were initiated by the
Company which resulted in substan
tial efficiency gains at both the manu
facturing plants as well as our
suppliers.
Global sourcing activities in
creased during 1993. The "Purchasing
Drive in the New Federal States" initi
ated by West German companies dur
ing 1992 had excellent results. Impor
tant contributions were made by the
companies of the Daimler-Benz group,
who increased their purchases in the
new Federal States to more than DM
800 million (1992: DM 600 million).
Investment in Property, Plant
and Equipment at DM 5.4 Billion
Substantial funds continued to be
deployed in 1993 to safeguard the fu
ture of Daimler-Benz. Investment in
property, plant and equipment totalled
DM 5.4 billion. During 1992, invest
ments totalled DM 8 billion. Also in
1993 additions to intangible assets
totalled DM 0.2 billion, and deprecia
tion and disposal of property, plant
and equipment and intangible assets
totalled DM 6.3 billion.
In the Commercial Vehicle division,
European investment focused on the
introduction of environment-friendly
engines and the light truck model up
date. Over DM 1 billion was expended
worldwide to maintain the compet
itiveness of the Mercedes-Benz com
mercial vehicle range and to take ac
count of market-specific requirements.
Investment in property, plant and
equipment additions totalled DM 0.6
billion for AEG , DM 1.0 billion for
DASA, DM 0.2 billion for debis, and
DM 0.1 billion for the holding com
pany.
Additions to leased equipment to
talled DM 5.9 billion (1992: DM 5.2
billion). Borrowing for leasing and
sales financing activities totalled
DM 13.7 billion (1992: DM 11.0
billion).
Research and Development Projects
amount DM 9 Billion
A total of DM 9 billion (1992: DM
9.6 billion) was expended on research
and development of which develop
ment work for third parties, primarily
at the Deutsche Aerospace corporate
unit, accounted for DM 4.1 billion.
The investment in property, plant
On October 19, 1993, the Daimler-
and equipment was for new produc
tion technologies, new products and
new strategies. The largest share of to
tal investment, DM 2.6 billion (1992:
DM 4.2 billion), was deployed by
Mercedes-Benz. In the Passenger Car
division, the preparations for produc
tion of the new C-class and E-class, the
introduction of 4-valve gasoline and
diesel engines and the change-over to
water-based paints consumed DM 1.3
billion of the total investment.
Benz Ulm Research Center was com
pleted at a cost of DM 270 million,
which can accommodate 1,000 em
ployees. At the center various re
search projects for the corporate units
and development on key technologies
is performed. The spectrum of activ
ities includes but is not limited to mi
croelectronics, functional and struc
tural materials, production research
and the environment, energy research
and information technology.
The Mercedes-Benz corporate unit
expended DM 3.2 billion (1992: DM
3.1 billion) on passenger car and com
mercial vehicle development.
10 Business Review
In the Passenger Car division, the
At Deutsche Aerospace, DM 4.8
190 compact series was replaced in
June 1993 by the new C-class. The
C-class has been newly engineered
throughout and offers significantly
more leg room. In June 1993, the
E-class was given a new look, incor
porating styling features from the
S-class and C-class. With a new genera
tion of four-valve gasoline and diesel
engines, we are giving our C-class and
E-class customers noticeably more
power and comfort, coupled with low
fuel consumption. At the Frankfurt In
ternational Motor Show, we presented
our VISION A 93 study, with which we
intend to enter a new market segment
with high growth potential. VISION A
is the foundation for development
work on the new Mercedes-Benz
A-class.
The Mercedes-Benz Commercial
Vehicle division presented new,
environment-friendly engines in 1993
which are being successively phased
into production. A variety of product
improvements have made the vehicle
range more attractive and even more
closely tailored to customer require
ments.
billion (1992: DM 5.5 billion) was
spent on research and development; of
which projects carried out for third
parties accounted for DM 3.9 billion.
In the Aircraft division, development
work in the Airbus and Fokker pro
grams continued. Further areas of ac
tivity included the EF 2000 European
Fighter Aircraft and the Tiger helicop
ter development program. In Space
Systems, research and development
focused on the Cluster, ERS-2, Polar
Platform and Ariane programs. In the
Defense and Civil Systems division,
further development was carried out
on anti-aircraft systems and the Milan
and Hot anti-tank systems. In the non-
military sector, digital transmitting
technology was the focus in the Eu
reka program. In Propulsion Systems,
a considerable investment was ex
pended on improving the efficiency
and service life of the PW 2000 jet en
gine range. In the field of medical sys
tems, a completely new lithotripter
system was introduced to the market.
Consolidated Net Income
Falls to DM 0.6 billion
In 1993, AEG spent DM 764 mil
The net income of the Daimler-
lion (1992: DM 726 million) on re
search and development. Central areas
of research activity included systems
engineering, postal automation sys
tems, a new generation of rail cars,
local public transport concepts and
products, semiconductors and vehicle
electronics.
Benz group in 1993 totalled DM 0.6
billion (1992: DM 1.45 billion). The de
cline of DM 0.8 billion was due to sig
nificant declines in operating results
in all the corporate units; however,
there were also some promising devel
opments. Adapting certain valuation
and accounting methods to tax regula
tions and US accounting standards led
to an extraordinary income of DM 2.6
billion.
Extraordinary results of DM 7.4
billion (1992: DM 4.5 billion) included,
among others, a book profit of DM 1.7
billion from the sale of securities. Re
sults from ordinary business activities
were a loss of DM 3.3 billion (1992:
DM 2.0 billion) is the fundamental
basis for the profit/loss contributions
of the operating units. Included in the
results from ordinary business activ
ities are costs arising from structural
measures amounting to DM 3.5 billion.
The automotive sector incurred a
loss of DM 1.3 billion (1992: a profit of
DM 2.3 billion). This was mainly due
to decline in revenues in the first half
of 1993 and substantial restructuring
expenditures of DM 1.7 billion. The
foreign companies in the automotive
sector made a larger overall contribu
tion than in the previous year.
The contribution of AEG in 1993
fell sharply from the small positive re
sult achieved in the previous year to a
loss of DM 0.9 billion, as a conse
quence of economic factors and struc
tural expenditures of DM 0.6 billion.
Particularly the fundamental restruc
turing in the Rail Systems field of ac
tivity, structural measures in Automat
ion and in electric motors made large
demands on resources.
The negative result of Deutsche
Aerospace increased further in 1993
to DM 1.0 billion and was considerably
worse than the 1992 loss of DM 0.5
billion. The primary reasons for this
negative result were due to declining
revenues in Defense and in Space Sys
tems, due to reductions in government
budgets, and the recording of provi
sions for structural adjustments of
DM 1.1 billion. Further adverse influ
ences were the reduction in deliveries
to international airlines and the
first-time inclusion of Fokker, where
negative results were posted.
debis made a positive contribution
to the Daimler-Benz consolidated re
sult of DM 0.4 billion (1992: DM 0.3
billion). Included in the positive contri
bution was a negative contribution
from Sogeti and additional restructur
ing expenditures in the Systemhaus
group.
The net interest expense of the
leasing and sales financing companies
totalled DM 0.3 billion (1992: DM 0.4
billion). Consolidated net interest in
come, excluding the above expenses,
amounted to DM 0.8 billion (1992: 1.0
billion). The first-time inclusion of Fok
ker and lower interest margins were
the primary reasons for the decline in
net interest income.
Sound Balance Sheet Structure
Due to the continued increase in
leasing and financing business, the
balance sheet total increased by al
most 6% to DM 90.9 billion . On the
asset side, both non-current and cur
rent assets increased. Liabilities rose
due to the first-time inclusion of
Fokker and the higher financing re
quirements of the financial services
business, while stockholders' equity
was reduced due to the inclusion of
Fokker, having been valued according
to Daimler-Benz accounting policies.
Excluding the financial services busi
ness, which is primarily financed by
debt, the equity ratio declined from
28% to 26% and the proportion of non-
current assets in relation to stock
holders' equity was reduced from 81%
to 78%. Long and medium-term capital
amounted to 60% of the consolidated
balance sheet total.
Allocation of Earnings
Net income of Daimler-Benz AG
totalled DM 390 million (1992: DM
703 million excluding extraordinary
income). This amount contains extra
ordinary income of DM 1,722 million
(1992: DM 4,490 million) which re
sulted from adjustments to valuations
for tax regulations and U.S. accounting
principles, particularly relating to pro
visions, inventories and receivables.
The profit transfer agreement was
slightly negative for Mercedes-Benz
including extraordinary income, and
debis, however, AEG and Daimler-
Benz Luft- und Raumfahrt-Holding AG,
the parent company of the DASA
group, incurred considerable losses.
At our Annual General Meeting on
May 18, 1994, we shall propose that a
dividend of DM 8 be paid per share of
DM 50 par value (1992: DM 13). The
total dividend payment will amount to
DM 373 million.
Outlook
The first signs of a recovery in the
global economy are visible at the
beginning of the 1994 financial year.
Although the upward trend of the US
economy is continuing, for Europe
- with the exception of the United
Kingdom - a slight recovery is the
most that can be expected. The same
also applies to Japan, although the gov
ernment is mounting large-scale eco
nomic programs to stimulate the econ
omy. In Germany, the recession has al
ready bottomed out, but a significant
upturn in 1994 is unlikely. The first
impetus should come from exports,
not the least due to the devaluation of
the Deutschmark against major cur
rencies in the first months of the year,
while domestic demand will be slow to
gain momentum.
12 Business Review
Sales of Mercedes-Benz passenger
cars in the first two months of 1994
significantly exceeded the low level of
1992. Commercial vehicle business in
Europe was still unsatisfactory and in
view of economic conditions will be
very slow to rally. The growth of our
markets in North America seems
likely to continue. We do not expect
vehicle demand to recover to any sig
nificant extent in Japan. Prospects in
the newly industrializing countries in
Asia and Latin America continue to be
promising.
In order to maintain the compet
itiveness of our German-based opera
tions, the measures to increase pro
ductivity will be accelerated.
Mercedes-Benz will also be expanding
its global market presence and its
worldwide activities in the areas of
purchasing, manufacturing, research
and development.
AEG Daimler-Benz Industrie
expects its Rail Systems, Micro
electronics and Automation fields of
activity in particular to record in
creased sales. However, the intended
sale of the Domestic Appliances field
of activity and the power meters and
lighting systems sectors will mean
that overall, incoming orders and sales
of AEG will be lower than in 1993. In
addition, the restructuring of the AEG
group will involve further industrial
activities of the Daimler-Benz group
being transferred to AEG Daimler-
Benz Industrie.
Deutsche Aerospace expects to
hold its revenues at the low level of
1993 in the current financial year. A
considerable increase is expected in
the Space Systems division and a
small increase in the Propulsion Sys
tems division. In the Aircraft division,
positive results can be expected only
from deliveries of the Dornier 328,
which began at the end of 1993. In the
Defense and Civil Systems division,
increase of production in the Stinger
program to the target volume will
offset declines in other projects.
The comprehensive program to cut
costs and improve performance
launched by Deutsche Aerospace in
1993 will continue through to 1996.
Daimler-Benz InterServices ex
pects favorable development prospects
in the services sector and anticipates
an increase in its total output and the
share of business with customers out
side the group. In those areas adver
sely affected by the recession, debis
will take measures aimed at stabiliz
ing business. Cost-cutting and effi
ciency improvement programs will
continue in 1994.
Our joint ventures will achieve
cost savings by concentrating on their
core areas of activity. Increased tech
nology transfer with other companies,
new marketing strategies and develop
ment of solutions to transport prob
lems through traffic management sys
tems are focal activities of these joint
ventures.
Despite the prevailing adverse
economic conditions, we believe the
Daimler-Benz group will achieve an in
crease in business as well as signifi
cantly improve the earnings trend.
Business Review 13
Even our youngest ''customers" can rely on us because the engineers of Mercedes-Benz have
always worked hard for safety. Always one step ahead, the Mercedes-Benz safety engineers
invented the crash test and such trend-setting safety features as the crumple zone and the
safety passenger cell. New Mercedes passenger cars continue to set new standards in the field
of active and passive safety.
Corporate Unit Mercedes-Benz
Consolidated sales of Mercedes-Benz for the 1993 financial year
totalled DM 64.7 billion (- 3%). We took the opportunity in the diffi
cult business environment which characterized this year to make
key decisions for the company. Bold measures were implemented
to make our organizational structures and processes more efficient
in order to safeguard the competitiveness of our German-based
operations. We expanded the global presence of our company and
laid the foundation for future growth by carrying out a strategic
restructuring of our product policy.
Sales Crisis in
West European Automotive Sector
The automotive sector was one of
the areas hardest hit by the recession
in Western Europe.
Passenger car sales suffered in
nearly all Western European markets
as prevailing economic uncertainty de
pressed consumer spending. This was
not offset by the more positive market
trend in the USA and various newly
industrializing countries. With a pro
nounced weakening in the Japanese
market as well, the world wide de
mand for passenger cars diminished
by 4% and thus to its lowest level
since 1987.
Low investment confidence and
growing surplus capacity in the truck
ing industry have slowed the replace
ment process in European commercial
vehicle fleets. Replacement volume
had been especially dynamic in pre
vious years, due to European integra
tion and German unification. During
1993, purchases were postponed due
to the unfavorable overall economic
outlook causing a sharp drop in sales
in major European commercial vehicle
markets. In contrast, the upturn in the
USA grew stronger, especially the
heavy duty trucks. Strong market
growth was also achieved in various
newly industrializing countries in
South America and Asia.
The Western European automotive
sector, faced with unfavorable sales
trends at home, was forced to notice
ably cut production of both passenger
cars and, to a greater extent, commer
cial vehicles.
Competition on prices and terms
in the commercial vehicle sector inten
sified further, and price pressure in
creased sharply even in the luxury
segment of world passenger car mar
kets as a result of growing surplus ca
pacity.
The entire European automotive
sector was forced to implement far-
reaching measures to bring about last
ing cost reductions. 1993 was marked
by plummeting profits, reduced work
ing hours and workforce reductions
throughout the industry.
Mercedes-Benz:
Sales of DM 65 Billion
With sales revenue of DM 64.7 bil
lion (1992: DM 66.5 billion), Mercedes-
Benz held its own in an extremely
harsh business environment. While
our volume of business in Western
Europe fell by 12% to DM 38.3 billion
as a result of the recession, we were
able to boost sales revenue by 22% to
DM 10.0 billion in the United States,
thanks in part to a strengthening of
the dollar against the Deutschmark.
Growth was also achieved in South
America, Eastern Europe and, above
all, in the newly industrializing
nations of Asia. In Japan, conversely,
we could not avoid a drop in sales
revenue of 10% to DM 2.5 billion.
In the Passenger Car division, rev
enues totalled DM 38.4 billion, down
3% from the previous year. Revenues
of the Commercial Vehicles division
were reduced by 2% to DM 26.2
billion.
16 Mercedes-Benz
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The Mercedes-Benz range extends from sleek SL convertibles for the sporty individualist to
E-class station wagons catering to the family. For all their diversity, the different models have
in common the typical Mercedes-Benz qualities which are prized by our customers the world
over. Children, in particular, appreciate the advantages of the practical and versatile E-class
station wagon.
Mercedes-Benz Passenger Cars:
Market Position Strengthened
by C and E-Classes
The unit sales corresponding to
the consolidated revenues fell during
1993 to 508,100 (1992: 520,200) pas
senger cars.
With the introduction of the new
C-class and the updated E-class in
mid-1993, we were able to increase
our market position substantially in
Germany. S-class sales were affected
by the recession in Germany, although
less than the rest of the market, the
S-class therefore improving the mar
ket share within its segment. Due to
the weak first half of the year, new
registrations of Mercedes-Benz cars, at
209,900, failed to reach the previous
year's volume of 239,000 vehicles.
We sold 289,300 passenger cars
abroad and were able to maintain
the strong volume of 287,400 unit
sales, we achieved the previous year.
While unit sales fell in Western Eu
rope and Japan as a consequence of
the recession, growth was seen in the
Asian newly industrializing countries,
Eastern Europe and Latin America.
Since the new C-class could not be de
livered to American customers until
year's end, sales in the US market also
fell to 61,900 (1992: 63,300) pas
senger cars.
In response to the generally
unfavorable demand situation in the
1993 financial year and in order to
reduce inventories, Mercedes-Benz
cut passenger car production by
9% to 480,600 vehicles.
Mercedes-Benz Commercial
Vehicles: Market Position
Maintained
Our commercial vehicles also suf
fered from the difficult business condi
tions in Western Europe. Worldwide
we sold 253,900 vehicles during 1993.
This amounts to 21,200 fewer units
than in the previous year, a drop of 8%.
Following the excellent years of
1991 and 1992, our new registrations
in Germany fell by 25% to 82,200
commercial vehicles.
Double-digit declines were also
posted in other Western European
countries, with the result that unit
sales in Western Europe outside Ger
many lagged 14% behind the previous
year's level. Despite greatly intensifed
competition, we were able to maintain
our position as the leading manufac
turer of trucks over 6 tons, with a 30%
market share in Western Europe.
We achieved strong results in
overseas markets. Our subsidiary,
Freightliner, made a major contribu
tion to that success. With sales of
36,800 (1992: 27,400) Class 8 trucks
(upwards of 15 tons), Freightliner was
able to improve the position of market
leader which it attained the year be
fore, with a share of almost 24% in
this fiercely contested market.
A total of 241,600 (1992: 277,300)
commercial vehicles rolled off the as
sembly lines at the 46 production sites
of the Mercedes-Benz group. Produc
tion volume in Germany had to be cut
by 26% to 121,200 vehicles due to the
market situation in Western Europe.
Our foreign plants set a new produc
tion record, of 120,400 vehicles, with
an increase of 7%.
Increased Competitiveness
Through New Structures
Faced with the difficult market sit
uation worldwide, we had to intensify
our efforts to improve competitiveness
in all areas of the company.
We have set up new performance
centers throughout Mercedes-Benz AG
which will help to achieve this goal.
We have strengthened our internal
management structures and organiza
tion through extensive delegation of
decision-making and responsibility.
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As part of the vigorous restructuring
which we implemented during 1993,
the number of hierarchical levels and
the number of positions at each level
were sharply reduced. Accordingly
processes and decision-making chains
are both faster and more flexible.
We will increase the capacity utili
zation efficiency at our plants, thereby
improving the productivity of the capi
tal deployed, by new methods of de
coupling working times from oper
ating times. With the introduction of
teamwork and the optimization of
work processes, productivity and the
quality of labor have increased.
Reductions in the Workforce
The weakness in important mar
kets and growing pressure to reduce
costs necessitated reductions in the
workforce at Mercedes-Benz, as was
the case throughout the industry.
At year's end, the group had
209,933 (1992: 222,482) employees
including 9,992 (1992: 10,752)
trainees and apprentices. At
Mercedes-Benz AG, the workforce fell
by 9,982 to 159,098 employees. Re
ductions affected the factories as well
as the administrative headquarters
and sales organization.
