Daimler AG Annual Report 2001

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FY2001 Annual Report · Daimler AG

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Answers for questions to come

Annual Report 2001

Key Figures

DaimlerChrysler Group
Amounts in millions

01
US $1)

01:00
Change in %

Revenues

136,072

152,873

162,384

149,985

European Union

of which: Germany

North America

of which: USA

Other markets

40,624

45,640

50,348

49,960

20,612

23,157

25,988

28,393

81,814

91,916

95,939

87,083

72,216

81,132

84,503

78,104

13,634

15,317

16,097

12,942

Employees (at year-end)

372,470

416,501

466,938

Research and development costs

5,348

6,008

7,395

7,575

Investments in property, plant
and equipment

7,918

8,896

10,392

9,470

Cash provided by operating activities

14,192

15,944

16,017

18,023

Operating profit (loss)

(1,173)

(1,318)

9,752

11,012

Operating profit adjusted3)

1,197

1,345

5,213

10,316

Net income (loss)

per share (in US $/ )

Net income adjusted3)

per share (in US $/ )3)

Total dividend

Dividend per share (in )

(589)

(662)

7,894

5,746

(0.59)

(0.66)

7.87

5.73

650

0.65

893

730

0.73

3,481

6,226

3.47

6.21

1,003

2,358

1.00

2.35

1) Rate of exchange: 1 = US $0.8901 (based on the noon buying rate on Dec. 31, 2001).
2) A 1% decrease after adjusting for changes in the consolidated Group.
3) Excluding one-time effects, see pages 54-60.

-62)

-9

-11

-4

-5

-11

-19

-14

-0

-74

-79

-57

A product range with infinite possibilities

Divisions

Mercedes-Benz Passenger Cars & smart
Amounts in millions

Operating profit
Operating profit adjusted
Revenues
Investments in property, plant and equipment
Research and development
Unit sales
Employees (Dec. 31)

Chrysler Group
Amounts in millions

Operating profit (loss)
Operating profit (loss) adjusted
Revenues
Investments in property, plant and equipment
Research and development
Unit sales
Employees (Dec. 31)

Commercial Vehicles
Amounts in millions

Operating profit (loss)
Operating profit adjusted
Revenues
Investments in property, plant and equipment
Research and development
Unit sales
Employees (Dec. 31)

Services
Amounts in millions

Operating profit
Operating profit adjusted
Revenues
Investments in property, plant and equipment
Employees (Dec. 31)

Other Activities
Amounts in millions

Operating profit
Operating profit adjusted
Revenues
Investments in property, plant and equipment
Research and development
Employees (Dec. 31)

01
US $
2,627

2,636

01
€
2,951

2,961

00
€
2,145

2,874

42,462

47,705

43,700

1,834

2,138

2,061

2,402

2,096

2,241

1,229,688

1,154,861

102,223

100,893

01
US $

(4,701)

(1,943)

56,506

4,524

1,959

01
€

(5,281)

(2,183)

63,483

5,083

2,201

00
€

501

531

68,372

6,339

2,456

2,755,919

3,045,233

104,057

121,027

01
US $
(458)

01
€
(514)

00
€
1,212

1,253

25,432

28,572

29,804

1,321

903

1,484

1,015

1,128

974

492,851

548,955

96,644

101,027

01
US $

545

514

01
€

612

578

00
€
2,457

641

14,999

16,851

17,526

100

112

9,712

282

9,589

01
US $

1,051

182

4,012

150

347

01
€

1,181

205

00
€
3,590

4,507

10,615

168

390

547

1,753

21,101

47,108

%
change
+38

-2

%
change

-7

-20

-10

-14

%
change
.

-96

-4

+32

-10

-4

%
change

-75

-10

-4

-60

%
change

-67

+206

-58

-69

-78

-55

Our Passenger Car
Brands

Our Commercial Vehicle
Brands

Our Alliance
Partner

Our Strategic
Partner

Answers for questions to come

With its strong brand portfolio,
its comprehensive product range and its global
presence, DaimlerChrysler is a company
with almost infinite possibilities.

We aim to enthuse our customers with our
products and services, and to apply innovative
technology to make the traffic of tomorrow
even safer, as well as more economical and
environment friendly.

To these ends we focus our global resources
and the knowledge, experience and energy
of our employees.

Chairman’s Letter

Board of Management

Business Review

12 Outlook
16

The Executive Automotive Committee

DaimlerChrysler Worldwide

Special Section:
The “Vision of Accident-Free Driving”

26 Operating Activities

Mercedes-Benz Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Services

Other Activities

Research and Technology
DaimlerChrysler and the Environment

Global Procurement and Supply
Human Resources

The DaimlerChrysler Shares

Analysis of the Financial Situation
Financial Statements

117

118

Supervisory Board
Report of the Supervisory Board

120 Major Subsidiaries
122
Six-Year Summary

123

124

International Representative Offices

Addresses & Information

Chairman‘s Letter

No one will forget 2001. The shocking and deeply regrettable tragedies of September 11 have since
inspired a set of values and memories that will enshrine forever the lessons of that day.

The attacks unleashed an unprecedented and decisive global response to terrorism. It was an answer
strengthened by passionate solidarity and marked by the firm, unbreakable resolve of a united
international community.

DaimlerChrysler’s reaction during the immediate aftermath was characterized by spontaneous and
heartfelt support for all those affected by the attacks. We also expressed our grief and compassion through
substantial material aid. Our company remains profoundly and acutely connected to the grim realities of
that day.

Notwithstanding this, it was essential for us to meet our commitments for 2001.

Performance in 2001. It is now a matter of record that with an operating profit of €1.3 billion, we reached
our anticipated earnings range for 2001.

We are certainly not satisfied with this result, but it should be considered that it was achieved in an
extremely difficult environment, particularly in the later part of the year.

For Mercedes-Benz and smart, however, 2001 was an excellent year with new records in revenue, sales
and profit. With over 1.1 million vehicles sold, Mercedes-Benz is today the world’s leading luxury car
brand. The resounding success of the C-Class family and strong demand for the new SL were two of the
factors driving growth to unprecedented levels and further enhancing the brand’s position. The now
well established smart brand also overachieved its sales targets.

At Chrysler Group we implemented our ambitious turnaround program with real signs of success.
Despite highly competitive market conditions in 2001, Chrysler Group exceeded the objectives set for its
cost reduction program and surpassed slightly the upper end of its earnings’ predictions.

In a US market artificially fuelled by high cash discounts and zero percent financing we managed to
introduce a selective incentive program. New and extremely appealing products, exemplified by the Jeep
Liberty, the Chrysler PT Cruiser and the Dodge Ram, as well as many others in the pipeline, are good
reason for optimism at Chrysler Group.

The results of our Commercial Vehicles division, the world’s largest manufacturer of vans, trucks and
buses, mirrors the downturn in North America and the weakening markets of Europe.

At Freightliner, the new management announced an effective turnaround plan in October. By the end of
last year the changes had shown early results. Inventories on new and used trucks were brought back
considerably.

Other areas of our Commercial Vehicles division were able to continue their excellent performance.
Our van operation, for example, already market leader in Europe, extended its product range by introducing
the very successful Sprinter in North America.

At DaimlerChrysler Services, the increased pressure on margins in the US market had a negative impact.
Our Services division will continue adding value to the automotive business through even stronger support
of our operations. It will also pursue its policy of divesting non-core activities.

Chairman‘s Letter

Finally, at our strategic partner Mitsubishi Motors Corporation (MMC), we have increased our stake
to 37.3%. We now have the potential to cooperate with the Commercial Vehicles division of MMC, as well.
The turnaround plans at Mitsubishi Motors are yielding promising results. Initiatives aimed at increasing
productivity and quality, along with considerable improvements in cost structures, are under way.
The management of MMC is confident that it will reach break-even during that company’s current financial
year ending March 2002. For the rest of 2002, one will have to take into consideration the extremely
difficult market conditions prevailing in Japan.

Group outlook 2002. The global automotive business is currently experiencing the toughening markets the
Chrysler Group started to feel as early as 2000. We said then, at the onset of the American industry’s
downturn, that while Chrysler Group may have to be one of the major automobile manufacturers to enter
this valley, we would also be first out. That, we believe, is beginning to happen.

The year in view, however, promises to be another demanding one, with several major economies facing
weaker growth. The world economy has moved off a solid base.

Consequently, DaimlerChrysler has reviewed and updated its planning assumptions to take into account
the consequences of a weaker economic and market environment. In February 2001, the Group set targets
for 2002 and beyond based on assumptions that were reasonable at that time, but which no longer apply.

The reality is that the fundamentals for 2002 have become more uncertain and the task more challenging.
Consequently, our current planning is conservative.

DaimlerChrysler nevertheless expects Group operating profit for 2002 to be significantly in excess
of twice the level of 2001.

However, we remain confident that we will achieve results similar to those projected in February 2001,
although at slightly later dates.

DaimlerChrysler has taken the right steps to deal with the uncertain times that many predict lie ahead.

Chairman‘s Letter

We are thus confident that our company’s strategy, set several years ago, will lead to our targeted
occupation of the automotive industry’s number one spot.

The strategy. DaimlerChrysler’s strategy is based on the four pillars of:

● Global presence through the development of dynamic operations in all important automotive markets,

to profit from regional growth and to attract new customers;

● Strong brands, creating efficient and effective market pull at the same time as they promote customer

loyalty;

● A broad product range, serving all customer needs, exploring and profiting from new market niches or

segments and allowing savings through significant economies of scale; and finally

● Leadership in technology, underpinning DaimlerChrysler’s position as the world automotive industry’s

foremost innovator and providing the key to further product differentiation.

Stunning future products planned for the passenger car and commercial vehicle divisions emphasize
the fact that ours remains the most exciting automotive company in the world. Our products are proof of
the excellent performance level of DaimlerChrysler.

DaimlerChrysler’s mix of premium brands and those suited for a wider market is one of the best balanced
in our business. Backed by strong research and development, these brands will be at the cutting edge
of technology in their respective segment, offering our customers the best there is in terms of innovation,
design, safety, quality, service and the sheer enjoyment of owning one of our products.

Implementation and execution. We are nevertheless conscious that even the best strategy needs energetic
commitment to proper execution. For us, 2002 will therefore be another important year of implementation.

What exactly do we mean by implementation? Perhaps it is best described as the productive drawing
together and integrating of the many, complex strands that make up the unique fabric of DaimlerChrysler
– our most vital process.

In this regard, the impact of DaimlerChrysler’s Executive Automotive Committee (EAC) on management of
product portfolios, technology, production capacities, as well as sales and marketing activities, has begun
to pay off.

The EAC continuously finds ways of saving costs and sharing technological know-how. This process allows
us to develop and launch new products faster and even more efficiently.

Another major focus is on multi-brand management. For us, the clear positioning of our brands is a key
factor in the success of our automotive business.

We have carefully positioned every one of our brands against its natural competitors. At the same time
we have taken care to ensure that all of our brands are clearly separated from each other. Like no other
competitor we cover the entire spectrum of products.

In its totality, our brand portfolio is the strongest in the industry. We will build on this advantage.

For 2002, the EAC will maintain its focus on the consistent and rigorous implementation of our strategy.

Chairman‘s Letter

An unconditional commitment to our shareholders. DaimlerChrysler counts some 370,000 highly creative
and multi-talented employees to whom I would like to express my sincere thanks for their outstanding
commitment.

These are the people who create the benchmarks that distinguish our company in the many markets it
serves. First class execution, high energy levels, innovative thinking and excellent management are the
qualities that will see us through the challenges of 2002 and the years that follow.

We continue to rate as one of the world’s most respected employers. As a result the company attracts the
best people who also understand and endorse DaimlerChrysler’s powerful commitment to its shareholders.

Cautious optimism. We emphasize the caliber of these great human assets because of their critical
importance in these times.

In our opinion, the difficult economic climate of 2001 has clearly spilled over into 2002. Several factors over
which we have little or no control will influence the global automotive industry’s short-term performance.

Notwithstanding these uncertainties, we remain confident that our determination and ability to handle
short-term demands will deliver outstanding medium to long-term results.

For more than a century we have characteristically met corporate challenges with cool heads and resolved
them with a high degree of accomplishment.

This experience, backed by unequalled products and a magnificent team, will help generate the higher
levels of profit our shareholders expect and deserve.

Against this background, my colleagues on the Board of Management and I are firmly convinced that the
years that lie ahead will bring great success to your company.

Sincerely Yours

Jürgen E. Schrempp

The Board of Management

Manfred Bischoff
Age: 59
Aerospace & Industrial Businesses
Board Member Mitsubishi Motors
Corporation
Appointed until 2003

Manfred Gentz
Age: 60
Finance & Controlling
Appointed until 2003

Günther Fleig
Age: 53
Human Resources
& Labor Relations Director
Appointed until 2004

Eckhard Cordes
Age: 51
Commercial Vehicles
Appointed until 2003

Jürgen Hubbert
Age: 62
Mercedes-Benz Passenger Cars & smart
Appointed until 2005

Rüdiger Grube
Age: 50
Corporate Development
Deputy Member of the Board of Management
Appointed until 2004

The Board of Management

Jürgen E. Schrempp
Age: 57
Chairman of the Board of Management
Appointed until 2005

Klaus-Dieter Vöhringer
Age: 60
Research & Technology
Appointed until 2003

Klaus Mangold
Age: 58
Services
Appointed until 2003

Gary C. Valade
Age: 59
Global Procurement & Supply
Appointed until 2003

Dieter Zetsche
Age: 48
Chrysler Group
Appointed until 2003

Thomas W. Sidlik
Age: 52
Procurement & Supply Chrysler Group
Board Member Hyundai Motor Company
Appointed until 2003

Wolfgang Bernhard
Age: 41
Chief Operating Officer Chrysler Group
Deputy Member of the Board of Management
Appointed until 2003

Business Review

Earnings target achieved despite difficult
market conditions

■ Successful restructuring programs

■ Operating profit (adjusted for one-time effects) of €1.3 billion, within the target range

■ Net loss of €0.7 billion (2000: net income of €7.9 billion);

excluding one-time effects, net income of €0.7 billion (2000: €3.5 billion)

■ Proposed dividend: €1.00 per share (2000: €2.35)

Earnings impacted by restructuring charges and
market weakness. In 2001, DaimlerChrysler achieved
an operating profit excluding one-time effects of €1.3
billion (2000: €5.2 billion). This was within the target
range announced in February 2001, despite a signifi-
cantly more difficult environment. Particularly as a re-
sult of the charges for turnaround activities at Chrysler
Group, Freightliner and Mitsubishi Motors, there were
negative one-time effects in a total amount of €2.7 bil-
lion. Operating profit in 2000 was influenced by posi-
tive one-time effects in a total amount of €4.5 billion.
Including one-time effects, there was thus an operating
loss of €1.3 billion (2000: operating profit €9.8 billion).
The Mercedes-Benz Passenger Cars & smart divi-
sion again increased its earnings. The earnings of the
Commercial Vehicles and Services divisions decreased,
however, and Chrysler Group reported an operating
loss excluding one-time effects of €2.2 billion. The main
reasons for the decline in earnings at Group level were
the extremely competitive US market for passenger
cars, minivans and light trucks, the dramatic contrac-
tion of demand for heavy trucks in North America,
continued pressure on margins in the financial services
business, and weakening demand in important
markets.

The Group sustained a net loss of €0.7 billion
(2000: net income €7.9 billion) and a loss per share of
€0.66 (2000: earnings per share €7.87). Excluding one-
time effects, both income and earnings per share were
positive, but lower than in the prior year at €0.7 billion
and €0.73 respectively (2000: €3.5 billion and €3.47
respectively). (see pp. 54-60).

€1.00 dividend. The Board of Management and the
Supervisory Board will propose to the shareholders at
the Annual Meeting that a dividend of €1.00 per share
is distributed (2000: €2.35). The total dividend distribu-
tion will therefore amount to €1,003 million (2000:
€2,358 million). The dividend level proposed is related
to the year’s earnings. However, DaimlerChrysler is
confident that it will take profits to much higher levels
in the future.

Extensive measures to improve profitability. In order
to return DaimlerChrysler to a position of strong and
sustainable profitability, even with difficult market
conditions, and to improve the competitive position
of the company, we initiated extensive restructuring
programs during the year under review.

Operating Profit
In millions

2001
US $

2001
€

2000
€

DaimlerChrysler Group

(1,173)

(1,318)

9,752

Mercedes-Benz
Passenger Cars & smart*)

Chrysler Group*)

Commercial Vehicles*)

Services*)

Other Activities*)

2,636

2,961

(1,943)

(2,183)

514

182

578

205

2,874

531

1,253

641

DaimlerChrysler Group*)

1,197

1,345

5,213

*) adjusted for one-time effects

Business Review

Chrysler Group’s turnaround plan has been
implemented faster than we anticipated, with better
savings and profitability effects being achieved in
2001 than originally planned. As a result, and despite
the negative impact of lower unit sales and revenues,
Chrysler Group was able to achieve an operating loss
(excluding one-time effects) of €2,183 million, slightly
better than we announced on February 26, 2001
(an operating loss in the range of €2.2-2.6 billion).

At Freightliner, our North American truck
subsidiary, the cost-cutting measures started in 2000
have been significantly reinforced by a comprehensive
turnaround plan which was announced on October 12,
2001. With this plan we should be able to achieve
continuously increasing positive effects on profitability,
amounting to US $850 million annually from the year
2004.

Key elements are savings on material costs,
production costs and fixed costs. Within the framework
of measures designed to improve the existing business
model, in the future Freightliner will concentrate on
generating profitable business rather than increasing
market share.

Global economic weakness. Prospects for the world
economy deteriorated throughout 2001. Weighted for
each country’s share of the Group’s revenues, economic
growth in DaimlerChrysler’s sales markets fell to 1.2%
from 3.9% in 2000. As a consequence of the general
economic weakness in North America, Western Europe,
and South America, and the subsequent effects on the
world economy of the terrorist attacks on September
11, growth rates were significantly lower than in the
prior year. The Japanese economy was in recession and
Asian emerging markets were unable to equal their
dynamic growth of previous years.

There were only small exchange-rate movements

during the period under review. The euro lost 5% of
its value against the US $ and 2% against the British
pound. However, it appreciated by 8% against the
Japanese yen.

Difficult markets worldwide. Competition in the inter-
national automotive industry continued to intensify in
2001 for both passenger cars and commercial vehicles
in nearly all market segments. This was primarily
due to weaker demand in important markets, the
resulting drop in capacity utilization and numerous
new models in established market segments.

The US market for passenger cars and light trucks

shrank by 1% or 0.2 million units to 17.1 million
vehicles, despite significant increases in sales incentives.
New registrations of passenger cars in Western Europe
only equaled the levels of the previous year, particu-
larly due to the weakness of demand in Germany, and
the markets of Asia, South America and Eastern Europe
did not provide any significant impetus.

The commercial vehicles sector was impacted by

the dramatic shrinkage of demand in North America
and Argentina. Particularly in the United States, follow-
ing the weakening of the market for heavy and medium
trucks in the prior year (-12%), there was a severe
decline in 2001 (-26%). Demand in Western Europe
also declined during the course of the year.

Consolidated revenues close to prior year’s figure. In
2001, DaimlerChrysler achieved total revenues of
€152.9 billion. Adjusted for changes in the consolidated
Group, revenues were nearly at the same level as in
2000.

Revenues
In millions

2001
US $

2001
€

2000
€

Consolidated Revenues
In billions of €

DaimlerChrysler Group

136,072

152,873

162,384

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

42,462

47,705

43,700

56,506

63,483

68,372

Commercial Vehicles

25,432

28,572

29,804

Other markets

150

125

100

Services

Other Activities

14,999

16,851

17,526

4,012

4,507

10,615

USA

European Union

10 Business Review

DaimlerChrysler Aerospace and debis Systemhaus

were partially included in the prior year’s figures. In
addition, TEMIC (Automotive Electronics) and Adtranz
(Rail Systems) were no longer consolidated from April
and May 2001 respectively.

While the Mercedes-Benz Passenger Cars & smart

division was able to increase revenues by 9%, at
Chrysler Group and the Commercial Vehicles division
they were lower than in the prior year. Services’
revenues also declined slightly, but on a comparable
basis there was growth of 12%.

4.5 million vehicles sold. DaimlerChrysler’s unit sales
of 4.5 million vehicles were lower than in the prior year
(4.7 million).

The Mercedes-Benz Passenger Cars & smart divi-
sion performed very well again, with record unit sales
of more than 1.2 million vehicles (+6%), strengthening
its position as the leading brand in the premium
segment. (see pp. 26-29).

Unit sales by Chrysler Group of the Chrysler,
Jeep and Dodge brands fell to 2.8 million vehicles
(2000: 3.0 million). (see pp. 30-33).

Unit sales by the Commercial Vehicles division

of 492,900 trucks, vans and buses were also lower
than the high level of the prior year (549,000).
(see pp. 34-37).

Consolidation phase at Services division. In the period
under review, the Services division focused even more
on sales financing and leasing for the products of the
DaimlerChrysler Group. It achieved total revenues
of €16.9 billion (2000: €17.5 billion). On a comparable
basis (adjusted for the revenues of debis Systemhaus,
which were still included at DaimlerChrysler Services
in the first nine months of the prior year) the division’s
revenues climbed by 12%. Total contract volume of
€131.8 billion reached the level of the prior year ad-
justed for exchange-rate effects, while, as planned, we
limited our new business to €54.9 billion (2000: €56.8
billion). (see pp. 38-39).

Other Activities fulfill expectations. Despite the nega-
tive effects of the terrorist attacks on September 11,
MTU Aero Engines was able to continue its positive
trend of the previous years and achieved further
increases in revenues and earnings. (see pp. 40-41).

EADS should also significantly increase revenues
and earnings in its first full financial year. At the end of
2001, its order backlog climbed to a new peak of
€183.7 billion. With a total of 1,575 aircraft on order,
Airbus further improved its strong position in the world
market for civil aircraft. (see pp. 41-42).

As expected, Mitsubishi Motors’ revenues and

unit sales decreased in the first half of the company’s
2001/2002 financial year (ending on March 31, 2002).
The restructuring measures are being implemented as
planned, and the management expects to break even in
the full 2001/2002 financial year. Mitsubishi Motors’
long-term competitiveness should improve as a result
of an extensive product offensive. (see pp. 42-43).

Concentration on the automotive business. In 2001,
DaimlerChrysler maintained its strategy of focusing on
the automotive business and related services.

In January 2001, we sold the remaining 10% of the

shares of debitel AG to the Swiss telecommunications
company, Swisscom.

On April 3, 2001, the European antitrust authori-

ties approved the sale of Adtranz, our Rail Systems
business unit, to the aeronautics and rail-technology
group, Bombardier. This had been negotiated in August
2000. Adtranz was therefore removed from the
DaimlerChrysler Group’s consolidation effective May 1,
2001.

On April 9, 2001, we agreed to sell an initial 60%

of the shares of TEMIC to Continental. We have an
option to sell the remaining 40% to Continental at an
agreed price between 2002 and 2005. TEMIC was
therefore removed from the consolidated Group
effective April 1, 2001 and has since been included
at equity in line with our 40% stake. With this sale
we have integrated TEMIC into a strong automotive
supplier group with a wide range of products,
increasing its potential for future growth.

In January 2002, we exercised our contractually

agreed option to sell to Deutsche Telekom AG our
49.9% equity interest in T-Systems ITS (formerly debis
Systemhaus AG). The sale of this investment is to be
concluded by March 2002.

Also in January 2002, DaimlerChrysler and GE

Capital agreed that GE Capital would acquire a part of
DaimlerChrysler Services’ capital services portfolio in
the United States. The items to be transferred to GE
Capital consist mainly of commercial real estate and
the asset-based lending portfolio.

Strong

brands

efficient processes

and innovative technologies

Business Review 11

Stronger position in Asia. In the year under review, we
enhanced our position in the growth markets of Asia.

In June 2001, we acquired from AB Volvo its 3.3%

equity interest in Mitsubishi Motors, including all
rights from the previous cooperation agreement
between Mitsubishi Motors and Volvo in the field of
commercial vehicles. We thus created the right conditions
for developing a strong competitive position in the
Asian commercial vehicle markets. DaimlerChrysler
now holds 37.3% of Mitsubishi Motors’ equity. Within
the framework of our cooperation with Mitsubishi
FUSO, the commercial vehicles division of Mitsubishi
Motors, in December 2001 DaimlerChrysler took over
the sales of the FUSO light truck, Canter, in selected
European markets.

With Hyundai Motor Company (HMC) of South
Korea, in which DaimlerChrysler holds a 10% equity in-
terest, we agreed in June on the establishment of a joint
venture for the production of medium-class commercial
vehicle engines of the Mercedes-Benz 900 series in
South Korea. Construction of the production facility
started immediately after the contract was signed.

372,470 employees. At the end of 2001,
DaimlerChrysler employed 372,470 people. The reduc-
tion compared with the prior year was partially due to
the fact that TEMIC and Adtranz employees are no
longer included in the workforce of the DaimlerChrysler
Group. In addition, there were workforce reductions
as a result of measures taken to improve profitability,
in particular at Chrysler Group and Freightliner.
(see pp. 50-51).