Further reductions in the work
force to protect the international com
petitiveness of our German-based op
erations are unavoidable. Given the
continued high level of surplus capac
ity in Western Europe, the Commercial
Vehicle division will be most affected
by future cutbacks.
20 Mercedes-Benz
Signal for the Future
At the end of 1993, the Board of
Management and the labor council
concluded an internal agreement re
garding improved competitiveness and
workforce reductions at Mercedes-
Benz AG. This agreement opened the
way both for economically viable pro
duction of the new A-class at the
Rastatt plant and for a socially accept
able implementation of further neces
sary reductions in personnel. This
means that measures already initiated
to boost productivity can be continued
in 1994.
This agreement will strengthen
our production operations in Germany
and the long-term profitability of the
company.
TANDEM - A New Concept
for Relations with Suppliers
We focused on relations with the
supply industry using an innovative,
comprehensive plan developed during
1993. This new plan is called TANDEM
to reflect the joint goal of increasing
the competitiveness of all parties.
Within the framework of TANDEM we
involve our partners more deeply than
ever before in our company's internal
processes. The experience and ideas of
our suppliers are utilized even more
intensively than in the past, for mu
tual gain.
Purchasing volume at DM 39 bil
lion, was 4% below the previous year's
level. As a result of our increased ac
tivities in new purchasing markets,
more purchases were made from out
side Germany. Since some TANDEM
projects led to significant cost savings
in the year under review, price trends
were slightly down.
Customer satisfaction with Freightliner trucks is the foundation of our success in the newly
emerging NAFTA region. Our Freightliner subsidiary widened its lead in the US market for
Class 8 trucks (upwards of 15 tons) with an increase in its market share to 24%.
During 1993 sales of Freightliner increased by approximately 40% to 45,800 trucks.
(see following pages)
DM 2.6 Billion Invested
in Property, Plant and Equipment
To protect our competitiveness in
the automotive field well into the
future, we pursued vigorously our
planned investment projects despite
the strained profit situation of the
company.
In the Passenger Car division the
focus of our investment budget of DM
1.3 billion was on preparations for pro
duction of the new C and E-classes,
the gasoline and diesel engines with
4-valve technology and the conversion
to water-based paints.
In the Commercial Vehicle divi
sion, our European investments were
concentrated on converting our model
range to environmentally compatible
engines and the updating of the light
duty trucks. Worldwide we spent over
DM 1 billion to enhance our model
range with even greater precision to
the complex demands of the different
markets.
In order to maximize the sales
potential for our passenger cars and
commercial vehicles in Eastern Eu
rope, the Commonwealth of Indepen
dent States, China, South East Asia
and South America, we have increased
our efforts to set up sales and service
organizations in those countries.
New Passenger Car Plant
in the USA
In September, 1993, the decision
was made to build a new Mercedes-
Benz plant in Tuscaloosa, Alabama, in
the southern United States. The plant
will manufacture a sports utility vehi
cle with 4-wheel drive. This will give
us a foothold in a new market segment
with exceptional growth prospects.
This vehicle will represent a new se
ries in the Mercedes-Benz range. The
favorable sales prospects in the United
States, as well as the intensity of the
competition in this segment led us to
choose this location.
Expansion of Our
Worldwide Sales Network
Production of the A-class
in Rastatt
We further strengthened our sales
organization with investments of DM
224 million (1992: DM 219 million).
Approximately half of these funds
were used to expand and modernize
our sales and service organization in
Germany, with special emphasis on
the new Federal states.
After long and difficult negotia
tions with the labor council, the Board
of Management decided to produce the
new A-class in Rastatt beginning in
1997.
The decision in favor of the loca
tion in Germany was made possible by
the volume of cost reductions agreed
upon by the labor council and manage
ment.
The A-class concept offers com
pact outer dimensions with extremely
generous and variable use of interior
space, as well as a level of safety un
matched in its class. With this vehicle,
Mercedes-Benz has redefined the seg
ment of sub-compact cars.
Mercedes-Benz 21
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R &D Expenditure
DM 3.2 Billion
In order to react even faster to the
evolving demands of our customers
worldwide, we have implemented new
forms of interdisciplinary project man
agement in our research and develop
ment departments. The supply indus
try, through the TANDEM plan, was
also integrated in this process at a
very early stage.
The year's outstanding model in
novation was the new C-class, which
was presented to the public in June,
1993, in four different model versions.
We also refined the E-class consid
erably, with a model update in June.
The Mercedes-Benz commercial vehi
cle range was also upgraded during
1993 with new, environmentally com
patible engines and various product
improvements.
Outlook
There is no significant improve
ment in sight in the business condi
tions for our company in 1994.
Although we expect continued
growth in our United States markets,
the economic weakness in Europe will
improve at best, only gradually. Nor
can any significant recovery in Japa
nese automotive demand be expected,
although the newly industrializing na
tions in Asia and Latin America show
good prospects.
In order to keep our German based
operations competitive, we must in
crease the measures already imple
mented to boost productivity.
24
AEG Daimler-Benz Industrie
We will actively expand the global
market presence of our company, as
well as the worldwide activities of
Mercedes-Benz in the areas of pur
chasing, manufacturing, research and
development.
All our efforts in the Passenger
Car division are directed at strength
ening our position as manufacturers of
exclusive vehicles by expanding our
range to include products for new,
growing market segments.
Our foremost goal in the Commer
cial Vehicle division is to offer individ
ualized solutions to the transportation
needs of our extremely diverse world
wide customer base.
Corporate Unit AEG Daimler-Benz Industrie
Adverse economic conditions had a substantial impact on business
at AEG. Although incoming orders rose due to an increase in for
eign business, sales revenue fell below the previous year's level.
We intend to align future business policy at AEG more closely to
the strategic position of the Daimler-Benz group and we have
already launched wide-ranging structural programs. The goal of
these measures is to close loss-making activities and to strengthen
the strategic basis and earnings capability of the future fields
of activity.
Further Decline in Business
in the West German
Electrical Engineering Industry
1993 saw a fall of almost 7% in
the output of the West German electri
cal engineering industry. The decline
was caused by the adverse conditions
for foreign business, the fall in de
mand in Germany and the economic
problems facing customers in impor
tant areas such as mechanical engi
neering, road vehicle building and the
chemical industry. Sales and incoming
orders fell sharply from their levels of
the previous year, by 5% and 6%,
respectively. The fall in business was
particularly marked in Germany, while
AEG is playing its part in ensuring that Shanghai's school children are punctual. Constructed
by the "German Shanghai Metro Group" consortium headed by AEG, the metro system will be
extended in stages in the coming years. In May, 1993 operation commenced on the first seven-
kilometer section of track. The metro project is a major milestone in the development of an
efficient infrastructure for this fast-growing Southern Chinese metropolis. (see following pages)
foreign business declined by almost
1 %. Further falls in capacity utilization
made it necessary to cut back produc
tion and drastically reduce workforce
levels by almost 8%.
High Level of Incoming
Orders from Foreign Markets
Incoming orders in the AEG group
totalled DM 12.1 billion, 2% over the
comparable figure for the previous
year. The increase was generated
solely by the foreign markets,
where demand increased by 16% to
DM 5.3 billion. Orders from Germany
were down by 7%.
The largest increase in orders of
25% was recorded in the Rail Sys
tems field of activity. This was attribu
table especially to large orders from
abroad, for example for a city rail sys
tem for Kuala Lumpur, Malaysia, a
monorail system for Newark Airport in
the USA, and a mass transit system
for the City of Toronto in Canada.
A positive trend was also recorded
in the Microelectronics field of activ
ity, largely due to a marked increase
in orders at TEMIC TELEFUNKEN
microelectronics.
The Automation field of activity
experienced a substantial loss of mo
mentum, particularly in the area of in
dustrial automation, due to weak do
mestic demand. However, postal auto
mation showed a positive trend due to
a high level of incoming orders from
foreign markets.
Orders in the Electrotechnical Sys
tems and Components field of activity
failed to match the levels of the pre
vious year. The components division
was particularly hurt by the recession.
Sales Down on the Previous Year
Restructuring the Group
Sales revenue of the AEG group at
DM 11.0 billion were 3% less than the
comparable figure for the previous
year. In Germany revenues fell by 3%
to DM 6.5 billion; revenues in
foreign markets also fell by 3%, to
DM 4.5 billion.
The growth in sales in Rail
Systems resulted largely from the in
voicing of projects in Germany and
from the first-time consolidation of
Kiepe Elektrik GmbH.
The increase in sales in the Micro
electronics field of activity was based
on the good performance by TEMIC
TELEFUNKEN microelectronics in the
area of semiconductors and vehicle
equipment.
In Automation, revenues fell
slightly short of the previous year's
level, since the recession led to a fall
in business particularly in the indus
trial systems division.
The Electrotechnical Systems and
Components field of activity presented
a divided picture. While the Energy
Systems Technology division achieved
a slight growth in sales, business in
the Components division was below
the previous year's level due to the
strong impact of the recession.
In Domestic Appliances, falling
foreign business resulted in a slight
decline in sales from the 1992 level.
The business goals of AEG will in
future be aligned more closely to the
strategic positioning of the Daimler-
Benz group. AEG will in the future
comprise only those business
activities
• which contribute track-bound
products and systems to the core
transport business of the Daimler-
Benz technology group,
which offer strategically important
microelectronics technology to the
group and the external market,
< which are responsible for indus
trial tasks within the group which
do not strictly belong to the auto
motive or aerospace sectors, along
with those which have evolved
from AEG's traditional business
focus.
The restructuring of the group will
also involve divesting activities which
lie outside the strategic core busi
nesses of AEG and the Daimler-Benz
group, such as domestic appliances,
lighting systems and power meters.
The joint venture formed with
Electrolux in 1992 involving a joint
production structure - initially for wet
appliances - fulfilled the expectations
of both partners. However, 1993 saw
changes in the operating environment
of AEG Hausgerate: the continuing
concentration in the retail trade
throughout Europe, the joining to
gether of competitors as well as the
appreciation of the DM relative to
other currencies.
AEG Daimler-Benz Industrie 25
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It was decided at the end of 1993
that AEG would withdraw from domes
tic appliances. A preferential offer was
given to Electrolux to acquire all opera
tions in this field of activity.
Structural Program
for AEG Rail Systems
The reorganization of the Rail Sys
tems field of activity is a central ele
ment in the overall AEG structural
program. Acquisitions made over re
cent years have caused revenues to
increase. It is now necessary to com
plete the integration of these activ
ities. Postponement of orders by the
German Federal Railways, surplus ca
pacity in the German rail industry
particularly in the mechanical sector,
and increased access of Western Euro
pean competitors to projects for the
German core market have significantly
depressed the profitability of
revenues.
Rationalization and cost-cutting
programs have been started with a
goal to strengthen competitiveness.
Any remaining overlap between activ
ities at different sites will be elimi
nated and co-ordinating functions will
be centralized at the Hennigsdorf site.
The level of vertical integration will be
reduced in all areas. Highly labor-
intensive activities will be transferred
to low-cost locations. This will lead to
the closure of AEG's Berlin Nonnen-
damm site. All programs are sched
uled to be completed by the end of
1995.
Investment in
Modernization Programs
Investment by the AEG companies
in 1993, including the assets taken
over from newly acquired companies,
totalled DM 764 million (1992: DM 916
million).
Investment activity concentrated
on modernization at AEG Schienen-
fahrzeuge in Hennigsdorf, projects in
the Domestic Appliances field of activ
ity and projects at TEMIC in Nurem
berg. Outside Germany, AEG invested
principally in the Pittsburgh Technogy
Centre for Systems Electronics, in the
USA, the administration and service
premises in Greece and the TEMIC
plants in South East Asia and Mexico.
Systems-Oriented
Research and Development
At DM 764 million (1992: DM 726
million), research and development
expenditure increased from the pre
vious year and as a proportion of sales
revenue increased to 7%.
Principal areas of research and
development activity included systems
engineering, postal automation sys
tems, a new generation of rail cars,
local public transport concepts and
products, semiconductors and vehicle
electronics.
More than 58,900 Employees
Worldwide, AEG employed 58,921
people at the end of 1993, 44,591 of
these in Germany. The reduction of ap
proximately 3% in the total workforce
from the prior year is largely attributa
ble to capacity adjustments which
were necessitated by the strained
employment situation.
28
AEG Daimler-Benz Industrie
Outlook
AEG expects to see a slight expan
sion in its business volume in 1994,
with a slightly stronger increase in
foreign markets than in Germany.
Increased revenue is expected partic
ularly in the Rail Systems, Micro
electronics and Automation fields of
activity. However, the intended dives
titures from the Domestic Appliances
field of activity and the power meters
and lighting systems sectors will
reduce consolidated revenues. The
restructuring of the AEG group will
involve additional industrial activities
of the Daimler-Benz group being trans
ferred to AEG. It is planned that AEG
will take over the industrial manage
ment. It is also intended to integrate
the diesel engine and decentralized
power supply activities of MTU
Friedrichshafen into AEG.
The goal of these measures and of
the restructuring program is to close
loss-making activities and to
strengthen the strategic basis and
earnings capability of the future fields
of activity in Automation, Diesel
Engines, Rail Systems, Energy Sys
tems Technology, Microelectronics
and Industrial Holdings.
The process of separating strate
gic group management tasks from
operative business responsibilities,
initiated in 1993, will continue. Staf
fing in the central group functions was
slashed in 1993 to approximately 25%
of former levels. Effective January 1,
1994, the required central service
functions are performed in indepen
dent units, with a view to improved
efficiency and more transparent costs
and structures. Despite the first signs
of a stabilizing economic environment
in 1994, there have been no signs of
improvement in the German electrical
engineering industry, as stabilization
means a continuation of extremely
depressed revenues as well as the
underutilization of capacities.
This is also the case for AEG. Fur
thermore, we have to continue our
comprehensive restructuring program
in 1994, which forms a necessary part
of our new strategic direction. These
restructuring programs will have a one
time charge which will result in last
ing cost reductions in future years.
All of our measures to secure the
future should turn around earnings in
1995.
Corporate Unit Deutsche Aerospace (DASA)
The operating environment of Deutsche Aerospace deteriorated
further in 1993. The result was a decline in business in virtually all
areas. We are reacting to these dramatic changes with a rigorous
program to improve structures, adjust capacity and reduce costs.
Greater efficiency is essential if we are to continue to have an ac
tive role in global markets. We have also intensified our policy of
partnerships with other companies to further strengthen our posi
tion in the world markets. The comprehensive programs to improve
profitability will continue.
Crisis in the Aerospace Sector
Necessitates Structural Changes
Deutsche Aerospace was hurt si
multaneously by worldwide economic
weakness, the cancellation of long-
term budgets and the structural crisis
affecting the airlines. In addition, com
petition in the world market is becom
ing fiercer. Many competitors receive
increasingly massive state support in
the USA and Japan, and new competi
tors are emerging from Eastern Europe
and the Far East.
Deutsche Aerospace 29
The fastest and safest mode of transport of our times must be serviced and refuelled before
every take-off The four-engine A340 has been in use on regular services since April, 1993. On
its record-breaking 48-hour flight around the world in June, 1993, all previous records for long-
haul flights were shattered and new standards were set in international air travel.
Deutsche Aerospace reacted to the
dramatic changes in its economic envi
ronment with a rigorous package of
programs to make structures more ef
ficient, adjust capacity and reduce
costs. In addition, the international
competitiveness of DASA will be pro
tected and expanded through an ag
gressive and targeted presence in the
market.
The Aircraft division needs to re
organize production structures and
eliminate excess capacity through con
solidation. In the Space Systems and
Propulsion Systems divisions, new
structures were put into place during
1993. Considerable resources are
being put into expanding non-military
activities in the Defense and Civil
Systems division.
One key element of our ongoing
effort to secure the company's future
is our market offensive in China,
South East Asia and America.
International Partnerships
to Safeguard the Core Business
Through increased cooperation
with international partners, a competi
tive critical mass will be attained in a
contracted market. Multilateral part
nerships are inevitable, given the com
plexity and growing financial costs of
large aerospace projects, the globaliza
tion of markets, the intensity of com
petition and the reductions in public
funds. Through numerous acquisi
tions, joint ventures and partnerships
at the national and international level,
we have achieved a strategic position
that improves our situation in the
world market.
The acquisition of a majority stake
In South America we initiated
in the Dutch aircraft manufacturer,
Fokker, significantly improved our
strategic position in the Aircraft
division. We now have a complete
product range from small turboprop
aircraft to large jets. We are also, to
gether with our Airbus partners Aero
spatiale, British Aerospace (BAe) and
Construcciones Aeronauticas (CASA),
working with Boeing on a feasibility
study for a very large commercial air
craft.
One promising development for
the future came in the form of a
"memorandum of understanding"
signed by four aero-engine manufac
turers, MTU, Snecma, Pratt & Whitney
and General Electric to develop a new
engine in the thrust range between
12,000 and 20,000 lbs.
We intensified our activities in
Eastern Europe and the People's
Republic of China by concluding a
number of cooperation agreements
in various aerospace fields.
Deutsche Aerospace (24.5%
share), together with Deutsche Bun-
despost Telekom (51%) and ANT
Bosch Telekom (24.5%) founded Ro
mantis GmbH. Now the activities of
the partners in satellite communica
tions will be together. Supported by lo
cal companies, Romantis will offer lan
guage (telephone), data and television
services in Eastern Europe via the
Intelsat VI satellite, and establish the
link-up with Western telecommunica
tions networks. Accordingly, Romantis
is making an important contribution to
infrastructural expansion in Eastern
Europe.
a further project to expand our com
mercial satellite business. As the
leader of a consortium with Aero
spatiale and Alenia, we entered into a
24-year license contract with the
Argentinian Comision Nacional de
Telecomunicaciones (CNT) for the
commercial satellite-based communi
cations system, Nahuel. The operating
company, Nahuelsat S.A., was formed
in December, 1993. We also entered
negotiations for the formation of a
satellite-manufacturing joint venture.
Sales Down in Almost Every Area
At DM 18.6 billion, sales of the
Deutsche Aerospace group, including
the newly acquired Fokker group,
were 10% below the comparable sales
for the previous year. With only a few
exceptions, business in all areas was
down. Especially affected were the De
fense and Civil Systems and the Pro
pulsion Systems divisions. The Space
Systems division also experienced
substantially lower revenues due to in
voicing factors. Business in Germany
weakened by 16% to DM 5.8 billion
(1992: DM 6.9 billion). Foreign sales
fell by 7% to DM 12.8 billion (1992:
DM 13.8 billion) and accounted for
69% of group sales. Military sales fell
to 29% of total business volume,
largely as a result of the disproportion
ate decline in Military purchases
and the first-time inclusion of Fokker.
Incoming orders were also down,
totalling DM 15.6 billion or 8% less
than the orders for the previous year.
However increases in customer orders
were received by the Propulsion Sys
tems division and by our joint venture
with AEG, TEMIC Telefunken micro
electronic GmbH.
30 Deutsche Aerospace
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Satellite aerials undergo intensive tests before going into orbit. In the compact range test
facility, the conditions in which aerials will be operating in space are simulated. Satellite
aerials play a key role in space missions, functioning as the communication link between the
satellite and the ground control center. Deutsche Aerospace and its subsidiary, Dornier, are
the world's leading suppliers of aerials for communications and remote sensing satellites.