Intensive cooperation with suppliers. In 2001,
DaimlerChrysler purchased goods and services world-
wide worth €106.5 billion. Of this, 33% was accounted
for by the Mercedes-Benz Passenger Cars & smart
division, 43% by Chrysler Group, 19% by Commercial
Vehicles and 5% by the other units. In close cooperation
with our suppliers we have succeeded in significantly
reducing the prices of materials. Parallel to this,
together with our partners we have intensified our
efforts to further improve the quality of our products.
(see pp. 48-49).

€14.9 billion invested in the future. Last year the
DaimlerChrysler Group invested €8.9 billion in property,
plant and equipment and €6.0 billion in research and
development. Expenditures were reduced as a result
of the more efficient cross-divisional concentration
of resources that was brought about by the turnaround
activities. Major investments were made in the
Mercedes-Benz Passenger Cars & smart division to
prepare for the production of the new E-Class and the
new SL. At Chrysler Group, preparations for the Jeep
Liberty and the new Dodge Ram were among the more
important projects. In the Commercial Vehicles division
the focus was on investments for the production of the
Vaneo and the Axor.

DaimlerChrysler’s research and development
departments employed more than 28,000 people at the
end of 2001. In addition to developing new products,
priority was given to developing new drive systems
and electronic systems to enhance traffic safety.
(see pp. 20-25 and 44-45).

Investments in Property, Plant and Equipment
In millions

2001
US $

2001
€

2000
€

Research and Development Costs
In millions

2001
US $

2001
€

2000
€

DaimlerChrysler Group

7,918

8,896

10,392

DaimlerChrysler Group

5,348

6,008

7,395

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Services

Other Activities

1,834

4,524

1,321

100

150

2,061

5,083

1,484

112

168

2,096

6,339

1,128

282

547

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Other Activities

2,138

1,959

903

347

2,402

2,201

1,015

390

2,241

2,456

974

1,753

12 Outlook

Continuous improvement in profitability

■ DaimlerChrysler Group: significant earnings improvement

expected in 2002 and beyond

■ Executive Automotive Committee (EAC) established as an implementation platform

for Group strategy

■ Further growth at Mercedes-Benz Passenger Cars & smart

■ Turnaround measures reinforced at Chrysler Group and Freightliner

■ Services division to continue focusing on automotive business

■ Investment in products and innovation to secure competitiveness

Slow recovery of world economy. As a consequence of
the generally difficult economic conditions in the world,
which have further deteriorated since the terrorist
attacks on the United States, we have re-examined and
adjusted our assumptions for the development of global
economic activity, particularly for the year 2002. We
now assume that the economic upturn originally ex-
pected for the end of 2001 is only likely to begin in the
second half of 2002, and then gather pace. We antici-
pate global economic growth of 1.4% in 2002, 3.4% in
2003 and 3.2% in 2004. The economies of the United
States and Western Europe should return to a path of
stable growth within the planning period, whereas the
Japanese economy will probably only begin to emerge
from recession. We do not expect above-average growth
in the emerging economies of Asia, South America or
Eastern Europe before 2003.

Intensified competition in the automotive industry.
Against this macroeconomic backdrop we have also
revised our projections for automotive markets. In the
year 2002 we now expect a significant decline in the
market for passenger cars and light trucks in North
America, and a moderate weakening of demand in
Western Europe and Japan. Demand in Western Europe
for trucks over 6 tons is likely to be distinctly lower

than last year, whereas demand in the US market
might continue to fall. The worldwide economic revival
expected to begin in the second half of 2002 should
have positive effects on automotive markets, with sales
increasing in 2003 and 2004. Generally difficult market
conditions, shorter product lifecycles and high produc-
tion capacities will intensify competition and increase
the pressure to cut costs in all market segments, which
in turn should accelerate consolidation in the industry.

Continuous improvement in profitability at
DaimlerChrysler. In order to counteract unfavorable
market developments we will continue to implement
the restructuring measures introduced in 2001, and
will actually strengthen them in some areas. However,
the fundamentals have now become more difficult and
the task more challenging. DaimlerChrysler neverthe-
less expects Group operating profit for 2002 excluding
one-time effects to exceed twice the 2002 level by a
very significant amount. We are confident that we will
achieve the results announced in February 2001, but at
slightly later dates. Not only the turnaround plans will
contribute to this, but also the enhanced coordination
of our global activities and the resulting cost reduc-
tions, a more favorable market situation, and many
attractive new products.

The Outlook section and other sections in this Annual Report contain forward-looking statements that reflect the current views of
DaimlerChrysler management with respect to future events. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,”
“project” and “should” and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and
uncertainties, including, but not limited to: changes in general economic and business conditions, especially an economic downturn in
Europe or North America; changes in currency exchange rates and interest rates; introduction of competing products; lack of acceptance of
new products or services, including increased competitive pressures on the general level of sales incentives and pricing flexibility; inability
to implement the turnaround plans for the Chrysler Group and Freightliner promptly and successfully, especially an inability to meet
revenue enhancement, efficiency and cost reduction initiatives; the ability of Mitsubishi Motors to implement its restructuring plan
successfully; and decline in resale prices of used vehicles. If any of these or other risks and uncertainties occur (some of which are described
under the heading “Analysis of the Financial Situation” in this Annual Report) , or if the assumptions underlying any of these statements
prove incorrect, then actual results may be materially different from those expressed or implied by such statements. DaimlerChrysler does
not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date
on which it is made.

With new concepts

for a

successful

future

Outlook 13

Revenues of €156 billion in the year 2004. On the basis
of the current order situation and market expectations,
we anticipate revenues of €142 billion in 2002 (2001:
€153 billion). The decline of 7% compared with the
prior year is mainly due to unfavorable market pros-
pects, which will particularly affect Chrysler Group and
the commercial vehicles business, but also to changes
in the consolidated Group and the projected exchange-
rate effects.

As a result of improving market conditions and

primarily due to the introduction of attractive new ve-
hicles, we expect revenues to increase to €156 billion
by 2004. This figure assumes a moderate increase in
the value of the euro against the US dollar, the British
pound and the Japanese yen. The most rapid growth in
revenues is likely to be achieved in Asia, South
America and Eastern Europe.

EAC: a strategy-implementation platform. The Execu-
tive Automotive Committee (EAC) is the platform for
the implementation of our strategy, with a focus on the
four key pillars of global presence, strong brands, wide
product range and technological leadership. Headed by
Jürgen E. Schrempp and Jürgen Hubbert, this commit-
tee has been used to coordinate the Group’s automotive
business since the beginning of 2001.

Its goal is the effective exchange of technologies,

innovations, components and processes between the
divisions. This should result in the continuous improve-
ment of the Group’s cost position, while strictly
maintaining the identity of individual brands.

Many important decisions were taken by the EAC

in 2001, two examples being a common platform for
the next-generation Chrysler Neon and Mitsubishi
Lancer, and the use of Mercedes-Benz components in
the Chrysler Crossfire.

The work of the EAC will continue to support the

implementation of our strategy in 2002.
(see pp. 16-17).

Further growth at Mercedes-Benz Passenger Cars &
smart. The Mercedes-Benz Passenger Cars & smart di-
vision plans to expand its product range in the coming
years and penetrate new market segments, in order
to ensure continued growth throughout the planning
period. New products in 2002 include the new
E-Class sedan and the CLK coupe. In addition, at the
end of 2002 we will launch a luxury sedan under
the Maybach brand, which will once more underscore
DaimlerChrysler’s leading position in the premium
segment. The smart model range will be extended in
2003 with a roadster and in 2004 with a four-seater
mini car.

Chrysler Group: return to profitability. Due to unfavor-
able economic conditions, the assumptions for 2002
underpinning Chrysler Group’s turnaround plan have
also been adjusted. In particular, expectations for the
US market have been revised from 16 million passen-
ger cars and light trucks to approximately 15 million
vehicles. In order to break even in 2002 in the face of
weaker market conditions, Chrysler Group has intensi-
fied and accelerated some aspects of the turnaround
plan that was announced on February 26, 2001.

Furthermore, various new, innovative models

such as the Dodge Viper, the Chrysler Crossfire, the
Chrysler Pacifica and the new Dodge Durango should
ensure that Chrysler Group’s competitive position
improves significantly in an extremely difficult market
environment. Closer cooperation both within the
DaimlerChrysler Group and with our partner
Mitsubishi Motors should also help improve our cost
position and margins, as well as the innovative
potential of Chrysler Group.

Revenues
In billions

Plan 2002
€

Target 2004
€

DaimlerChrysler Group

142

156

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Services

Other Activities

14 Outlook

Consolidation in the commercial vehicles business. In
2002, the Commercial Vehicles division will continue
to adjust its capacities and cost structures to lower
demand worldwide. As announced, another top priority
will be to further implement the Freightliner turn-
around plan. In order to strengthen its position as
global market leader for commercial vehicles, in the
year 2002 the division will present six new or revised
vehicles, including the successor model in the
Freightliner Business Class, the double-decker of the
new Setra TOPClass 400 family of luxury buses, and re-
vised versions of the successful Mercedes-Benz models,
Actros and Sprinter. Important new products are also
planned in the area of components, particularly the
launch of the new OM 457 engine with turbobrake. Our
long-term strategy is to achieve cost savings by taking
more advantage of our position as the world’s largest
manufacturer of commercial vehicles. We see further
potential to reduce costs and penetrate new markets,
particularly the growth markets of Asia, as a result of
the cooperation with our partners, Mitsubishi Motors
and Hyundai.

Continued specialization at Services. The Services divi-
sion will continue its strategy of focusing on automo-
tive financial services, and will further improve its
processes and structures in order to secure a sustained
increase in profitability. At the same time, its product
range will be more closely oriented towards the cus-
tomers of the Group’s various vehicle brands. Within
the context of this strategy, in Germany from the
middle of 2002, the DaimlerChrysler Bank will offer de-
posit and savings facilities, investment funds and cus-
tomer credit cards, in addition to its existing products.
We also intend to extend our activities in the areas of
automotive and personal insurance, in fleet manage-
ment and with telematics services.

Mitsubishi Motors: Growth with new products.
Mitsubishi Motors (MMC) will continue to implement
its restructuring program, which has already led to
significantly better results in the 2001/2002 financial
year. At the same time, innovative new models should
ensure long-term profitability and growth for the impor-
tant volume segments. The company will launch a total
of 16 new model variants in the financial years from
2001 to 2003, including different variants for Japan,
the United States, Europe and Asia. This ambitious plan
will be supported by close cooperation between
Mitsubishi Motors and DaimlerChrysler and particu-
larly the Chrysler Group. And due to our acquisition of
AB Volvo’s equity interest in MMC in June 2001, there
will also be new possibilities for cooperation between
DaimlerChrysler’s Commercial Vehicles division and
MMC’s FUSO unit.

Changed environment in the aeronautics industry. The
terrorist attacks on September 11 have significantly
altered the economic environment of the aeronautics
industry.

Against this background, the MTU Aero Engines
business unit anticipates a decline in revenues in the
civil aircraft business in 2002. However, MTU Aero
Engines aims to ensure its future profitability by means
of targeted measures such as the analysis of planned
investments, cost and development budgets, as well as
the adjustment of existing capacities by flexible staff-
ing. The foundation for this was already laid by expand-
ing the maintenance business and participating in new
programs.

EADS has also taken steps to maintain its profit-

ability. These measures include keeping its Airbus
manufacturing capacities at the level achieved in 2001
instead of the originally planned expansion, prudent
human-resources planning and the accelerated imple-

Investments in Property, Plant and Equipment
In billions
2002–2004
€

Plan 2002
€

DaimlerChrysler Group

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Services

Other Activities

8.0

2.7

3.7

1.3

0.1

0.2

22.9

8.0

10.4

3.8

0.2

0.5

Impressive premieres: In Detroit DaimlerChrysler
presented concept cars by Mercedes-Benz,
Jeep® and Dodge.
Left picture: from left to right, Jeep Willys2,
Jeep Compass, Dodge Razor, and Dodge M80.
Right picture: Mercedes-Benz Vision GST
(Grand Sports Tourer)

Outlook 15

facilities in the automotive business and on the
development of new technologies that will enhance
the safety, environmental compatibility and economy
of road transport.

With our investments and extensive research and

development activities, the turnaround plans, and the
cross-divisional activities of the Executive Automotive
Committee, we are laying the foundations for continu-
ously growing earnings at DaimlerChrysler.

mentation of cost-cutting programs. In conjunction
with its highly flexible production system, EADS
expects that these measures will enable it to remain
profitable despite sharper fluctuations in Airbus pro-
duction. In 2002, EADS expects to deliver 300 Airbus
aircraft (2001: 325). The development of the A380 is
proceeding as planned.

Investment secures competitiveness. In the planning
period of 2002 to 2004, DaimlerChrysler expects to in-
vest €41 billion in property, plant and equipment, and
research and development. A large part of this expendi-
ture will be on the development and preparation for
production of new passenger car and commercial ve-
hicle models. In addition, we are planning significant
spending on the modernization of manufacturing

Research and Development Costs
In billions

Plan 2002
€

2002–2004
€

DaimlerChrysler Group

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Other Activities

5.9

2.4

2.1

1.0

0.4

17.6

6.9

6.5

3.1

1.1

16 Executive Automotive Committee

Executive Automotive Committee:
driving the implementation process

■ Key steering instrument for worldwide automotive business

■ Preparation of cross-divisional decisions and initiatives
■ Numerous projects defined and addressed; many already successfully completed

Successful start for EAC. The Executive Automotive
Committee (EAC), which was formed at the beginning
of 2001 under the joint leadership of Jürgen E.
Schrempp and Jürgen Hubbert, has already introduced
several pioneering initiatives and has established itself
as an effective, efficient and goal-oriented instrument
for coordinating our global automotive business.

The activities of the EAC are intended to optimize
and strengthen the Group’s entire automotive business.
Enormous cost-reducing potential can be realized
through joint projects by the Group’s three automotive
divisions and our partner, Mitsubishi Motors, and
through the resulting knowledge transfer.

The variety of DaimlerChrysler’s brands is the
basis for us to selectively target our customers – and to
fulfill their individual wishes. In this context, the task
of the EAC is to secure the uniqueness and identity of
each individual brand.

To achieve this, the EAC concentrates on the

following areas of work:

- Coordinating and optimizing the product portfolio
- Identifying new technologies and innovations and

selecting the products and brands in which they will
be applied

- Standardizing components
- Steering the global production capacities of the

DaimlerChrysler Group

- Coordinating our global sales and marketing activities

Quick and flexible decisions. The EAC meets at
monthly intervals.

In the year 2001, 45 projects were defined and

analyzed, and reports on their progress were regularly
submitted to the Committee. 19 of these projects were
either already successfully completed in the first year
or are now in their final stages. There are examples of
the success of the EAC throughout its whole range of
activities.

The overall steering of DaimlerChrysler’s automo-
tive business now takes place – with due consideration
being paid to our alliance partners – in accordance with
standard rules and processes. It is also an advantage
that cross-divisional projects are discussed in detail in
the EAC. This detailed coordination will enable us to
keep ahead of the competition with our next generation
of vehicles.

Product portfolio: cross-divisional segment strategy.
In some vehicle segments the foundations have already
been laid for the realization of synergies between the
various products of the Group. For example, engineers
from DaimlerChrysler and Mitsubishi Motors are work-
ing on a shared design concept for a small car in the
so-called B-segment. The smart four-seater and the two
Mitsubishi variants that are based on this platform are
to be launched as early as 2004.

Another decision was taken to develop a common

C-segment platform, with an estimated production
volume of more than 500,000 vehicles per year, for the
Chrysler Neon and the Mitsubishi Lancer and derived
product variants.

Chrysler Group and MMC have also defined a

third platform for full-sized sedans in the D-segment,
that is, for the successors to their Stratus/Sebring and
Galant models.

Definition of a long-term innovation calendar. A Group-
wide innovation plan has been prepared as a joint
project by the research and development departments.
On this basis, the EAC has prioritized and coordinated
the current innovation projects. The result is an innova-
tion calendar which defines when each innovation is to
be applied in which brand and in which product.

Groundbraking

initiatives for the future

Executive Automotive Committee 17

Standardization and exchange of components. Under
the leadership of the EAC, interdisciplinary component
teams of development engineers and purchasing man-
agers have already identified numerous components
which can be bought or made in larger numbers in
the future, and which will therefore be significantly
cheaper. These include electronic control units,
batteries and fuel pumps.

A good example of the cross-divisional exchange
of components is the Mercedes-Benz five-speed auto-
matic transmission, which will be used in a modified
form in Chrysler Group vehicles and for this purpose
will be produced at a new gearbox plant in Indiana,
USA, starting in the year 2004.

A product example is the Chrysler Crossfire, in
which Mercedes-Benz components are also used. In
this case in particular, a crucial condition was that the
interests of both brands, Chrysler and Mercedes-Benz,
were fully taken into consideration.

Coordination of sales and marketing activities. Cross-
divisional, regional strategies are being developed
together with representatives of our global sales and
marketing organizations.

An important goal here is to investigate possibili-
ties for standardization, while determining which areas
have to remain unique for reasons of brand identity or
to protect our customers’ interests. Some of the issues
to be dealt with are the further development of the
distribution network, the organization of after-sales
and service activities, and customer communication.
The coordination of sales and marketing activities is
one of the main tasks of the EAC for 2002.

Continued implementation in 2002. The EAC has
already proven its worth as a central platform for the
implementation of our strategy of encouraging the in-
tensive exchange of technologies, innovations, compo-
nents and processes within the Group. In this way we
can continuously improve our cost position and quality
standards, and ultimately also the attractiveness of our
products for the customers of DaimlerChrysler.

With this goal in mind, the EAC will successfully

continue its work in the year 2002.

The role of the EAC within DaimlerChrysler

Board of Management

EAC
Schrempp
Hubbert

Mercedes-Benz
Passenger
Cars & smart
Hubbert

Chrysler Group

Zetsche

Commercial
Vehicles
Cordes

Mitsubishi
Motors
Corporation
Bischoff

Corporate
Development
Grube

Divisions

Mercedes-Benz
Passenger
Cars & smart

Chrysler Group

Commercial
Vehicles

Mitsubishi
Motors
Corporation

The EAC four major areas of work

Executive Automotive Committee

Cross-divisional coordination of

Product
portfolio

Technology

Production
capacities/Pur-
chasing & supply

Sales
and marketing
organization

Areas for cross-divisional synergies

Car

Speciality
SUV

Sports tourer

Multi Purpose Vehicle

Van

Pickup

FWD manual

Manual RWD/4WD
Automatic RWD

Automatic FWD
IL-4 gasoline

Chassis

Exterior
Interior

Electronics

Products

Powertrain

Commodities

Out of this assessment the EAC initiated various projects to realize cross-divisional effects

18 DaimlerChrysler Worldwide

A Global Company – DaimlerChrysler
■ DaimlerChrysler products are sold in more than 200 countries
■ Manufacturing facilities in 37 countries
■ Broad access to the fast-growing Asian markets through our strategic partners

Mitsubishi Motors and Hyundai Motor

Europe

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Sales Organization
Automotive Businesses

Services

Other Activities

NAFTA

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Sales Organization
Automotive Businesses

Services

Other Activities

South America

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Sales Organization
Automotive Businesses

Services

Other Activities

Production
locations

Sales outlets

Revenues in
millions of €

Employees

–

29,894

93,807

3,785

2,261

15,313

63,080

5,012

–

35,293

4,768

3,817

2,221

16,898

Production
locations

Sales outlets

Revenues in
millions of €

Employees

–

11,891

2,111

58,210

101,027

9,463

18,615

5,522

–

2,200

11,596

5,231

2,012

4,030

Production
locations

Sales outlets

Revenues in
millions of €

Employees

–

347

1,508

725

748

1,456

12,024

691

–

212

–

305

–

Note:
Unconsolidated revenues of each division (segment revenues)

A global presence

with strong brands and products

DaimlerChrysler Worldwide 19

Asia

Australia/Oceania

Production
locations

Sales outlets

Revenues in
millions of €

Employees

Production
locations

Sales outlets

Revenues in
millions of €

Employees

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Sales Organization
Automotive Businesses

Services

Other Activities

Africa

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Sales Organization
Automotive Businesses

Services

Other Activities

4,236

443

347

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

1,170

1,496

Commercial Vehicles

–

1,054

–

109

167

511

173

Sales Organization
Automotive Businesses

Services

Other Activities

–

343

–

561

152

396

–

531

729

132

–

Production
locations

Sales outlets

Revenues in
millions of €

Employees

–

210

–

776

168

774

–

4,450

898

–

151

–

The “Vision of Accident-free Driving”

Electronic systems, on the other hand, have
almost no reaction time. In about two-thirds of all road
accidents, they could be in a position to recognize cer-
tain critical situations in good time. They register the
surroundings of the vehicle and transmit this data to a
special electronic system, where it is evaluated and in-
terpreted. Such driver assistance systems can help
people to perceive hazardous situations and to act
safely in road traffic. Sensors can help alert the driver
and increase the opportunity to prevent an accident.

Innovation through electronics. Today, 80% of all inno-
vations in the automotive industry are influenced by
electronics. Thanks to high-powered microchips and in-
creasingly efficient computer architecture, computation
speeds have doubled annually over the past few years
and this has been a decisive factor in the development
of driver-assistance systems. DaimlerChrysler research-
ers have made pioneering advances that can interpret
images in near real-time. A rapid, efficiently-organized
data-processing system is employed which accesses net-
worked tables instead of having to carry out intricate
computations. Images can thus be recognized consider-
ably more quickly than with methods used previously.

Road accidents are generally regarded as inevitable.
However, many of them can be prevented, and
DaimlerChrysler, a pioneer in the application of innova-
tive technologies, with its premium brand Mercedes-
Benz is pursuing its “Vision of Accident-free Driving.”
Our researchers and developers are working towards
increasing the safety of future automobile generations
to a level which only a few years ago would have been
regarded as unattainable: Our objective is to prevent
most accidents or at least to alleviate their conse-
quences. In matters of safety, Mercedes-Benz has been
at the forefront for decades. And our commitment to the
“Vision of Accident-free Driving” should be an encour-
agement to the entire automotive industry.
DaimlerChrysler intends traffic to be safer, more
convenient and more environment-friendly overall.
At least every second road accident might be
prevented if the vehicles involved were fitted with
appropriate driver-assistance systems. The number of
fatalities and injuries could thus be drastically reduced
over the coming 15 to 20 years. On the other hand,
driver-assistance systems should not restrict drivers’
freedom in critical situations or diminish their ultimate
responsibility.

Putting critical fractions of a second to use. In the year
2000, some three million people were injured and
42,000 killed in accidents on US roads; during the
same period, there were 500,000 injuries and 7,700
fatalities in Germany. Nine out of ten road accidents
resulting in injury or death are the result of human
error. Even if a driver recognizes a hazard, he or she
often lacks sufficient time for an appropriate reaction
as a result of the surprise situation.

The car of tomorrow

will think with you

The reliable recognition of traffic
signs also works in conditions of
diffuse light and during the night at
distances of 30 to 40 meters.

The “Vision of Accident-free Driving”

Night vision: Two headlights
illuminate the road with beams of
invisible infrared light. An infrared
video camera captures the
reflected light and the image is
shown on an LCD screen.

Our researchers also make use of so-called teach-
able methods. So the emphasis is no longer on drafting
and testing, but on the selection and training of certain
systems. Like humans, it is possible for systems to
learn by example and thus they can become increas-
ingly versatile.

Matching man and machine. Research also makes use
of findings from the fields of psychology, anthropology,
ergonomics and neurophysiology. Drivers do not react
the same way in all situations. When taking evasive
action at high speed, for example, drivers tend to exag-
gerate steering movements. In such a situation, he or
she often reacts in a reflex manner. If a driver is trying
to read a map or is distracted by a child in the rear seat,
he or she could fail to notice other, objectively more
important occurrences.

Research in the field of “human-machine interac-

tion” is important for the development of practice-orien-
ted information systems capable of individualization.
The goal of such systems is to help drivers become
more attentive without diverting their attention from
the traffic situation.

Causes of
fatal road accidents*)

*) On highways in Bavaria in 1991

Source: GDV, Institut für
Fahrzeugsicherheit, München
(Institut for Automotive Safety, Munich)

Sleep
Inattention
Medical causes
Vehicle in front
Vehicle dynamics
Weather
Veering off course
Stationary vehicle
Pedestrian/occupant/animal
Accident
Other persons
Other factors

Physiological factors 38%

False assessment 46%

Unexpected behavior 11%

Technical problems 5%

10%

15%

20%

25%

The “Vision of Accident-free Driving”

DaimlerChrysler is committed to a total safety concept

Pioneers in safety. DaimlerChrysler is an innovator in
automotive safety research and increasingly employs
assistance systems which help drivers recognize haz-
ardous situations. Mercedes-Benz engineers are now
working on new intelligent systems which will enhance
active and passive safety even further.

At DaimlerChrysler, safety has consistently been

accorded utmost priority from the earliest days of
the company’s history. The first safety features were
developed by Mercedes-Benz as early as 1939. The
safety cell with crumple zones in the front and in the
rear of a car as well as improved restrained systems
like automatic seat belts, seat belt pretensioners and
airbags have long been standard equipment for many
of its passenger vehicles. For decades, the company has
enhanced the concepts of “passive safety” for mitigat-
ing the consequences of an accident and “active safety”
for accident prevention. As early as the seventies, pat-
tern recognition – the multidimensional recognitition
and interpretation of objects by computer – was a
major focus of research at Mercedes-Benz. Advances
in brake technology paved the way for the anti-lock

braking system (ABS) in 1978: For the first time, sen-
sors were used to monitor the rotation of each wheel
and control brake pressure accordingly. This was fol-
lowed by inventions such as acceleration skid control
(ASR), brake assist, and the electronic stability program
(ESP). Today, DaimlerChrysler is committed to a holistic
safety concept. Active safety in particular still offers
considerable potential.