Workforce Reductions and
Reduced Working Hours Inevitable
Deutsche Aerospace had 86,086
(1992: 94,293) employees at the end
of 1993, including 3,560 trainees and
apprentices. Deutsche Aerospace AG
employed 17,363 (1992: 20,051) peo
ple, including 843 trainees and ap
prentices. The persistent worsening of
economic conditions led to extensive
underutilization of capacity in all
areas of the group. This made further
reductions in the workforce unavoid
able. In addition, reduced working
hours had to be implemented for over
half of the workforce.
46,863 (comparably calculated for
1992: 51,781) people were employed
in the Aircraft division, 4,463 (1992:
4,864) in Space Systems, 12,387
(1992: 14,369) in Defense and Civil
Systems and 15,347 (1992: 16,338) in
Propulsion Systems. In other business
activities, which largely comprise the
joint venture TEMIC, which is in
cluded on a pro rata basis, and medi
cal systems, 7,026 (comparably calcu
lated for 1992: 6,941) were employed.
Space Systems Influenced
By Large Projects
Sales revenue in the Space
Systems division are influenced to a
significant extent by large projects. In
contrast to the previous year, no indi
vidual major projects were invoiced in
1993, which resulted in a considerably
lower sales level of DM 1.4 billion
(1992: DM 1.9 billion). Large contribu
tions, once again, came from ongoing
invoicing in the Ariane and Columbus
projects. Customer orders of DM 1.5
billion (1992: DM 1.7 billion) also
failed to reach the high level of the
previous year.
Defense:
Sales Now Sharply Down
The downward trend in customer
orders experienced by the Defense
and Civil Systems divisions for a num
ber of years was for the first time
fully reflected in sales for 1993.
At DM 2.8 billion (1992: DM 3.6
billion), revenues were 21% lower
than in the previous year. The already
very low level of customer orders de
clined further by 6% to DM 2.3 billion
(1992: DM 2.4 billion).
Propulsion Systems:
Decline in Sales
in All Business Units
Sales in the Propulsion Systems
division dropped 13% from the pre
vious year's level to DM 3.1 billion
(1992: DM 3.6 billion). Especially hard
hit was the Aircraft Propulsion Sys
tems business unit. However, one
major order for each of the business
units Aircraft Propulsion Systems and
Propulsion Systems Land/Marine
Applications resulted in a considerable
increase in customer orders to DM 3.2
billion (1992: DM 2.8 billion) after a
low overall level the previous year.
Renewed Emphasis on
Aircraft Activities
With the integration of Fokker, the
Aircraft division now contributes more
than half of the total consolidated
sales. Revenues of DM 10.3 billion were
slightly lower than the comparable
figure of the previous year. The
Deutsche Aerospace Airbus business
unit was almost able to compensate
for lower sales in other units. The first
deliveries of the Dornier 328 did not,
from a sales perspective, have an
impact during 1993.
Incoming customer orders fell
again, to DM 7.6 billion (1992: DM 9.1
billion). While new orders in the Deut
sche Aerospace Airbus business unit
remained at the very low level of the
year 1992, the Tornado contract from
Saudi Arabia led to a marked increase
in military aircraft orders. All other
business units, however, experienced
drastic declines in customer orders.
32 Deutsche Aerospace
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Capital Expenditures Decreased
Outlook
During 1994, we expect a modest
increase in sales revenue. In the Space
Systems division, higher revenues can
be expected particularly due to deliv
ery of the ERS-2 satellite. We also an
ticipate moderate growth in the Pro
pulsion Systems division. In the Air
craft division positive results can be
expected only from deliveries of the
Dornier 328, which began at the end
of 1993. In the Defense and Civil Sys
tems division, increase of production
in the Stinger program to the target
volume should offset declines in other
projects. We will continue through to
1996 with the comprehensive program
already initiated to cut costs and
improve performance. Even with
numerous programs to improve effi
ciency and structures, a further reduc
tion in capacity is essential. By the
end of 1996, we must eliminate
approximately 10,000 more jobs and
close several plants. This will reduce
overhead to be highly competitive and
DASA's position in international com
petition will be significantly enhanced.
We have initiated an internally funded
product development program to in
crease market penetration which will
provide a strong basis for future
growth.
Due to the difficult economic situa
tion, we have limited our capital ex
penditures to the minimum necessary
level. As a result and despite the first-
time consolidation of Fokker, capital
expenditures were lower than in the
previous year. We invested DM 1.0 bil
lion (1992: DM 1.2 billion) in property,
plant and equipment in the group and
DM 100 million (1992: DM 200 mil
lion) in Deutsche Aerospace AG. Pro
duction was reorganized to accommo
date new technological and structural
challenges and non-military products.
We also put considerable funds into
expanding the production of airbags.
Commissioned Research
and Development
Expenditures on research and de
velopment projects for third parties
also fell as a result of overall weak
business conditions to DM 3.9 billion
(1992: DM 4.5 billion), representing
21% of sales revenue. Our in-house
research and development funding to
protect our future operations was at
the previous year's level of approx
imately DM 0.9 billion or 5% of sales
revenue. Total research and develop
ment expenditures amounted to DM
4.8 billion (1992: DM 5.5 billion). In
the Aircraft division, expenditures
were concentrated on the Airbus
A330/A340, Dornier 328 and Euro-
fighter (EF 2000) programs. In Space
Systems, the main emphasis was on
the ERS-2 (European Remoted Sensing
Satellite), Cluster, Columbus, Polar
Platform and Ariane. In the Defense
and Civil Systems division, we concen
trated particularly on the Pars 3 pro
gram and also expanded activities in
non-military sectors. In the Propulsion
Systems division we focused on the
EJ 200 engine for the EF 2000, devel
opment of non-military engines and
two new diesel engine series.
Corporate Unit
Daimler-Benz InterServices (debis)
debis increased its total 1993 revenue by 20% to DM 9.5 billion. In
tensified competition on prices and terms caused us to initiate a
vigorous campaign in 1993 to reduce costs and increase
efficiency. The international emphasis of our activities was further
increased in all divisions.
Services sector also affected
by the recession
The services sector was affected
by the adverse world economic situa
tion in differing degrees. Suppliers of
information technology services for in
dustry suffered from the reduction of
project orders. Investment in standard
software also declined sharply. How
ever some service sectors were un
affected by the recession. In Germany,
vehicle leasing acquisition reached, to
a large extent, the high level of the
previous year, despite reduced vehicle
sales due to the low level of economic
activity. In the USA, leasing was popu
lar and led to an increase in demand
for capital goods. Demand for mobile
communication services greatly
increased.
debis: Continued Growth
debis increased its consolidated
revenues during 1993 by 20% to
DM 9.5 billion. 51 % of total revenue
was generated in Germany, 10% in
other European Union (EU) countries,
31 % in the USA and 8% in other mar
kets. Total revenue include sales reve
nue of DM 8.7 billion and interest in
come from sales financing receivables
of DM 0.8 billion. Consolidated net in
come of debis declined in 1993 to DM
18 million (1992: DM 122 million).
There was a sharp increase in
business with customers outside the
Daimler-Benz group, which increased
from 79% to 83% as a proportion of
total revenue. In financial services
and bartering, almost all business was
with external customers; the share of
external business in the other divi
sions was in excess of 50%.
Although additional acquisitions
were made during 1993, the increase
in revenues of debis was largely due to
growth in existing areas of the com
pany. The Financial Services division
had a substantial expansion in busi
ness, which was due to increasing
internationalization as well as an
expanded range of services offered.
Large Investment in
Leased Equipment
Additions to leased equipment
grew by 5% to DM 6.2 billion.
Our investment in property, plant
and equipment increased in 1993 by 16%
to DM 200 million. As in the past, this
largely comprised data processing
equipment. Modern computer operat
ing systems were installed in our for
eign financial services companies.
Daimler-Benz InterServices (debis)
35
To be able to receive calls anywhere at any time is now an essential requirement in business.
In the private sector too, while still considered a luxury, mobile communication is becoming
increasingly popular and, in 1993, was one of the few growing markets in Germany, debitel
further improved its position in this promising industry and with 100,000 customers
strengthened its role as the leading supplier of mobile communication services in Germany.
8,812 Employees
in the debis group
The consolidated companies of the
debis group employed 8,812 people at
the end of 1993, an increase of 7%
from the previous year. 7,527 people
were employed in Germany and 1,285
abroad. Of the total, 6,196 were em
ployed in the Systemhaus division,
1,570 in Financial Services, 351 in In
surance Brokerage, 84 in Trading, 319
in Marketing Services, 173 in debitel
and 23 in dIM (debis Real Estate Man
agement). 223 interns were receiving
training at debis at year end.
debis Systemhaus:
debis Systemhaus increased its
total revenue by 7% to DM 1.7 billion.
This growth was contributed primarily
by the CCS group. However, the Cap
debis group suffered because of the
difficult economic conditions which
negatively affected the software prod
ucts market. The results of this divi
sion were further depressed by neces
sary provisions for future restructur
ing programs.
Diebold, the third subdivision of
debis Systemhaus, further increased
its total revenue and profit in the mar
ket for high technology and manage
ment consulting services.
Financial Services:
Further Internationalization
The Financial Services division in
creased its total revenue - excluding
the 50% owned subsidiary Solovam,
which was not consolidated - by 18%
to DM 6.7 billion.
In Germany, the favorable trend
was assisted by passenger car leasing
programs in cooperation with
Mercedes-Benz AG.
In the USA, an increase in com
mercial vehicle contracts compensated
for declines in passenger car con
tracts. The newly founded Mexican
subsidiary made a positive contribu
tion to sales and income on an operat
ing basis.
In the early part of 1993 we estab
lished another leasing and sales financ
ing company in Denmark. Now debis
offers financial services in 13 coun
tries.
New business worldwide in
creased by 22% to 195,000 acquisi
tions, for a volume of DM 12.9 billion.
At year-end, the total number of con
tracts outstanding totalled 435,000,
corresponding to a total value of DM
22.8 billion, debis Aviation Leasing
supported the financing of four aircraft
during 1993. Two operating type
leases were completed, for an Airbus
A 340 and another for an Airbus
A 300.
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Creativity is the name of the game: modern bartering methods offer many different possibilities
for promoting trading relations between contrasting markets and opening up new sales
channels. During 1993, debis Trading facilitated exports worth DM 500 million to countries
weak in foreign currency. Particularly in the Asian region, substantial bartering transactions
were concluded.
Insurance Brokerage
In a market characterized by large
insurance claims, debis Assekuranz
GmbH steadily expanded its volume
of business; commission totalled
DM 68 million on a premium volume
of DM 0.6 billion.
Trading:
Successful Partnerships
The services of the Trading divi
sion facilitated exports totalling DM
500 million in 1993 to countries weak
in foreign exchange. Total revenue
amounted to DM 371 million (1992:
DM 436 million). The decrease in
1993 is attributable largely to invoic
ing factors.
In December, 1993 debis AG pur
chased the remainder of debis Interna
tional Trading GmbH from the Treu-
handanstalt.
Marketing Services:
Further Acquisitions
In spite of the difficult economic
environment, the Marketing Services
division increased its 1993 revenues
to DM 561 million (1992: 205 million).
This is primarily due to the first time
consolidation of GFMO, Gesellschaft
fur Media Optimierung mbH, a com
pany acquired in 1992.
Mobile Communication Services:
Dynamic Market Growth
As a provider of mobile communi
cation services, debitel profited from
the dynamic market growth in Ger
many which followed the entry into
service of the 'D-networks'. Our joint
venture with Metro is now the market
leader among the carrier-independent
service providers. Total customers
served were 106,000 with a total
revenue of DM 152 million.
In May, 1993, 2 MTel, the French
joint venture with Metro, commenced
operation.
Outlook
debis is ready for the diverse
demand trends and the intense com
petition in the individual services
markets. With our superior range of
individual services and complete
systems, we have excellent prospects
to increase earnings and total
revenues. Additionally, our business
dealings with external customers will
continue to increase.
Joint V e n t u re Companies
In its first full financial year, TEMIC focused on expanding its inter
national structures in the fields of development, manufacturing and
sales. Mercedes-Benz CharterWay swiftly became established in its
markets; demand for long-term Mercedes-Benz commercial vehicle
rental, which this company provides, is high.
TEMIC Telefunken
microelectronic GmbH -
Reorganization and Expansion
of Global Structures
In TEMIC's first full financial year,
the focus was on a reorganization of
the various business activities and an
expansion of the global development,
production and distribution structures.
The volume of business increased
to DM 1.5 billion, although depres
sed markets handicapped sales to
the consumer goods and automotive
industries.
The semiconductors sector now
unites five of the world's leading spe
cialists in the field of application-
specific, customer-oriented semicon
ductor products: TELEFUNKEN in
Heilbronn, Siliconix in Santa Clara,
California, MATRA MHS in Nantes,
France and Dialog Semiconductor in
Joint Venture Companies 39
Long-term rental of Mercedes-Benz commercial vehicles under the trade name Mercedes-Benz
CharterWay enjoys growing popularity with our customers. It is not difficult to see why:
Mercedes-Benz CharterWay takes care of vehicle administrative duties, residual value risks,
repair, maintenance, taxes and tolls and guarantees transport capacity at all times.
CharterWay provides immediate assistance if a vehicle is out of commission.
Mercedes-Benz CharterWay
Since the start of business in early
summer, 1992, long-term rental of
Mercedes-Benz commercial vehicles
under the tradename Mercedes-Benz
CharterWay has become a vital tool of
sales promotion. This is illustrated,
among other things, by the numerous
requests for information which have
been received from markets where
CharterWay is not yet offered. To date,
CharterWay's activities are located in
Belgium, Germany, France, the United
Kingdom and the Netherlands. In
these markets, rental contracts for ap
proximately 3,000 vehicles had been
initiated by the end of 1993, most of
which in the second half of the year.
Following the successful launch phase,
we are confident that our CharterWay
concept will become even more firmly
established in the market. The striking
benefits for the customer, who incurs
no risk relating to the sale of the used
vehicle, repair and maintenance and
downtime provides a promising basis.
The relief from administrative vehicle
management tasks is also a great
benefit.
Munich and Swindon, United King
dom, as well as EUROSIL in Hong
Kong. This group is supported by the
TEMIC Integrated Circuits Develop
ment Center (EZIS) in Ulm, Germany.
TEMIC's semiconductors and design
ideas are sold around the world in the
following target markets: computers,
telecommunication, motor vehicles,
entertainment electronics and indus
trial applications. In order to remain
abreast of technological development,
we concluded a license agreement
concerning development and manufac
ture of a new 8-bit micro controller ar
chitecture with the American semicon
ductor manufacturer INTEL. In the
framework of long-term cooperation,
we concluded an agreement with Ja
pan's Mitsubishi Electric Corporation,
so that we will continue to be assured
access to leading CMOS technology.
We took our first step into the growing
Chinese market with the formation of
Simconix in Shanghai - a joint venture
between Siliconix Inc., Santa Clara,
and the Shanghai Institute of Metal
lurgy - which will produce and test
semiconductor components.
In the microsystems field we
develop, produce and market custom-
made solutions consisting, for example,
of sensors, hybrids and application-
specific integrated circuits (ASICs).
Micro-switch and foil switch systems
provide the control interface between
man and machine in a great many in
dustrial products and systems. In this
field, we recorded a growth in sales of
vehicle electronics systems.
In the vehicle equipment field we
are developing innovative systems
with a high electronics content and
high quality standards. Our market po
sition was significantly strengthened
by the latest generation of control
units for anti-lock braking systems
(ABS) and the sensor systems and gas
generators for airbags and belt-
tensioners. Business in the field of
fractional horsepower motors for in
stallation in the exterior mirror and
seat adjustment, window control and
heating and ventilation systems of
motor vehicles was static due to de
pressed conditions in the automotive
industry. However, sales of anti-theft
systems are increasing.
We are now suppliers to more
than half of the world's largest auto
motive manufacturers. These suc
cesses prompted us to construct a new
production facility at the TEMIC plant
in Nabern and, at considerable invest
ment cost, to expand capacity at the
Aschau plant. We also opened a new
production plant for microelectronics
and vehicle equipment in Nuremberg
and commenced construction of a
plant in Mexico for the manufacture of
electronic components and systems
for the NAFTA markets.
The cable harness activities of
TEMIC Telefunken Kabelsatz GmbH
(TKG) in Muhlheim, which specializes
in development and manufacture of
cable harnesses for wide-ranging ap
plications in the automotive industry,
were taken over on December 31,
1993, by the American company
Electro-Wire Inc., of Dearborn,
Michigan.
40
Joint Venture Companies
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Central Corporate Functions within the Group
Research and Technology
Daimler-Benz has concentrated its research activities, which are
acquiring increasingly international orientation, at its new Ulm
Research Center. The research sectors carry out projects in close
collaboration with the various corporate units and with diverse
institutions within and outside Germany. An example of success
fully implemented synergy is the interdisciplinary TRAFFONIC
project for vehicle and transport research.
Daimler-Benz Research Center
in Ulm Completed
The Daimler-Benz Research Cen
ter on Oberer Eselsberg, to the north
west of Ulm's city center, commenced
operations with an opening ceremony
on October 19, 1993. Building costs
amounted to DM 270 million. The Re
search Center, which can accommo
date 1,000 employees, makes a signifi
cant contribution to the scientific city
of Ulm. Alongside the universities, the
affiliated institutes run jointly by in
dustry and the state and a "Science
Park" geared to the needs of small and
medium-sized companies. The existing
and continually improving close con
tact between the individual institutes
is intended to promote exchange be
tween academic and industrial re
search both within and beyond the
frontiers of the growing technological
region of Ulm.
At the new Daimler-Benz Re
search Center, research projects are
carried out for our corporate units and
fields of activity. Additionally as a
"hub of knowledge" for the group it
also develops key technologies which
provide an important basis for secur
ing competitive advantages on the
growing markets of tomorrow. The
spectrum of activities includes:
Microelectronics,
Functional and structural
materials,
Production research and the
environment,
• Energy research and
Information technology.
42
Research and Technology
The increasing significance for the
group of information technology was
emphasized in 1993 with the estab
lishment of a separate research sector.
The information technology re
searchers in Ulm develop new com
puter applications, technologies and
concepts.
The Enterprising Researcher
In a communication process en
compassing the entire research divi
sion, a new model of the "enterprising
researcher" has been developed and
incorporated into the Daimler-Benz
research program. This model of
"strategy-oriented entrepreneurial
management" is based on the re
searcher's displaying an "enterprising
spirit within the enterprise". The en
terprising researcher makes full use of
the opportunities provided to him re
garding visions, goals and resources
within the overall strategy of his field
of research.
In order to deepen the knowledge
required for this purpose in the fields
of strategic competence and orienta
tion towards the market and the cus
tomer, the research and technology
division, together with the training sec
tor of Daimler-Benz AG, has developed
a management skills program encom
passing the topics of innovation man
agement, strategy and marketing.
Globalization of Research
Activities in the field of research
and technology are becoming increas
ingly internationalized. The trends are
towards co-operation with research in
stitutes throughout the world, student
and employee exchange programs
with internationally renowned re
search institutes and the involvement
of scientists in the research and devel
opment activities of group companies
outside Germany. Examples of this are:
Industrial cooperation with Aero
spatiale (France), United Technol
ogies (USA) and Mitsubishi
(Japan),
EU-subsidized European research
and wordwide joint research
projects and
Research cooperation with compe
tent research institutes in the CIS
countries and in the USA.
Such cooperation serves to incor
porate international expertise and new
impulses and experience into research
work. Tangible results have already
been achieved in the fields of mate
rials and material technologies, both of
which are crucial competitive factors
in the design of future products.
The AIT Program:
Pan-European User Initiative
A further example of interna
tionalization is the pan-European in
dustrial user initiative "Advanced In
formation Technology in Design and
Manufacturing" (AIT) launched by the
Daimler-Benz research division.
Advances in Vehicular
and Transport Research
The TRAFFONIC synergy program
has been brought to a successful con
clusion after a period of more than
four years. Mercedes-Benz, Deutsche
Aerospace and various Daimler-Benz
research departments have jointly de
veloped new vehicular functions. In
terdisciplinary expertise across the
group was indispensable for the note
worthy successes achieved, especially
in the fields of radar sensor technol
ogy and speech processing in road
transport. With the support of the cor
porate unit Deutsche Aerospace and
the TEMIC joint venture, many of the
TRAFFONIC projects are now being
further developed to production
standard.
Traffic Management
by Intertraffic
In 1993, Daimler-Benz AG ac
quired all the shares in ITF Intertraffic
Gesellschaft fur Integrierte
Verkehrsmanagement-Systeme, which
previously all corporate units of the
Daimler-Benz group held shares. The
company brings together the know-
how of the Daimler-Benz group in the
fields of traffic management systems,
transport systems and information
technology.
The current situation in European
ITF is playing a leading role in im
industry shows that the suppliers of
information technology (IT) do not ade
quately cater to the needs of users.
Headed by Daimler-Benz, 17 large Eu
ropean IT users from the automotive
and aviation industries have, accord
ingly, devised a project which is be
ing sponsored by the European Union
(EU). The objective of which is to de
termine future IT requirements in de
velopment and production, so that IT
suppliers can develop appropriate so
lutions.
plementation of the traffic manage
ment system STORM. This project re
quires the Daimler-Benz research divi
sion, the Transport Ministry of Baden-
Wurttemberg, the City of Stuttgart and
various other major companies to
jointly conduct trials of advanced traf
fic information and advice systems in
the Stuttgart region. Data linkage be
tween public and private transport
In the sound lab: in 26 thousandths of a second, the airbag inflates into a balloon-like safety
cushion. Scientists in Ottobrunn measure the blast from the gas explosion in their efforts to
make the inflation process still more efficient. The Daimler-Benz research department carries
out continuous development work on the airbag with a goal to provide even greater safety for
the customer.
provides the basis for the following six
pilot projects:
traffic information system
individual guidance system
constantly updated park and ride
information
connections information
fleet management and an
aid call system.
The STORM project infrastructure
will be completed by the end of 1994
and will undergo trials through the
end of 1995.
Also, ITF will participate in a com
pany which builds, operates and ar
ranges financing for individualized
traffic management systems.
The Channel Tunnel Vehicle STTS
in Operation
Following the completion of the
tunnel under the English Channel, the
innovative inductive track guidance
system, which we developed for the
Service Tunnel Transport System
(STTS), will commence operations. The
track-guided special vehicles, devel
oped by Mercedes-Benz AG in collab
oration with the Daimler-Benz re
search division and AEG, travel along
the tunnel's 4.8 meter (approximately
16 feet) wide central shaft, which
serves as a maintenance facility and
an escape route. Tests by the tunnel
operator confirmed the system's effi
ciency and its robustness in the event
of a malfunction.
Psychological Analysis
of Driver Errors
Motor vehicles move in traffic
more safely when they meet the needs
and cater to the individual characteris
tics of the driver. To make progress in
this area, vehicle developers must be
come familiar with, among other
things, the mistakes made by the
driver. With the help of psycholo
gical fault analysis, Daimler-Benz
researchers have compiled error
profiles for various vehicle categories
and driver groups. The influences of
stress, experience and age on error
frequency have been evaluated.
It has been shown, for instance,
that high stresses placed on the driver
in traffic can lead to mistakes;
however, there was no evidence that
driving errors result in higher
stress levels. The hypothesis that
increased experience levels reduce
the frequency of errors was con
firmed.
Another experiment disproved the
commonly held belief that the fre
quency of driving errors increases
with age. Here, too, experience plays
the decisive role: older drivers with
a greater level of experience made
the least errors of all groups in
vestigated.
Non-Contact Battery Charging in the
Electrically Powered Vehicle
The transmission and conversion
of electrical energy is also showing
technical advances.
When power is transmitted at
frequencies in excess of 20 kHz, the
space and weight requirements of
electromagnetic components along
with losses occurring in them, are con
siderably reduced. More importantly,
electrical power can be transmitted at
these high frequencies over an air gap,
without direct contact. New, rapidly
switching, economically operating
semiconductor components are now
making this frequency range viable.
This opens up a broad spectrum of
highly interesting product oppor
tunities, such as:
Contact-free charging devices for
electric road vehicles,
Contact-free vehicular drive mech
anisms,
High-voltage power supply for
locomotives and
On-board power supply for all
types of vehicles.
Daimler-Benz researchers from
the automation field in Frankfurt are
currently preparing the necessary
technology and systems for the pro
duction and operation of such
medium-frequency power transmis
sion units.
Mobile Computing and the
Automatic Reading of Handwriting
Information is only of value when
it is available at the right time, at the
right place and in the right language.
Accordingly "Mobile computing" is
one of the most important require
ments placed on modern information
technology.
In the field of "Mobile subscribers
to networked systems", a basic infor
mation and communication technology
system is currently being created at
the Daimler-Benz Research Center in
Ulm. Mercedes-Benz branches are cur
rently testing mobile computing for
mobile recording of repair and inspec
tion orders.
In a different field of information
technology, Daimler-Benz researchers
have been achieving international ac
claim and successfully applying their
findings in automatic letter sorting
systems of AEG Electrocom: on the
basis of image and handwriting anal
ysis and of speech and graphic recog
nition, they have developed concepts
and methods for the automatic reading
of handwriting. With a recognition rate
of over 80%, they have rapidly at
tained a leading international position.
44 Research and Technology
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Microelectronics and
Microsystems Technology
Microelectronics research exper
tise is not only of benefit to products
of the future. The Ulm Research Cen
ter incorporates a newly established
"foundry" - a manufacturing center for
gallium/ arsenide semiconductor com
ponents - where transistors, circuits
and other products for the Daimler-
Benz group are produced. External
customers are now supplied with
tailor-made components; as a rule,
these are small series of a few hun
dred chips, the production of which
would not be cost effective in a com
mercial semiconductor production
facility.
In a wide range of corporate prod
ucts such as passenger cars or rail ve
hicles, in aviation and aeronautics or
in drive systems and automation tech
nology, intelligent sensor and actuator
components known as smart-power
circuits are incorporated (addressable,
diagnosable and self-monitoring sys
tem solutions), which are being devel
oped by the research division in close
contact with technological develop
ments. Using this technology, a con
trol circuit for reluctance motors used
for positioning exterior mirrors on pas
senger cars is being developed to
gether with TEMIC TELEFUNKEN mi
croelectronic GmbH, Heilbronn.
Wheel and suspension accelera
tion on road vehicles will, in the
future, be measured by micro-
mechanical sensors integrated on a
single chip the size of a pinhead,
which convey this data to control
units. These new acceleration sensors,
developed by researchers at the
Munich-Ottobrunn site, are about to
go into series production.
Research and Technology
New Materials - New Opportunities
for Energy and the Environment
The characteristics of new mate
rials are opening up a variety of attrac
tive applications to Daimler-Benz in
the field of energy and the environ
ment.
A major focus of continuing devel
opment for materials scientists at the
Ulm Research Center is functional ma
terials, for example for electrodes and
membranes in batteries for electrically
powered vehicles. For future genera
tions of the "ZEBRA" sodium/nickel-
chloride high-energy battery, jointly
developed by the Anglo-American
corporation, South Africa, and AEG,
Daimler-Benz researchers are cur
rently developing new materials with
a goal to reduce operating tempera
tures, costs and enhancing func
tionality.
Environmental compatibility is the
supreme goal in the "solid oxide fuel
cell" research objective. This cell pro
duces electricity from any combustible
gas, for example natural gas or hydro
gen without a flame, steam or rotating
turbine blades, to an efficiency factor
of 60%. The development of appropri
ate electro-ceramics, combinable flat
cells and of integrating and connecting
technology the Daimler-Benz re
searchers are making the required
know-how available for practical appli
cation.
Production Research for the
Industrial Society of Tomorrow
1993 saw the initiation of the In
telligent Manufacturing System (IMS)
research program, designed on a
global scale as a three-way alliance be
tween the USA, Japan and Europe. IMS
has the objective of standardizing in
dustrial production and to carry out
comprehensive data integration - from
placement of orders, development and
manufacture to ultimate distribution.
As part of the "Rapid Product Develop
ment" pilot project, Daimler-Benz is
investigating a closed process chain
from the CAD model via prototype pro
duction, with such methods as stereo-
lithography, with subsequent return of
the measured prototype to CAD data.
Future-Oriented Research -
and the Searching Internal Review
The Berlin "Research, Technology
and Society" group processes non-
technological future-oriented knowl
edge in order to support the corporate
units in operative and strategic pro
cesses. On the basis of research re
sults, investigations held to determine
whether existing and planned prod
ucts, services or organizational princi
ples have a realistic future.
The researchers have identified
for example, the future trends that will
be of relevance for the company and
its products in the years to come. The
interdisciplinary trend analyses are
grouped according to the following
observation fields:
Economic framework data
Socio-demography
The environment
Energy
City planning and area develop
ment
Transport
Society, values and behavior
The working world and leisure
time behavior
Companies.
This is complemented by a re
search audit; carried out by internal
and external experts of world renown.
This procedure tests our own research
activities for efficiency, effectiveness
and quality. The customers of the
Daimler-Benz research sector expect
products which not only equal or, in
most cases, exceed any comparison
with the world's best in terms of tech
nology, but also ensure competitive
pricing.
Environmental Protection
As a result of amendments to waste legislation in Germany, more
emphasis will be placed on residual materials from the manufacture
of a product in the future. Together with newly implemented test
audits at the production plants and product-based ecological
records, the documentation of environmental protection has been
further optimized by means of an environmental information
system. The segregation and recycling of residual plastics as well
as the use of natural materials have shown encouraging
test results.
New Waste Legislation
An important focus of environ
mental discussion in 1993 concerned
the amendments to waste legislation,
which focuses on the prevention of
waste, through recycling. The new leg
islation covers all residual materials
arising from a product from the manu
facturing stage up to disposal. The
manufacturer's responsibility has
been extended to include designing
products which can be recycled sev
eral times, produce minimal residual
material and have a long service life.
Additional significant changes in
the field of waste policy are imminent
in the form of the electronic waste and
junked vehicle ordinances and the
obligation on manufacturers to take
back scrapped products; this will also
affect the manufacturing and product
development sectors. The recycling
legislation and the two above ordi
nances have not yet been passed into
law at the present time.
Environmental Information System
Acquires Increasing Significance
The central working group "Envi
ronmental Protection", comprising all
chief environmental officers within the
Daimler-Benz group, decided in May,
1993 that the corporate unit, debis,
should develop a group-wide environ
mental information system, which was
subsequently launched at the begin
ning of 1994. The purpose of this in
formation system is to coordinate the
monitoring of facilities, processes and
hazardous substances at the various
plants and to ensure efficient docu
mentation of environmental protection
within the company. The information
from the plants' data banks is cen
trally coordinated to allow environ
mental protection to be monitored on a
group-wide basis.
Environmental Audit
for Company Operations
Prior to the EC directive on the
voluntary environmental auditing of
production plants, test audits were
previously performed at two of the
group's plants, so that experience
could be gained with this instrument.
These tests revealed that the legisla
tion, which has come into effect, is
lacking detailed analysis criteria.
Moreover, the directives reinforce na
tional differences which put German
plants, with their high environmental
standards, at a disadvantage over
foreign plants.
The Product-Related
Ecological Balance Sheet
With the further development of
environmental legislation, attention is
focusing on the overall "balance sheet"
of the burden a product places on the
environment in manufacture, opera
tion and disposal. The Daimler-Benz
Environmental Protection 47
One recycling problem is solved: test facility at the Ulm Research Centre for categorized
recycling of composite plastic materials on a purely mechanical basis. Synthetic waste is in
this way turned into a new source of raw materials.
Research Center in Ulm is placing
more emphasis on this issue scien
tifically sound criteria for measuring
the environmental burden of a product
must be recognized at an early stage
and immediately incorporated into the
manufacturing process. On the basis of
material and energy balance sheets,
ecological weak-point analyses have
already been completed for various
products of the company.
Investments in
Environmental Protection
Investments in environmental pro
tection declined to approximately DM
200 million which was less than that
invested in the previous year. The pri
mary reason for this is the high level
of investments capitalized in 1992, re
lating to the conversion to water based
paints in car production. Additionally
this also reflects the overall declining
level of investments in property, plant
and equipment.
Recycling Synthetic
Material Waste
A further objective in corporate
research is the development of pro
cesses for the recycling of complex
synthetic waste materials created in
production. The Daimler-Benz Re
search Center has succeeded for the
first time in mechanically sorting com
posite synthetic waste created in the
manufacture of dashboards into the
original materials and reusing these in
a high-quality recycling process. As
soon as the sorting unit, currently un
dergoing endurance testing, is put into
operation at the Worth plant, 1,500
tons of waste can be prevented annu
ally and the pure plastic constituents
reused in the manufacture of automo
tive components.
Cooperation with Mitsubishi
In November, 1993, Daimler-Benz
and Mitsubishi agreed to commence with
two environmental protection projects.
Within the framework of a joint re
search and development project, the
recycling of mixed synthetic waste
and electronics waste is being re
searched. In the second environmental
cooperation project, it was agreed to
work closer together in the recycling
of metals from scrap vehicles. In addi
tion, both corporations displayed a
renown cross section of their environ
mental know how at the 'New Earth
Environmental Show' in Osaka in
December, 1993.
Conservation of
Natural Resources
In a joint venture involving var
ious corporate units, UNICEF and the
University of Para in Belem, Brazil, a
variety of materials and methods are
being tested for the industrial utiliza
tion of natural fibers and other renew
able raw materials. During 1993
approximately 6,000 tons of natural
materials such as coconut fiber and
caoutchouc were processed into parts
at small-scale Brazilian production
plants and installed in buses and
trucks by Mercedes-Benz do Brasil. In
addition to various technological ad
vantages, such as a contribution to im
proved interior climate and greater air
permeability, natural fibers are also of
considerable ecological advantage,
because they dispense with the use of
exhaustible resources and no prob
lems are encountered in recycling or
disposal.
This project is also significant in
terms of development policy. Farmers
are able to replace roving cultivation
with an environmentally compatible
basis of existence as suppliers of fiber
to the automotive Industry.
Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen.
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It was omitted in the pdffile to improve the usability of the file size.
The five core topics of internationalization, concentration to the markets, innovative talent,
entrepreneurship as the key to competitiveness and social responsibility were the focus of
discussions at the Daimler-Benz Congress '93. The discussion of these issues by more than
2,000 senior managers of the company generated a mood of enthusiasm which is making a
valuable contribution to the integration of the group.
we have in the past. To keep these
redundancies to a minimum, however,
new methods of adjusting capacity will
also be considered. Emphasis will be
placed on the flexible structuring of
working time.
A further focus of our personnel
work, especially in this difficult year,
was the maintenance and further
development of our human resource
potential. Training in efforts to raise
skills continued in the Daimler-Benz
group during 1993. Basic vocational
and advanced training are considered
permanent tasks designed to protect
the future of the company and its
employees.
Employment Situation
At year-end the Daimler-Benz
group employed a workforce of
366,736 (1992: comparably calculated
388,888), on January 1, 1994 employ
ment in the group declined a further
4,546 to 362,190. 284,576 people
(1992: 302,464) were employed at the
end of 1993 in Germany. In the corpo
rate units of the group the employ
ment situation was extremely
strained.
Personnel
Difficult economic conditions in 1993 created adjustments to the
workforce not only at the operating units but also at the Daimler-
Benz holding. Reduced working hours in response to fluctuations in
activity was also necessary. The workforce of the Daimler-Benz
group was reduced by 6% to 366,736; affected by the decline, in
particular, were Mercedes-Benz, AEG and DASA. We continue to
improve the skills of our employees through basic and advanced
training, which is a critical factor in maintaining our international
competitiveness.
Strengthening Competitiveness
in a Difficult Environment
The difficult economic conditions
of 1993 made it necessary for the
Daimler-Benz group to reduce its
workforce and personnel costs. Releas
ing personnel, especially on the scale
that is necessary, is always a painful
step. The company not only loses
knowledge and experience; the reduc
tions also impair the age structure of
the remaining workforce.
In 1993, we tried to make the
adjustments in a socially acceptable
manner, particularly through normal
attrition, early retirement and individ
ual severance agreements. In addition,
reduced working hours were used to a
considerable extent to accommodate
fluctuations in activity. In the corpo
rate units of AEG and DASA, however,
redundancies were unavoidable in
1993.
It is our intention that future re
ductions in personnel, which are nec
essary if we are to secure our interna
tional competitiveness, will be carried
out in as socially compatible a manner
as possible, though the room for flex
ibility is more limited. The possi
bilities for taking advantage of attri
tion and early retirement have now
been largely exhausted. Thus, we will
not be able to avoid redundancies as
50 Personnel
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 five core topics of internationalization, concentration to the markets, innovative talent,
entrepreneurship as the key to competitiveness and social responsibility were the focus of
discussions at the Daimler-Benz Congress '93. The discussion of these issues by more than
2,000 senior managers of the company generated a mood of enthusiasm which is making a
valuable contribution to the integration of the group.
we have in the past. To keep these
redundancies to a minimum, however,
new methods of adjusting capacity will
also be considered. Emphasis will be
placed on the flexible structuring of
working time.
A further focus of our personnel
work, especially in this difficult year,
was the maintenance and further
development of our human resource
potential. Training in efforts to raise
skills continued in the Daimler-Benz
group during 1993. Basic vocational
and advanced training are considered
permanent tasks designed to protect
the future of the company and its
employees.
Employment Situation
At year-end the Daimler-Benz
group employed a workforce of
366,736 (1992: comparably calculated
388,888), on January 1, 1994 employ
ment in the group declined a further
4,546 to 362,190. 284,576 people
(1992: 302,464) were employed at the
end of 1993 in Germany. In the corpo
rate units of the group the employ
ment situation was extremely
strained.