The “Vision of Accident-free Driving” today.
DaimlerChrysler already offers driver-assistance sys-
tems that help increase safety in many of its production
passenger cars and commercial vehicles. Crucial stop-
ping distance can be wasted if drivers fail to apply suf-
ficient pressure to the brake pedal in critical situations.
Brake Assist recognizes a hazardous situation on the
basis of how quickly the driver depresses the pedal,
and immediately applies full braking pressure.

Skidding is another critical factor. Sooner than
even the most experienced driver, the Electronic Stabil-
ity Program (ESP) recognizes when a vehicle is tending
to skid. The system then intervenes to help stabilize
the vehicle by issuing precisely-metered braking
impulses or by reducing engine output. ESP therefore
helps unite the functions of other driving dynamics
regulation systems such as brake assist, the anti-lock
braking system (ABS) and acceleration skid control
(ASR).

Sensotronic Brake Control (SBC) is an electronic
system that also helps stabilize vehicles and reduces
braking distances. SBC transmits the driver’s braking
commands to a microcomputer which calculates the
optimum brake force for each wheel. Maximum brake
force is applied more rapidly thanks to a high-pressure
reservoir and electronically controlled valves.

The electronic brake system encompasses other

valuable features such as the dry braking function
which eliminates the film of water which forms on the
brake disks during wet weather, and the new soft-stop
function which allows more gentle stopping in inner-
city driving.

The stereo-vision camera is the
sensor for the City Assistant.
The picture of the surroundings
must be passed on in high definition
to image processing for instant
evaluation.

We are driven by visions

of the future

The “Vision of Accident-free Driving”

Distronic, a comfort system, also eases the burden

on the driver. A radar sensor located in the radiator
grille measures the distance to the vehicle in front.
The sensor can observe the traffic scenario up to 150
meters (almost 500 feet) ahead. If the car approaches a
recognized vehicle in front too closely, Distronic can
automatically disengage the accelerator and – if
necessary – gently apply the brakes.

Drifting from a traffic lane on motorways is a
major cause of accidents, especially when trucks and
buses are involved. The Lane-departure Warner can alert
the driver to the danger of leaving a recognized lane of
traffic with a signal – the distinctive sound of a vehicle
crossing a line of marker studs on the road. The driver
then steers the vehicle back on course. The vehicle’s
position is analyzed by a high-powered computer on
the basis of camera images and lane markings.

Our “Vision of Accident-free Driving” tomorrow. Safety
systems which are already on board of road vehicles
have helped to bring about a considerable reduction in
accidents. Even more might be prevented if drivers
were supported by additional ‘eyes.’ Future develop-
ments will therefore help enhance visibility, especially
at night and in complex traffic situations.

Many accidents occur in darkness, rain, fog and in
the dazzling light of oncoming vehicles. With the Night
Vision infrared system, the driver has a range of vision
of up to three times as long as that provided by conven-
tional low-beam headlights. Night Vision can help
drivers recognize the topography of the road, obstacles
and darkly clothed pedestrians 150 meters (almost 500
feet) away. Conventional low-beam headlights, on the
other hand, illuminate the road ahead for only 40
meters (130 feet).

Nose-to-tail collisions resulting from driver fatigue

or distraction can have devastating consequences.
Many accidents, especially those involving heavy
trucks, could be prevented by the development of intel-
ligent systems. The so-called Electronic Crumple Zone
can prevent up to 80% of rear-end collisions involving
two trucks and over 30% of all truck accidents on
motorways. This system can help brake a vehicle if it
approaches the vehicle in front too closely and the
driver fails to react.

More efficient road utilization, a 15% reduction in
fuel consumption and improved working conditions in
the truck cockpit are provided by the Electronic Draw-
bar. This means greater safety for other road users as
well. With this system, two trucks are coupled by elec-
tronic means: The leading vehicle is driven as usual,
while the second truck automatically follows it without
a mechanical connection. Either vehicle can terminate
the link at any time.

Proven in the test car: In critical
situations a driver can react faster
with sidesticks than with
accelerator and brake pedal.

The “Vision of Accident-free Driving”

Many minor accidents in inner-city traffic are also

avoidable. Relief from stress in this complex environ-
ment and in bumper-to-bumper traffic is provided by
the City Assistant: Vehicles fitted with this system can
follow the car in front at a previously selected distance
under normal conditions. It can help to identify stop
signs, traffic lights, moving objects and pedestrians:
Several recognition modules operating in parallel ana-
lyze the characteristic shapes and image sequences

The CLK convertible
with a glass bubble roof
is used to investigate
vision requirements
when driving. The test
drivers’ viewing behavior
can be analyzed with a
variety of simulated
A columns.

Pedestrians are recognized from
their typical leg movements.
The system uses picture sequences
for identification.

with the results being conveyed to the driver or directly
to the brake and steering systems or the cruise control
unit.

With the Lane-change Assistant, displays in the ex-
terior mirror warn the driver when detected overtaking
vehicles are in his or her ‘blind spot.’ For this purpose,
video cameras are fitted behind the rear-view mirror
and on the vehicle exterior; the images they provide are
analyzed in real-time.

Engineers are investigating how the driver’s
peripheral field of vision can be improved with the
Bubble-top Car. Human beings process 90% of all infor-
mation visually. A Mercedes-Benz CLK convertible
fitted with a glass bubble roof is helping researchers to
analyze how often and for how long a driver fixes his
or her gaze in a particular direction, and to use this
information for example to optimize the contours of the
A-pillars or in developing new vehicle concepts.

In the future, the PRE-SAFE occupant-protection
concept from Mercedes-Benz can help reduce injury
risk in certain critical situations. The protective systems,
such as seat belt pretensioners, react within a matter of
milliseconds; the human recognition phase, on the other
hand, is in the order of seconds. Taking advantage of
this reduction in time will open up a new dimension in
vehicle-occupant protection. Thus, PRE-SAFE may acti-
vate special protective systems such as seat belt pre-
tensioners and automatically adjustable seats in certain
critical situations. If no accident occurs, all systems
return to their original status. Extendable bumpers,
deployable crash boxes or movable interior elements
are also being researched. The system is analogous to
nature: a falling cat will turn in flight so as to assume
the most favorable position on landing.

Infinite possiblities. Driver-assistance systems will be
even more efficient once they are capable of processing
and transmitting location based data. The telematic
control complex PASS (Position Aware Safety Systems),
currently being researched, uses an automated

The “Vision of Accident-free Driving”

Position Aware Safety Systems
(PASS) will optimize car driving:
vehicles could automatically help
to avoid obstacles that suddenly
appear, such as rocks on the road.

exchange of information between traffic participants
whose positions are provided by the Differential Global
Positioning System (DGPS). The assistance systems on
board a vehicle receive all this data, evaluate it and
may react by steering or braking. Information on road
conditions is acquired by special computers on board
the vehicles which build up an increasingly precise
database. In the future, vehicles might be able to inform
each other of hazards or traffic jams. In addition to
enhancing safety, this vehicle-to-vehicle communication
will improve route planning.

A further future safety element is provided by the
Drive by Wire electronic system. Accelerating, braking
and steering can be carried out electronically without
any mechanical connections. Like aircraft, road vehicles
can be controlled by purely electronic means using
‘sidesticks’ – two ergonomically contoured joysticks
which perform the functions of the steering wheel and
pedals. Mechatronic sensors register how much pres-
sure the driver applies to the sidestick and in which
direction, filter out excessively sharp steering move-
ments and give the driver the feeling of direct contact
with the road. The sidesticks thus help the driver to
brake more rapidly or even to better avoid obstacles.
The driver does not tire as quickly and can have a
better view of the instruments. The electronically
controlled brake system (Brake by Wire) is already
available in certain Mercedes-Benz production vehicles.

The “Vision of Accident-free Driving” at
DaimlerChrysler: vehicles will become increasingly
skilled at understanding their surroundings. They will
recognize the traffic in their vicinity, and they may be
fitted with microphones so that we can talk to them;
they may be able to interpret road signs and react of
their own accord when necessary. Their ability to
“think along with the driver” will help prevent many
accidents or mitigate their consequences. These
assistance systems, which are constantly on the alert
and are never distracted, will support the driver and
make road traffic considerably safer.

Our goal is accident-free

road transport

26 Mercedes-Benz Passenger Cars & smart

Another record year for Mercedes-Benz and smart
■ Adjusted operating profit adjusted up 3% to €3.0 billion
■ New sales record of more than1.2 million units (+6%)
■ New SL-Class with pioneering technology
■ Growth continues at smart

Record sales, revenues and operating profit. The
Mercedes-Benz Passenger Cars & smart division in-
creased sales, revenues and operating profit once again
in the year under review. Worldwide, 1,229,700 ve-
hicles were sold (2000: 1,154,900). Revenues increased
9% to €47.7 billion (2000: €43.7 billion). Despite higher
costs associated with the development and launch
of new models and the last full year of the current
E-Class, operating profit adjusted for one-time effects
increased by 3% to €3.0 billion – also a new record.

Success continues at Mercedes-Benz. The Mercedes-
Benz brand posted a new record in 2001 by selling
1,113,500 vehicles, a 6% increase. The C-Class family
was particularly successful. The series includes the
C-Class sedan, the new version of the station wagon,
and the brand new sports coupe, more than 59,000
units of which have already been delivered since the
vehicle was launched last spring. The excellent perfor-
mance of the C-Class more than offset the lifecycle-
related decline of the E-Class. The A-Class, which under-
went a model update in June and is now also available
in a long-wheelbase version, has done very well in the
market. The M-Class underwent a substantial model
update in the fall of 2001, and unit sales again reached

a high level, despite difficult market conditions in the
US. With a worldwide market share of more than 50%,
the S-Class sedan was once again by far the number-
one vehicle in its segment.

The Mercedes-Benz brand continued to grow in

nearly all markets in 2001. Sales of Mercedes-Benz ve-
hicles in Western Europe rose 6%. In Germany, despite
a weakening market, we nearly equaled our sales level
of the previous year, while further increasing market
share to 11.9% (2000: 11.8%). We sold 206,600 passen-
ger cars in the US, thereby surpassing the record set
in 2000 by 0.5%. In Japan, the success enjoyed by the
new C-Class led to a significant increase in new
registrations of Mercedes-Benz vehicles (+5%). Sales
also developed positively in other regions, particularly
in the emerging markets of Asia and Eastern Europe.

First cycle of the product offensive successfully com-
pleted. The launch of the new SL in the fall of 2001
marked the successful completion of the first cycle of
the product offensive begun in 1993. Sales have more
than doubled since the program was initiated.
Mercedes-Benz now has one of the youngest model
ranges in the premium class, with an average age of
only 2.6 years (excluding the G-Class SUV). Completely
new models which had no predecessor series in 1993
now account for 46% of total unit sales. The A-Class and
M-Class make up 26% of total unit sales.

Amounts in millions

Operating profit

Operating profit adjusted

2001
US $

2,627

2,636

2001
€

2,951

2,961

2000
€

2,145

2,874

Revenues

42,462

47,705

43,700

Investment in property,
plant and equipment

Research and development

Production (units)

Unit sales

Employees (Dec. 31)

1,834

2,138

2,061

2,402

2,096

2,241

1,249,951

1,161,601

1,229,688

1,154,861

102,223

100,893

Worldwide

luxury

brand No.1

Mercedes-Benz Passenger Cars & smart 27

A dream come true: The new SL is
Mercedes-Benz’ interpretation of a
thoroughbred sports car – it offers roadster
exhilaration combined with maximum safety
and supreme comfort.

28 Mercedes-Benz Passenger Cars & smart

A continuing passion:
The new E-Class.

Greater efficiency with the Mercedes-Benz Production
System. Assembly of the SL at DaimlerChrysler’s plant
in Bremen, Germany, is setting new standards, thanks
to the new Mercedes-Benz Production System (MPS).
With this system the necessary quality gates in produc-
tion were achieved much earlier than was previously
the case due to a higher level of standardization and
more extensive integration of production processes into
the vehicle development stage. The improved processes
enabled us to reach optimal capacity after only four
months. We will therefore probably be able to produce
30,000 SLs in 2002.

Mercedes-Benz portal launched. Since September 2001,
customers and others interested in the Mercedes-Benz
brand have been able to obtain extensive mobility
services via the new Mercedes-Benz portal at
www.mercedes-benz.t-online.de or from a special
call center (tel. in Germany: 0190/78 88 80). Services
include detailed route planning with up-to-the-minute
traffic and weather reports, professional office applica-
tions, customizable appointment calendars, an exten-
sive range of information and various transaction and
reservation features. The Mercedes-Benz portal is oper-
ated by StarMobility GmbH, a joint venture between
DaimlerChrysler (51%) and T-Online (49%).

100 years of Mercedes-Benz. In December 1900,
Emil Jellinek commissioned Wilhelm Maybach, chief
engineer of the Daimler Motoren Gesellschaft (DMG), to
build 36 vehicles for resale. Jellinek used the pseudonym
Mercedes (his daughter’s name) for his cars when they
were driving in races. The numerous racing successes
recorded by the “Mercedes cars” led the Daimler
Motoren Gesellschaft to begin marketing all of its
vehicles under the Mercedes name in 1901. According
to Interbrand’s ranking, Mercedes-Benz is today the
world’s most valuable premium automobile brand and
twelfth among all kinds of brands worldwide.

Successful in motor sports. Mercedes-Benz was among
the top brands in motor sports in the year under
review. The McLaren-Mercedes team finished second in
the Constructors’ Championship of the Formula 1
racing series, which is seen by an average 300 million
television viewers and spectators per race. David
Coulthard finished second in the Drivers’ Champion-
ship, while Mika Häkkinen, in whose placed Kimi
Raikkönen will be racing next season, finished fifth.
Mercedes-Benz also won eight of ten races in the
German Touring Car series, capturing both the drivers’
and the team championships.

The second cycle of the product offensive will also

involve penetrating market segments that are new to
Mercedes-Benz as a means of ensuring further the
profitable growth of our premium vehicles. The “Vision
GST” concept car presented at the Detroit Auto Show
in January 2002 illustrates the opportunities generated
by this approach.

Pioneering innovation in the new SL-Class. In the fall of
2001, Mercedes-Benz embarked on a new chapter in
the tradition of the SL roadster by introducing a stylisti-
cally fascinating new sports car with state-of-the-art
engineering.

The most important technical milestone in the SL

is its Sensotronic Brake Control (SBC) electronic-
hydraulic braking system. Mercedes-Benz was the first
in the world to offer this system. SBC represents the
first element of future by-wire systems that use elec-
tronic signals to carry out drivers’ commands, instead
of conventional mechanical parts or hydraulics.

It works together with the proven electronic stabil-

ity program (ESP) and the Active Body Control (ABC)
chassis system that reduces body movements to a
minimum in bends or during braking. (see pp. 20-25).
This unique combination of modern electronic chassis
systems gives the new SL dynamic handling like no
other vehicle as well as offering the highest level of
safety.

In addition, the newly developed Vario roof makes
driving the SL a truly fascinating experience that com-
bines the driving pleasure of an open roadster with the
excellent comfort of a Mercedes-Benz coupe.

smart:

unique
driving experience and great practicality

Mercedes-Benz Passenger Cars & smart 29

Individually open – from the folding sliding roof to fully
convertible: The smart convertible & passion
represents a flexible, future-oriented mobility concept.

More than 116,000 smarts sold. The innovative smart
car concept, combining fun and great practicality with a
compact yet spacious and safe interior, was particularly
successful in 2001. Smart sold 116,200 city coupes
and convertibles (up 14%) in the year under review.
Increased demand within the smart brand occurred
mainly from sales of the smart cdi and smart convert-
ible, selling 27,700 and 23,300 units. The smart cdi
remains the best selling and best-priced “three-liter car”
(fuel consumption better than 67 miles per US gallon)
in Western Europe. Germany is its most important
market, with sales of 46,700 vehicles, followed by Italy
(30,000), and France (8,700). The successful introduc-
tion of the smart in the UK and Greece was followed by
its launch in Japan in the year under review. The smart
city coupe has been available as a right-hand-drive
vehicle since October 2001, and is also now offered as a
“kei car” version subject to a lower vehicle tax in Japan.

Upcoming new smart products. Following the presenta-
tions of the smart roadster and roadster coupe concept
vehicles in 1999 and 2000 respectively, additional fu-
ture model variants of the smart were presented at the
International Auto Show in Frankfurt. Among the high-
lights was the world premiere of the smart tridion4
show car. The car demonstrates the versatility of the
brand and shows that a model with four seats and five
doors can still be a true smart. We also introduced an
alternative drive concept known as the smart hyper.
It features both a diesel engine and an electric motor.
This combination allows noticeably lower fuel con-
sumption and emissions than a conventional drive
system.

Maybach: new luxury-car brand with tradition. Supreme
individuality, stylish elegance and ultimate exclusive-
ness combined with maximum space and comfort –
these are the goals of the newly established Maybach
brand. Maybach is to be revitalized as an independent
top brand in the ultra-luxury segment. Product develop-
ment is running according to plan. The Maybach
factory will start operations in the fall of 2002, and will
use a flexible manufacturing system to produce up to
1,500 limousines a year.

Unit Sales 2001 *)

Mercedes-Benz

of which: A-Class

C-Class

of which: CLK

SLK

Sport Coupe

E-Class

S-Class/SL

M-Class

G-Class

smart

Mercedes-Benz
and smart worldwide

Europe

of which: Germany

Western Europe
(excluding Germany)

NAFTA

USA (retail sales)

South America

Asia/Australia (excluding Japan)

Japan (new registrations)

*) Group figures, unless otherwise indicated,

(including leased vehicles)

1,000
Units

1,114

191

507

201

107

102

116

1,230

854

436

402

229

207

01:00
(in %)

-4

+30

-20

-19

-18

-2

-3

+53

+14

-1

+16

-20

+12

+13

30 Chrysler Group

Turnaround plan meets expectations

■ Operating loss excluding one-time effects of €2,183 million is lower

than previously announced

■ Better cost reductions and efficiency improvements offset decline in unit sales and revenues
■ Successful launch of new Jeep Liberty and Dodge Ram

Earnings goal achieved. Despite the difficult market
conditions in North America, Chrysler Group’s operat-
ing loss excluding one-time effects of €2,183 million
(2000: operating profit of €531 million) was lower than
the target range set at the beginning of the year (oper-
ating loss of €2.2–2.6 billion). The implementation of
the turnaround plan achieved cost savings and effi-
ciency improvements that were substantially greater
than originally planned, offsetting the negative impact
of declining unit sales and revenues. Due to the
intensely competitive market situation with further
increases in sales incentives, unit sales in the United
States fell by 11% to 2,196,000 vehicles, and market
share slipped to 13.0% from 14.2% in the prior year.

Worldwide, Chrysler Group sold 2.76 million cars,

minivans, SUVs and light trucks in 2001 (2000: 3.05
million). These figures reflect Chrysler Group’s short
term strategy of improving profits rather than protect-
ing market share at any price. New and additional
products will provide for market share growth in the
medium to long term. Revenues declined by 7% to
€63.5 billion.

Efficiency and creativity in product development. New
and attractive products offered at competitive prices
are the foundation of the future success of Chrysler
Group. Established in 1989, Chrysler Group’s Platform
Team concept revolutionized the product-creation pro-
cess for high-volume manufacturers. Building on that
experience we have now formed Product Innovation
Teams to more closely link the entire organization. This
new approach aims for “disciplined pizzazz” at all lev-
els of the product-creation process in order to achieve
reduced vehicle development times, improved quality
and sustained profitability. At the same time, we will
maintain the attractive design and ability to discover
new market niches that Chrysler has become known
for, and which is the basis for the success of our
brands.

The Chrysler Crossfire: from concept to reality. The
Chrysler Crossfire concept vehicle continues Chrysler
Group’s strategy of developing breakthrough vehicle
concepts and turning them into reality. Following in the
footsteps of the Dodge Viper, Chrysler Prowler and

Amounts in millions

2001
US $

2001
€

Operating profit (loss)

(4,701)

(5,281)

Operating profit (loss) adjusted

(1,943)

(2,183)

2000
€

501

531

Revenues

56,506

63,483

68,372

Investment in property,
plant and equipment

Research and development

Production (units)

Unit sales

Employees (Dec. 31)

4,524

1,959

5,083

2,201

6,339

2,456

2,679,411

2,963,822

2,755,919

3,045,233

104,057

121,027

The American
way of life...

Chrysler Group 31

Convincing for customers:
Stunning design and innovative
features put the all-new 2002 Dodge
Ram 1500 at the head of its class.

32 Chrysler Group

North American Car of the Year:
The segment-busting Chrysler PT Cruiser
with its head-turning design and high
versatility.

Successful launch of Jeep® Liberty. The all-new Jeep
Liberty provides a distinctive Jeep design that delivers
efficient space utilization, enhanced versatility and new
levels of innovation, while paying homage to the
brand’s 60-year heritage. With these best-in-class capa-
bilities, Liberty has gone on to set new sales records
each month since its launch in spring 2001 – all with-
out sales incentives. Unit sales of the new Jeep Liberty
in North America totaled 141,700 in 2001. In Europe
the Liberty was presented under the Cherokee name at
the Frankfurt International Motor Show in September
2001.

The Jeep Liberty is produced for the world market

at the new Toledo North Assembly Plant (TNAP) in
Ohio. DaimlerChrysler began to design TNAP at the
time of the merger in 1998. It now represents the cul-
mination of best practices from the company’s world-
wide manufacturing operations and is a great example
of incorporating new technology from Mercedes-Benz.
Unit sales of the Jeep brand were 523,000

vehicles in 2001 (2000: 607,500).

Presentation of pioneering automotive concepts. Build-
ing on the momentum of its award-winning Jeep Willys
concept vehicle, Chrysler Group designers presented
the radical Jeep Willys2 design study concept at the
Tokyo Motor Show in October 2001. Willys2 was
also designed with unsurpassed imagination and an
adventurous flair. Its usefulness and versatility were
developed to exist in harmony with nature, while being
perfectly suited for the rigors of an active lifestyle.

Other concept vehicles introduced at auto shows
in early 2002 were the Dodge M80 pickup truck, the
Dodge Razor and the Jeep Compass. Chrysler Group’s
2002 concept vehicles all target the Millenial Genera-
tion, the next large emerging group of consumers.
They were designed to be aspirational, emotional,
minimalist and practical. By incorporating many
corporate off-the-shelf components, all concepts will be
affordable if produced.

Chrysler PT Cruiser, the series version of the Crossfire
will give the Chrysler brand another exciting and
aspirational vehicle. It joins the Chrysler PT Cruiser,
300M and Town & Country in reinforcing the brand’s
innovative appeal. As an image car, Chrysler Crossfire
demonstrates Chrysler Group’s flexibility and speed
in decision-making. DaimlerChrysler will produce the
Chrysler Crossfire together with the Karmann company
in Osnabrück, Germany. Many Mercedes-Benz compo-
nents will be used in this car, which is to be launched
in 2003, just 18 months after the production decision
was taken in August 2001. The Chrysler Crossfire is
a good example of the potential that cross-divisional
cooperation initiated by the Executive Automotive
Committee is making available to the Group.

214,300 Chrysler PT Cruisers sold. In response to the
strong global demand for the PT Cruiser, we have
steadily increased production of this innovative and
versatile vehicle since it was launched at the beginning
of 2000. The popular PT Cruiser offers the interior vol-
ume of a full-size sedan or sport-utility vehicle with a
length shorter than many compact cars. After unit sales
of 141,200 in its first year, 214,300 PT Cruisers were
sold in 2001.

In total, the Chrysler brand achieved unit sales of

775,500 vehicles (2000: 694,200).

Excellent design and

convincing functionality

Chrysler Group 33

The ultimate SUV: Jeep Liberty combines
legendary off-road abilities with on-road comfort.

In addition, the Chrysler Pacifica concept
vehicle premieried in early 2002. This all-wheel-drive
vehicle is particularly well suited for long trips and
combines the spatial comfort of a minivan with the
versatility of an SUV as well as the smooth driving
qualities of a sedan. A series version of the Chrysler
Pacifica, which will be very similar to the concept
study, will be presented by Chrysler Group in 2002.
Production should then begin in the first half of 2003.

New 2002 Ram continues Dodge brand’s success story.
The all-new 2002 Ram 1500 was launched in Septem-
ber 2001 and sets new standards for the competition.
Compared to the previous model the Dodge Ram was
improved significantly in every area, from design to
handling, from performance to capability, while main-
taining the core qualities of every Ram. This was dem-
onstrated by Four Wheeler magazine’s selection of the
all-new Dodge Ram for its prestigious “Pickup Truck of
the Year” award.

Due to this model changeover and the generally
difficult market conditions, however, unit sales by the
Dodge brand were 1,457,400 vehicles (2000:
1,695,400).