Personnel
Difficult economic conditions in 1993 created adjustments to the
workforce not only at the operating units but also at the Daimler-
Benz holding. Reduced working hours in response to fluctuations in
activity was also necessary. The workforce of the Daimler-Benz
group was reduced by 6% to 366,736; affected by the decline, in
particular, were Mercedes-Benz, AEG and DASA. We continue to
improve the skills of our employees through basic and advanced
training, which is a critical factor in maintaining our international
competitiveness.
Strengthening Competitiveness
in a Difficult Environment
The difficult economic conditions
of 1993 made it necessary for the
Daimler-Benz group to reduce its
workforce and personnel costs. Releas
ing personnel, especially on the scale
that is necessary, is always a painful
step. The company not only loses
knowledge and experience; the reduc
tions also impair the age structure of
the remaining workforce.
In 1993, we tried to make the
adjustments in a socially acceptable
manner, particularly through normal
attrition, early retirement and individ
ual severance agreements. In addition,
reduced working hours were used to a
considerable extent to accommodate
fluctuations in activity. In the corpo
rate units of AEG and DASA, however,
redundancies were unavoidable in
1993.
It is our intention that future re
ductions in personnel, which are nec
essary if we are to secure our interna
tional competitiveness, will be carried
out in as socially compatible a manner
as possible, though the room for flex
ibility is more limited. The possi
bilities for taking advantage of attri
tion and early retirement have now
been largely exhausted. Thus, we will
not be able to avoid redundancies as
Hier gab es ein Produkt- oder Stimmungsbild ohne Text oder Zahlen.
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Here was a product or mood picture without text or figures.
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Mercedes-Benz employed a total
of 209,933 people at the end of 1993,
including 160,175 in Germany. The
workforce declined in Germany by
9,982 from the previous year to
159,098. Reduced working hours were
agreed upon in both divisions, partic
ularly the commercial vehicle sector.
Generally, workforce reductions con
formed to socially compatible meas
ures such as extensive offerings of
early retirement and severance agree
ments.
AEG had a total of 58,921 em
ployees at the end of 1993, including
44,591 in Germany. The workforce de
clined by 4%. The reductions affected
particularly the Automation, Electro-
technical Systems and Components,
and Microelectronics fields of activity.
At Deutsche Aerospace (DASA)
86,086 people were employed at year-
end, including 69,373 in Germany. In
comparison with the previous year,
the workforce in Germany declined by
8%. Additionally approximately 50% of
employees were affected by reduced
working hours. The continued dra
matic sales decline in the Aircraft,
Space Systems and Defense Systems
divisions led to the announcement in
October, 1993 of significant changes
in structure and employment at the
DASA group.
Daimler-Benz InterServices
(debis) had a total workforce of 8,812
at the end of 1993, including 7,527
people in Germany. Primarily through
acquisitions, the workforce increased
by 600 from the previous year.
Included in this net increase is a
reduction of approximately 150 em
ployees at debis Systemhaus due to
the difficult business situation.
At Daimler-Benz AG, the execu
tive holding company, a total of 2,984
people were employed at December
31, 1993, of which 540 were in group
management functions, 1,274 in group
research functions and 1,170 in ser
vice areas for the corporate units and
the Mohringen location. The workforce
declined by 156 employees from the
previous year.
Collective Agreements for 1993
In the old Federal states of Ger
many, wages and salaries rose by 3%
effective April 1, 1993, as a result of
the pay agreements concluded for the
metal-working and electrical indus
tries in 1992. Additionally, the con
tractually guaranteed special remu
neration rose to 60% of a month's pay.
The reduction in working hours to 36
hours per week without loss of pay,
previously agreed to in 1990, also
went into effect on this date. In the
new Federal states, the 1991 agree
ments on gradual adjustment of wage
and salary contracts to the level in
West Germany were changed only af
ter a labor dispute. The decisive mate
rial change consists in an extension of
the phases of the time frame. As of De
cember 1, 1993, pay rates were gradu
ally raised to 80% of the West level. As
of July 1, 1994 the ratio will be 87%.
After a further increment to 94% on
July 1, 1995, the level in the old Ger
man states will be the same for all
German states by July 1, 1996.
Personnel and Social
Welfare Expenditure
Group personnel expenditures
increased by 6% to DM 33.8 billion.
In connection with the vigorous cost-
cutting measures, social benefits were
curtailed in all corporate units and in
the holding company.
The company pensions, a central
element of social benefits in the
Daimler-Benz group, remained un
affected. Daimler-Benz AG and
Mercedes-Benz AG paid DM 353 mil
lion to approximately 53,200 retirees,
widows and children in 1993. A total
of DM 551 million was allocated to
pension provisions at Daimler-Benz
AG and Mercedes-Benz AG. AEG dis
bursed DM 107 million in 1993 and
DASA paid DM 113 million. A total
of DM 1.4 billion were provided for
company pensions in the group.
Private Capital Formation
Company Training Activities
Particularly in difficult economic
times, the Daimler-Benz group con
siders the training of junior personnel
an important strategic task to protect
the future of the company.
At year-end 1993, approximately
12,800 young people were undergoing
vocational training in Germany, of
which 3,200 young men and women
commenced training in 1993. Over
100 of the jobs created by the Daimler-
Benz group, in the new Federal states
in 1993, exceeded the actual needs
and is evidence of the company's
strong sense of social responsibility.
Training is offered in almost 60 techni
cal trades and 10 different business
professions. This training is supple
mented by 15 special programs for
high school graduates at professional
academies.
All corporate units offer advanced
training in comprehensive programs
consistent with the different fields of
activity. The focus of training for se
nior managerial staff in 1993 was the
structural change in the group and its
markets.
Expenditures for basic vocational
and advanced training was approx
imately DM 800 million in 1993.
Assistance in employee stock
ownership programs was provided
again in 1993 to the domestic group.
Daimler-Benz AG, Mercedes-Benz AG,
and a few companies belonging to
debis participated in these programs.
Every entitled employee had the
opportunity to purchase a share of
Daimler-Benz AG at a discounted
price. Approximately 73,000 em
ployees, or 41 % of those entitled,
took advantage of this offer.
Managerial Development
and Planning
Managerial development and plan
ning is characterized by increasingly
difficult economic conditions. Execu
tives are also affected by the neces
sary adjustments in staffing levels.
The 1993 executive staff review
reflected a sufficiently large number of
qualified junior personnel to meet the
expected future need of managerial
staff. We are assisting our managerial
staff through specially developed
training programs to improve their in
novative skills and acquiring greater
general management competence with
a more international profile.
The expansion of networks for
knowledge transfer, integration and
communication within the group was
assisted by the '93 Daimler-Benz Con
gress in Berlin: in numerous working
groups, approximately 2,000 senior
managers from domestic and foreign
companies of the group discussed
issues of internationalization, market
orientation, innovative strength, com
petitiveness and responsibility toward
society.
The 1993IAAF World Championships in Athletics in Stuttgart drew nearly half a million
spectators to the Gottlieb-Daimler Stadium. More than four billion people around the world
followed the competitions on television. Daimler-Benz and Mercedes-Benz were active
sponsors of this extremely successful event.
Our sponsoring policy has two pri
mary goals. First, it should yield tan
gible benefits for society by concentrat
ing on projects which would not have
been possible, or not at the same high
level, without the support of Daimler-
Benz. Second, by coordinating spon
sorship goals with company goals,
positive effects should result for the
company in the market, as well as
specific benefits for our employees.
The primary focus of sponsorship
policy within Daimler-Benz AG is our
international drive to promote the ad
vancement of young people. In addi
tion to contributing to better inter
national understanding by bringing
together young people from different
nations and cultures as well as to im
prove the image of Germany abroad,
we are also securing the development
of highly qualified, internationally ori
ented management personnel for the
future. The program "Award of Excel
lence" in cooperation with the Goethe
Institute provides an opportunity for
selected students from the United
States and Canada to live for several
weeks with German host families -
employees of our company - allowing
them to become acquainted with our
country and our company. The re
sponse to this program within the
company and the participants has
been so positive
Preventive Health Care
and Occupational Safety
Medical care for our employees is
traditionally an essential part of our
personnel and social policy. In the
German group companies, approx
imately 230 employees are in the
medical care service to provide health
care to their peers.
Approximately 200 full-time
safety experts ensured on-the-job
safety. The success of their work is
reflected in the further reduction in
accidents in all corporate units.
Thanks to Our Workforce
We would like to express our grat
itude to all our employees for their
commitment and hard work in a year
which was characterized by a very dif
ficult economic situation and painful
steps to optimize costs. We also ex
tend our appreciation to the represen
tatives of the labor councils and man
agerial committees at all levels of our
group.
The Company's Role in Society -
Public Relations' Promoted Activities
Daimler-Benz sponsors a wide range of projects in social, cultural
and ecological areas as well as sports. In addition to the positive
benefits to society, our activities also achieve positive effects for
the company. Particularly important are the international programs
we have designed to promote the advancement of young people.
The same strong sense of respon
sibility which we feel toward our
customers also extends to our share
holders and to the general public.
This sense of responsibility includes
our permanent readiness to engage in
critical exchanges of ideas with people
outside, and inside the company. This
dialogue and cooperation with various
groups is assisted by a wide range of
sponsoring projects in social, cultural
and ecological areas as well as in
sports.
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In the sponsoring of cultural pro
grams and sports, promoting a new
generation plays an important role.
This is also true of our support for
young artists in which we offer spon
soring through various methods.
The Daimler-Benz Junior Cup, an
international youth soccer tourna
ment, held annually in Sindelfingen, in
which employees of the Daimler-Benz
group are among the participants, not
only contributes to communication
among young people across Europe,
but also provides the SOS-Kinderdorf
in Sarajevo with desperately needed
financial support.
that we plan to expand it in the com
ing years. In the future, we will also
invite young people from other coun
tries and regions in which we have
growing business interests to visit
Germany for several months as guests
of the Daimler-Benz group.
Planned activities during 1994 for
young Russian economists have been
set at several locations within the
group. These activities will give them
a comprehensive insight into the busi
ness practices of German industrial
corporations as well as to build a net
work of links with the future decision
makers in Russia.
Complementing this program are
a number of specific activities at for
eign locations, such as in the NAFTA
region. There, we are offering unem
ployed young people in Mexico
positions as trainees at local group
subsidiaries.
The youth projects, which the
Group is undertaking, in the new Ger
man states are especially timely. Dur
ing 1993 Daimler-Benz AG held a con
ference in Hoyerswerda on the subject
"Youth and Violence". The conference
included the financing of work promo
tion programs to benefit unemployed
youth in cooperation with the Freuden-
berg Foundation and the German
Foundation for Children and Youth.
Similar goals are being pursued by the
Youth Projects in Mannheim, which
has a long tradition of assisting young
people.
national and international markets and
pass these funds to the operating com
panies. This method enables the financ
ing costs to be lower than through
direct refinancing by the operating
companies in the local markets
Due to the continuing growth of
the financial services business,
we again used the various interna
tional capital markets in connection
with the central procurement of funds
for financing. We focused on borrow
ing under our Euro medium-term note
program, and were able to support
the needs of our leasing and sales
financing companies very flexibly.
Due to the scope of this borrowing we
limited ourselves to a few activities
involving the standard Eurocurrency
loans. We performed a securitization
of sales financing receivables in the
USA for the first time, with the goal of
extending our investor base and diver
sifying our financial instruments.
As part of our Treasury activities
we also make use of derivative money
and capital market instruments to
limit the group's financial risk and
improve financial results.
Finance and Materials
We have merged group-wide functions of the Finance and Materials
division at the headquarters in Stuttgart-Mohringen. Important
events in 1993, among other things, were the obtaining of a long-
term rating by Standard & Poor's and Moody's Investors Service,
the preparation and implementation of the New York Stock
Exchange listing of the Daimler-Benz shares and the activities in
connection with the Purchasing Drive in the New Federal States.
Group Treasury
During 1993 we continued to
develop the concept and technical
aspects of our central cash manage
ment and included the European
group companies in the cash concen
tration process.
In the area of cash management,
flexibility and efficiency were further
improved through increased use of
commercial paper programs, espe
cially in Germany and the USA.
Through active portfolio management,
we invested long-term funds primarily
in fixed interest rate instruments of
first-class issuers and, to a smaller
extent, in investments in shares of
other companies.
As in the past, the task of foreign
exchange management consisted of
ascertaining and limiting, by foreign
exchange hedging methods, the cur
rency risks of the operative sectors,
particularly with regard to USD and
JPY and also for selected European
currencies. We will continue in the
future to be guided in our strategy by
continually updating currency rate ex
pectations and will employ the finan
cial instruments individually depend
ing on the currency and business field.
The financing needs of the group
are essentially handled by Daimler-
Benz AG and its network of regional
holding and finance companies. The
networks, in their function as financial
hubs, procure external funds on the
The handling of financial transac
tions and the use of the financial trad
ing instruments in connection with
central cash and foreign exchange
management and the central refinanc
ing tasks is governed by financial trad
ing guidelines and thus subject to
strict regulation. Accordingly, we
employ electronic systems with
defined financial control parameters
which take functional distinctions into
account.
A hierarchically structured report
ing system, which is steadily improved
upon, shows us risk areas and poten
tials very early on and provides us
with up-to-date information on which
to base decisions. Since we make
extensive use of electronic data pro
cessing systems in our cooperation
with external associates, we give great
importance to data security.
Financial Planning and Control
To minimize the cost of capital in
financing group activities, we optimize
the allocation of the existing funds in
the group, along with the distribution
channels through which the necessary
capital from outside and inside the
group, is provided to the users within
the group.
We view the maintenance and im
Sales and Project Financing
Supporting worldwide sales of
group products increasingly requires
specific product and customer related
financing solutions in addition to the
offering of standardized financing pro
grams. We need innovative financing
and hedging facilities for projects of
units operating in the infrastructure
sector.
In traditional export financing we
made use of the opportunities pro
vided by the existing financing and
hedging instruments. We also have fi
nancings in which these methods are
not utilized. For construction and as
sembly projects in Eastern Europe and
the Far East, tailored financing solu
tions were developed.
The further recovery of the econ
omies of the countries of Latin Amer
ica, Central Europe and in part, the
Far East, contrasted with a partial de
terioration of political stability and the
economic climate in several countries
of Africa, Eastern Europe and the CIS.
Restrictive policies continued for the
approval of credit risk insurance, and
resistance by international banks were
met within these regions. This
required greater effort to structure
financing solutions.
provement of the financial flexibility of
the group as an important goal. Our
mobility shows itself, for example, ap
propriate to the business needs, in the
fact that gross liquid funds are avail
able within the group (at year-end
1993 over DM 10 billion). Addi
tionally, we finance less than two
thirds of our financial services exter
nally and the rest from group funds.
An external refinancing level as high
as 90% is customary in the industry.
With a view to financial security,
we always supply our foreign subsid
iaries with enough equity so that they
can refinance themselves on a stand
alone basis regardless of the oppor
tunities for fund procurement through
our centrally controlled regional hold
ing and finance companies.
During 1993, there were larger re
quirements for funds, above all in the
domestic areas of the group. These
were covered notably by freeing DM 3
billion in funds from inventories and
by generally raising the efficiency of
working capital management.
In the 1993 financial year,
Moody's Investors Service and the
Standard & Poor's ratings group for
the first time issued long-term ratings
to bonds and issues under the Euro
medium-term note program guaran
teed by Daimler-Benz. Both agencies
rated the good credit standing of
Daimler-Benz with Aa3 and AA, and
particularly stressed the group's favor
able financial profile. These strong rat
ings improve possibilities for borrow
ing on the international debt markets.
Programs of public institutions to
For private shareholders, we organ
aid the financing of delivery and in
vestment projects are important not
only for the newly industrializing and
developing nations of Africa, Asia and
Latin America, but increasingly also
for the countries of Eastern Europe
and the CIS. There are also oppor
tunities in connection with technical
assistance and rehabilitation programs
which are used for the financing of
products of our group.
It will continue to be a central
task of trade and project financing to
minimize financing risks in order to
support product sales and, at the same
time, to maintain the group's latitude
for financing.
Investor Relations Activities
As part of our investor relations
activities we provide comprehensive
information on our enterprise and its
development, to financial analysts and
institutional investors, as well as to
our private shareholders and potential
investors, both domestic and foreign.
We address all our shareholders and
the general public through our annual
and interim reports.
ized an Investor Relations Forum in
the Stuttgart Liederhalle auditorium in
June, 1993, together with DG Capital
Management. We introduced our com
pany to over 1,000 interested guests,
giving them a survey of the activities
of the Daimler-Benz group. In view of
the exceedingly favorable response,
we will stage further events in the fu
ture specifically addressed to private
investors.
In addition, we take the informa
tion requirements of institutional in
vestors and financial analysts into ac
count through round-table discussions
and company presentations. The in
creasing demand for round-table dis
cussions, which we hold at our head
quarters in Stuttgart-Mohringen, indi
cates that this form of communication
with the capital market has become
indispensable.
We hold company presentations in
Germany and in major foreign finance
centers, in close cooperation with
renowned commercial and investment
banks. The high point of these activ
ities was an extended roadshow in the
USA, where we conducted presenta
tions and individual talks with inves
tors in Los Angeles, San Francisco,
Portland, Chicago, Boston and New
York in preparation for our New York
stock listing. To give US investors and
financial analysts direct and timely
access to company information, we es
tablished an Investor Relations Office
in New York parallel to introducing
the stock there.
Investments in Related Companies
Mergers & Acquisitions
It was again our policy in 1993 to
adjust or round out the core business
segments of the group through the for
mation of joint ventures, divestitures,
and selective acquisitions, and in this
way to secure our competitive posi
tion. As specific examples, a transac
tion structure was developed; busi
nesses were appraised and analyses of
companies performed (due diligence)
in connection with purchases; and
concepts for investments in related
companies and management concepts
were elaborated.
Beyond the consulting-related du
ties we exercised the asset protection
function for the group by evaluating
the group's subsidiaries and affiliates
as to performance and, where re
quired, developing methods for im
provement together with the corporate
units. These ranged from optimization
of capital employment to consideration
of joint ventures and divestitures.
In the framework of subsidiary
and affiliate administration, we as
sisted with and exercised Supervisory
Board duties for the group companies,
followed and assessed ongoing pro
jects, and drafted decisions for the
internal bodies.
Purchasing Drive in the
New Federal States Supports
Upswing in the East
The "Purchasing Drive in the New
Federal States" initiated in 1992 by
West German enterprises can look
back on encouraging results in the
first full year in which it was in effect.
Important contributions were also
made by the companies of the
Daimler-Benz group. Purchases from
the new Federal states were increased
to over DM 800 million (1992: DM 600
million). Despite the continued diffi
cult economic situation we expect that
the purchasing goal of DM 1 billion in
the new Federal states expected for
the year 1995 can be achieved, if not
exceeded.