More than nine million minivans sold. Eighteen years
after Chrysler Corporation invented the minivan
segment, Chrysler Group celebrated production of the
nine-millionth minivan in April 2001. It came off the
assembly line at the European manufacturing facility
in Graz, Austria. Chrysler Group sells nearly 600,000
minivans a year in more than 70 countries around the
world. With three minivan assembly plants, Chrysler
Group has the capacity to build more than 2,700
minivans per day. The Dodge and Chrysler brands have
over 35% of the minivan segment in the United States,
despite having over 15 competitors.

U-Connect – new vehicle communication system. Start-
ing in 2002, DaimlerChrysler will be the first auto-
maker to offer an innovative communication system
featuring hands-free voice recognition. An affordable
solution designed specifically for Chrysler Group
customers. U-Connect is multilingual (English, Spanish
and French) and recognizes various voices (up to five).
Unlike competing products, U-Connect is based on a
customer’s mobile telephone and works both inside and
outside the vehicle. An after-market version of the new
system will be available in the spring of 2002, with
factory installation starting in early 2003.

Unit Sales 2001 *)

Total

of which: Passenger Cars

Light Trucks

Minivans

SUVs**)

USA

Canada

Mexico

Rest of the world

*) Shipments (including leased vehicles)
**) Including the PT Cruiser

1,000
units

2,756

698

596

592

870

2,196

241

133

186

01:00
(in %)

- 10

- 15

- 16

+ 1

- 6

- 11

- 10

+ 10

- 0

34 Commercial Vehicles

in North America

Still the world leader
■ Business developments significantly impacted by weak market
■ Adjusted operating profit slightly positive at €51 million
■ 492,900 commercial vehicles sold (–10%)
■ Restructuring measures well underway at Freightliner
■ Strategic partnerships strengthen market presence in Asia

Consolidation in the Commercial Vehicles division.
Despite a difficult year for the sector as a whole, Com-
mercial Vehicles sold 492,900 (2000: 549,000) trucks,
buses and vans worldwide of the brands Mercedes-
Benz, Freightliner, Sterling, Western Star, Thomas Built
Buses, Setra, Orion and American LaFrance. We there-
fore succeeded in maintaining our position as the
world’s leading manufacturer of commercial vehicles.
Revenues totaled €28.6 billion (-4%). A slight decline in
Western Europe (-1% to €14.4 billion) was accompanied
by drops in North America (-9% to €9.5 billion) and
South America (-16% to €1.5 billion). Operating profit
adjusted decreased significantly to €0.1 billion (2000:
€1.3 billion). This was primarily due to the losses at
Freightliner in the United States, where we introduced
an extensive turnaround program in October 2001.

Full-line product range expanded. The Mercedes-Benz
truck portfolio was expanded in September 2001 with
the introduction of the new Axor truck series, which is
positioned between the Actros and the Atego. In addition,
the new Setra TopClass 400 luxury coach family has
met with a tremendous response. In October, the bus
was also honored with the most important international

prize in the sector, the “Coach of the Year 2002” award.
The range of vans was expanded through the addition
of a six-ton variant of the successful Sprinter model and
a new version of the vehicle for the North American
market. We also introduced the new Vaneo compact
van at the International Motor Show in Frankfurt as a
premium product in the fast-growing compact-van
segment.

Mercedes-Benz Trucks remain successful in a difficult
market environment. Unit sales of 107,900 Mercedes-
Benz trucks in the year under review were down 11%
from 2000. The decline was primarily due to sharply
lower demand in the troubled markets of Turkey and
Argentina as well as a drop in demand in Western
Europe, although this was partially offset by growth
in other markets outside Europe. Nevertheless, with
67,300 units sold (2000: 77,700) and a market share
of 22% (2000: 23%), Mercedes-Benz was once again the
leading brand in Western Europe for trucks over 6
metric tons. Mercedes-Benz Trucks also maintained its
leading position in the most important South American
markets of Brazil and Argentina, with market shares
of 34% (2000: 37%) and 35% (2000: 36%), respectively.

Amounts in millions

Operating profit (loss)

Operating profit adjusted

2001
US $

2001
€

(458)

(514)

2000
€

1,212

1,253

Revenues

25,432

28,572

29,804

Investments in property,
plant and equipment

Research and development

Production (units)

Unit sales

Employees (Dec. 31)

1,321

903

1,484

1,015

1,128

974

494,866

552,471

492,851

548,955

96,644

101,027

Customized transport

solutions for our customers

Commercial Vehicles 35

Specific range of application: The new
Mercedes-Benz Axor semi-trailer truck is
designed to fulfill customer requirements
such as low weight, low fuel consumption,
attractive price and maximum economy.

36 Commercial Vehicles

The most modern long-distance bus in the world:
The Setra TopClass 400 generation of long-
distance buses offers innovative technology,
high economy and exemplary comfort.

the previous year with unit sales of 11,000 vehicles
(2000: 11,900). We nevertheless remained the leader
in Western Europe, with a market share of 26%
(2000: 26%), as well as in Brazil (52%; 2000: 59%),
and Argentina (72%; 2000: 68%).

Mercedes-Benz Vans expand global presence. A total
of 243,200 vans were sold in the year under review,
thereby surpassing the record set in 2000 by 1%.
Unit sales in Western Europe were up 3% to 202,100
vehicles, while market share once again reached 19%.
Mercedes-Benz thus maintained its leading position
in the 2 - 6 metric ton segment in Western Europe.
In South America, where unit sales fell to 7,800 vehicles
(2000: 12,000), Mercedes-Benz remained the market
leader in the comparable segment. The Mercedes-Benz
Sprinter was launched in the US market under
the Freightliner brand name in mid 2001 and sales
reached more than 2,200 by the end of the year.

Global components strategy continues successfully.
DaimlerChrysler is one of the world’s leading
manufacturers of diesel engines for commercial ve-
hicles. We recently gathered together the worldwide
component activities of Mercedes-Benz, MTU/Diesel
Engines and Detroit Diesel Corporation in the
DaimlerChrysler Powersystems business unit. This has
enabled us to more efficiently structure the develop-
ment, production and marketing of diesel engines and
components. Long-term synergies have already been
identified and realized, particularly in purchasing.
Our global components strategy, which is de-

signed to increase the share of Group components in
our brands, was further pursued throughout 2001.
The engine for the Mercedes-Benz Axor truck, for
example, is built by a production network involving São
Bernardo do Campo, Brazil, and Mannheim, Germany.
Further economies of scale will be achieved through
the decision to produce transmissions and steering sys-
tems along with engines and axles in Brazil. In addition,
our operations in the US are being expanded through the
establishment of a manufacturing plant for drive shafts
and steering systems. The integration of our diesel-
engine activities in the off-highway business also had a
positive effect. With the added benefit of a clear brand
strategy we are present in this market with an attractive,
competitive range of diesel engines covering the entire
output spectrum.

Restructuring at Freightliner, Sterling, and Thomas
Built Buses. The collapse of demand in North America
led to a substantial reduction in sales of our North
American brands in 2001 (-34% to 100,400 units). Our
leading position in the segment for Class 8 heavy
trucks (15 tons and up) nevertheless remained unchal-
lenged in the US. Our market share for Class 8 vehicles
reached 39% (2000: 36%), while in Class 6/7 (from 8.8
to 15 tons), it was 27% (2000: 24%).

To ensure a return to long-term profitability as
quickly as possible, Freightliner presented a turna-
round program in October. With this plan we should be
able to achieve continuously increasing positive effects
on profitability, amounting to an annual US $850
million from the year 2004. Numerous measures
are already being implemented and showing positive
results.

Mercedes-Benz and Setra Buses defend market position.
Last year 26,700 complete buses and bus chassis of the
Mercedes-Benz and Setra brands were sold worldwide
(2000: 27,500), making DaimlerChrysler by far the
world’s leading bus manufacturer once again. Unit
sales in Western Europe (including Turkey) were down
16% on the record year of 2000 to 6,600 vehicles as a
result of generally negative market developments,
particularly in the segment of tourist buses, and the
severe decline of the important Turkish market. In South
America, we did not maintain the high sales level of

The world’s leading manufacturer

Commercial Vehicles 37

of commercial vehicles

Strategic partnership with MMC. In June 2001,
DaimlerChrysler acquired AB Volvo’s 3.3% interest in
Mitsubishi Motors Corporation (MMC), including all
legal rights arising from the cooperation between
Mitsubishi FUSO Truck & Bus Company (MFTB) and
Volvo. With worldwide sales of more than 140,000
trucks and buses and a market share of over 30% in
Japan, MFTB is particularly well represented in the
Asian commercial vehicles market. Being able to work
together with MFTB gives us the opportunity to
strengthen our position in Japan and other Asian
markets over the long term. In December 2001,
DaimlerChrysler assumed control of sales and service
of MMC’s Canter light truck in five countries. The
model is now available with its own brand presentation
at selected Mercedes-Benz dealerships in the United
Kingdom, France, Italy, Sweden and Poland. In the
future, our strategy will include joint investment and
development programs within the commercial vehicle
field.

Engine joint venture with Hyundai. We took the first
firm step toward commercial vehicle collaboration with
our partner Hyundai in June 2001, by establishing the
joint venture “Daimler Hyundai Truck Corporation.”
The company was set up to produce Series 900
Mercedes-Benz diesel engines in South Korea. A large
proportion of Hyundai commercial vehicles will be
equipped with these engines in the future. Planning of
a production facility in the immediate vicinity of
Hyundai’s state-of-the-art plant in Chonju was begun
shortly after the joint-venture contract was signed.

The star among the compact vans:
The multifunctional Mercedes-Benz Vaneo
is a family sedan, recreational vehicle and
spacious station wagon all in one.

Unit Sales 2001 *)

World

of which: Vans

(incl. V-Class)

Trucks

Buses

Unimogs

Europe

of which: Germany

Western Europe
(excl. Germany)

of which: France

Italy

North America

of which: USA

South America

of which: Brazil

Asia/Australia

*) Wholesale (including leased vehicles).

1,000
Units

01:00
(in %)

493

258

189

293

106

170

106

-10

-24

-12

+32

-3

-6

-31

-32

-15

-9

38 Services

Financial Services well positioned for the future

■ Adjusted operating profit only slightly below prior year's level despite difficult situation

in North America

■ As expected, new business slightly down from prior year at €54.9 billion
■ Strategic refocus of Services

Well positioned with Group-focused financial services.
DaimlerChrysler Services is well positioned for the
future in the dynamic growth markets of financial and
mobility services. The division continues to concentrate
on DaimlerChrysler’s core automotive business, and
uses its innovative products to extend the value chain
of the Group’s brands. DaimlerChrysler Services also
offers fleet management programs, mobility services
and target-group focused insurance solutions. Great
success has been achieved in using services to support
the sales of vehicles by the Mercedes-Benz Passenger
Cars & smart, Chrysler Group and Commercial Vehicles
divisions. With more than 100 operating companies in
38 countries in the four regions of North America,
Europe, Asia/Pacific, and South America/Africa/Middle
East, DaimlerChrysler Services is one of the world’s
leading providers of automotive financial services.

Further increase in revenues at Financial Services.
DaimlerChrysler Services posted revenues of €16.9 bil-
lion in 2001 (2000: €17.5 billion). Excluding the rev-
enues of debis Systemhaus (IT services), which were
fully consolidated in the first nine months of the prior
year, revenues increased by 12%. New business was
slightly lower than in the prior year at €54.9 billion, as
we had anticipated. With a share of €35.7 billion, the
US remained DaimlerChrysler Services’ most important
market for new business (2000: €35.4 billion).

Worldwide contract volume reached €131.8 billion

(2000: €126.3 billion); adjusted for exchange-rate
effects, the portfolio was around the same size as a
year earlier. Again, the largest share was accounted for

by North America (€95.0 billion). As a result of the
global presence of the Financial Services division, one
of every three DaimlerChrysler vehicles sold was
financed by DaimlerChrysler Services. The size of the
non-automotive portfolio was reduced in 2001.

Adjusted earnings slightly below prior year’s level
despite difficult market conditions in North America. In
2001, the division achieved an operating profit of €0.6
billion – significantly lower than the previous year
(€2.5 billion), which was positively affected by one-time
effects totaling €1.8 billion. Operating profit in 2001 in-
cluded one-time income of €0.3 billion arising from the
sale of the remaining debitel AG shares to Swisscom,
a Swiss telecommunications company, as well as one-
time losses of €0.1 billion caused by the devaluation of
the Argentinean peso against the US $ and of €0.2
billion for the sale of parts of the capital services port-
folio in the United States that was agreed on in January
2002. Excluding one-time effects, there was an operat-
ing profit of €0.6 billion, slightly lower than the level
of the prior year. Business was impacted by continuing
pressure on margins, provisions for risks associated
with the commercial vehicle portfolio, and residual-
value losses in connection with Chrysler Group ve-
hicles. Competitive pressures have intensified in the
financial services business due to the entry of new
companies and the merger of established firms. These
negative factors were offset by the efficient utilization
of the available refinancing instruments, and by an
optimized cost structure resulting from measures
designed to improve profitability.

Amounts in millions

Operating profit

Operating profit adjusted

Revenues

Contract volume

Investments in property,
plant and equipment

Employees (Dec. 31)

2001
US $

545

514

2001
€

612

578

2000
€

2,457

641

14,999

16,851

17,526

117,340

131,828

126,314

100

112

9,712

282

9,589

Leasing and financing all

around the automobile

Services 39

You can hear the smile. Friendly and
competent service-liners look after our
customers from the call center in
Dallas, USA.

of off-lease vehicles, programs have been developed in
cooperation with dealers that offer customers various
alternatives at the end of the leasing period. This has
made it possible to boost customer loyalty.

Activities expanded. In 2001, we further expanded our
fleet management operations. We were able to attract
new customers by offering innovative fleet programs,
particularly in Germany, where our total fleet of man-
aged vehicles increased to more than 110,000 units.
Our vehicle financing operations have been concen-
trated in the new DaimlerChrysler Bank, and after we
receive a full banking license DaimlerChrysler Services
will further expand its product range. Our goal is
to begin offering our customers a range of banking
services in 2002 that go beyond those available through
the financing and leasing packages of a typical auto-
motive bank.

We expanded our presence in the eastern Medi-

terranean by establishing a financial services company
in Greece.

The Mobility Management Services unit also
further expanded its activities, focusing primarily on
the development and operation of telematics services
for toll-collection systems on highways.

Services focused on core business. Since the beginning
of 2001, the Services division has been operating under
the DaimlerChrysler corporate brand name, thereby
underscoring the important role played by financial ser-
vices in the sale of Group vehicles. Following a decade
of dynamic growth, in 2001 we decided to focus on the
consolidation of our operations. In order to boost the
earnings of the Services division, we focused our
activities even more strongly on supporting the sales
of DaimlerChrysler vehicles, while at the same time
controlling our growth in the automotive leasing and
financing business with a clear focus on profitability.

Against a backdrop of increasing loan defaults and

losses on the sale of ex-lease vehicles, a stronger
emphasis was laid on the evaluation and control of the
risks inherent in our business. We further improved
our risk-management system by, among other things,
standardizing our credit principles. The losses
sustained on the sale of off-lease vehicles primarily
involved Chrysler and Freightliner products.

Measures introduced to increase profitability. In order
to increase profitability, the division introduced numer-
ous measures to cut costs, boost the efficiency of busi-
ness processes, and optimize internal routines. The
customer-focused coordination of products and services
was further improved by means of closer cooperation
between the leasing and financing companies and the
sales organizations of the automotive divisions. Activi-
ties throughout the Services division were also more
closely aligned with its goals. In addition, we reduced
costs by merging administrative back-office functions
in various countries. In order to improve the remarketing

40 Other Activities

Other Activities

MTU Aero Engines

Amounts in millions

2001
US $

2001
€

2000
€

Amounts in millions

2001
US $

2001
€

2000
€

Operating Profit

1,051

1,181

3,590

Revenues

Operating Profit Adjusted

182

205

Incoming Orders

2,214

2,487

2,105

1,943

2,183

2,409

The Other Activities segment comprises the MTU

Aero Engines business unit, our equity interests in
EADS, TEMIC, Mitsubishi Motors Corporation, and until
April 2001 included the Rail Systems business unit,
which was sold last year. It also includes our Corporate
Research department, our real estate activities, and
the holding and finance companies.

In 2001, the Other Activities segment achieved an
operating profit of €1.2 billion (2000: €3.6 billion). This
included one-time income totaling €1.0 billion resulting
from the sale of Adtranz (€0.3 billion) and 60% of the
stock in TEMIC (€0.2 billion), our proportionate share
(€0.9 billion) of the gain arising from EADS in connec-
tion with the formation of Airbus SAS, and our share of
the restructuring charge at Mitsubishi Motors (€0.4 bil-
lion). In the year 2000, there was one-time income of
€3.5 billion, primarily due to the exchange of a control-
ling interest in DaimlerChrysler Aerospace for shares
in EADS.

Excluding one-time effects, operating profit

amounted to €205 million (2000: €67 million).

Employees (Dec. 31)

7,839

7,162

Global partnerships. Together with its partners, the
MTU Aero Engines business unit develops and pro-
duces engines for civil and military applications. It also
performs servicing and maintenance on engines at 11
locations worldwide. MTU Aero Engines is the world's
largest independent provider of maintenance services
for civil aviation engines. The company's customers
include users and manufacturers of aircraft engines
and industrial gas turbines around the world.

Further growth in revenues and earnings. MTU Aero
Engines continued to increase revenues and earnings
despite the negative effects of the terrorist attacks of
September 11. In 2001, the business unit's revenues
grew by 18% to reach €2.5 billion. This was primarily
due to an increased demand for civil-aircraft engines
and significantly higher revenues by the maintenance
plants, but also to the stronger US $. Civil applications
particularly benefited from the growth of the CF-6
programs and higher sales of V2500 engines, as well
as from strong demand for LM6000 industrial gas
turbines. On the military side, MTU Aero Engines
delivered the first series production engines for the
Eurofighter (EJ200) during the year under review.

Incoming orders at MTU Aero Engines also devel-
oped positively again in 2001, reaching a total of €2.2
billion. As expected, they did not match the previous
year's extraordinarily high level (2000: €2.4 billion)
which was influenced, among other things, by the first
series production orders for the Tiger military helicop-
ter. The business unit registered strong demand for
CF-6 and V2500 replacement parts in 2001, and also
gained new customers for its civil maintenance
services for V2500 engines in the US and Middle
East markets.

As a result of these positive developments, earn-
ings at MTU Aero Engines GmbH again surpassed the
figure for the previous year.

Stronger competitive

position in a difficult market

Other Activities 41

The Eurofighter has two EJ200 jet
engines. MTU is the system leader
for this engine in Germany.

With the new Airbus A380
family, EADS can introduce new
technologies while securing
long-term competitiveness in
the field of large civil aircraft.

New projects secure growth and competitiveness.
MTU Aero Engines is steadily expanding its mainte-
nance business in order to participate in the good
growth prospects in that sector. For example, MTU
Maintenance Zhuhai - a 50:50 joint venture between
MTU Aero Engines and China Southern Airlines –
received its business license in April 2001. Starting in
November 2002, it will be able to repair engines close
to the Asian customer base.

The business unit is also investing in new pro-
grams that will strengthen its position as an engine
manufacturer. For example, MTU Aero Engines is par-
ticipating in the GP 7000 engine program for the Air-
bus A380. In 2001, Air France became the first airline
to order GP 7000 engines for the Airbus aircraft it has
ordered. We expect this to be followed by orders from
other airlines. The PW6000 engine developed with
Pratt & Whittney was certified for the Airbus A318 . The
first flight of the Airbus A318 took place on January 15,
2002.

EADS

Successfully meeting market challenges. EADS is the
world’s second largest aerospace and defense company.
Since its establishment in July 2000, it has been
included in DaimlerChrysler's consolidated financial
statements at equity, in proportion to our 33% stake.
Despite a difficult market in 2001, particularly follow-
ing the events of September 11, EADS expects to reach
its revenue and earnings targets in its first full year of
operation. The company made substantial progress
with its two major projects - the Airbus A380 for the
civil aircraft market and the Airbus A400M military
transport aircraft. EADS also entered into numerous
cooperative agreements and partnerships that will result
in sustained improvements in its competitiveness.

Repeated strong growth in revenues, incoming orders
and earnings. EADS’ revenues of €30.8 billion were
27% higher than the pro-forma figure of the prior year
(€24.2 billion). A large part of this growth is explained
by the fact that since the formation of Airbus SAS, BAe
Systems’ share of Airbus revenues is also included,
which was not the case in the prior year. Adjusted for
this effect, revenues rose by 10%. The main factors
behind the rise were the above-average increases in
revenues at Airbus SAS, which delivered a record 325
aircraft (2000: 311), and in the Military Transport
Aircraft and Defence & Civil Systems divisions. Positive
effects also came from higher revenues in the
Aeronautics division and from changes in the value of
the US $. On the other hand, the Space division did not
quite equal the prior year’s figure.

42 Other Activities

Incoming orders increased to € 60.2 billion in 2001

(2000: €49.1 billion). Adjusted for the consolidation
effect of Airbus SAS, incoming orders rose by 5%.

In the first nine months of 2001, mainly due to the
growth in business at Airbus, there was a 32% increase
in earnings before taxes and interest (EBIT) to €1.1 bil-
lion. The company also expects full-year earnings ad-
justed for one-time effects and goodwill amortization to
be significantly higher than the previous year's figure.

Order backlog at record level. EADS’ order backlog
reached a new record level of €183.7 billion for 2001
year-end, which is equivalent to the revenues of more
than six years. Airbus further consolidated its leading
position in the civil-aircraft market with a record
order backlog of 1,575 aircraft. In terms of the number
of units on order, this corresponds to a market share
of 54%. In the defense sector, at the end of December
2001, eight European countries decided to procure 196
military transport aircraft of the type Airbus A400M,
with a total value of about €18 billion.

Partnerships strengthen competitiveness. In July 2001,
Airbus SAS was established with retroactive effect from
January 1, thereby combining into one company all pre-
vious activities of the former Airbus consortium. EADS
owns 80% of the new company, with the remaining 20%
held by BAE Systems.

MBDA, which was established in December 2001,

combines the guided missile activities of EADS, BAE
Systems and Finmeccanica. EADS has a 37.5% stake in
MBDA, which is the world's second largest manufac-
turer of guided missiles and covers all market
segments in the sector.

One of EADS’ most important strategic goals is to

expand its presence in the US market. To this end,
EADS and Northrop Grumman have signed cooperative
agreements for the fast-growing sectors of defense elec-
tronics and the maintenance and servicing of Airbus
fleets in the US. Joint projects with other US partners
are also being examined. EADS generated revenues of
approximately US $4 billion in the US in 2001.

Mitsubishi Motors

Mitsubishi Motors' worldwide presence. Mitsubishi
Motors Corporation (MMC), Japan's fourth-largest auto
maker, designs and produces small cars, full-size pas-
senger cars, SUVs, light and heavy trucks, and buses.
The company has production plants in 13 countries,
including seven assembly and component plants in
Japan. More than 50% of all Mitsubishi vehicles are sold
outside Japan, primarily in Asia, America and Europe.

Further expansion of alliance with MMC. At the begin-
ning of 2001, DaimlerChrysler had a 34% stake in
Mitsubishi Motors Corporation. At that time the field of
cooperation was limited to passenger cars and light
commercial vehicles. However, in June 2001 we
acquired Volvo's 3.3% interest in Mitsubishi Motors,
including all legal rights arising from the previous
cooperation between Mitsubishi Motors and Volvo in
the area of medium and heavy commercial vehicles.
We and Mitsubishi Motors thereby placed our alliance
on a significantly broader base encompassing all ve-
hicle segments. DaimlerChrysler has included its 37.3%
stake in MMC in its consolidated financial statements
at equity.

Turnaround measures cut losses. In the first half of the
2001/2002 financial year (which ends on March 31,
2002), sales of Mitsubishi Motors vehicles totaled
658,000 units, lower than the 675,000 units recorded
during the same period of the previous financial
year. This decline was due to the fact that although
sales remained stable in North America, there was a
noticeable drop in sales in the Japanese, European and
Asian markets.

Revenues according to Japanese GAAP totaled

1,533 billion yen. (€14.2 billion), falling slightly short
of the previous year's figure of 1,543 billion yen. As ex-
pected, MMC recorded an operating loss in the first half
of the 2001/02 financial year of 13.1 billion yen (€121
million). That loss was 44% less than the figure for the
first six months of 2000/01 (23.2 billion yen). This
significant improvement was largely a result of the
turnaround measures introduced in February 2001.

The loss before one-time effects and taxes totaled

27.4 billion yen (€253 million), representing a 7%
improvement on the half-year results of 2000/01
(a loss of 29.5 billion yen).

New

potential

through global alliance

Other Activities 43

Car of the Year in Japan in the mini-car
segment - the Mitsubishi ek Wagon,
introduced in October 2001.

The exciting Space Liner concept car
gives a preview of Mitsubishi Motors’
upcoming minivan generation.

Long-term improvement in earning power. In February
2001, the Board of Management of Mitsubishi Motors
Corporation introduced a comprehensive turnaround
plan designed to return the company to sustained prof-
itability and long-term growth. Organizational and per-
sonnel changes were crucial elements of the rapid and
effective implementation of this program. Accordingly,
Mitsubishi Motors reduced the number of management
levels to four, cut executive management positions by
25%, and replaced approximately 60% of its executive
and senior executive officers.

The company also introduced measures designed

to reduce material costs, and fixed costs. Mitsubishi
Motors is on schedule with regard to fixed costs, and
the company is confident it will surpass the 2001/02
cost-cutting targets for materials. The planned work-
force reductions (9,500 employees by the end of the
2003 financial year) are also progressing faster than
expected. By the end of 2001, 7,500 persons had
already left the company, 3,000 more than was
originally planned.

Due to the progress achieved with the turnaround

plan to date, the MMC Board of Management is confi-
dent that the positive developments of the first half of
the 2001/02 financial year will continue in the second
half. MMC therefore expects to achieve its goals for the
financial year 2001/02, which ends on March 31, 2002.
As previously announced, MMC should be able to reach
breakeven for the 2001/02 financial year.

Growth through new products. In addition to its re-
structuring measures, Mitsubishi Motors plans to en-
sure future profitability and long-term growth primarily
through the introduction of new, innovative products
for key volume segments. Mitsubishi Motors offered a
preview of its future model program at the Tokyo Motor
Show in October 2001. In addition to the S.U.P. and
Space Liner concept cars, the company presented the
CZ2 and CZ3, two models very similar to the com-
pletely new compact car that will be launched in Japan
in late 2002. With this automobile MMC will broaden
its range in the important compact-car segment, which
is expected to grow substantially in the medium to long
term. The vehicle combines space and style, and is both
sporty and elegant. In addition to the new compact
car's fresh styling, spaciousness and attractive interior,
it features an array of other appealing customer
benefits.

Last year, MMC launched the Airtrek (a sedan/

SUV) and the eK Wagon mini-car in Japan. The all-new
eK Wagon sets new standards, especially in terms of
safety, in this very important market segment in Japan.
Only three months after its market launch in early
October, orders for more than 45,000 of this car had
been placed.

44 Research and Technology

Close cooperation between operating units
and research

■ F 400 Carving: a further design study for the car of the future

■ Progress with hybrid and fuel-cell drive systems
■ Focus on lighter materials, lower fuel consumption and reduced emissions for the

benefit of customers and the environment

Taking the lead through innovation. Innovation plays
a key role in distinguishing DaimlerChrysler from its
competitors. The technological basis for innovation is
provided by Corporate Research and the divisional de-
velopment departments. In 2001, DaimlerChrysler in-
vested €6.0 billion (2000: €7.4 billion) in the research
and development of new products and technologies.
Expenditure on research and development was lower
than in the previous year due to the deconsolidation of
Dasa, Temic and Adtranz. At the end of the year, 2,700
people were employed at Corporate Research, while
another 25,400 employees worked in the various
divisional development departments.

F400 Carving continues the series of innovative con-
cept vehicles. The F 400 Carving concept car first dem-
onstrated at the Tokyo Motor Show incorporates many
pioneering innovations. The tilt of the vehicle's wheels
can be adjusted by up to 20 degrees, allowing more
force to be applied to the road surface. Newly devel-
oped asymmetrical tires improve handling characteris-
tics even further. When driving into bends, the vehicle
achieves lateral acceleration of up to 1.28 g (g mea-
sures accelerative force expressed in terms of the
earth’s gravitation) thereby enabling it to outperform
current sports cars by about 25 percent. The vehicle's
safety can be further enhanced through the installation
of active safety systems developed by DaimlerChrysler
such as the Electronic Stability Program (ESP), Active
Body Control (ABC) and Sensotronic Brake Control
(SBC). During the development of the F 400 Carving,
engineers at DaimlerChrysler Research were able to
draw on the expertise gained with previous concept
cars such as the F 200 Imagination and the F 300 Life-
Jet, particularly with regard to driving safety and han-
dling. The chassis is tuned with the help of an active
hydro-pneumatic system that optimally adjusts the
vehicle's suspension and shock absorbers to the road
surface and the driving situation.

The F 400 Carving is also equipped with a

pioneering steering system that does not require
conventional mechanical steering technology. The
system electronically registers the driver’s steering
movements and transforms them into commands for
the electrically driven steering gear.

Improved drive technology for a mobile future. The
main objectives in the development of drive systems
continue to be greater fuel efficiency and lower emis-
sions. To achieve these goals, DaimlerChrysler is simul-
taneously working on improving internal-combustion
engines, determining the optimal configuration for
hybrid drive systems, and fuel-cell technology.

Research is focusing on new combustion methods,

improved recharging technology, and innovative
exhaust-gas treatment systems. In the future, smart
technology for managing systems that charge batteries,
combust fuels, and treat exhaust gases will become
significantly more important.

Hybrid drive system being tested. Corporate Research
is currently testing and researching hybrid drive
concepts aimed at reducing fuel consumption and
emissions without diminishing driving pleasure,
comfort or a vehicle’s utility value.

The “smart hyper,” for example, is equipped with
an electric motor and a CDI diesel engine that work in
tandem by optimally adjusting the output of each to the
driving situation. Both drive systems are turned off
when the vehicle is not moving, thereby ensuring that
no fuel is consumed and no emissions produced. To get
the car moving again, the electric motor is turned on
first, allowing the smart to travel silently while con-
serving energy. If greater speed or acceleration is
needed, the diesel engine is automatically activated.
When the vehicle is braked, the electric motor becomes
a generator that recharges the batteries. The hybrid
system reduces fuel consumption by more than 10%
on average and noticeably improves the vehicle's
acceleration. Similar results have been achieved with
the “A-Class hyper” and the “Dodge Durango TTR.”

Leading-edge

technology and a tradition of innovation

Research and Technology 45

Car of the future: The F 400 Carving
research vehicle is a concrete example of
technologies and innovations to come.

Further development of fuel-cell technology. Our activi-
ties in the development of fuel-cell technology are
aimed at reducing costs and improving the efficiency of
fuel cells and other components.

In addition to working on hydrogen-based drive
technology, we are developing innovative direct metha-
nol systems that can easily transform liquid methanol
into electric power. DaimlerChrysler has already dem-
onstrated a fuel-cell powered go-cart – the world’s first
small vehicle to use this technology.

Modern production technology. The extensive use of
light materials can significantly reduce fuel consump-
tion and emissions, thereby providing benefits for
customers and the environment alike. Depending on
the type of engine and its performance, every 100-kg
decrease in weight reduces fuel consumption by up
to 0.4 liters per 100 kilometers. In addition to new,
extremely light materials such as aluminum, magnesium,
ceramics and fiber-reinforced plastics, improved
high-strength steel components can be employed for
far better lightweight construction than is currently
possible with conventional steel.

The processing properties of new materials are an
important factor that has to be taken into account when
using them in production. This not only requires exper-
tise in materials, production technology and new meth-
ods of construction, but also the knowledge of how best
to combine them. In addition to meeting higher stan-
dards with regard to safety, comfort, quality and price,
the new materials have to be environmentally compat-
ible. An environmental audit is therefore conducted
primarily on the materials used, the amount of energy
needed to manufacture the product, the length of the
materials’ lifecycles, and their recyclability.

Thanks to new simulation software currently be-
ing developed at DaimlerChrysler Research, it will be-
come possible to combine technical data on the proper-
ties of materials, processes and production techniques
with the specifications of individual components. This
will allow the wide differences between materials to be
evaluated in a virtual environment, thereby eliminating
the need for expensive and time-consuming develop-
ment and the construction of prototypes.

46 DaimlerChrysler and the Environment

Focus on sustainable and environment
friendly mobility

■ Lower fuel consumption with hybrid and fuel-cell technology

■ Further development of new renewable fuels
■ Awards received for exemplary environmental reporting

Agreements were reached with ten major Euro-

pean cities to test Mercedes-Benz municipal buses
equipped with fuel cells. The first such vehicles will be
built at the end of 2002; plans call for the delivery of a
total of 30 Citaro city buses throughout Europe by the
end of 2003. DaimlerChrysler is therefore the first
automobile manufacturer to sell fuel-cell vehicles to its
customers.

Pilot projects have also been agreed for passenger

cars. In the US, DaimlerChrysler plans to provide 15
vehicles for the California Fuel Cell Partnership project,
which aims to demonstrate the suitability of fuel-cell
vehicles for practical applications. At the beginning of
2001, the world’s first methanol-powered fuel-cell-
vehicle equipped with technology suitable for everyday
use was tested on public roads in Japan. The vehicle
was the NECAR 5 which is based on the Mercedes-Benz
A-Class.

First production vehicle with hybrid technology in the
near future. Hybrid technology complements long-term
fuel-cell development when it comes to the potential
for boosting fuel economy in the near term.
DaimlerChrysler is therefore accelerating development
of a marketable hybrid drive technology and plans to
produce various hybrid vehicles, such as the Dodge
Durango and the “RAM Contractor Special.” The hybrid
vehicles under development at DaimlerChrysler
improve fuel economy by more than 25% compared to
similar vehicles with conventional drive systems.

Efficient use of resources — the key to sustainable
mobility. In view of the sharply increasing demand for
energy – particularly in developing countries and the
emerging markets – as well as continuing climatic
changes due to the use of fossil fuels, the importance of
environment-friendly energy sources is growing signifi-
cantly. If we want to safeguard mobility over the long
term, we will have to continuously lower fuel consump-
tion while at the same time reducing our dependence
on fossil fuels. In order to achieve these goals and
strengthen its competitive position over the long run,
DaimlerChrysler is investing substantially in new tech-
nologies such as hybrid drive systems and fuel cells.
The use of fuel-cell technology leads to signifi-

cantly greater fuel economy, as vehicles with fuel-cell
drive have much higher internal efficiency ratings (the
standard measurement for efficiency of energy conver-
sion) than do conventional internal-combustion en-
gines. Currently, fuel cells that operate with hydrogen
are 50% more efficient than optimized diesel engines.
Our overall goal is to further increase fuel-cell
efficiency once again by more than 10% in the next
phase of development.

Fuel-cell technology in practical tests. DaimlerChrysler
continued its development of fuel cells in 2001,
focusing particularly on field tests of fuel-cell driven
vehicles.

An important milestone on the road toward the
first marketable fuel-cell vehicle was the delivery of the
first fuel-cell van – a Mercedes-Benz Sprinter – to the
Hermes Versand Service parcel delivery company. The
vehicle is equipped with an asynchronous electric
motor in the front and pressurized-hydrogen tanks
beneath the floor. This concept does not restrict cargo
space in any way. It does, however, offer great driver
comfort and allows for quiet, high-torque acceleration.
And, as is typical of fuel- cell systems, it also ensures
zero emissions of CO, NOx and particulates.

Active environmental

protection for sustainable
corporate success

DaimlerChrysler and the Environment 47

Practical trials in city traffic:
The first Mercedes-Benz Sprinter
with fuel-cell technology was
delivered to a customer in 2001.

DaimlerChrysler’s environmental commitment hon-
ored. In 2001, DaimlerChrysler was honored with a
number of awards in recognition of its efforts to pro-
mote sustainable mobility. The company’s Environmen-
tal Report, for example, received the Society of Ameri-
can Engineers’ Environmental Communications Prize
for the second consecutive year. DaimlerChrysler also
received the international Environmental Communica-
tion Award from the United Nations Environmental Pro-
gram (UNEP). In addition, DaimlerChrysler was named
the automotive company with the best sustainability
reporting by the UNEP partner organization Sustain-
ability. Finally, DaimlerChrysler was listed in the Dow
Jones Sustainability Index as “Sustainability Leader”
in the automotive sector.

Renewable fuels: an opportunity for the future. Techno-
logical progress should not be limited to the vehicle
itself. Advances also need to be made in the fuels used.
The successful establishment of new fuels on the
market – from sulfur-free gasoline to biofuels – will
require the combined efforts of the automotive industry,
oil companies and government authorities. The use of
renewable fuels, such as methanol made from
biomass, is a promising alternative for substantially
reducing CO2 emissions. At the same time, the extraction
and processing of biomass will create new jobs and
will thus have a positive economic, ecological and
social impact. DaimlerChrysler actively supports the
development of biofuels and is helping to finance the
construction of a pilot facility for producing bio-methanol
and bio-diesel.

We have also achieved important successes with

conventionally powered vehicles: The diesel variant
of the smart (smart cdi), for example, is the undisputed
German market leader in the so-called three-liter
segment (fuel consumption better than 67 miles per
US gallon) for especially fuel-efficient vehicles.

48 Global Procurement & Supply

Utilizing the potential of supplier networks
■ Total purchasing volume of €106.5 billion
■ Further increase in online transactions
■ Optimization of processes with suppliers

Close cooperation with suppliers. DaimlerChrysler
purchased goods and services worth €106.5 billion
from suppliers in 2001 (2000: €113.3 billion). In 2001,
Global Procurement & Supply (GP&S) purchased goods
and services totaling €101.2 billion (2000: €103.1 bil-
lion) for our automotive divisions, these figures include
non-production materials.

Due to competitive pressures, our procurement

activities in 2001 again focused on cost-reduction
measures. We streamlined processes and achieved
significant cost savings through better exploitation of
expertise throughout the Group. For example, on the
model of Mercedes-Benz we strengthened the links
between development and procurement at Chrysler
Group.

Savings at the Chrysler Group. The short-term unit-cost
reductions set out for 2001 in the Chrysler Group turn-
around plan for 2001 were surpassed. This achieve-
ment was due to Chrysler Procurement’s ability to
obtain significant cost reductions from suppliers. The
second phase of this program, which is already under
way, involves the substantial reduction of long-term
system costs.

e-business gains in importance. GP&S uses e-business
to optimize and accelerate processes as well as to make
them more transparent. e-business enabled significant
purchasing cost reductions. We see exceptional poten-
tial in the areas of e-procurement and logistics (supply
network collaboration). Total e-business was up sharply
in 2001.

Online bidding again played an important role
in procurement. Online bidding facilitates price optim-
ization and provides tremendous time saving. Such
bidding events also benefit suppliers by enabling them
to better assess their position with respect to their
competitors.

In one of the largest online bidding events, we
purchased 1,200 different body-in-white parts in 80 dif-
ferent subgroups. Covisint, a company whose share-
holders include DaimlerChrysler and several other au-
tomotive manufacturers, provided the technology and
was also responsible for carrying it out. Covisint is a
service company that, among other things, manages an
Internet exchange for online bidding events in the
US and Europe.

The Supply Network Collaboration unit, which

collects precise data on all processes – from supply to
production – in near real-time, conducted several
promising pilot projects in North America and Europe
in 2001.

Purchasing Volume
€106.5 bilion (2000: €113.3 billion)

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Other

33 %

43 %

19 %

5 %

Optimized procurement and logistics through

web-based

technology

Global Procurement and Supply 49

Auction on the Internet:
Online bidding as a modern
instrument of global procurement.

Expanding networks. Intense competition in the auto-
motive industry will continue to have a major impact
on the forms of cooperation adopted in supplier net-
works. Effective management of such networks is of
crucial importance for the long-term success of us and
our partners. Our goal is to create the world’s most
effective supply network, and use the tools at our dis-
posal to continue the successful cooperation we have
experienced within the framework of our Extended
Enterprise® program.

Cost reduction through commodity strategies. Com-
modity strategies also gained significantly in impor-
tance in 2001 and are helping us to reach our targets.
Such strategies involve the standardized description
and definition of material groups and the application of
these definitions to derive strategic goals for procure-
ment activities. Sixty material groups were identified in
2000, equivalent to half of total purchasing volume in
that year. Another 21 groups were added in 2001.

Assessing supplier potential with the External
Balanced Scorecard method. The External Balanced
Scorecard method enables DaimlerChrysler to measure
the performance of suppliers in terms of quality,
system costs, technology and delivery effectiveness
in a structured manner. These measurements can
then be analyzed and, if necessary, used to develop
new approaches to improve weak areas. This method
supports the joint goal-agreement process and therefore
represents an important instrument for enhancing
performance.

We also improved the Global Procurement and
Supply Information System (GPSIS), which obtains data
worldwide from the operative procurement, logistics
and invoicing systems. The system provides valuable
performance measures and other information to
support the decision-making process at Global
Procurement & Supply.

50 Human Resources

Employees prepared for future challenges

■ Company agreement on long-term working-time accounts boosts motivation and flexibility

■ Increasing use of internal e-business applications by our employees

■ 372,470 employees worldwide (2000: 416,501); reduction due to consolidation effects

and turnaround activities

Global human-resources strategy implemented. In
2001, we focused primarily on implementing the global
human-resources strategy adopted in the previous year.
Key activities included supporting turnaround plans,
integrating various corporate units, and securing our
next generation of managers by attracting top talent.
We also focused on the future by developing new hu-
man-resources tools designed to cope with an aging so-
ciety and workforce, and by supporting various activi-
ties in Asia through appropriate recruitment activities
and assistance for expatriates. Our human-resources
strategy supports our employees in creating value for
the Group and thus strengthens DaimlerChrysler’s
position as an attractive employer.

More flexible capacity utilization and working times.
The use of tools designed to ensure flexible human-
resources management is becoming increasingly impor-
tant at DaimlerChrysler. This enables us to quickly
adapt our capacity utilization to changes in demand so
that we can better compensate for seasonal or cyclical
variations. In the context of short- and medium-term ca-
pacity management, DaimlerChrysler has implemented
a range of highly flexible arrangements, including
various models for working hours and plant operating
times, as well as the use of temporary employment
contracts when necessary. In this way we can react
promptly to fluctuations in incoming orders while
providing sufficient work for our highly qualified core
workforce even if orders decline temporarily.

An important element of our long-term human-
resources planning was the conclusion of a general
labor-management agreement covering long-term
worked-hours accounts in Germany: Starting in 2002,
this will enable our employees to record additional
hours worked in the form of time credits which can
later be used for further training, early retirement or
time off. This ensures that we have the right amount
of manpower in all situations while responding to the
needs of all groups of employees.

New e-business applications for human resources. In
2001, we combined all employee-related e-business
activities in our “DC eLife” initiative. This means that
the workforce will soon be able to access all individual
e-business applications through a single registration
procedure via the employee portal. The system is
gradually being introduced at all of our locations in
Germany. Not only does the portal benefit all of the
workforce by providing a better general overview, but
use of the portal also helps to improve employees’
e-business skills. In this way, employees of all age
groups are automatically prepared for the e-business
applications of the future.

Employees (Dec. 31)

2001

2000

DaimlerChrysler Group

372,470

416,501

Mercedes-Benz Passenger Cars & smart

102,223

100,893

Chrysler Group

Commercial Vehicles

104,057

121,027

96,644

101,027

Sales Organization Automotive Businesses

38,733

36,857

Services

Other1)

9,712

9,589

21,101

47,108

1) MTU Aero Engines, corporate research department, real estate activities,

and holding and finance companies

Qualification and

motivation

lead to success

Human Resources 51

Top marks for vocational training:
The foundation for our competent and
committed workforce.

again, more than 2,800 young people began a training
program at DaimlerChrysler in Germany. Some 10,400
people are presently being trained worldwide by
DaimlerChrysler in approximately 75 professions or
programs of study.

372,470 employees worldwide. At December 31, 2001,
DaimlerChrysler employed 372,470 people worldwide
(2000: 416,501). 191,158 worked in Germany (2000:
196,861) and 104,871 in the US (2000: 123,633). The
decrease in the number of employees by 44,000 was
largely due to deconsolidation (primarily Adtranz
and TEMIC) and measures taken in connection with
turnaround programs.

A thank-you to our employees. We would like to thank
all our employees for their initiative, commitment and
achievements. We are convinced that their skills,
enthusiasm and energy will enable us to successfully
shape the future of the Group. We also extend our
thanks to the representatives of the employees and of
the management committees for their constructive
cooperation.

The ePeople project links up HR processes. Within the
framework of the ePeople project, in 2001 we began to
raise the efficiency of web-based human-resources pro-
cesses, to ensure global consistency, and to extensively
network our human resources departments. In this
way, the ongoing globalization of our company is
reflected and supported by our human-resources
activities.

Executive development with LEAD. We use the LEAD
(Leadership Evaluation And Development) system to
standardize executive assessment and development
worldwide, and to give the best individuals the possibil-
ity to develop their potential throughout the Group. In
2001, this system was applied at all management levels
throughout the Group for the first time. As a result we
are able to identify management potential at an early
stage and utilize it where it is needed, thereby ensuring
that our management requirements are optimally cov-
ered. LEAD is now firmly anchored in the management
culture of DaimlerChrysler.

Securing top talent for DaimlerChrysler.
DaimlerChrysler again succeeded in recruiting young,
highly qualified individuals in 2001, not least due to
the activities of our national and international compa-
nies and locations. The focus was on contacts with uni-
versities and schools, the networks of access to interns
and graduates. By directly approaching specific target
groups and executing special applicant programs in
various locations we make contact with the best candi-
dates so that we can attract them to our company. Once

52 The DaimlerChrysler Shares

Stock markets depressed by fear of recession

■ Declining stock markets for second consecutive year

■ Price falls triggered by terrorist attacks in September

■ Strong recovery in the fourth quarter

■ MSCI World Index Automobiles down 9% over the year

■ DaimlerChrysler shares performed better than DAX and MSCI World Index Automobiles in 2001

Further falls in equity prices. Shareholders’ hopes for a
stock-market recovery were disappointed in 2001,
mainly due to the US recession and the terrorist attacks
of September 11. At the same time, economic growth
slowed in Europe and Japan.

International share indices reached their lowest

point for the year after the attacks in the United States.
The bear market was followed by a temporary strong
recovery, as investors became convinced that the
medium- and long-term economic effects of the attacks
would not be as severe as they had initially feared. The
fact that the US central bank lowered its Fed Funds
Rate eleven times to 1.75%, the lowest level since 1961,
was also regarded as positive. In addition, the oil price
fell sharply after the events of September 11, and com-
panies worldwide implemented extensive cost-cutting
measures, both of which are expected to have positive
effects on earnings.

Despite the strong recovery in the fourth quarter,

most important share indices declined for the second
consecutive year in 2001. (see table on page 53).

Share Price Index

140

130

120

110

100

DaimlerChrysler

MSCI Automobiles Index

DAX

Jan. 3
2001

March
2001

May
2001

July
2001

Sep.
2001

Nov.
2001

Jan. 31
2002

Increase in DaimlerChrysler share price.
DaimlerChrysler’s stock began 2001 at the low level of
€44.41. In most of the first half of the year, the price
fluctuated between €50 and its peak for the year of
€58.19, which was reached on May 3. However, from
the middle of July the price of our shares could not
escape the sharp downward trend of the market, espe-
cially after the effects of the terrorist attacks, and fell to
a low of €27.24 over the two months to September 21.
The subsequent 77% recovery to €48.35 by the end of
the year was significantly stronger than that of the
DAX (+46%) and of the MSCI World Index Automobiles
(+24%). During this period, DaimlerChrysler’s shares
recorded the second highest price rise of all automotive
shares. Over the whole of the year, DaimlerChrysler’s
share price rose by 8%, making it one of only four DAX
stocks with an increase in value during 2001. However,
by the end of January 2002, our share price had fallen
by about 3% in line with a generally weak stock market.

Trading volume in DaimlerChrysler stock world-
wide was about 1.3 billion shares in 2001 (2000: 1.0
billion) of which 130 million shares were traded on US
stock exchanges (2000: 127 million) and 1,169 million
in Germany (2000: 888 million).

Prize for best communication with investors. At the
end of October 2001, DaimlerChrysler received the
“Investor Relations Magazine Euro Award 2001” for the
best communication with private investors. The prize
was awarded in recognition of the Investor Relations
department’s intensive support work in individual
dialogue and organized events, as well as for the
quality of the Investor Relations section of the corporate
web-site, which is frequently used by both private and
institutional investors as well as by analysts.

The DaimlerChrysler Shares 53

Development of Important Indices

Status
End of 2001

Status
End of 2000

% Change

Dow Jones Industrial Average

10,022

10,787

Nasdaq Composite

FTSE 100

Nikkei

Dow Jones Euro Stoxx 50

DAX 30

Dow Jones Stoxx Auto Europe

MSCI World Index Automobiles

For comparison:
DaimlerChrysler share (in €)

1,950

5,217

2,471

6,223

10,543

13,786

3,806

5,160

224

4,772

6,434

226

48.35

44.74

-7

-21

-16

-24

-20

-1

-9

Statistics
December 31

01
US $

01
€

00
€

Capital stock (in millions)

2,322

2,609

Number of shares (in millions)

1,003.3

Market capitalization (in billions)

41.81

48.51

44.89

Number of shareholders (in millions)

1.9

Weighting on share index

DAX 30

DJ Euro Stoxx 50

Credit rating, long-term

Standard & Poor’s

Moody’s

6.8%

2.2%

BBB+

01
€

0.73

1.00

5.1%

1.8%

00
€

3.47

3.45

2.35

Net income (basic)1)

Net income (diluted)1)

Dividend

01
US $

0.65

Stockholders’ equity (Dec. 31)

34.60

38.88

42.27

Share price: year-end

41.672)

48.353)

44.743)

high

low

52.722)

58.193)

79.973)

25.602)

27.243)

42.703)

DaimlerChrysler Share Price (high/low) in €

€

Jan.
2001

Feb.
2001

March
2001

April
2001

May
2001

June
2001

July
2001

Aug.
2001

Sep.
2001

Oct.
2001

Nov.
2001

Dec.
2001

Jan.
2002

Shareholders Structure as of Dec. 31, 2001

Deutsche Bank AG
Kuwait Investment Authority

12%
7%

54%

Free float
81%

Institutional
investors

Statistics per Share

27%

Retail investors

Rest of the world
8%

USA
17%

Europe
75%

1) Excluding one-time effects
2) New York Stock Exchange.
3) Frankfurt Stock Exchange.