We want to assure as efficient a
procedure as possible for making con
tact with and selecting potential sup
pliers from Eastern Germany. For this
purpose we have created a special pro
ject organization "Purchasing Drive in
the New Federal States in the Daimler-
Benz Group": with the Daimler-Benz
holding company exercising overall
coordination. Project officers have
been appointed in every corporate unit
who steer the activities of their partic
ular company.
To achieve optimum communica
tion between potential suppliers and
the companies of the Daimler-Benz
group and to effectively support the
existing links, "sponsorships" were in
troduced in the fall of 1993. Ten expe
rienced managers from the group are
each responsible for ten companies.
Information concerning potential
suppliers, such as the range of
products offered, financial data and
previous talks with group companies
are collected by the Materials sector of
Daimler-Benz AG in an information
data base to which all corporate units
have access.
To assist the purchasing sectors, a
coordination office was opened in Ber
lin on July 1, 1993. It serves the corpo
rate units as an information and con
tact point, and is the contact for poten
tial suppliers and associations. The
various parties are already making
very active use of this liaison office.
Global Sourcing Activities
Our purchases from abroad have
increased due to additional global
sourcing activities. To further improve
our cost structures, we are striving to
raise the foreign share of purchasing
in Germany to 25% in the medium
term.
Eight corporate offices have been
established in the important and
productive markets in Europe, North
America, Asia and Australia to coordi
nate purchasing. They support our do
mestic purchasing departments with
information on potential new suppliers
and about market trends and poten
tials in the respective countries and
make purchases locally for the individ
ual group companies.
Additionally, up-to-date informa
tion on the international markets is
available to purchasers through a
foreign supplier information system
installed worldwide.
On October 5, 1993, Daimler-Benz AG was the first German company to be listed on the New
York Stock Exchange. The successful negotiations with the US Securities and Exchange
Commission (SEC), have opened up a new epoch for us in capital procurement and financial
disclosure.
The Daimler-Benz Share
The price of the Daimler-Benz share rose by 57% in 1 993, to
DM 844, primarily due to the good atmosphere on the German
stock markets as well as the very favorable reception regarding
the introduction of our shares on the New York Stock Exchange.
To increase the number of our shareholders in the USA, Deutsche
Bank reduced its stake in Daimler-Benz AG to slightly more than
24% and placed just under 4% of our capital stock on the American
market. Following the merger of Mercedes Aktiengesellschaft
Holding with Daimler-Benz AG, we will have more flexibility in using
the international capital markets.
During the beginning of the sec
ond half of the year, the German stock
index DAX increased at an accelerated
pace, climbing to a new record high of
2,267 points by the end of the year.
At DM 844, the Daimler-Benz
share attained a year-end price which
it had last reached in early August,
1990. The 57% increase in 1993 was
higher than the average increase for
the 30 enterprises included in the DAX
(47%). In the first months of 1994, the
German stock market entered a phase
of consolidation which coincided with
the revision of the optimistic expecta
tions in regard to the economy and
profits, not least because of fears that
interest rates would rise again. The
Daimler-Benz share price fell, through
the end of February, by 4% to DM
808.3, while the DAX average declined
by 7%.
Once again in 1993, our shares
were among the most heavily traded
securities on German stock exchanges.
A total of 309 million shares, a third
more than the previous year, were
traded. This volume, with a market
value of DM 204 billion, represented
11 % of the total trade in domestic
stocks. On the German Futures Ex
change, Daimler-Benz options also
ranked among the most actively
traded securities, with 1.6 million
contracts traded.
Stock Exchange Trend
In 1993 almost all major stock
exchanges reached new highs. The
boom in the German stock market was
nourished by declining interest rates
and repeated rumors of additional in
terest rate cuts. Other factors were the
anticipation of medium-term profits
now that numerous enterprises have
instituted cost-cutting measures and
that the new law to safeguard loca-
tional advantages had been passed.
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Daimler-Benz on
Foreign Stock Exchanges
In October, 1993, we listed our
shares on the New York Stock
Exchange. Daimler-Benz is the first
German company to have gained
direct access to the largest and most
important capital market in the world.
The American Depositary Shares
(ADS) traded there are denominated at
a tenth of the par value of a Daimler-
Benz share. The opening quotation
was 47 1/8 dollars; the quotation on
December 30, 1993, was 48 5/8
dollars.
The Daimler-Benz share is now
listed on eight foreign stock
exchanges:
MAH shares will be exchanged for
Daimler-Benz stock at a ratio of 1 for
1, now that this has been noted in the
register of corporations in Frankfurt/
Main and Stuttgart. MAH held a
blocking minority of 25% of the
Daimler-Benz capital stock. Following
the merger, Daimler-Benz will be able
to make more flexible use of the inter
national capital markets. In the future
it will be possible to increase capital
stock depending on the market situa
tion and to issue convertible bonds or
options. In addition, our shares will be
come accessible to a broader range of
investors.
470,000 shareholders, Daimler-Benz is
one of Germany's largest public corpo
rations.
Dividend Reduced
For the financial year 1993, a divi
dend of DM 8 (1992: DM 13) for each
eligible share of DM 50 par value will
be proposed at the Annual General
Meeting taking place on May 18,
1994. For shareholders subject to
income taxes in Germany, the gross
dividend amounts to DM 11.43.
The trading volume of our shares
on foreign stock exchanges in 1993
increased by 44% to 24 million
shares. Trading in London was partic
ularly active.
To further internationalize our
financing activities and to strengthen
our global presence, we intend to be
the first German company to introduce
our stock in Singapore in May, 1994.
As soon as the necessary conditions
are met, we also plan to go to the
Shanghai stock exchange, where no
foreign companies are presently listed.
We want to underscore the growing
significance of East Asia for our
product range.
Shares more widely held
At the end of December, 1993,
the Extraordinary General Meeting of
Daimler-Benz AG and the Annual
General Meeting of Mercedes
Aktiengesellschaft Holding (MAH)
resolved to merge the two companies.
At the beginning of February,
1994, Deutsche Bank placed part of its
holding, about 4% of our capital stock,
on the American market. Deutsche
Bank's interest in our company
thereby declined to 24.4%. Our share
holder base in the USA has thus been
substantially broadened.
The Government of Kuwait, with
approximately 14%, is the second
largest shareholder in Daimler-Benz
after Deutsche Bank. Stella Automobil-
Beteiligungsgesellschaft mbH will
retain a share of 12.6%. When the
merger of Mercedes Aktiengesell
schaft Holding with Daimler-Benz AG
takes effect, almost half of our capital
stock will be widely held. With a mar
ket value of DM 37.7 billion (at the
end of February, 1994) and over
Good Yield Opportunities
A long-term investment in
Daimler-Benz shares offers good yield
opportunities, although a share price
decline may produce a negative re
turn. Investments made in currencies
other than the D-Mark entail further
opportunities and risks due to fluctua
tions in currency exchange rates.
A twelve-year investment in Daimler-
Benz stock reflects an average return
of 13.8% per annum; an investment of
only three years reflects a return of
16.1%. In this calculation we have
assumed that the proceeds from rights
issues and cash dividends (excluding
tax credits) were reinvested in
Daimler-Benz stocks and that the
investor has not purchased any
additional amounts.
Discussion and Analysis of the Financial Situation
The 1 993 consolidated group net income is DM 0.6 billion
(1992: DM 1.5 billion); it was supported by changes in valuation in
which we adjusted certain accounting principles to the U.S. ac
counting principles. Using U.S. accounting principles, results for
1993 amounted to a loss of DM 1.8 billion (1992: a profit of
DM 1.4 billion). Due to the sharp decline in business operations,
and extensive restructuring costs incurred of DM 3.5 billion,
the net operating result was a loss of DM 3.3 billion DM
(1992: a profit of DM 2.0 billion).
Valuation in Consolidated
Financial Statements Adjusted to
U.S. Accounting Principles
We began to conform our balance
sheet accounting and valuation
methods to international conventions
with the 1989 consolidated financial
statements, in order to simplify com
parison with other companies as well
as to improve our method of reporting.
We were the first German company to
list its stock on the New York Stock
Exchange, and therefore reconciled
net income and stockholders' equity to
generally accepted accounting princi
ples in the U.S. (U.S. GAAP). It became
apparent that there were still substan
tial differences between our account
ing principles and the U.S. accounting
principles, which have a decisive
influence on financial reporting.
In the 1993 consolidated financial
statements, we have therefore adapted
our methods of accounting and valua
tion as closely as possible to U.S.
GAAP. These measures, which at the
same time achieve substantial align
ment between the German commercial
balance sheet and the German tax bal
ance sheet, have generated a one-time
income before tax of DM 2.6 billion in
the German consolidated financial
statements. This amount is classified
as extraordinary income. The balance
of the differences are from rules and
regulations regarding obligatory ac
counting and valuation procedures.
Our annual report includes a
reconciliation of the net income
and stockholders' equity determined
according to the principles of the Ger
man "Handelsgesetzbuch" (Commer
cial Code) to those amounts reported
under U.S. GAAP.
Consolidated Net Income of
DM 615 Million Reported
In addition to the changes in ac
counting principles and valuation
methods, the 1993 consolidated finan
cial statements include special factors
and the first-time inclusion of the Fok
ker group. As a result of the recession
ary weakness in the most important
markets, sales revenue declined by 0.8%
to DM 97.7 billion. On a comparable
basis, i.e. taking Fokker's 1992 sales
into account, the decrease was 3.8%.
As a result of the reduction in inven
tory at Mercedes-Benz (offset, how
ever, by inventory increases at DASA
and AEG), total revenue declined more
sharply than sales revenue, down
DM 1.4 billion to DM 99.3 billion. Costs
of materials exceeded those of the pre
vious year because of the first-time
consolidation of Fokker; accordingly,
the latter's share in the total revenue
increased from 48.7% to 51.3%.
Despite the reduction in employment,
personnel expenses continued to rise,
as a result of the inclusion of Fokker
and of the high costs of structural per
sonnel strategies, so that this compo
nent now represents 34.0% (1992:
31.7%) of total revenue. Since the pre
ceding years' high level of investment
in property, plant and equipment and
leased equipment continued during
1993, the depreciation increased by
13.7%, to DM 8.1 billion.
The interest expense for our leas
ing and sales financing companies, at
DM 342 million, was significantly
lower than that of the preceding year.
Interest income of the leasing busi
ness is included in the lease payments
and therefore included in revenues.
When the interest expense for financ
ing leasing and sales are excluded, the
net interest income for the group is
DM 0.8 billion (1992: DM 1.0 billion).
As in previous years we have reduced
interest income by the inflationary
effects, from highly inflationary
countries.
Balance Sheet Influenced
by Financial Service Business
Even greater than the effect on the
income statement, is the effect of the
continued strong growth of leasing
and sales financing on the consoli
dated balance sheet. Our leasing con
tracts are primarily operating type
leases. Leased equipment is valued at
its acquisition or manufacturing cost
less accumulated depreciation. It is
listed separately as part of the
non-current assets.
The financing of sales is a install
ment receivable, which increases the
balance sheet due to the recording of
such receivables and liabilities due to
the financing of such receivables. Ad
ditionally, prepaid customer operating
lease payments are reported as a lia
bility included in deferred income.
We utilize the financial services
business, within the Daimler-Benz
group, as a flexible instrument of our
world-wide sales strategy. The effects
of this business on the consolidated
balance sheet are shown in the follow
ing table. It is assumed that the funds
which are utilized by the financial
service business are available for the
payment of liabilities.
The results from ordinary busi
ness activities declined significantly,
from DM 2.5 billion in 1992 to a loss
of DM 1.1 billion in 1993. The 1993
net income of DM 615 million (1992:
DM 1,451 million) was achieved only
because of lower taxes on earnings
and other taxes and certain accounting
changes which had a considerable ef
fect on the 1993 consolidated net in
come. These changes in accounting
principles influenced almost all areas
of operations and the net income of
Daimler-Benz AG.
In addition to the one-time profit
of DM 2.6 billion due to the change in
certain accounting principles which
we posted as extraordinary income,
we had a gain of DM 1.7 billion from
sales of securities. There were also
income of DM 1.0 billion from tax
rebates and DM 237 million from the
recapture of over-funded assets of the
Daimler-Benz external pension funds
to the provider companies Daimler-
Benz AG and Mercedes-Benz AG,
which thus was a tax free transaction.
In contrast to these revenues were
expenses of approximately DM 3.5 bil
lion connected to the restructuring of
technical capacities and the extensive
reduction in personnel. There were
also additional provisions resulting
from write-downs of the portfolio of
investments in affiliated and related
companies and from the first-time
inclusion of the Fokker group in the
Daimler-Benz consolidated financial
statements.
The disappointing trend of busi
ness in the year 1993 is more clearly
evident in the operating results than
in the reported net income.
Following a profit of DM 2.0
billion in 1992, this (for an internal
calculation) important figure took a
significant turn to a loss of DM 3.3 bil
lion in 1993. (see page 69)
Results of Operations
Allocation among the divisions:
While the decline of business in
the automobile and commercial vehi
cle industry had a negative effect on
the operating profit of Mercedes-Benz,
the restructuring expenses, amounting
to approximately DM 1.7 billion, also
played a decisive role in reducing
income.
The operating loss at AEG
includes restructuring expenses of
DM 607 million.
The results of DASA were im
paired by the decline in demand in the
areas of defense technology and space
systems and by the first-time inclusion
of Fokker. In addition there were pro
visions for future restructuring ex
penses amounting to DM 1.1 billion.
The higher operating profit of
debis is a result of lower net interest
costs for the financing of leasing and
sales, as well as improvements in the
earnings of certain foreign leasing
companies.
The rent expense on operating
leases for 1993 was DM 935 million.
Future minimum rental payments
under these operating leases as of
December 31, 1993 are (in millions
of DM) as follows:
Future rental income, from con
tractual agreements totalling
DM 10,307 million, are distributed
over the future years as follows
(in millions of DM):
Balance Sheet Total Increase
for the Group
The consolidated balance sheet to
tal increased again in 1993 as a result
of the first-time inclusion of Fokker
and the further expansion of the leas
ing and sales financing business by
5.5% to DM 90.9 billion. Including the
leased equipment, non-current assets
increased by 5.1 % to DM 35.4 billion.
If the leased equipment is excluded,
the non-current assets declined by
DM 0.4 billion, to DM 23.5 billion. The
net increase of DM 4.7 billion in prop
erty, plant and equipment, including
the acquisition of DM 0.8 billion of the
Fokker group which is consolidated
for the first time, is reduced by DM 5.2
billion in depreciation. The leased
equipment continues to have above-
average growth, increasing by 21.5%
to DM 11.9 billion. Excluding the in
ventory of lease vehicles, property,
plant and equipment would be re
duced from 27.7% to 25.8% of total
assets. Receivables from the financing
of sales increased by 42.2%, to
DM 8.8 billion.
Inventories, which increased only
slightly in comparison to the previous
year, were financed by approximately
33% through customer down pay
ments. Despite the inclusion of Fok
ker, "net inventories", after customer
down payments, were reduced from
DM 17.6 billion to DM 16.9 billion.
The release of funds from inventories,
together with more effective manage
ment of working capital, helped meet
the need for additional financial as
sets, especially in Germany. Liquid
funds had a net increase from DM 9.8
billion to DM 10.5 billion. The percent
age of liquid funds to the total assets
is 11.5%, which is consistent with that
of the prior year.
On the liabilities side, stock
holders' equity, excluding the amount
intended for dividend distribution, was
reduced by DM 1.3 billion to DM 17.8
billion. With only a small amount
- DM 0.2 billion - retained from
1993 net income, the amortization
of good-will relating from the acqui
sition of Fokker and the reduction in
minority interest of shareholdings
were the primary reason for this de
crease. The percentage of stock
holders' equity to total liabilities de
clined from 22.2% to 19.5%. If we ex
clude the financial service business,
which is dependent on business vol
ume and is largely financed from out
side sources, the percentage of stock
holders' equity to total liabilities is
26.0% (1992: 27.9%), the coverage of
non-current assets (excluding leased
equipment) by stockholders' equity
decreased from 81.1% to 77.5%.
Liabilities from the financing of
leasing and sales increased by 24.5%,
to DM 13.7 billion while allowances
for losses increased by only 3.4%, to
DM 35.9 billion. The income from the
changes in accounting principles was
reduced by the first-time inclusion of
the Fokker group and the established
provisions for the reduction in work
force and the restructuring of capacity.
Provisions amounted to 39.5% (1992:
40.3%) of the balance-sheet total.
Stockholders' equity and long and
medium-term provisions fully cover
both the non-current assets (excluding
leased equipment) and net inventories.
Below we have reproduced the
segment reporting, based on German
accounting principles, as it appears in
the Form 20-F report, which we file
with the U.S. Securities and Exchange
Commission.
Statement of Financial Accounting
Standards No. 95
"Statements of Cash Flows"
(SFAS 95)
The cash flow statement of the
Daimler-Benz group included in the
1992 annual report, has been revised
to completely conform to the U.S. Ac
counting Standard, SFAS No. 95. Ac
cordingly, the effects of foreign curren
cies are eliminated, the additions to
non-current assets are adjusted for
significant changes in the consolida
tion group, changes in stockholders'
equity allocated, and the declaration of
cash is based only on instruments of
payment, rather than on total liquid
assets. A reconciliation to the liquid
assets is included in this report.
In comparison to the previous
year, the cash flow from operating ac
tivities increased by 86% to DM 9.9
billion. This increase is primarily due
to the significant reduction in inven
tory assets, after adjustment for
changes in the consolidation group.
Cash flow from investing activities, of
DM 10.5 billion, was also substantially
higher than in 1992 (DM 7.5 billion).
The primary reason for this increase
was the first-time consolidation of
Deutsche-Aerospace Airbus GmbH,
Information on Derivative Financing
Instruments in Accordance with
US Standards
Daimler-Benz uses derivative fi
nancing instruments in order to hedge
currency and interest rate exposure
for normal business operations.
We work only with banks which
have strong long-term ratings.
The financial instruments are
written almost exclusively in the cur
rencies of the large industrial coun
tries. At December 31, 1993, the vol
ume of positions in foreign currencies
was DM 30.9 billion (1992:
DM 19.1 billion), and that of interest
rate contracts was DM 13.1 billion
(1992: DM 8.6 billion). These gross
amounts represent the base values of
all buying and selling contracts, as
they are required to be disclosed in ac
cordance with Statement of Financial
Accounting Standard No. 105.
Differences in Accruals as a Result
of the Change in the Treatment of
Provisions, and Valuation Methods.
U.S. accounting principles do not
allow the formation of the extensive
loss provisions as permitted by Ger
man law. The excess German loss pro
visions have to be dissolved, which
has an effect on the net income as well
as stockholders' equity. According to
U.S. GAAP, the stockholders' equity
and its large amount of cash (DM 2.0
billion) at the time of its initial consol
idation. Since the surplus in financial
assets from the industrial sector was
not sufficient to fully cover the finan
cial needs of the rapidly expanding
leasing and sales financing business,
we required additional debt of DM 1.3
billion in 1993 (1992: DM 3.7 billion).