54 Analysis of the Financial Situation

Analysis of the Financial Situation

■ Operating loss €1.3 billion (2000: €9.8 billion operating profit);

adjusted for one-time effects operating profit of €1.3 billion (2000: €5.2 billion)

■ Operating result significantly impacted by restructuring measures and intense competition

in North America

■ Net loss €0.7 billion (2000: €7.9 billion net income);

adjusted to exclude one-time effects net income of €0.7 billion (2000: €3.5 billion)

Mitsubishi Motors, a proportionate share of its restruc-
turing charges amounting to €0.4 billion was recorded
in 2001. A charge of €0.2 billion related to the recover-
ability of lease receivables was recorded on portfolios of
Capital Services in 2001. An impairment charge of
€0.1 billion relating to e-business activities was recog-
nized and allocated to the segments Mercedes-Benz
Passenger Cars & smart, Chrysler Group and Commer-
cial Vehicles. Due to the decision of the Argentine gov-
ernment to reform its financial system and monetary
policy, which has resulted in a floating exchange rate
against the U.S. dollar since January 2002, the Group
recognized a loss of €0.1 billion in 2001, which mainly
affected the segments Services and Commercial
Vehicles.

A positive impact of €0.9 billion resulted from the

Group’s share of the one-time gain arising at EADS in
connection with the formation of Airbus SAS. In addition,
gains resulted from the sale of the Rail Systems business
unit to Bombardier (€0.3 billion), from the sale of the
remaining equity interest in debitel to Swisscom
(€0.3 billion), and from the sale of 60% of the Group’s
interest in TEMIC to Continental (€0.2 billion).

Last year’s operating profit also included one-time

effects totaling €4.5 billion.

The one-time effects reported in the 2001 and
2000 financial years are shown by segment in the table
on page 55.

Group operating loss impacted by one-time effects
and intense competition in North America. For 2001,
DaimlerChrysler reported an operating loss of €1.3
billion, compared to an operating profit of €9.8 billion
in the prior year. The year under review was particularly
affected by sizeable expenses for restructuring mea-
sures and the extremely competitive market in North
America. Earnings in both years were significantly
influenced by one-time effects.

In February 2001, the Supervisory Board of
DaimlerChrysler AG approved the turnaround plan for
Chrysler Group, which resulted in a charge of €3.1
billion. In addition, operating profit was impacted by a
charge of €0.5 billion at the Freightliner, Sterling and
Thomas Built Buses business unit resulting from the
initiation of the turnaround plan and special costs
associated with unforeseen market developments.
Furthermore, as a result of the Group’s investment in

Operating Profit (Loss) by Segments
01
US $

In millions

01
€

00
€

Mercedes-Benz
Passenger Cars & smart

2,627

2,951

2,145

Chrysler Group

(4,701)

(5,281)

501

Commercial Vehicles

(458)

(514)

1,212

Services

Other Activities

Eliminations

545

612

2,457

1,051

1,181

3,590

(237)

(267)

(153)

DaimlerChrysler Group

(1,173)

(1,318)

9,752

Adjusted for one-time effects

1,197

1,345

5,213

Note: The chapters “Business Review”, “Analysis of the Financial
Situation” and “Outlook” correspond to the consolidated business
review report of DaimlerChrysler Group based on the Financial
Statements compiled according to United States generally
accepted accounting principles (U.S. GAAP).

Adjusted to exclude one-time effects, the Group

recorded an operating profit of €1.3 billion, which was
significantly lower than the comparable prior year’s
operating profit of €5.2 billion. This decline was mainly
attributable to the forecasted loss at Chrysler Group
and the slightly positive result of Commercial Vehicles.
These segments suffered in particular from the intensely
competitive situation in the North American markets.
A further reduction in operating profit resulted from
the Group’s share of the operating result at Mitsubishi
Motors, which was mainly affected by declining unit
sales.

Operating profit of Mercedes-Benz Passenger Cars &
smart above previous year’s level. The Mercedes-Benz
Passenger Cars & smart division achieved an operating
profit of €3.0 billion, exceeding the prior year’s result
by €0.8 billion. Operating profit for 2001 includes an
impairment charge allocated to the segment relating to
the Group’s e-business activities. The prior year’s oper-
ating profit included one-time charges of €0.7 billion
mainly due to the strategic review of the smart brand
and the initial application of the European Union’s
end-of-life vehicle directive.

Adjusted for these one-time effects, the division’s

operating profit was slightly higher than in the prior
year. The continued excellent demand for the S-Class,
particularly after the successful market launch of the
new SL, and the C-Class, with its strong rise in unit
sales for the sedan as well as the new station wagon and
sport-coupe launched in March 2001, contributed to
the positive development in operating profit. However,
this trend was partially offset by a decline in unit sales
of E-Class vehicles due to life-cycle changes.

The operating loss at smart was significantly
reduced due to further sales increases of the city coupe
and smart cabrio.

Analysis of the Financial Situation 55

Operating results of Chrysler Group negatively
impacted by restructuring and intense competition.
Chrysler Group posted an operating loss of €5.3 billion
in 2001 compared to an operating profit of €0.5 billion
in 2000. The 2001 operating loss includes restructuring
charges of €3.1 billion recorded in connection with the
turnaround plan implemented in 2001 in response to
an increasingly competitive and weakening U.S. auto-
motive market. The turnaround plan is designed to
improve Chrysler Group’s financial performance and
market position. The restructuring charges primarily
related to workforce reductions, asset write-downs and
contract cancellation costs. The operating loss also
includes impairment charges allocated to Chrysler Group
relating to DaimlerChrysler’s e-business activities.
Operating profit in 2000 included a charge resulting
from the initial application of the European Union’s
end-of-life vehicle directive.

One-Time Effects included in Operating Profit (Loss)
by Segments
In millions

01
US $

01
€

00
€

Mercedes-Benz
Passenger Cars & smart

Chrysler Group

Commercial Vehicles

Services

Other Activities

Eliminations

(9)

(10)

(729)

(2,758)

(3,098)

(503)

(565)

(30)

(41)

870

1,816

976

3,523

DaimlerChrysler Group

(2,370)

(2,663)

4,539

Operating Profit (Loss) adjusted for One-time Effects

In millions

Industrial Business

Financial Services

01
US $

696

501

01
€

782

563

00
€

4,621

592

DaimlerChrysler Group

1,197

1,345

5,213

56 Analysis of the Financial Situation

Adjusted to exclude one-time effects, the 2001
operating loss amounted to €2.2 billion (2000: €0.5
billion operating profit). The decline mainly resulted
from lower factory unit sales, an unfavorable shift in
product mix, increased sales incentives, and higher
customer satisfaction, depreciation and amortization
costs. The decrease in unit sales, higher sales incentives
and decline in market share were mainly attributable
to intense competitive pressures in the North American
market. This situation particularly affected two of
Chrysler Group’s historically more profitable market
segments of upper-middle sport utility vehicles and
pick-up trucks. The deterioration in operating results
was partially offset by cost reduction initiatives and
other actions taken as part of the turnaround plan.
Improvements resulting from higher vehicle pricing
were more than offset by the higher sales incentives.

Operating profit of Commercial Vehicles impacted by
North American market. In 2001, the Commercial Ve-
hicles segment posted an operating loss of €0.5 billion,
compared with an operating profit of €1.2 billion in the
prior year. The operating loss in 2001 includes one-time
charges of €0.5 billion at the Freightliner, Sterling and
Thomas Built Buses business unit relating to the initia-
tion of the turnaround plan and special costs associated
with unforeseen market developments. In addition, the
operating loss includes charges of €0.1 billion mainly
relating to the depreciation of the Argentine peso
against the U.S. dollar as a result of the economic crisis
in Argentina and allocated charges from the Group’s
e-business activities. In the prior year, the segment’s
operating profit was impacted by expenses relating to
the initial application of the end-of-life vehicle directive
passed by the European Union.

Adjusted for these one-time effects, the segment’s

operating profit was slightly positive (€0.1 billion),
compared to an operating profit of €1.3 billion in 2000.
This decline in operating profit was primarily caused
by the sharp contraction of the market for commercial
vehicles in North America, which led to significant
price reductions for new and used vehicles and to a 34%
decline in unit sales for the Freightliner, Sterling and
Thomas Built Buses business unit.

Further factors negatively impacting earnings

were the drop in vehicle demand due to the economic
crises in Argentina and Turkey and the lower demand
for trucks in Western Europe.

The MTU/Diesel Engines business unit – previ-

ously included in the Other segment – is reported
within the new Powersystems business unit as part of
the Commercial Vehicles segment since the beginning
of 2001. The respective prior year’s results have been
reclassified in order to achieve comparability.

Operating result of Services slightly below prior year.
The Services division recorded an operating profit of
€0.6 billion in 2001 compared to €2.5 billion in the
prior year. Those results are influenced by one-time
effects in both years. Operating profit for 2001 includes
a one-time gain of €0.3 billion from the sale of the
remaining 10% equity interest in debitel to Swisscom,
which was partially offset by a charge of €0.1 billion
relating to the monetary crisis in Argentina. In addition,
a charge of €0.2 billion related to the recoverability
of lease receivables was recorded in connection with
the intended sale of parts of the portfolio of Capital
Services in 2002. The operating profit of the prior year
was positively impacted by one-time effects totalling
€1.8 billion, which was the net result of a dilution gain
in connection with Deutsche Telekom’s investment in
debis Systemhaus and an impairment charge on the
carrying value of leased vehicles.

Excluding these one-time effects, operating profit

was €0.6 billion in 2001, slightly below prior year’s
level. The result was negatively influenced by continuing
pressure on margins, loss reserves for the receivables
of the Commercial Vehicles portfolio and residual value
losses of Chrysler Group vehicles. These negative
effects were offset by the use of more favorable
refinancing instruments, benefits from asset/liability
management and savings which were realized due
to cost reduction measures initiated within the Services
segment.

Operating profit of the Other Activities segment influ-
enced by EADS and Mitsubishi Motors. At the beginning
of 2001, the Aerospace segment, which consisted of
the equity method investment in EADS and the fully
consolidated MTU Aero Engines business unit, was
reclassified to the Other Activities segment. The previ-
ous year’s figures have been adjusted accordingly. This
segment also includes our equity method investments
in Mitsubishi Motors and TEMIC, as well as holding
and finance companies, real-estate activities and the
Group’s corporate research. The Rail Systems business
unit was included in the segment until its disposition
to Bombardier.

Analysis of the Financial Situation 57

Consolidated Statements of Income (Loss)

In millions

Revenues

Cost of sales

01
US $

01
€

00
€

136,072 152,873 162,384

(114,283)(128,394)(134,370)

Selling, administrative and
other expenses

(16,317) (18,331) (18,303)

Research and development

(5,281)

(5,933)

(6,337)

The operating profit of €1.2 billion achieved by

the Other Activities segment was below the prior
year’s level of €3.6 billion. The results of both years
were strongly influenced by one-time effects. In 2001,
operating profit was positively impacted by EADS
(€0.9 billion) due to the Group’s share of the one-time
gain arising at EADS in connection with the formation

Other income

1,079

1,212

946

Reconciliation to Operating Profit (Loss)

Effects of changes in
German tax laws

Income taxes

Total income taxes

Minority interests

Income (loss) before
extraordinary items and
cumulative effects of
changes in accounting
principles, net of taxes

Extraordinary items - gains on
disposals of businesses,
net of taxes

Cumulative effects of changes
in accounting principles:
transition adjustments resulting
from adoption of SFAS 133
and EITF 99-20, net of taxes

(2,727)

(3,064)

In millions

Turnaround plan expenses –
Chrysler Group

Income (loss) before financial
income

(1,457)

(1,637)

4,320

Financial income, net

137

154

156

Income (loss) before income
taxes

(1,320)

(1,483)

4,476

Income (loss) before
financial income

+ Pension and postretirement
benefit expenses other than
service cost

+ Operating income from

affiliated, associated and
related companies

+ Gains on disposals of

(263)

777 (1,736)

692

777 (1,999)

businesses

(12)

+ Miscellaneous

01
US $

01
€

00
€

(1,457)

(1,637)

4,320

(401)

(450)

(228)

459

516

(35)

260

(34)

292

5,832

(39)

(137)

(589)

(662)

2,465

5,516

(87)

Operating profit (loss)

(1,173)

(1,318)

9,752

of Airbus SAS, from the sale of 60% of the Group’s
interest in TEMIC to Continental (€0.2 billion) and from
the sale of the Rail Systems business unit (€0.3 billion).
However, charges of €0.4 billion due to the restructuring
program at Mitsubishi Motors had a negative impact
on operating profit. In 2000, one-time income totaling
€3.5 billion resulted from the exchange of the Group’s
controlling interest in DaimlerChrysler Aerospace for
shares in EADS and from the sale of the Fixed Installa-
tions business by the Rails Systems business unit.

Net income (loss)

(589)

(662)

7,894

Net income (loss) adjusted
for one-time effects1)

650

730

3,481

Adjusted to exclude these one-time effects, the

Other Activities segment achieved an operating profit
of €0.2 billion in 2001, which is slightly above the
comparable result of €0.1 billion in the prior year. The
positive contributions from MTU Aero Engines and
from EADS, whose earnings were mainly influenced by
increased Airbus deliveries, compensated for the
Group’s proportionate share of the loss at Mitsubishi
Motors.

1) 2001: Turnaround plan Chrysler Group, restructuring of Freightliner,

Sterling and Thomas Built Buses business unit, Mitsubishi
Motors restructuring, charge related to the recoverability of
lease receivables of the Capital Service’s portfolio,
impairment charge relating to e-business activities and
the economic crisis in Argentina, gain arising at EADS in
the connection with the formation of Airbus SAS, sale of
the remaining 10% equity interest in debitel, sale of 60%
of the Group’s interest in TEMIC, sale of Adtranz.

2000: Exchange of the Group’s controlling interest in

DaimlerChrysler Aerospace for shares in EADS, investment of
Deutsche Telekom in debis Systemhaus, sale of Fixed
Installations business, gain from dilution of equity interest in
Ballard, repositioning of smart, EU directive regarding the
recycling of end-of-life vehicles, impairment on carrying values
of leased vehicles, effects of changes in German tax law.

58 Analysis of the Financial Situation

Financial income at prior year’s level. Financial income
of €0.2 billion was comparable to the prior year. In
2001, financial income was impacted by one-time
effects totaling €0.7 billion. Investment income, which
primarily reflects the Group’s equity method invest-
ments in EADS and Mitsubishi Motors, improved
mainly due to the gain at EADS in connection with the
formation of Airbus SAS. This gain was partially offset
by the negative impact from the Group’s share of the
net loss at Mitsubishi Motors mainly resulting from
restructuring expenses recorded in 2001.

In addition, expenses of €0.1 billion resulted from

the effects of the depreciation of the Argentine peso
against the U.S. dollar due to the economic crisis in
Argentina.

The higher interest expense was mainly caused by

increased borrowing in the industrial business.

The effects on operating profit of the operative

investments were allocated to the respective segment
operating profits. In 2001, this resulted in a net positive
contribution to operating profit of €0.5 billion, of which
€0.7 billion was accounted for by the investments in
EADS and Mitsubishi Motors and negative contributions
of €0.2 billion by other investments.

Net income after adjustments to exclude one-time
effects. The 2001 net loss was €0.7 billion, compared
with net income of €7.9 billion in the prior year. The
Group reported a loss per share of €0.66 after earnings
per share of €7.87 in 2000.

The one-time charges and gains as described in

the preceding paragraphs with respect to operating
profit and financial income had a net negative effect of
€1.4 billion on the net loss in the year under review
(2000: €4.8 billion net positive effect). In addition, the
prior year was affected by a one-time charge from the
write-down of deferred tax assets in connection with
the tax reform in Germany and effects on earnings
from the first application of Statement of Financial
Accounting Standards (SFAS) No. 133 and Emerging
Issues Task Force (EITF) No. 99-20. In the prior year,
due to accounting regulations on the use of the pooling-
of-interest method, gains from the sales of businesses
were recorded as extraordinary items.

Net income adjusted for these one-time effects
decreased by €2.8 billion to €0.7 billion. Basic earnings
per share adjusted for these one-time effects amounted
to €0.73, compared with €3.47 in 2000.

Dividend of €1.00 per share. We propose to the Annual
Meeting on April 10, 2002, that for 2001 a dividend
of €1.00 per share be distributed. The amount to be
distributed is €1,003 million.

Analysis of the Financial Situation 59

Performance measures as an important component of
corporate management. The performance measures
implemented by DaimlerChrysler encourage decentral-
ized responsibility, cross-divisional transparency and
capital-market-oriented investment performance in all
areas of the Group, thereby supporting management in
its tasks of leading and developing the entire company
and its individual business units.

For performance purposes, we differentiate
between the Group level and the operating levels of the
segments and business units. At the Group level, value
added is calculated as an absolute performance measure
by deducting weighted average cost of capital from net
operating income, an after-tax performance measure.
For the determination of the Group performance
measure, return on net assets (RONA), net operating
income is compared to the capital employed by the
Group. Return on net assets demonstrates the extent
to which the DaimlerChrysler Group achieves or
surpasses the rate of return required by its investors.
The required rate of return, or the Group’s average
cost of capital, is defined as the minimum rate of return
that investors expect on invested equity and borrowings.
These capital costs are mainly determined by long-
term, risk-free, fixed-interest bond rates combined with
a risk premium for investments in stocks. At the Group
level in 2001, a cost-of-capital rate of 9.2% was used,
which has been unchanged since 1998. For the
industrial divisions and business units, operating profit
is used as an earnings measure, a commonly accepted
performance measure before interest and taxes, which
accurately reflects the areas of responsibility under
the control of the business unit management. The
industrial businesses also use net assets, defined as
assets minus non-interest-bearing liabilities, as a
capital basis. The minimum required rate of return on
net assets was 15.5% before taxes. For financial
services activities, as is usual in this sector, return on
equity is applied as a performance measure. The target
rate of return on equity was 17% before taxes. The
decrease of three percentage points compared to the
prior year resulted from a lower average tax rate for
Financial Services.

Development of net assets and return on net assets.
In 2001, net operating income, which is derived from
net income, totaled €1.6 billion excluding one-time
effects (€0.3 billion including one-time effects). In con-
nection with an increase in net assets from €6.4 billion
to €65.9 billion (annual average), return on net assets
for the DaimlerChrysler Group amounted to 2.5% after
taxes. The Mercedes-Benz Passenger Car & smart
division again significantly surpassed the 15.5% (before
taxes) minimum required rate of return. Chrysler
Group, Commercial Vehicles and Financial Services did
not achieve the minimum required rate of return,
primarily due to the unsatisfactory economic situation
in North America. During 2001, Chrysler Group and
the Freightliner, Sterling, Thomas Built Buses business
unit implemented comprehensive programs designed
to improve their profitability.

Net Assets and Return on Net Assets1)
00
(annual average, in billions of €)
Net Assets

01
%

00
%
Return on Net Assets

DaimlerChrysler
Group
(after taxes)

Industrial business
(before interest and
taxes)

Mercedes-Benz
Passenger Cars &
smart

Chrysler Group

Commercial Vehicles

Services2)

Other Industrial
Activities3)

65.9

59.5

2.5

7.4

54.7

48.8

1.4

9.5

11.1

26.6

9.2

2.2

10.9

25.0

7.6

1.1

26.7

(8.2)

0.6

1.9

26.3

2.1

16.5

9.5

5.6

4.2

7.2

10.8

Stockholders’ Equity

Return on Equity4)

Financial Services

9.6

6.2

5.9

9.6

1) Adjusted for one-time effects.
2) Excluding Financial Services (due to the investment of Deutsche

Telekom in debis Systemhaus figures are not comparable with the prior
year).

3) Due to the addition and disposition of a number of investments,

figures are not comparable with the prior year. The other industrial
activities include the investments in Mitsubishi Motors (since October
2000) and EADS (since July 2000) as well as MTU Aero Engines. The
sold business unit Rail Systems was included through April 2001 and
the business unit Automotive Electronics was included through March
2001, thereafter at equity.

4) Before taxes.

60 Analysis of the Financial Situation

Due to decreased net operating income and higher

net assets, the DaimlerChrysler Group reported a
negative value added of €4.4 billion (calculated on the
basis of a 9.2% cost of capital after taxes).

Net assets are derived from the consolidated

balance sheet, as shown in the following table.

Net Assets1)
of the DaimlerChrysler Group

In millions

Stockholders’ equity2)

Minority interests

Financial liabilities of the industrial
segment

Pension provisions of the industrial
segment

Net assets

01
€

00
€

39,184

42,713

417

519

15,701

9,508

12,608

11,114

67,910

63,854

1) Represents the value at year-end; the average for the year was

€65.9 billion (2000: €59.5 billion).

2) Adjusted for the effects from the application of SFAS 133.

Reconciliation to Net Operating Income

In millions

Net income (loss)

One-time effects

Net income (loss) adjusted for
one-time effects

Minority interests

Interest expense related to industrial
activities, after taxes

Interest cost of pensions related to
industrial activities, after taxes

Net operating income

01
€

00
€

(662)

7,894

1,392 (4,413)

730

3,481

(44)

422

241

539

649

1,647

4,383

In view of a series of changes both in the Group’s
capital structure and in the requirements of the capital
markets, capital costs were recalculated beginning with
the year 2002. The various parameters of capital costs
according to the capital-asset-pricing model led to a net
reduction in the Group’s cost of capital rate to 8% after
taxes. This results in a minimum required rate of
return of 13% (before taxes) for the industrial business
activities, and 14% (before taxes) for financial services
activities. The requirements of the business units are
derived by benchmarking them against the best compa-
rable companies. In general, they significantly surpass
the minimum rate of return and are not affected by
changes in capital costs. An adequate cost-of-capital rate
encourages investment in value-adding projects and
utilizes appropriate growth opportunities. The goal of
creating sustained value for our shareholders continues
to be pursued.

Increase in total assets. In 2001, the Group’s total
assets grew by 4% to €207.4 billion. The main reason
for this increase was the higher value of the US dollar
compared with the prior year. The assets and liabilities
of the Group’s U.S. companies were translated on De-
cember 31, 2001 at an exchange rate of €1 = U.S. dollar
0.881 (2000: €1 = U.S. dollar 0.931), which resulted in
correspondingly higher balance sheet positions in
euros. Of the aggregate rise in total assets, €6.2 billion
was explained by currency effects. The sale of the Rail
Systems business unit to Bombardier led to the
deconsolidation of Adtranz in April 2001, and therefore
to a reduction in total assets of €1.9 billion.

The increases in equipment on operating leases

(7%) and receivables from financial services (2%) were
mainly caused by the changes in exchange rates. At
year end, the two positions totaled €85.5 billion or 41%
of our total assets. These asset positions were offset
by financial liabilities of €90.9 billion at the end of the
year. Currency effects caused €3.0 billion of the increase
in financial liabilities.

Analysis of the Financial Situation 61

Balance Sheet Structure
In billions of €

Balance Sheet Structure of the Industrial Business
In billions of €

Fixed assets

207
45%

207
18%

199
45%

199
20%

Stockholders’ equity

Property, plant
and equipment

109
37%

107
37%

107
31%

109
26%

Stockholders’ equity

20%

Accrued liabilities

Non-fixed assets

50%

18%

57%

43%

56%

44%

Other fixed assets

16%

33%

37%

Accrued liabilities

Liabilities

of which:
Financial liabilities

Inventories

Receivables

Liquidity

16%

14%

10%

14%

13%

10%

35%

33%

Liabilities

2%
01

Deferred taxes
and income

of which: Liquidity

Deferred taxes and
prepaid expenses

Deferred taxes
and income

Deferred taxes and
prepaid expenses

Property, plant and equipment increased by 3%
to €41.2 billion during the period under review. The
increase resulted mainly from currency effects, which
were partially offset by higher depreciation in particular
at Chrysler Group in connection with the restructuring
activities.

Financial assets increased slightly over the
preceding year, reaching an amount of €12.4 billion
(2000: €12.1 billion). This increase was primarily
due to the one-time gain arising at EADS in connection
with the formation of Airbus SAS, which accordingly
increased the book value of our equity method invest-
ment in EADS. On the other hand, the book value of
our equity method investment in Mitsubishi Motors fell
due to the negative earnings at that company.

Inventories – net of advance payments received –
totaled €16.8 billion (2000: €16.3 billion) in the consoli-
dated balance sheet. As well as the positive currency
translation effects (€0.2 billion), the increase in invento-
ries was primarily caused by the market launch of new
products in the Mercedes-Benz Passenger Cars & smart
segment (€0.9 billion). The deconsolidation of the
Adtranz Group had an offsetting effect of €0.5 billion.

Trade receivables and other receivables increased
slightly to €22.6 billion (2000: €22.4 billion). A reduction
of €1.6 billion in trade receivables occurred mainly due
to the deconsolidation of Adtranz (€0.7 billion) and a
decrease (€0.3 billion) at the Mercedes-Benz Passenger
Cars & smart segment, while other receivables rose
by €2.2 billion. Besides positive currency effects, an
increase occurred in other receivables because of the
higher market values of derivative financial instruments
and higher retained interests in sold receivables.

The level of liquid funds rose by 16% to €14.5
billion. This was largely a reflection of the increase in
cash and cash equivalents to €11.4 billion (2000: €7.1
billion), which was primarily due to a higher cash flow
from receivables sold by the financial services business
and a general shift from securities into cash. The value
of securities fell by 43% to €3.1 billion.

62 Analysis of the Financial Situation

Stockholders’ equity declined by 8% to €39.0
billion (2000: €42.4 billion). This decline was mainly
due to the dividend distribution for the 2000 financial
year (€2.4 billion) and the net loss of €0.7 billion. The
equity ratio, net of dividend distribution, fell by 1.8
percentage points to 18.3%. The equity ratio for the
industrial business was 25.7% (2000: 31.2%). The main
reason for this decline, aside from the net loss, was a
capital increase carried out at Financial Services, with
a corresponding reduction in equity in the industrial
business.

The Group’s accrued liabilities rose by €5.1 billion
to €41.6 billion. This increase was primarily the result
of higher provisions for warranty claims, additions to
accrued liabilities in connection with the turnaround
plan at Chrysler Group, and increased risk reserves at
the Freightliner, Sterling and Thomas Built Buses
business unit. In addition, accrued liabilities rose due
to currency effects by a total of €1.1 billion.

Trade liabilities and other liabilities decreased by
€0.5 billion to €24.4 billion. Adjusted for positive cur-
rency translation effects (€0.7 billion), the decrease was
mainly explained by the deconsolidation of Adtranz
(€0.8 billion) and the reduction of trade liabilities in the
Mercedes-Benz Passenger Cars & smart and Commer-
cial Vehicles divisions.

Statement of cash flows impacted by financial services
business. Cash provided by operating activities
remained substantially unchanged in 2001 at €15.9
billion (2000: €16.0 billion). This resulted from the
decrease in cash-effective operating result, which was
nearly offset by positive effect of change in working
capital.

The substantial decrease in cash used for investing

activities to €13.3 billion (2000: €32.7 billion) was
primarily impacted by the intentionally lower expansion
of the financial services business. For Financial Services,
cash used for investing activities declined by €12.6
billion to €7.5 billion (2000: €20.1 billion). This was
particularly due to a decrease of €7.6 billion in net
additions to receivables from financial services and a
€3.4 billion lower increase in equipment on operating
lease. The decrease in cash used for investing activities
in the industrial business was primarily a result from
the net dispositions of businesses in 2001 compared to
the net acquisitions of businesses in the previous year.
Due to the reduced growth of the leasing and sales

financing business, which is typically financed with
a high proportion of debt, cash provided by financing
activities decreased from €14.5 billion to €1.4 billion.

Cash and cash equivalents with an original matu-
rity of three months or less increased from €7.1 billion
to €11.4 billion in the reporting period. Total liquidity,
which also includes long-term investments and securi-
ties, increased from €12.5 billion to €14.5 billion.

Cash Flow
In billions of €

-5

-10

-15

-20

-25

-30

1999

2000

2001

Cash provided by
operating activities

Cash used for
investing activities

Cash provided by
financing activities

Analysis of the Financial Situation 63

Refinancing at the DaimlerChrysler Group. On February
26, 2001, the corporate rating of the DaimlerChrysler
Group was reduced by the Standard & Poor’s (S&P)
rating agency from A to A-, and by Moody’s Investors
Service (Moody’s) from A2 to A3. The simultaneous
downgrading of the short-term credit rating from A-1
to A-2 (S&P) and from P-1 to P-2 (Moody’s) not only
had the effect of making our short-term borrowing
(commercial paper) more expensive, but also reduced
the volume of commercial paper that can be placed,
particularly in the United States. In January 2001,
DaimlerChrysler therefore began to replace short-term
financing with longer-term borrowings reaffirming the
strategy implemented in the second half of 2000
through the issue of a multi-currency, multi-tranche
corporate bond in the amount of U.S. dollar 7.1 billion.
In March 2001, the Group continued and almost
completed this strategy with the issue of a multi-tranche
bond totaling €6.5 billion.

After these two large transactions, as the year pro-

gressed DaimlerChrysler was able to cover its current
financing requirements with smaller transactions in the
capital markets. These transactions took place through
medium-term note programs in the form of public bonds
and private placements. In the area of public bonds,
DaimlerChrysler was able to reach new market seg-
ments and groups of investors in the international
capital markets by means of a first issue of bonds in
Polish zloty, Slovakian koruna and Hungarian forint,
and in a local capital market with a bond issue in South
African rand.

The 364-day tranche of the global credit facility

was converted into a 2-year working capital line in
2001. Altogether, the facility established in 1999
comprises three tranches with varying periods totaling
U.S. dollar 18 billion. Since its inception, this credit
facility has not been utilized.

Primarily as a result of weak demand in the US
automotive market, at the end of October 2001, Standard
& Poor’s again lowered our long-term rating from
A- to BBB+. Moody’s Investors Services, however, left
our rating unchanged at A3.

Early recognition and consistent management of future
risks. In view of the global operations of Daimler-
Chrysler and the increasingly intense competition in all
markets, the Group’s business units are subject to many
risks which are directly connected with entrepreneurial
activity. We have developed and used effective moni-
toring and control systems for the early recognition and
assessment of existing risks and the formulation of
appropriate responses. With a view to the legal require-
ments, we have integrated the Group’s early-recognition
systems into a risk-management system. The risk
management system is an integral component of the
entire planning, controlling and reporting process and
is responsible for systematically identifying, assessing,
monitoring and documenting risks. Risks are identified
by the management of the business segments and units
applying predefined risk categories and assessed in
terms of their probability of occurrence and possible
extent of damage. The reporting of relevant risks is
regulated by limit levels defined by management.
Within the framework of risk management, we have
developed and implemented measures to avoid and
reduce risks and to safeguard against their potential
effects. The identified risks are regularly monitored
by management.

The risk-management system of the Daimler-
Chrysler Group aims to ensure that management reco-
gnizes significant risks at an early stage and initiates
compensating measures. Compliance with the Group’s
uniform guidelines as defined in the risk management
manual is safeguarded by our internal auditors. In addi-
tion, the external auditors review the early-recognition
system integrated in the risk management system in
terms of its fundamental suitability for recognizing at
an early stage any developments that might jeopardize
the continued existence of the company.

64 Analysis of the Financial Situation

Risks from general economic developments. In 2001,
the world economy deteriorated significantly, and
expectations for the full-year 2002 are still rather
subdued. In view of the unusually high uncertainty
concerning economic developments, risks exist for
DaimlerChrysler’s profit outlook if the upturn we
expect for the second half of 2002 does not materialize
or is substantially weaker.

A possible cause of prolonged economic decline in
the United States would be a renewed loss of confidence
among consumers and investors with a downward spiral
of expectations. This could lead to a stronger drop in
U.S. domestic demand and significant stock-market
losses. Due to trading and capital-market links, with
such a scenario the assumed economic recovery in the
Group’s important markets of Western Europe would
not occur. Significant growth losses would probably
also occur in Asia and South America.

Another potential risk is the possibility of a deeper

and longer recession in Japan than has been forecast.
This would not only affect one of our important export
markets, but would make the restructuring process at
Mitsubishi Motors more difficult. A sustained decline of
the Japanese economy would also worsen the situation
in some of the emerging markets in Asia, which could
have a negative impact on our investment in Hyundai
Motor Company.

Further local risk potentials lie in a sustained
economic decline in certain emerging markets in South
America, Asia and Eastern Europe.

Industry- and company-specific risks. In addition to
general economic developments and weakening sales
markets, a risk factor also arises from increasing
competitive pressures. It is no longer only the traditional
product features that are decisive for the sales success
of a product, but to a greater extent also its price and
sales promotion offers. Particularly in the U.S. automo-
tive markets, after the events of September 11, 2001,
price incentives on new cars were substantially raised
and financing conditions were improved. Because these
activities prevented stronger than originally expected
market shrinkage, the danger of sustained reductions
in margins and lower profitability exists. If the economic
upturn does not come as expected, there is also the risk
that purchases will be merely brought forward with
additional sales incentives, thus increasing the probab-
ility of lower unit sales in future periods. This situation
could also necessitate further reductions in production
capacities in the passenger car and commercial vehicle
businesses.

The future success of DaimlerChrysler is particu-

larly dependent on the extent to which traditional
product and market segments can be extended and
new markets can be penetrated with innovative
products. The growth of the various segments depends
not least on legislation regulating consumption and
emissions, as well as on energy prices. If there is a shift
in demand towards smaller vehicles with lower profit
margins or the need for significantly higher technologi-
cal expenditures, the profitability of DaimlerChrysler
will be affected.

A further risk could arise connected with stronger

international competition due to increasing price
transparency, alternative sales channels such as the
Internet, or the revision of the European Union block-
exemption directive. The directive, which expires at
the end of September 2002, allows automobile manu-
facturers to use selective and exclusive distribution
networks. The approval of a revised block-exemption
directive is expected by the middle of 2002.

Like other automobile manufacturers, Daimler-

Chrysler is combating these risks by, among other
things, efficiency improvements all along the value
chain including changes to the sales organization.
Cost reductions by suppliers, however, could result in
additional quality risks.

Analysis of the Financial Situation 65

The success of the turnaround plans for Chrysler

Group, the Freightliner, Sterling and Thomas Built
Buses business unit as well as Mitsubishi Motors
depends crucially upon the extent to which manage-
ment can continue to successfully implement the
planned measures despite worsened market conditions.
DaimlerChrysler’s financial services business
primarily consists of the leasing and financing of Group
products, mainly vehicles. Refinancing is carried out to
a considerable extent through external capital markets,
which involves the risk of interest rate movements.
In addition, a risk of default exists in the financing
business as well as residual value risks in the leasing
business when vehicles are sold by the Group at the
end of their leases.

Through our 33% stake in EADS, we also participate
indirectly in the company’s risks. The success of EADS
mainly depends on the competitiveness and market
success of the Airbus aircraft. The market for civil air-
craft is subject to cyclical fluctuations, as the worldwide
volume of orders and deliveries of new aircraft are
determined by airlines’ profitability and fleet-renewal
cycles.

Transparency of market risks. The DaimlerChrysler
Group is exposed to market risks from changes in
foreign currency exchange rates, interest rates and
equity prices. These changes may adversely affect
DaimlerChrysler’s operating results and financial
condition. The Group seeks to manage these risks
through its regular operating and financing activities
and, when deemed appropriate, through the use of
derivative financial instruments. DaimlerChrysler
controls and manages foreign exchange risk, interest
rate risk and equity price risk by continually monitoring
changes in key economic indicators and market
information.

In order to quantify the foreign exchange risk,
interest rate risk and equity price risk of the Group on
a continuous basis, DaimlerChrysler’s risk management
control systems employ value-at-risk analyses as
recommended by the Bank for International Settlements.
The value-at-risk calculations employed by Daimler-
Chrysler express potential losses in fair values and are

based on the variance-covariance approach and assume
a 99% confidence level and a holding period of five days.
Estimates of volatilities and correlations are primarily
drawn from the RiskMetrics™ datasets and supple-
mented by additional exchange rate, interest rate and
equity price information.

The Group does not use financial instruments for

trading or other speculative purposes.

Following organizational standards in the inter-

national banking industry, DaimlerChrysler maintains
risk management control systems independent of
Corporate Treasury and with a separate reporting line.

Foreign exchange rate management. The international
orientation of our business activities results in cash
receipts and payments denominated in various curren-
cies. Cash inflows and outflows balance themselves
out if they are denominated in the same currency.
Within the framework of central currency management,
currency exposures are regularly assessed and hedged
with suitable financial instruments according to ex-
change rate expectations, which are constantly reviewed.
The net assets of the Group which are invested in sub-
sidiaries and affiliated companies outside the euro zone
remain generally not hedged against currency risks.
However, in specific circumstances, DaimlerChrysler
seeks to hedge the currency risk inherent in certain of
its long-term investments.

The following table shows value-at-risk figures for

DaimlerChrysler’s 2001 and 2000 portfolio of foreign
exchange rate sensitive derivative instruments.

Value-at-Risk

Average
for

In millions of €

12.31.2001

2001 12.31.2000

Average
for
2000

Exchange rate
sensitive derivative
financial instruments1)

368

430

541

574

1) Forward foreign exchange contracts, foreign exchange swap

contracts, currency options.

66 Analysis of the Financial Situation

The average and period-end values-at-risk of
derivative financial instruments used to hedge exchange
rate risk decreased in 2001, primarily as a result of
lower foreign exchange rate volatilities and a slightly
decreased foreign exchange derivatives volume.

DaimlerChrysler changed the presentation of
exchange rate risk from the sensitivity analysis used
in previous reports to value-at-risk to have a uniform
method for the measurement of exchange rate risk,
interest rate risk and equity price risk that allows
comparisons between the different types of market risks.

Asset and liability management. DaimlerChrysler holds
a variety of interest rate sensitive assets and liabilities
to manage its operative and strategic liquidity require-
ments. In addition, a substantial volume of interest rate
sensitive assets and liabilities is related to the leasing
and sales financing business. In particular, the Group’s
leasing and sales financing business enters into trans-
actions with customers primarily resulting in fixed rate
receivables. DaimlerChrysler’s general policy is to
match funding in terms of maturities and interest rates.
However, for a limited portion of the receivables port-
folio funding does not match in terms of maturities and
interest rates. As a result, DaimlerChrysler is exposed
to risks due to changes in interest rates.

DaimlerChrysler coordinates funding activities of

the industrial business and financial services on the
Group level. It uses interest rate derivative instruments
such as interest rate swaps, forward rate agreements,
swaptions, caps and floors to achieve the desired
interest rate maturities and asset/liability structures.

The following table shows value-at-risk figures for
DaimlerChrysler’s 2001 and 2000 portfolio of interest-
rate sensitive financial instruments.

Value-at-Risk

In millions of €

12.31.2001

Average
for
2001

12.31.2000

Average
for
2000

Interest-rate-sensitive
financial instruments

334

272

126

128

In 2001, the average and period-end values-at-risk
of DaimlerChrysler’s portfolio of interest rate sensitive
financial instruments increased significantly, primarily
due to higher volatilities and an increased mismatch
funding of the Group’s leasing and sales financing
business.

Equity price risk management. DaimlerChrysler also
holds investments in equity securities. These securities
subject DaimlerChrysler to risks due to changes in
quoted market prices. DaimlerChrysler uses derivative
financial instruments including futures and options to
manage the risks arising from changes in equity prices.
The following table shows value-at-risk figures
for DaimlerChrysler’s 2001 and 2000 portfolio of equity
securities.

Value-at-Risk

Average
for

In millions of €

12.31.2001

2001 12.31.2000

Average
for
2000

Equity securities and
related derivatives

In 2001, DaimlerChrysler changed its asset
allocation policy and reduced the portfolio of equity
securities. Consequently, the average and period-
end values-at-risk of the equity portfolio decreased
significantly.

Ratings. During 2001, DaimlerChrysler’s long-term
corporate rating was lowered from A to BBB+ by the
Standard & Poor’s (S&P) rating agency and from A2
to A3 by Moody’s Investors Service (Moody’s). At the
same time, our short-term rating was reduced from
A-1 to A-2 (by S&P) and from P-1 to P-2 (by Moody’s).
A further downgrade would result in rising

capital costs.

Analysis of the Financial Situation 67

Legal risks. Like all internationally active automobile
manufacturers, the DaimlerChrysler Group is affected
by intensifying legal regulations in its various markets
concerning the exhaust emissions and fuel consumption
of its range of cars as well as their safety standards.
Furthermore, there are several actions, in particular
relating to product liability, pending against companies
of the DaimlerChrysler Group. In the event of adverse
decisions in these proceedings, DaimlerChrysler could
be required to pay substantial compensatory and
punitive damages, or to undertake service actions,
recall campaigns or other costly actions.

A number of shareholder lawsuits are pending

in the United States against DaimlerChrysler and
certain members of its Supervisory Board and Board
of Management that allege the defendants violated
U.S. securities law and committed fraud in obtaining
approval from Chrysler stockholders for the business
combination between Chrysler and Daimler-Benz AG
in 1998. The complaints seek relief ranging from sub-
stantial monetary damages to rescinding the business
combination. DaimlerChrysler believes that these
claims are without merit and is defending against them
vigorously.

Overall risk. No risks are apparent that could jeopardize
the continued existence of the Group.

Events after the end of the 2001 financial year. Follow-
ing a decision of DaimlerChrysler’s Board of Manage-
ment in 2001, DaimlerChrysler and GE Capital reached
an agreement in January 2002 for GE Capital to
purchase a portion of the DaimlerChrysler’s Capital
Services portfolio in the United States. DaimlerChrysler
will receive approximately €1.3 billion for the sale,
which represents a further step towards focusing on
the automotive business. The transaction is expected to
be completed in the first quarter of 2002.

In January 2002, DaimlerChrysler decided to exit
the debis Systemhaus joint venture in March 2002 by
exercising its option to sell to Deutsche Telekom the
Group’s 49.9% interest in T-Systems ITS (formerly
debis Systemhaus) for proceeds of €4.7 billion.
No further developments beyond the ones
described above have occurred since the end of the
2001 financial year which are of major significance to
DaimlerChrysler and would lead to a changed assess-
ment of the Group’s position. The course of business
in the first two months of 2002 confirms the statements
made in the section Outlook.

68 Statement by the Board of Management

Preliminary Note

The accompanying consolidated financial state-
ments (consolidated balance sheets as of December 31,
2001 and 2000, consolidated statements of income
(loss), cash flows and changes in stockholders’ equity
for each of the financial years; 2001, 2000 and 1999)
were prepared in accordance with generally accepted
accounting principles in the United States of America
(U.S. GAAP).

In order to comply with Section 292a of the HGB
(German Commercial Code), the consolidated financial
statements were supplemented with a consolidated
business review report and additional explanations.
Therefore, the consolidated financial statements, which

have to be filed with the Commercial Register and pub-
lished in the Federal Gazette, comply with the Fourth
and Seventh Directives of the European Community.
For the interpretation of these directives we relied on
the statement by the German Accounting Standards
Committee.

The consolidated financial statements and the
consolidated business review report as of December 31,
2001 prepared in accordance with Section 292a of the
HGB (German Commercial Code) and filed with the
Commercial Register in Stuttgart under the number,
HRB 19 360, will be provided to shareholders
on request.

Statement by the Board of Management

The Board of Management of DaimlerChrysler AG
is responsible for preparing the accompanying financial
statements.

We have installed effective controlling and moni-
toring systems to guarantee compliance with account-
ing principles and the adequacy of reporting. These
systems include the use of uniform guidelines group-
wide, the use of reliable software, the selection and
training of qualified personnel, and regular reviews by
our internal auditing department.

Taking the legal requirements into consideration
we have integrated the group’s early warning systems
into a risk management system. This enables the Board
of Management to identify significant risks at an early
stage and to initiate appropriate measures.

KPMG Deutsche Treuhand-Gesellschaft Aktien-
gesellschaft Wirtschaftsprüfungsgesellschaft audited
the consolidated financial statements, which were
prepared in accordance with generally accepted
accounting principles in the United States of America,
and issued an unqualified audit report.

Together with the independent auditors, the Su-

pervisory Board’s Financial Audit Committee examined
and discussed the consolidated financial statements
including the business review report and the auditors’
report in depth. Subsequently, the entire Supervisory
Board reviewed the documentation related to the
financial statements. The result of this examination is
included in the Report of the Supervisory Board.

Jürgen E. Schrempp

Manfred Gentz

Independent Auditors’ Report 69

Independent Auditors’ Report

The Supervisory Board
DaimlerChrysler AG:

We have audited the accompanying consolidated
balance sheets of DaimlerChrysler AG and subsidiaries
(“DaimlerChrysler”) as of December 31, 2001 and
2000, and the related consolidated statements of in-
come (loss), changes in stockholders’ equity, and cash
flows for each of the years in the three-year period
ended December 31, 2001. These consolidated financial
statements are the responsibility of DaimlerChrysler’s
management. Our responsibility is to express an opin-
ion on these consolidated financial statements based on
our audits. We did not audit the financial statements of
DaimlerChrysler Corporation or certain of its consoli-
dated subsidiaries (“DaimlerChrysler Corporation”),
which statements reflect total assets constituting 29
percent at December 31, 2000, and total revenues con-
stituting 42 percent and 43 percent for the years ended
December 31, 2000 and 1999, of the related consoli-
dated totals. Those statements were audited by other
auditors whose report has been furnished to us, and
our opinion, insofar as it relates to the amounts in-
cluded for DaimlerChrysler Corporation, is based solely
on the report of the other auditors.

We conducted our audits in accordance with gen-
erally accepted auditing standards in the United States
of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes as-
sessing the accounting principles used and significant
estimates made by management, as well as evaluating
the overall financial statement presentation. We believe
that our audits and the report of the other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report

of the other auditors, the consolidated financial state-
ments referred to above present fairly, in all material
respects, the financial position of DaimlerChrysler as of
December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in
the three-year period ended December 31, 2001, in con-
formity with generally accepted accounting principles
in the United States of America.

As discussed in Note 10 to the consolidated finan-

cial statements, in 2000 DaimlerChrysler adopted
Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging
Activities,” and Emerging Issues Task Force Issue No.
99-20, “Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in
Securitized Financial Assets.”

Stuttgart, Germany
February 8, 2002

KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

Prof. Dr. Wiedmann
Wirtschaftsprüfer

Schmid
Wirtschaftsprüfer

70 Consolidated Statements of Income (Loss)

Consolidated Statements of Income (Loss)

(in millions, except per share amounts)

Revenues

Cost of sales

Gross margin

Selling, administrative
and other expenses

Research and development

Other income

Turnaround plan expenses – Chrysler Group

Income (loss) before financial income

Financial income (expense), net (therein gain on issuance of
associated company stock of €747 in 2001)

Income (loss) before income taxes

Effects of changes in German tax law

Income taxes

Total income taxes

Minority interests

Income (loss) before extraordinary items and
cumulative effects of changes in accounting principles

Extraordinary items:

Gains on disposals of businesses, net of taxes (therein gain
on issuance of subsidiary and associated company stock
of €2,418 in 2000)

Losses on early extinguishment of debt, net of taxes

Cumulative effects of changes in accounting principles:
transition adjustments resulting from adoption of
SFAS 133 and EITF 99-20, net of taxes

Net income (loss)

Earnings (loss) per share

Basic earnings (loss) per share

Income (loss) before extraordinary items and cumulative
effects of changes in accounting principles

Extraordinary items

Cumulative effects of changes in
accounting principles

Net income (loss)

Diluted earnings (loss) per share

Income (loss) before extraordinary items and cumulative
effects of changes in accounting principles

Extraordinary items

Cumulative effects of changes in
accounting principles

Net income (loss)

Consolidated
Year ended December 31,

2001

€

2000

€

1999

€

Note

2001

(Note 1)

136,072

152,873

162,384

149,985

(114,283)

(128,394)

(134,370)

(119,688)

21,789

24,479

28,014

30,297

(16,317)

(18,331)

(18,303)

(16,063)

(5,281)

(5,933)

(6,337)

(5,737)

1,079

1,212

(2,727)

(3,064)

946

–

827

–

(1,457)

(1,637)

4,320

9,324

137

154

(1,320)

(1,483)

–

692

–

777

156

4,476

(263)

333

9,657

(812)

(1,736)

(3,721)

(1,999)

(4,533)

(12)

(18)

(589)

(662)

2,465

5,106

–

5,516

–

659

(19)

(87)

–

(589)

(662)

7,894

5,746

(0.59)

(0.66)

–

(0.59)

(0.66)

(0.59)

(0.66)

–

(0.59)

(0.66)

2.46

5.50

(0.09)

7.87

2.45

5.44

(0.09)

7.80

5.09

0.64

–

5.73

5.06

0.63

–

5.69

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statements of Income (Loss) 71

Industrial Business*
Year ended December 31,

Financial Services*
Year ended December 31,

2001

€

2000

€

1999

€

2001

€

2000

€

1999

€

(in millions)

136,020

147,260

139,929

16,853

15,124

10,056

Revenues

(113,342)

(120,474)

(111,274)

(15,052)

(13,896)

(8,414)

Cost of sales

22,678

26,786

28,655

1,801

1,228

1,642

Gross margin

(16,756)

(17,059)

(15,063)

(1,575)

(1,244)

(1,000)

Selling, administrative
and other expenses

(5,933)

(6,337)

(5,737)

1,160

(3,064)

842

–

691

–

(1,915)

4,232

8,546

278

146

166

327

(1,769)

4,398

8,873

743

(2,152)

(4,340)

(11)

(16)

286

(2)

–

104

–

(10)

153

(1)

–

Research and development

136

Other income

–

Turnaround plan expenses – Chrysler Group

778

Income (loss) before financial income

Financial income (expense), net (therein gain on issuance of
associated company stock of €747 in 2001)

784

Income (loss) before income taxes

Effects of changes in German tax law

Income taxes

(193)

Total income taxes

(2)

Minority interests

(980)

2,235

4,517

318

230

589

Income (loss) before extraordinary items and
cumulative effects of changes in accounting principles

Extraordinary items:

–

5,516

–

659

(19)

–

(980)

7,761

5,157

318

–

(97)

133

–

Gains on disposals of businesses, net of taxes (therein gain
on issuance of subsidiary and associated company stock
of €2,418 in 2000)

Losses on early extinguishment of debt, net of taxes

Cumulative effects of changes in accounting principles:
transition adjustments resulting from adoption of
SFAS 133 and EITF 99-20, net of taxes

–

589

Net income (loss)

Earnings (loss) per share

Basic earnings (loss) per share

Income (loss) before extraordinary items and cumulative
effects of changes in accounting principles

Extraordinary items

Cumulative effects of changes in
accounting principles

Net income (loss)

Diluted earnings (loss) per share

Income (loss) before extraordinary items and cumulative
effects of changes in accounting principles

Extraordinary items

Cumulative effects of changes in
accounting principles

Net income (loss)

–

*) Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.