We are also anticipating a high
level of capital expenditures in the
Daimler-Benz group in the next few
years. We are exploring the utilization
of a variety of financing models for the
leasing and sales financing business,
which continues to expand. Addi
tionally, we would like to support the
anticipated growth of the companies
by adding equity in the future.
Additional Information in
Accordance with the "U.S. Generally
Accepted Accounting Principles"
(U.S. GAAP)
With the introduction of Daimler-
Benz stock on the New York Stock Ex
change, we are filing an annual report
as a "Form 20-F" with the Securities
and Exchange Commission (SEC).
Much of the content of this filing is
information taken from our annual
report; however, additional data and
financial information is provided deter
mined on the basis of U.S. accounting
principles. In the following sections
we have set forth what we consider to
be the most important information
from the "Form 20-F." Since there are
substantial differences, especially in
the annual net income and stock
holders' equity, the reconciliations are
required to convert certain financial
data from the German consolidated fi
nancial statement to the values calcu
lated by using U.S. generally accepted
accounting principles (see page 73).
increased by DM 5.8 billion during
1993 as a result of the dissolution of
certain loss provisions which also
changed the inventory and receivables
value. We use the term "Appropriated
Retained Earnings" to disclose to the
American investors that such retained
earnings are not available for distribu
tion as dividends. This term also
establishes a bridge between the two
different accounting cultures.
Long-Term Manufacturing
Customer deposits and manufac
turing costs are reported under Ger
man law in accordance with the com
pleted contract method, whereas U.S.
principles generally require that the
percentage of completion method be
used. The majority of contracts within
the group require partial prepayment
as well as partial recognition of profits
based upon payments received. Con
tracts of this nature are also custom
ary in the USA, and are recognized
under its accounting regulations. The
resulting differences therefore are
not material.
Goodwill and Acquisition
of Investments in Businesses
Currency Translation and Financial
Instruments
Under German accounting regula
Unrealized exchange profits and
losses on financial instruments are
treated differently in the two account
ing systems. Under German law, ac
cording to the imparity principle, only
unrealized losses are to be recorded,
whereas under U.S. GAAP unrealized
profits as well as losses must be
recorded.
Other Differences in Valuation
Additional differences between
German and American accounting
methods may occur with respect to
inventories, minority interests and
leasing activities.
Deferred Taxes
Under German accounting regula
tions, deferred tax assets are estab
lished only for the elimination pro
cesses in consolidation. Under U.S. ac
counting principles deferred tax assets
can also be recorded for valuation
adjustments and existing tax loss
carry-forwards.
tions, goodwill can be allocated to
stockholders' equity, or capitalized
and amortized generally over the ex
pected useful life, which in Germany
ranges between 5 to 15 years. Under
U.S. GAAP, the difference between ac
quisition costs and market value must
be capitalized and amortized over a
period not exceeding 40 years.
Disposal of Investments
in Businesses
Under German accounting princi
ples, sales of subsidiaries and share
holdings in businesses must be
allocated to the period in which the
contract is signed. According to
U.S. GAAP, the gain or loss on invest
ment cannot be recognized until after
the actual monetary exchange of the
investment.
Pension Provisions
According to U.S. accounting prin
ciples, the determination of provisions
for old-age pensions requires, among
other things, a determination for antic
ipated increases in wages and salaries.
The calculation is not based on the dis
count rate of 6% for unaccrued inter
est, which is applicable under German
tax law but incorporates the respective
actual interest rates. Another differ
ence is a result of the requirement
that health care costs for retirees be
actuarily calculated and accrued for in
the USA.
Accounting and Valuation
Intangible assets are valued at ac
quisition cost and are amortized on a
straight-line basis over the respective
useful lives. Goodwill resulting from
capital consolidation is amortized over
a period of five years, providing it re
lates to the expansion of the Group.
Where it relates to the 1989 restruc
turing of the Group, it is charged to re
tained earnings. Goodwill resulting
from strategic alliances is split; the
amount relating to the expansion of
the Group is charged to earnings and
the amount relating to restructuring is
charged to retained earnings.
Property, plant and equipment is
valued at acquisition or manufacturing
cost. Self-constructed assets include
direct costs, materials, handling and
production overhead which includes
depreciation.
Acquisition and capitalized manu
facturing costs are depreciated. Where
applicable, accelerated depreciation
methods are used in Germany, pur
suant to certain sections of the Ger
man Tax Guidelines.
Notes to the Consolidated Financial Statements
Summary of Significant Accounting Policies
The consolidated financial state
ments have been prepared in accord
ance with German generally accepted
accounting principles ("German
GAAP"). All amounts shown herein,
unless separately stated, are in mil
lions of German marks ("DM").
During 1993, Daimler-Benz made
several changes in accounting policies
in order to avoid or abandon taxed pro
visions and to approach the account
ing policies generally accepted in the
United States. The change of account
ing and valuation principles has in
creased income by DM 2.6 billion as of
January 1, 1993. For comparibility
purposes, this amount has been re
corded as extraordinary income in the
statements of income (see Note 32).
The significant changes in
accounting policies affecting income
are as follows:
Inventories
The accounts of subsidiaries
operating in highly inflationary
economies have been translated
using historical exchange rates
instead of year end rates as used
in previous years.
Receivables
Only long-term non-interest or
low-interest bearing receivables
are present valued. The allowance
for losses remains unchanged ex
cept for the allowance for general
risks which was previously re
corded on a country-specific basis
and is now recorded based upon
company-specific considerations.
Provisions for Employee Benefits
and Social Costs
The obligations for anniversary
bonuses, previously calculated
ratably without discounts, are now
determined actuarially on the
basis of an assumed interest rate
of 5.5%, the entry age actuarial
cost method and the consideration
of employee turnover.
Expense Provisions Pursuant to
§ 249 Par. 2 of the German
Commercial Code
The elective right for the valuation
of expense provisions has not
been exercised. For comparibility
purposes, the extraordinary in
come also includes the effects
from reducing accruals that were
not necessary upon adoption of
the new method.
Provisions for Deferred Repairs and
Maintenance
This provision, which was previ
ously estimated, is now calculated
based upon future plans for re
pairs and maintenance.
With the exception of the above,
these changes in accounting and
valuation principles have not resulted
in any significant changes to income.
At the beginning of 1993,
Daimler-Benz changed the currency
translation applied to the non-current
assets of foreign subsidiaries, from
historical exchange rates to year end
exchange rates. Subsidiaries in highly
inflationary countries (presently Brazil
and Turkey) are excluded from the
foregoing. The adjustment resulting
from this accounting change is
recorded in stockholders' equity.
Property, plant and equipment is
depreciated over the useful lives as
follows: 17 to 50 years for buildings,
8 to 20 years for site improvements,
3 to 20 years for technical equipment
and machinery and 2 to 10 years for
factory, office and other equipment. If
equipment is used in multiple-shift op
erations, the useful life is reduced ac
cordingly. Buildings are depreciated
using the greater of the straight-line or
the accelerated method of deprecia
tion. Moveable property having a use
ful life of four or more years is
depreciated using the greater of the
declining balance or the straight-line
method. Depreciation on additions dur
ing the first and second half of the
year is calculated using full or half-
year rates, respectively. Additional de
preciation is recorded wherever
deemed necessary. Items having an
immaterial value are expensed when
purchased.
Investments and other financial as
sets are valued at the lower of cost or
market; long-term non-interest or low-
interest bearing loans are recorded at
present value. Investments in associ
ated companies are generally recorded
on the equity method.
Leased equipment is valued at
acquisition or manufactured cost and
depreciated using the greater of the
declining balance method or straight-
line method. Where applicable, tax
deductible depreciation methods
provided in Section 35 of the Income
Tax Guidelines are utilized.
Raw materials, supplies and goods
purchased for resale are valued at the
lower of cost or market; finished goods
are valued at manufacturing cost.
Manufacturing costs include direct
material, labor and applicable manu
facturing overhead including deprecia
tion.
Loss provisions are recorded for
inventories that have long periods of
storage or changes in construction.
Non-interest or low-interest bear
ing receivables and other assets matu
ring after more than one year are pre
sent valued after taking into account
all known risks. An allowance for
doubtful accounts is deducted from the
receivables.
Other securities are valued at the
lower of cost or market.
Provisions for pensions and similar
obligations, including postretirement
medical benefits for retirees of U.S.
subsidiaries, are actuarially deter
mined on the basis of an assumed in
terest rate of 6% using the entry age
actuarial cost method.
Provisions for taxes and other provi
sions have been recorded using the
principles of reasonable accounting
valuation. The obligations in employee
benefits and social costs have been
recorded at the lower of the present
value of future payments or at the pro
rata amount, depending upon the
respective benefits acquired.
Liabilities are recorded at their
repayment amounts.
Consolidated Group
In addition to Daimler-Benz AG,
the consolidated Group consists of 305
domestic and foreign subsidiaries
(1992: 271) and 12 joint ventures. The
joint ventures are accounted for using
the pro rata consolidation method.
During 1993, 53 subsidiaries and
5 joint ventures were added to the
consolidation and 19 subsidiaries were
deleted.
In May 1993, Deutsche Aerospace
AG acquired a 78% majority share in
Fokker-Holding B.V., which owns 51%
of Fokker N.V. The effects of including
this company in the consolidated fi
nancial statements for the first time
are explained in the notes to the finan
cial statements. The loss for the short
period arising prior to the acquisition,
has been deducted from other operat
ing expenses.
At December 31, 1993, 271 sub
sidiaries were not consolidated as
their effect on the financial position
and results of operations was not ma
terial (their total revenues were less
than 1 % of consolidated revenues). Ad
ditionally, 11 other companies admin
istering external pension funds, whose
assets are subject to restrictions, were
not included in the consolidation. The
entire consolidated Group of Daimler-
Benz AG is contained in the list of in
vestment holdings filed in the Stut
tgart Commercial Register as entry
No. HRB 15 350.
Consolidation Principles
Capital consolidation is accom
plished using the book value method
by netting the acquisition cost and the
pro rata share of stockholders' equity
of the subsidiary at the time of its ac
quisition or when it is first included in
the consolidation. Joint ventures are
also accounted for under this method.
Significant investments in which
Daimler-Benz has an ownership inter
est in the range of 20% to 50% are
generally accounted for using the eq
uity method. Investments in which
Daimler-Benz has an ownership inter
est of less than 20% are accounted for
at cost.
These financial statements include
references to affiliated, associated and
related companies. Affiliated com
panies include entities in which
Daimler-Benz has majority ownership
or an interest of 20% to 50% and
which are not consolidated or ac
counted for on the equity method, re
spectively, as their effect would not be
material. Associated companies repre
sent entities in which Daimler-Benz
owns between 20% and 50% and are
accounted for using the equity
method. Related companies include
entities which have a significant own
ership interest in Daimler-Benz or an
entity in which a member of Daimler-
Benz management is a board member.
Wherever possible, the accrued
differences arising from capital consol
idation are shown under the respec
tive consolidated balance sheet item
and are amortized to income over the
expected useful life. Goodwill is amor
tized in accordance with the method
discussed in "Accounting and Valua
tion" above. The accrued difference of
DM 841 million, remaining after the
acquisition of Fokker, is valued in con
junction with the restructuring of the
Company and, accordingly, has been
charged directly to retained earnings
without affecting net income.
A deferred difference arising from
capital consolidation is shown sep
arately under "Other provisions" as
"Difference from capital consolidation
with accrual character."
Appropriated retained earnings of
acquired subsidiaries are included in
the Company's retained earnings. The
1993 unappropriated profit reported in
the consolidated financial statements
represents the unappropriated profit of
Daimler-Benz AG. Accordingly, the
proceeds from consolidation measures
affecting operating income and the un
appropriated profits of the subsidiaries
have been offset against the retained
earnings of the Company.
Investments in 142 associated
companies are recorded in the consoli
dated financial statements.
For the year ended December 31,
1993, 21 associated companies have
been included in the consolidated fi
nancial statements at equity using the
book value method.
The remaining associated com
panies are reported as investments at
acquisition cost net of applicable de
preciation because the ownership is
insignificant to the financial position
of the Company.
All material intercompany trans
actions have been eliminated in con
solidation.
The deferred taxes shown in the
consolidated balance sheet include the
elimination procedures affecting net
income.
Currency Translation
Foreign currency assets are trans
lated at the lower of the entry date ex
change rate or year end exchange rate;
foreign currency liabilities are trans
lated at the higher of the selling rate
on the entry date or at the year end
selling rate.
The year end exchange rate
is generally used to translate bal
ance sheet items of foreign companies
from the respective local currency to
German marks. Excluded from this
treatment are the non-current assets
and inventories of companies in highly
inflationary countries, where historical
exchange rates are used.
The difference resulting from the
currency translation of the balance
sheet items is charged or credited to
stockholders' equity; for companies
operating in highly inflationary coun
tries translation gains or losses are ap
plied to income.
The currency translation of non-
current assets at year end exchange
rates reflect translation gains or losses
in the property, plant and equipment
analysis, and have been shown sep
arately in the schedule. Such transla
tion gains and losses were charged or
credited to appropriated retained earn
ings without affecting income. The
readjustment of the values in the 1992
consolidated balance sheet to year end
exchange rates results in a negative
difference of DM 106 million, which
was charged to appropriated retained
earnings without effecting 1992 earn
ings.
Expense and income items are
generally translated at the annual
average exchange rate. Where such
items concern non-current assets and
inventories of companies in highly
inflationary countries, the historical
exchange rates are used. Net income,
appropriated retained earnings and
unappropriated profit are translated at
the year end exchange rate. The differ
ence between the annual average and
year end exchange rates is included in
"Other operating expenses" (included
in other operating income in 1992).
Notes to Consolidated Balance Sheet
At December 31, 1993, included in intangible assets are DM 523 million of goodwill
(1992: DM 611 million) from capital consolidation and from individual accounts, acquired
computer software, patents and, to a lesser extent, advance payments.
During 1993, additional amortization of goodwill amounted to DM 88 million.
The decrease in property, plant and equipment by DM 333 million to DM 18,921 mil
lion is a result of DM 5,432 million in additions, DM 210 million in currency translation
gains, and their reclassifications of minus DM 15 million, DM 751 million in disposals and
depreciation expense amounting to DM 5,209 million. Included in depreciation expense
is accelerated depreciation of DM 76 million (1992: DM 163 million) which is allowed
by German tax law and additional accelerated depreciation of DM 287 million (1992:
DM 21 million) relating to certain revaluations of property, plant and equipment.
As a result of subsidiaries consolidated for the first time, capital expenditures in
creased by DM 1,854 million and depreciation by DM 909 million; of which capital expen
ditures of DM 1,638 million and related depreciation of DM 833 million resulted from the
acquisition of Fokker.
Financial assets primarily represent investments in associated companies, other loans
and investments.
Loss provisions, amounting to DM 298 million (1992: DM 83 million) were recorded on
investments with non-consolidated subsidiaries.
As a result of the first-time consolidation of Fokker, acquisition costs were increased
by DM 147 million and amortization increased by DM 70 million.
The increase of DM 2,102 million of leased equipment - almost exclusively vehicles -
to DM 11,879 million primarily is the result of lease acquisitions from Mercedes-Benz
Credit Corporation, Norwalk, USA, and MBL Mercedes-Benz Leasing GmbH & Co OHG,
Stuttgart and, for the first time consolidation of Fokker which amounted to DM 458 mil
lion.
In accordance with the provisions of tax law, additional depreciation has been re
corded on leased equipment in the amount of DM 5 million (1992: DM 3 million).
The majority of consolidated inventories is from Mercedes-Benz and Deutsche Aero
space. The increase over 1992 amounting to DM 2,560 million, is primarily from the corpo
rate unit DASA, of which DM 2,066 million is from the first-time consolidation of Fokker.
Inventory decreases were recorded in the Mercedes-Benz division.
Advance payments received in the amount of DM 7,317 million (1992: DM 5,549 mil
lion) primarily represent projects and long-term contracts with AEG, DASA AG, Fokker,
Dornier, Eurocopter and MTU. Such payments have been deducted from inventories.
This item represents receivables from customers in the amount of DM 8,771 million
(1992: DM 6,166 million), of which DM 5,569 million (1992: DM 2,804 million) are long-
term receivables. An allowance for losses of DM 174 million has been recorded on these
receivables.
Approximately DM 0.4 billion (1992: DM 0.4 billion) of the receivables from related
companies represent fixed interest rate debt instruments and securities.
Tax refund claims and interest receivable are included in "Other assets." This item
also includes liquid assets in non-marketable debt instruments amounting to DM 186 mil
lion (1992: DM 437 million).
An allowance for loss of DM 1,670 million has been provided for on receivables and
other assets.
In November, 1993, Daimler-Benz AG and the corporate units sold 72,945 shares (par
value of DM 3.6 million, or 0.16% of equity) to employees at a discounted price of DM 337
per share. The remaining 49,357 shares of treasury stock were sold in the public market.
Other securities primarily consist of fixed interest rate instruments.
Certain current assets could have been increased by DM 27 million to their original
values in accordance with German GAAP, however, the revaluation was not recorded due
to a negative effect on currently payable income taxes.
The balance of DM 2,954 million (1992: DM 2,968 million) includes cash in banks,
cash on hand, cash in the German Bundesbank and Postbank, as well as deposits in tran
sit.
The liquid assets included in various balance sheet positions total DM 10.5 billion
(1992: DM 9.8 billion).
Deferred taxes generated from elimination procedures affecting income total DM 323
million (1992: DM 1,329 million). Among other things, the decrease is the result of minor
inter-company profits from inventory reduction in the automotive sector.
Additionally, a discount totalling DM 16 million has been included in this balance
sheet position.
The capital stock and additional paid-in capital pertain to Daimler-Benz AG.
Daimler-Benz shareholders have approved, on June 26, 1991, through June 30, 1996,
the issuance of up to DM 600 million (par value) of additional share capital.
Retained earnings contain the German statutory provision of DM 160 million and other
retained earnings of Daimler-Benz AG totalling DM 13,091 million. Retained earnings also
include the group's share of the consolidated subsidiaries retained earnings and balance
sheet results, provided the earnings were generated by such subsidiaries since joining the
Company. Additionally, retained earnings include the cumulative effect resulting from the
elimination of inter-company profits from the consolidation and foreign currency transla
tion gains and losses.
The interest held by third-parties in the stockholders' equity of the consolidated sub
sidiaries primarily consists of Daimler-Benz Luft- und Raumfahrt Holding AG, AEG,
Mercedes-Benz Mexico, Dornier, MTU and Eurocopter.
In addition to the above a negative minority interest amounting to DM 758 million
relates to Fokker.
Pension accruals have increased by DM 542 million to DM 12,759 million (1992:
DM 12,217 million) as a result of the annual increase in pension provisions.The pension
accruals and the plan assets of the external pension plan, fully fund the Company's pen
sion obligations.
Accrued taxes amounting to DM 833 million (1992: DM 764 million), represent
currently payable income taxes for Daimler-Benz, the balance of the accrued taxes is
currently payable for all other consolidated companies.
The difference from capital consolidation with accrual character represents the pur
chase of two subsidiaries consolidated for the first time and an accrual for related start-up
expenses.
In addition, the company is liable for compensatory payments guaranteed by Deutsche
Aerospace AG which cannot be reasonably estimated for 1994 and future years. For
outside shareholders of AEG Aktiengesellschaft and Daimler-Benz Luft- und Raumfahrt
Holding AG claims also exist for compensatory payments which cannot be reasonably
estimated.
Additionally, outstanding contractual performance guarantees exist for which future
liability cannot be reasonably estimated.
The other financial obligations are for future services from rental, leasehold and
leasing agreements and amount to an average annual amount of DM 677 million over an
average contractual period of 8 years.
Other financial obligations due to non-consolidated subsidiaries, represent annual pay
ments due of approximately DM 34 million over an average contractual period of 13 years.
In connection with the fiduciary settlement by Deutsche Aerospace Airbus GmbH of
the federally guaranteed serial credits, the effective amount cannot be determined until
the beginning of 1995 when the federal government's last tranche of DM 1 billion is due;
this also applies to the reorganization profit received in 1989.
Within the scope of the government-supported Airbus-Development-Program, Deut
sche Aerospace Airbus GmbH has agreed to assume performance portions itself. DM 199
million thereof relate to the time after the balance sheet date, to the extent that they are
not already reflected in the annual accounts.
All assets acquired by Deutsche Aerospace Airbus GmbH with subsidy funds have
been conveyed to the Federal Republic of Germany as security.
With reference to the development work for the Airbus program, Airbus Industrie
G.I.E. has given a performance guarantee to Agence Executive (government office in
charge of Airbus); this guarantee was taken over by Deutsche Aerospace Airbus GmbH -
to the extent of its share interest - without restriction. Deutsche Aerospace Airbus GmbH
considers the obligation fully covered by the relevant agreements for the financing and
execution of the development work.
Beginning in 2002, the profit sharing agreement provides that the federal government
will share 40% in the profits of Deutsche Aerospace Airbus GmbH. This requirement, in its
economic effect, stipulates the sequence of the government's repayment demands.
The remaining financial obligations, particularly purchase order commitments for capi
tal investments, are within the scope of normal business activities.
The obligation arising from stock and capital subscriptions pursuant to Section 24 of
the GmbH Act, amounts to DM 9 million.
The company is jointly and severally liable for certain non-incorporated companies,
partnerships and joint ventures. In addition, there exist performance and miscellaneous
guarantees in connection with normal business transactions.
Income from dissolved provisions is DM 2,348 million (1992: DM 1,519 million).
Gains totalling DM 1,659 million were realized from the sale of securities. Additionally, the
recapture of over-funded assets of Daimler-Benz Unterstützungskasse GmbH to Daimler-
Benz AG resulted in income totalling DM 237 million. The source of such re-capture is the
1992 Tax Amendment Law, which limits the over-funding of such assets. Additional
income resulted from the currency translation gains from countries outside of Germany
relating to open payments and deliveries. Losses from open payments and deliveries are
included in "Other operating expenses". Additionally, income was generated from
subrental agreements.
Other operating income in the amount of DM 3,581 million (1992: DM 2,226 million)
is primarily related to reductions in estimated loss provisions.
The cost of materials compared to the total output of DM 99,494 million (1992:
DM 100,879 million) is 51% (1992: 49%), respectively.
The wages and salaries also include personnel expenses of DM 3.1 billion for restruc
turing in conjunction with workforce reductions; of this amount, DM 2.7 billion represent
accruals for provisions.
The number of employees also includes 11,575 people employed by Fokker. Addi
tionally, 10,740 people are employed in joint ventures.
The majority of the property, plant and equipment is owned by Mercedes-Benz.
The increase of depreciation of leased equipment over the prior year results from the
expanded leasing activities of the domestic and foreign financial service companies.
Other operating expenses include increases to provisions, maintenance costs, adminis
trative and sales costs including commissions for sales representatives, rental and leasing
costs, currency exchange translation losses from open payments and deliveries, freight
and packaging, and the losses from currency exchange translation of companies in highly
inflationary countries. An accrual has been provided for future restructuring costs. Fok-
ker's DM 94 million loss arising from the acquisition during the period from January 1
through May 18, 1993 has been deducted from other operating expenses.
Additionally, included in other operating expenses are DM 224 million (1992: DM 161
million) which primarily relate to changes in estimated loss provisions.
1992
DM in millions DM in millions
1993
Interest paid to third parties from the leasing and sales financing business amounts to
DM 342 million (1992: DM 421 million).
The extraordinary income, amounting to DM 2,603 million, include non-recurrent in
come from the new valuation methods and changes in accounting principles as explained
in the "Summary of Accounting Policies".
At January 1, 1993, provisions were reduced by DM 1,935 million; of this amount,
DM 1,119 million were allocated to expenditure provisions, DM 548 million to provisions
for employee benefits and social costs, and DM 268 million to provisions for maintenance
costs. An additional reduction of DM 445 million resulted from a change in receivable
valuation methods. Additional income of DM 223 million was realized from translating
inventories of companies in highly inflationary countries using historical exchange rates
for the first time.
In addition to the economic slowdown of important markets, 1993 net income of
DM 615 million was reduced by a one time charge of DM 3.5 billion, before income taxes,
for the restructuring of capacities and reduction in workforce. Offsetting this one time
charge was income from securities sold, from the new accounting and valuation methods
utilized and reduced tax expenses.
Statutory depreciation of financial and current assets had an insignificant effect on
consolidated net income.
Under the presumption that the proposed dividend is ratified by the shareholders at
the Annual Meeting on May 18, 1994, the remuneration paid by the group companies to
the members of the Board of Management and the Supervisory Board of Daimler-Benz AG
amounts to DM 14,348,204 and DM 1,289,595 respectively. Disbursements to former
members of the Board of Management of Daimler-Benz AG and their survivors amount to
DM 9,790,261. An amount of DM 79,727,443 has been accrued in the financial statements
of Daimler-Benz AG and Mercedes-Benz AG for pension obligations to former members of
the Board of Management and their survivors. As of December 31, 1993, advances and
loans to members of the Board of Management of Daimler-Benz AG amounted to
DM 169,863. Home mortgages included herein are not subject to interest; other loans and
advances bear interest averaging 5.5%. During 1993, DM 65,104 of outstanding loans was
repaid. The terms for home mortgages are ten years and less than one year for loans and
advance payments.
Auditor's Report
We rendered an unqualified opinion on the consolidated financial state
ments and the business review report in accordance with § 322 HGB
(German Commercial Code). The translation of our opinion reads as follows:
"The consolidated financial statements, which we have audited in accordance
with professional standards, comply with the legal provisions. With due regard
to the generally accepted accounting principles, the consolidated financial state
ments 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/Main, March 23, 1994
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Zielke
"Certified Public Accountant"
Dr. Koschinsky
"Certified Public Accountant"
Proposal for the Allocation of Unappropriated Profit
The annual financial statements of Daimler-Benz AG as of December 31, 1993,
show an unappropriated profit of DM 390,387,317.00. It will be proposed at the
Annual General Meeting that this amount be applied as follows:
Stuttgart-Möhringen, March 8, 1994
The Board of Management
Supervisory Board
WOLFGANG GABELE*)
Bremen
Deputy Chairman of the
Corporate Labor Council,
Daimler-Benz Group Chairman of the
Corporate Labor Council and the
Joint Labor Council, AEG
MANFRED GÖBELS*)
Leonberg
Senior Manager, Mercedes-Benz AG
Chairman of the Senior Managers'
Committee, Daimler-Benz Group
Chairman of the
Senior Joint Managers' Committee,
Mercedes-Benz AG
ERICH KLEMM*)
Calw
Chairman of the Labor Council,
Sindelfingen Plant,
Mercedes-Benz AG
MARTIN KOHLHAUSSEN
Frankfurt/Main
Speaker for the Board of Management,
Commerzbank AG
RUDOLF KUDA*)
Frankfurt/Main
Departmental Manager within the
Board of Management,
Metal-Workers' Union
HlLMAR KOPPER
Frankfurt/Main
Member of the Board of Management,
Deutsche Bank AG
Chairman
KARL FEUERSTEIN*)
Mannheim
Chairman of the Corporate Labor
Council, Daimler-Benz Group
Chairman of the Joint Labor
Council, Mercedes-Benz AG
Deputy Chairman
PROF. DR. RER. NAT. GERD BINNIG
Munich
Head of IBM Physics Group
WILLI BÖHM*)
Kandel
Member of the Labor Council,
Worth Plant, Mercedes-Benz AG
BIRGIT BREUEL
Berlin
President of the Treuhandanstalt
(Government Agency for Privatization)
PROF. HUBERT CURIEN
Paris
Former Minister for Research and
Technology of the Republic of France
DR. JUR. MICHAEL ENDRES
Frankfurt/Main
Member of the Board of Management,
Deutsche Bank AG
HELMUT LENSE*)
Stuttgart
Member of the Labor Council,
Untertürkheim Plant,
Mercedes-Benz AG
WALTER RIESTER**)
Frankfurt/Main
Vice-Chairman,
Metal-Workers' Union
(as of 10/26/1993)
JÜRGEN SARRAZIN
Frankfurt/Main
Speaker for the Board of Management,
Dresdner Bank AG
DR. JUR. ROLAND SCHELLING
Stuttgart
Attorney at Law
DR. MANFRED SCHNEIDER
Leverkusen
Chairman of the Board
of Management, Bayer AG
(as of 12/20/1993)
PETER SCHÖNFELDER*)
Augsburg
Member of the Labor Council,
Deutsche Aerospace AG
PROF. DR. JUR. JOHANNES SEMLER
Kronberg/Taunus
Lawyer
BERNHARD WURL*)
Mainz
Departmental Manager within the
Board of Management,
Metal-Workers' Union
*) Elected by the employees.
**) Judicially appointed as employee
representative.
Outgoing Members of the
Supervisory Board:
HERMANN I. ABS
Frankfurt/Main
Honorary Chairman,
Deutsche Bank AG
Honorary Chairman
(deceased 02/06/1994)
RICHARD BOLLMANN*)
Mannheim
Senior Manager, Deputy Chairman of
the Senior Managers' Committee,
Mercedes-Benz AG
(on 05/26/1993)
PROF. DR.-ING. E.H.
WERNER BREITSCHWERDT
Stuttgart
(on 05/26/1993)
DR. RER. POL. HORST J. BURGARD
Frankfurt/Main
Member of the Supervisory Board,
Deutsche Bank AG
(on 05/26/1993)
HELMUT FUNK*)
Stuttgart
Chairman of the Labor Council,
Untertiirkheim Plant and Main Office,
Mercedes-Benz AG
(on 05/26/1993)
HUGO LOTZE*)
Reinhardshagen
Chairman of the Labor Council,
Kassel Plant,
Mercedes-Benz AG
(on 05/26/1993)
PROF. DR.-ING. E.H. DR. H.C.
WERNER NIEFER
Stuttgart
(deceased 09/12/1993)
DlPL.-lNG. HANS-GEORG POHL
Hamburg
Deutsche Shell AG
(on 05/26/1993)
DR. RER. POL. WOLFGANG RÖLLER
Frankfurt/Main
Chairman of the Supervisory Board,
Dresdner Bank AG
(on 05/26/1993)
SIEGFRIED SAUTER*)
Frankfurt/Main
Deputy Chairman of the Corporate
Labor Council, Daimler-Benz AG
Chairman of the Joint Labor Council,
AEG Aktiengesellschaft
(on 05/26/1993)
FRANZ STEINKÜHLER*)
Frankfurt/Main
First Chairman,
Metal-Workers' Union
(on 06/21/1993)
HERMANN-JOSEF STRENGER
Leverkusen
Chairman of the Supervisory Board,
Bayer AG
(on 05/26/1993)
*) Elected by the employees.
Report of the Supervisory Board
Hermann Josef Abs, Frankfurt/
Main, died on February 6, 1994. He
served as Chairman of the Supervisory
Board from 1955 to 1970 and subse
quently as Honorary Chairman. During
his service Mr. Abs greatly influenced
the development of Daimler-Benz and
we will always remember his achieve
ments and exceptional personality
with great admiration and respect.
Professor Werner Niefer, a former
member of the Board of Management
from 1975 through May 26, 1993, died
on September 12, 1993. On May 26,
1993, Mr. Niefer was elected to the Su
pervisory Board. He was able to partici
pate in the Board only for a very short
period. We would have liked to draw on
his energy and wealth of experience for
a long time to come. As a replacement
for Mr. Niefer, Dr. Manfred Schneider,
Leverkusen, was elected to the Super
visory Board on December 20, 1993.
Mr. Herbert Lucy, Mannheim, died
on January 15, 1994. From the year
1965 until leaving the company in No
vember, 1989, he had been a member
of the Supervisory Board as employee
representative, and as of 1978 as dep
uty chairman. His committed efforts
on behalf of the employees, his consci
entious cooperation and willingness to
work together with trust and respect,
earned him widespread appreciation
and recognition - both within and out
side the company. We will remember
Mr. Lucy with great admiration.
We would like to take this oppor
tunity to express our sincere gratitude
to the outgoing members of the Super
visory Board, some of whom belonged
to this Board for many years, for their
active participation and their highly
technical knowledge.
In connection with the audit en
gagement, the Supervisory Board and
KPMG had no disagreement with the
companys' records. We approved the
1993 consolidated financial statements
of Daimler-Benz AG as prepared by the
Board of Management; and such finan
cial statements are hereby ratified. We
concur with the proposal of the Board
of Management regarding the alloca
tion of unappropriated profit. The con
solidated financial statements, the busi
ness review and the external auditors'
report were submitted to us.
As s result of the regularly sched
uled elections to the Supervisory
Board, at the Annual General Meeting
on May 26, 1993, a number of
changes were made in the Supervisory
Board. Departing the supervisory
board were Prof. Dr.-Ing. Werner
Breitschwerdt, Stuttgart, Dr. Horst
Burgard, Frankfurt/Main, Hans-Georg
Pohl, Hamburg, Dr. Wolfgang Röller,
Frankfurt/Main and Hermann-Josef
Strenger, Leverkusen. Elected to the
supervisory board were Mrs. Birgit
Breuel, Berlin, as well as Prof. Hubert
Curien, Paris, Dr. jur. Michael Endres,
Frankfurt/Main, Prof. Werner Niefer,
Stuttgart and Jürgen Sarrazin,
Frankfurt/Main.
Also departing the Supervisory
Board, at the close of the Annual Gen
eral Meeting on May 26, 1993, were
the following employee representa
tives: Richard Bollmann, Mannheim,
Helmut Funk, Stuttgart, Hugo Lotze,
Reinhardshagen, and Siegfried Sauter,
Frankfurt/Main. Elected to the Super
visory Board were the following em
ployee representatives: Willi Böhm,
Kandel, Wolfgang Gabele, Bremen,
Manfred Göbels, Leonberg, and Hel
mut Lense, Stuttgart. Franz Stein-
kiihler, Frankfurt/Main who resigned
from the Supervisory Board on June
21, 1993 was replaced by Walter Ries-
ter, Frankfurt/Main, on October 26,
1993, by the appropriate legal body.
During 1993, the Supervisory
Board held four formal meetings in
which we were informed in detail con
cerning the state of the company and
essential matters of corporate policy.
The Supervisory Board also discussed
these issues with the Board of Man
agement. Our discussions focused on
medium-term corporate planning, in
cluding but not limited to capital ex
penditures, trends in employment and
earnings and further developments in
the structuring of the group. Addi
tionally, we discussed major business
transactions and made decisions
concerning individual transactions
which, by either law or company
by-laws, required submission to the
Supervisory Board for review and
approval.
The Supervisory Board examined
the consolidated financial statements
and the business review of Daimler-
Benz AG and the group, as well as the
proposal for the allocation of unap
propriated profit. KPMG Deutsche
Treuhand-Gesellschaft AG, Wirt-
schaftsprufungsgesellschaft,
Frankfurt/Main, audited the financial
statements of Daimler-Benz AG and
the consolidated financial statements
of the group as of December 31, 1993,
as well as the business review. The
consolidated financial statements were
in accordance with generally accepted
accounting principles. The Supervisory
Board approved the audit results of
KPMG in a joint meeting with the
Board of Management on April 7, 1994.
Executive Management and Daimler-Benz Group Representatives
Executive Management
DR. JUR. BOY-JÜRGEN ANDRESEN
Personnel Policy
HANSJÖRG BAUMGART
Daimler-Benz Art Possessions
MARTIN BERGER
Annual Accounts and
Accounts Planning
DR. RER. POL. ROLF A. HANSSEN*)
Corporate Planning and Controlling
MATTHIAS KLEINERT*)
Public Affairs and Political -
Economic Policy
DR.-ING. MICHAEL KRÄMER
Research 1
DR. RER. NAT. VOLKER LEHMANN
Research 2
WERNER POLLMANN
Technology, Environmental Officer
Daimler-Benz
PROF. DR. RER. NAT.
ROLF SCHARWÄCHTER*)**)
Directorate for Group Business in
Emerging Markets
JÖRG SEIZER
Subsidiaries and Affiliated Companies
KONRAD STRAUB
Corporate Auditing
DR. OEC. PUBL. PAUL WICK*)
Finance and Taxes
DR. IUR. SOLMS WITTIG*)
Staff Lawyer
GERD WORIESCHECK
Personnel Development
for Senior Group Executives
*) With general power of procurement.
**) Also deputy member of the Mercedes-Benz
Board of Management without an own
department.
Daimler-Benz Group Representa
tives
Berlin
PETER-HANS KEILBACH
Englerallee 40
14195 Berlin
Bonn
ALFONS PAWELCZYK
Friedrich-Ebert-Allee 26
53113 Bonn
Brussels
DR. HANNS R. GLATZ
133, RUE FOISSART - BTE. 29
B-l040 BRUSSELS
BELGIUM
JERUSALEM/TEL AVIV
BENJAMIN NAVON
Ramban Street 11
Jerusalem
Israel
Moscow
LOTHAR GLEITZE
Prosp. Vernadskogo 9/10, App. 602
Moscow 117311
Russia
Tokyo
RAINER JAHN
Roppongi First Bldg.
9-9, Roppongi 1-chome
Minato-ku, Tokyo 106
Japan
Washington D.C.
RICHARD H. IMUS
Suite 800, 1350 I Street, N. W
Washington D. C. 20005-3305
U.S.A.
Executive Management and Daimler-Benz Group Representatives 99
Balance Sheet Press Conference:
April 12, 1994
10.00 a.m.
Haus der Wirtschaft
Stuttgart
Annual General Meeting:
May 18, 1994
10.00 a.m.
International Congress Center (ICC)
Berlin
Daimler-Benz reports on the first
quarter of 1994 during the Balance
Sheet Press Conference on April
12, 1994, on the first six months with
an audited semi-annual report at the
end of August, 1994 and during early
November on the first nine months of
1994.
Daimler-Benz AG
IR
70546 Stuttgart
Telephone: 49-711-1 79 22 87
Telefax: 49-711-1 79 41 09
This report has been printed on
environment-friendly paper bleached
without the use of chlorine.