72 Consolidated Balance Sheets
72 Financial Statements

Consolidated Balance Sheets

(in millions)

Assets

Intangible assets

Property, plant and equipment, net

Investments and long-term financial assets

Equipment on operating leases, net

Fixed assets

Inventories

Trade receivables

Receivables from financial services

Other receivables

Securities

Cash and cash equivalents

Non-fixed assets

Deferred taxes

Prepaid expenses

Total assets (thereof short-therm
2001: €68,676; 2000: €71,300)

Liabilities and stockholders’ equity

Capital stock

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income

Treasury stock

Stockholders’ equity

Minority interests

Accrued liabilities

Financial liabilities

Trade liabilities

Other liabilities

Liabilities

Deferred taxes

Deferred income

Total liabilities (thereof short-term
2001: €80,874; 2000: €81,516 )

Consolidated
At December 31,

Industrial Business*
At December 31,

Financial Services*
At December 31,

Note

2001

2000

2001

2000

2001

2000

(Note 1)

€

2,548

2,863

3,113

2,662

2,907

36,641

41,165

40,145

41,016

40,043

201

149

206

102

11,015

12,375

12,107

11,349

10,967

1,026

1,140

32,046

36,002

33,714

3,004

3,047

32,998

30,667

82,250

92,405

89,079

58,031

56,964

34,374

32,115

14,913

16,754

16,283

15,338

15,333

1,416

5,723

6,430

7,995

6,134

7,617

296

950

378

44,071

49,512

48,673

49,486

48,643

14,409

16,188

14,396

7,512

6,414

8,676

7,982

2,739

3,077

5,378

2,636

4,195

441

1,183

10,172

11,428

7,127

8,057

6,445

3,371

682

92,027 103,389

99,852

39,703

40,034

63,686

59,818

2,679

3,010

2,436

2,930

2,350

7,660

8,606

7,907

8,480

7,782

126

125

184,616 207,410 199,274 109,144 107,130

98,266

92,144

2,322

2,609

6,485

7,286

23,536

26,441

29,461

2,374

2,668

3,053

–

34,717

39,004

42,409

29,009

35,825

9,995

6,584

371

417

519

403

506

37,001

41,570

36,441

40,534

35,772

1,036

669

80,917

90,908

84,783

15,701

9,508

75,207

75,275

12,601

14,157

15,257

13,773

14,875

384

382

9,135

10,262

9,621

7,431

7,068

2,831

2,553

102,653 115,327 109,661

36,905

31,451

78,422

78,210

4,318

4,851

5,480

(2,212)

(639)

7,063

6,119

5,556

6,241

4,764

4,505

4,215

1,736

549

149,899 168,406 156,865

80,135

71,305

88,271

85,560

Total liabilities and stockholders’ equity

184,616 207,410 199,274 109,144 107,130

98,266

92,144

*) Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statements of Changes in Stockholders‘ Equity 73

Consolidated Statements of Changes in Stockholders’ Equity

(in millions of €)

Accumulated other
comprehensive income (loss)

Additional
paid-in
capital

Capital
stock

Retained
earnings

Cumulative
translation
adjustment

Available-
for-sale
securities

Derivative
financial
instru-
ments

Minimum
pension
liability

Treasury
stock

–

(20)

–

(8)

–

(28)

–

Total

30,367

5,746

2,242

7,988

(86)

(2,356)

(6)

36,060

7,894

812

8,706

–

(88)

(2,358)

42,409

(662)

(385)

(1,047)

–

(86)

–

(88)

–

Balance at January 1, 1999

2,561

7,274

20,533

(509)

528

5,746

–

2,431

(181)

Net income

Other comprehensive income (loss)

Total comprehensive income

Issuance of capital stock

Purchase of capital stock

Re-issuance of treasury stock

Dividends

Other

–

(2,356)

(8)

–

Balance at December 31, 1999

2,565

7,329

23,925

1,922

347

Net income

Other comprehensive income (loss)

Total comprehensive income

–

7,894

–

1,363

(149)

(408)

Increase in stated value of capital stock

(44)

Issuance of capital stock

Purchase of capital stock

Re-issuance of treasury stock

Dividends

–

(2,358)

–

Balance at December 31, 2000

2,609

7,286

29,461

3,285

198

(408)

(22)

(662)

–

565

(137)

–

(884)

Net loss

Other comprehensive income (loss)

Total comprehensive loss

Purchase of capital stock

Re-issuance of treasury stock

Dividends

–

(2,358)

Balance at December 31, 2001

2,609

7,286

26,441

3,850

(337)

(906)

The accompanying notes are an integral part of these Consolidated Financial Statements.

–

(66)

–

(2,358)

39,004

74 Consolidated Statements of Cash Flows
74 Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows

(in millions)

Net income (loss)
Income (loss) applicable to minority interests
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gains on disposals of businesses
Depreciation and amortization of equipment
on operating leases
Depreciation and amortization of fixed assets
Change in deferred taxes
Equity (income) loss from associated companies
Cumulative effects of changes in accounting principles
Change in financial instruments
(Gains) losses on disposals of fixed assets/securities
Change in trading securities
Change in accrued liabilities
Turnaround plan expenses - Chrysler Group
Turnaround plan payments - Chrysler Group
Changes in other operating assets and liabilities:

– inventories, net
– trade receivables
– trade liabilities
– other assets and liabilities

Cash provided by operating activities

Purchases of fixed assets:

– Increase in equipment on operating leases
– Purchases of property, plant and equipment
– Purchases of other fixed assets

Proceeds from disposals of equipment on operating leases
Proceeds from disposals of fixed assets
Payments for investments in businesses
Proceeds from disposals of businesses
Change in cash from exchange of businesses
Additions to receivables from financial services
Repayments of receivables from financial services:

– Finance receivables collected
– Proceeds from sales of finance receivables

Acquisitions of securities (other than trading)
Proceeds from sales of securities (other than trading)
Change in other cash
Cash used for investing activities

Change in commercial paper borrowings and short-term
financial liabilities
Additions to long-term financial liabilities
Repayment of financial liabilities
Dividends paid (including profit transferred from subsidiaries)
Proceeds from issuance of capital stock
(including minority interests)
Purchase of treasury stock
Cash provided by (used for) financing activities

Effect of foreign exchange rate changes on cash and
cash equivalents (maturing within 3 months)
Net increase (decrease) in cash and cash equivalents
(maturing within 3 months)

Cash and cash equivalents (maturing within 3 months)

At beginning of period

At end of period

Consolidated
Year ended December 31,

2001

€

2000

€

1999

€

(662)

(44)

7,894

5,746

2001

(Note 1)

(589)

(39)

(684)

(768)

(5,568)

(1,181)

6,457
6,250

(942)
(86)
–

(364)
(534)
(4)

2,515
2,727
(325)

(645)
552
(746)
649
14,192

7,254
7,022

(1,058)
(97)
–

(409)
(600)
(4)

2,825
3,064
(365)

(725)
620
(838)
729
15,944

6,487
7,131

1,220
244
87

(90)
(455)
22

1,778
–
–

(876)
(731)
(424)
(714)
16,017

3,315
6,035

2,402
(23)
–

247
(1,215)
495

4,001
–
–

(2,436)
(733)
1,331
21
18,023

(15,978)
(7,918)

(17,951)
(8,896)

(19,117)
(10,392)

(19,336)
(9,470)

(583)
9,828
928

(731)
1,495
–

(655)
11,042
1,043

(821)
1,680
–

(480)
8,285
862

(4,883)
311
(1,351)

(645)
6,575
507

(1,289)
1,336
–

(116,481)

(130,863)

(116,507)

(102,140)

47,399
68,237

(400)
2,250
127

53,251
76,662

(449)
2,528
142

44,276
63,649

(7,786)
10,224
200

41,928
51,843

(4,395)
3,719
(743)

(11,827)

(13,287)

(32,709)

(32,110)

(11,065)

23,661
(9,252)
(2,107)

(12,431)

26,582
(10,394)
(2,367)

67
(59)

75
(66)

(3,238)

29,257
(9,152)
(2,379)

112
(88)

9,333

13,340
(4,611)
(2,378)

164
(86)

1,245

1,399

14,512

15,762

230

259

501

805

3,840

4,315

(1,679)

2,480

6,304

10,144

7,082

11,397

8,761

7,082

6,281

8,761

The accompanying notes are an integral part of these Consolidated Financial Statements.

Industrial Business*
Year ended December 31,

Financial Services*
Year ended December 31,

Consolidated Statements of Cash Flows 75
Consolidated Statements of Cash Flows 75

2001

€

2000

€

1999

€

(980)

(46)

7,761

5,157

2001

€

318

(762)

(5,568)

(1,181)

(6)

2000

€

1999

€

133

589

–

3,247
69

906
(13)
–

–
(2)
–

88
–
–

(49)
(192)
109
168
4,922

6,964
105

6,280
84

537
(7)
–

(44)
–
(7)

353
–
–

(176)
80
(7)
2,173
10,285

630
59
97

(14)
(1)
–

36
–
–

(151)
(33)
74
(91)
7,104

(14,334)
(111)

(15,551)
(52)

(16,401)
(63)

(91)
7,091
52

(20)
224
–

(58)
4,911
26

(160)
13
–

(121)
3,568
96

(144)
–
–

(28)

(131,070)

(116,640)

(102,112)

–
–

(3,958)
3,333
(462)

53,251
76,662

(220)
1,150
(125)

44,276
63,649

(2,192)
1,869
(185)

41,928
51,843

(437)
386
(281)

68
5,966

1,496
(10)
–

247
(1,213)
495

3,913
–
–

(2,387)
(541)
1,222
(147)
13,101

(2,935)
(9,407)

(524)
3,007
411

(1,145)
1,336
–

290
6,917

(1,595)
(90)
–

(365)
(600)
3

2,472
3,064
(365)

(549)
540
(831)
(1,444)
5,659

207
7,047

590
185
(10)

(76)
(454)
22

1,742
–
–

(725)
(698)
(498)
(623)
8,913

(3,617)
(8,785)

(3,566)
(10,340)

(564)
3,951
991

(801)
1,456
–

207

–
–

(229)
1,378
267

(422)
3,374
836

(4,723)
298
(1,351)

133

–
–

(5,594)
8,355
385

(5,746)

(12,615)

(10,372)

(7,541)

(20,094)

(21,738)

1,264

3,100
(347)
(2,356)

(88)
(66)

1,507

(393)

2,523
2,324
(2,370)

(224)
(88)

1,772

(260)

918
439
(2,373)

82
(86)

(13,695)

23,482
(10,047)
(11)

(2,845)

26,734
(11,476)
(9)

163
–

336
–

9,593

12,422
(5,050)
(5)

82
–

(1,280)

(108)

12,740

17,042

206

471

750

1,626

(1,459)

2,199

2,689

(220)

6,400

8,026

7,859

6,400

5,660

7,859

682

3,371

902

682

281

621

902

(in millions)

– inventories, net
– trade receivables
– trade liabilities
– other assets and liabilities

Cash provided by operating activities

Purchases of fixed assets:

– Increase in equipment on operating leases
– Purchases of property, plant and equipment
– Purchases of other fixed assets

– Finance receivables collected
– Proceeds from sales of finance receivables

Acquisitions of securities (other than trading)
Proceeds from sales of securities (other than trading)
Change in other cash
Cash used for investing activities

Effect of foreign exchange rate changes on cash and
cash equivalents (maturing within 3 months)
Net increase (decrease) in cash and cash equivalents
(maturing within 3 months)

Cash and cash equivalents (maturing within 3 months)

At beginning of period

At end of period

*) Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.

76 Consolidated Fixed Assets Schedule

Consolidated Fixed Assets Schedule

(in millions of €)

Other intangible assets

Goodwill

Intangible assets

Land, leasehold improvements and
buildings including buildings on
land owned by others

Acquisition or Manufacturing Costs

Balance at
January 1,
2001

Currency
change

Change
in consoli-
dated

companies Additions

Reclassi-
fications Disposals

Balance at
December 31,
2001

880

(104)

4,413

5,293

170

187

(724)

(828)

248

137

385

–

1,034

3,980

5,014

20,306

384

(532)

483

600

242

20,999

Technical equipment and machinery

33,734

1,034

(615)

1,162

3,475

1,844

36,946

Other equipment, factory and
office equipment

Advance payments relating to plant
and equipment and construction
in progress

20,880

627

(313)

1,118

3,386

1,964

23,734

7,301

295

(40)

6,143

(7,513)

272

5,914

Property, plant and equipment

82,221

2,340

(1,500)

8,906

(52)

4,322

87,593

Investments in affiliated companies

Loans to affiliated companies

Investments in associated companies

Investments in related companies

Loans to associated and related companies

Long-term securities

Other loans

912

137

(4)

8,196

(122)

1,769

305

917

193

–

254

105

1,072

–

(3)

490

(12)

(5)

–

105

(56)

–

(56)

251

Investments and long-term financial assets

12,429

(36)

(12)

2,223

Equipment on operating leases2)

42,607

2,105

(1)

17,951

1) Currency translation changes with period end rates.
2) Excluding initial direct costs.

150

1,059

674

362

548

143

8,574

1,871

341

369

368

1,879

12,725

14,274

48,388

–

The consolidated fixed assets schedule is part of the Notes to Consolidated Financial Statements.

Balance at
January 1,
2001

Currency
change

Depreciation/Amortization
Change
in consoli-
dated

companies Additions

Reclassi-
fications Disposals

Consolidated Fixed Assets Schedule 77

Book Value1)

Balance at
December
31, 2001

Balance at
December
31, 2000

(in millions of €)

453

1,727

2,180

(58)

(359)

(417)

172

184

356

8,602

20,834

100

497

(163)

745

(383)

3,611

–

(9)

(6)

542

492

427

Other intangible assets

1,609

2,371

2,686

Goodwill

2,151

2,863

3,113

Intangible assets

101

9,174

11,825

11,704

Land, leasehold improvements and
buildings including buildings on
land owned by others

1,499

23,054

13,892

12,900

Technical equipment and machinery

12,634

299

(224)

3,101

1,756

14,074

9,660

8,246

–

123

(5)

–

126

5,788

7,295

Other equipment, factory and
office equipment

Advance payments relating to plant
and equipment and construction
in progress

42,076

898

(770)

7,580

120

–

192

–

(7)

–

(8)

(30)

–

322

(44)

9,073

488

(1)

7,254

–

3,356

46,428

41,165

40,145

Property, plant and equipment

(4)

–

130

–

(2)

929

143

792

137

Investments in affiliated companies

Loans to affiliated companies

8,576

8,196

Investments in associated companies

210

1,661

1,577

Investments in related companies

340

368

358

305

916

184

Loans to associated and related companies

Long-term securities

Other loans

350

12,375

12,107

Investments and long-term financial assets

4,216

12,598

35,790

33,534

Equipment on operating leases2)

78 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Foreign Currencies – The assets and liabilities of
foreign subsidiaries where the functional currency is
not the euro are generally translated using period-end
exchange rates while the statements of income (loss)
and the statements of cash flows are translated using
average exchange rates during the period. Differences
arising from the translation of assets and liabilities in
comparison with the translation of the previous period
are included as a separate component of stockholders’
equity.

The assets and liabilities of foreign subsidiaries
operating in highly inflationary economies are trans-
lated into euro on the basis of period-end rates for mon-
etary assets and liabilities and at historical rates for
non-monetary items, with resulting translation gains
and losses being recognized in earnings. Further, in
such economies, depreciation and gains and losses
from the disposal of non-monetary assets are deter-
mined using historical rates.

Due to the economic and political situation in
Argentina, assets and liabilities of Argentine subsidiar-
ies at December 31, 2001 were translated from Argen-
tine peso (“ARP”) into euro using the first subsequent
rate after the balance sheet date at which exchanges
could be made (€1 = ARP 1.498). In addition,
DaimlerChrysler recognized losses due to lower esti-
mated net realizable values of assets denominated in
Argentine peso and to remeasure foreign currency
assets and liabilities of Argentine subsidiaries. The
total pretax effect recognized in 2001 from these
adjustments amounted to €177 million.

Basis of Presentation
1. Summary of Significant Accounting Policies
General – The consolidated financial statements of
DaimlerChrysler AG (“DaimlerChrysler” or the
“Group”) have been prepared in accordance with
Generally Accepted Accounting Principles in the
United States of America (“U.S. GAAP”). All amounts
herein are shown in euros and for the year 2001
amounts are also presented in U.S. dollars (“$”), the
latter being unaudited and presented solely for the
convenience of the reader at the rate of €1 = $0.8901,
the Noon Buying Rate of the Federal Reserve Bank of
New York on December 31, 2001.

Certain prior year balances have been reclassified
to conform with the Group’s current year presentation.
Commercial practices with respect to the products

manufactured by DaimlerChrysler necessitate that
sales financing, including leasing alternatives, be made
available to the Group’s customers. Accordingly, the
Group’s consolidated financial statements are also sig-
nificantly influenced by activities of the financial ser-
vices business. To enhance the readers’ understanding
of the Group’s consolidated financial statements, the ac-
companying financial statements present, in addition to
the consolidated financial statements, unaudited infor-
mation with respect to the financial position, results of
operations and cash flows of the Group’s industrial and
financial services business activities. Such information,
however, is not required by U.S. GAAP and is not
intended to, and does not represent the separate U.S.
GAAP financial position, results of operations or cash
flows of the Group’s industrial or financial services
business activities. Transactions between the Group’s
industrial and financial services business activities
principally represent intercompany sales of products,
intercompany borrowings and related interest,
and other support under special vehicle financing
programs. The effects of transactions between the
industrial and financial services businesses have been
eliminated within the industrial business columns.

Consolidation – All material companies in which

DaimlerChrysler has legal or effective control are
consolidated. Significant investments in which
DaimlerChrysler has 20% to 50% of the voting rights or
the ability to exercise significant influence over operat-
ing and financial policies (“associated companies”) are
accounted for using the equity method. The effects of
intercompany transactions have been eliminated.

For business combinations accounted for using
the purchase method, all assets acquired and liabilities
assumed are recorded at fair value at the date of
acquisition.

Notes to Consolidated Financial Statements 79

The exchange rates of the significant currencies of

The Group recognizes unrealized gains or losses

non-euro countries used in preparation of the consoli-
dated financial statements were as follows:

Exchange rate at
December 31,
2000
€1 =

2001
€1 =

Annual average
exchange rate
1999
€1 =

2000
€1 =

2001
€1 =

2.05

1.84

2.11

1.69

1.93

0.61

0.62

0.61

0.66

Currency:

Brazil

BRL

Great
Britain GBP

Japan

JPY

115.33

106.92

108.69

99.47

121.25

United
States USD

0.88

0.93

0.90

0.92

1.07

Revenue Recognition – Revenue is recognized

when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered,
the price of the transaction is fixed and determinable,
and collectibility is reasonably assured. Revenues are
recognized net of discounts, cash sales incentives,
customer bonuses and rebates granted. Cash sales
incentives are recorded as a reduction of revenue
when the related revenue is recorded.

Sales under which the Group conditionally guar-

antees the minimum resale value of the product are
accounted for as operating leases with the related rev-
enues and costs deferred at the time of title passage.
Operating lease income is recorded when earned on a
straight-line basis. Revenue on long-term contracts is
generally recognized under the percentage-of-comple-
tion method based upon contractual milestones or
performance. Revenue from finance receivables is
recorded on the interest method.

Receivable Sales and Retained Interests in Sold

Receivables – The Group sells significant amounts of
finance receivables as asset-backed securities through
securitization. The Group sells a portfolio of receivables
to a non-consolidated trust and remains as servicer,
and is paid a servicing fee. Servicing fees are earned on
a level-yield basis over the remaining term of the
related sold receivables. In a subordinated capacity, the
Group retains residual cash flows, a beneficial interest
in principal balances of sold receivables and certain
cash deposits provided as credit enhancements for
investors. Gains and losses from the sales of finance
receivables are recognized in the period in which sales
occur. In determining the gain or loss for each qualify-
ing sale of finance receivables, the investment in the
sold receivable pool is allocated between the portion
sold and the portion retained based upon their relative
fair values.

attributable to the change in the fair value of the
retained interests, which are recorded in a manner simi-
lar to available-for-sale securities, net of related income
taxes as a separate component of stockholders’ equity
until realized. The Group is not aware of an active mar-
ket for the purchase or sale of retained interests, and
accordingly, determines the estimated fair value of the
retained interests by discounting the expected cash
flow releases (the cash-out method) using a discount
rate which is commensurate with the risks involved. In
determining the fair value of the retained interests, the
Group estimates the future rates of prepayments, net
credit losses and forward yield curves. These estimates
are developed by evaluating the historical experience of
comparable receivables and the specific characteristics
of the receivables purchased, and forward yield curves
based on trends in the economy. An other-than-tempo-
rary impairment adjustment to the carrying value of
the retained interests generally is required if the ex-
pected cash flows decline below the cash flows inher-
ent in the cost basis of an individual retained interest
(the pool-by-pool method). Other-than-temporary
impairment adjustments are recorded as a component
of revenue.

Estimated Credit Losses – The allowance for doubt-
ful accounts represents management’s estimate of the
amount of asset impairment in the portfolios of finance,
trade and other receivables. The Group determines the
allowance for doubtful accounts based on periodical
review and evaluation performed as part of the credit-
risk evaluation process, historical loss experience, the
size and composition of the portfolios, current eco-
nomic events and conditions, the fair value and ad-
equacy of collateral, and other pertinent factors. Credit
exposures deemed to be uncollectible are charged
against the allowance for doubtful accounts.

Product-Related Expenses – Provisions for esti-

mated product warranty costs are recorded in cost of
sales at the time the related sale is recognized. Non-
cash sales incentives that do not reduce the transaction
price to the customer are classified within cost of sales.
Shipping and handling costs are recorded as cost of
sales. Expenditures for advertising and sales promotion
and for other sales-related expenses are charged to
selling expense as incurred.

Research and Development – Research and

development costs are expensed as incurred.

Sales of Newly Issued Subsidiary Stock – Gains
resulting from the issuance of stock by a Group subsid-
iary or equity method investment which reduces
DaimlerChrysler’s percentage ownership (“dilution
gains”) are recorded in the statement of income (loss).

80 Notes to Consolidated Financial Statements

and straight-line depreciation is preferable in these
circumstances. The effect of this change on the net loss
of 2001 was not significant.

Leasing – The Group is a lessee of property, plant

and equipment and lessor of equipment, principally
passenger cars and commercial vehicles. All leases that
meet certain specified criteria intended to represent
situations where the substantive risks and rewards of
ownership have been transferred to the lessee are
accounted for as capital leases. All other leases are
accounted for as operating leases. Equipment on
operating leases, where the Group is lessor, is valued
at acquisition cost and depreciated over its estimated
useful life of 1 to 30 years using the straight-line
method.

Long-Lived Assets – The Group accounts for long-
lived assets in accordance with the provisions of SFAS
121, “Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of.”
This Statement requires that long-lived assets and cer-
tain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recov-
erable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be gener-
ated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured
as the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to
be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

Non-fixed Assets – Non-fixed assets represent the
Group’s inventories, receivables, securities and cash,
including amounts to be realized in excess of one year.
In the accompanying notes, the portion of assets and li-
abilities to be realized and settled in excess of one year
has been disclosed.

Marketable Securities and Investments – Securities

and investments are accounted for at fair value, if
readily determinable. Unrealized gains and losses on
trading securities, representing securities bought princi-
pally for the purpose of near term sales, are included in
earnings. Unrealized gains and losses on available-
for-sale securities are included in accumulated other
comprehensive income, net of applicable taxes. All
other securities are recorded at cost. Unrealized losses
on all marketable securities and investments that are
other than temporary are recognized in earnings.

Earnings Per Share – Basic earnings per share is
calculated by dividing net income by the weighted av-
erage number of shares outstanding. Diluted earnings
per share reflects the potential dilution that would
occur if all securities and other contracts to issue Ordi-
nary Shares were exercised or converted (see Note 33).
Net income represents the earnings of the Group after
minority interests.

Intangible Assets – Purchased intangible assets,

other than goodwill, are valued at acquisition cost and
are amortized over their respective useful lives (2 to 10
years) on a straight-line basis. Goodwill derived from
acquisitions that were completed before July 1, 2001, is
capitalized and amortized over 3 to 40 years. The
Group periodically assesses the recoverability of its
goodwill based upon projected future undiscounted
cash flows. Goodwill acquired in business combinations
after June 30, 2001, and intangible assets with an
indefinite useful life acquired after June 30, 2001, were
not amortized in accordance with Statement of Finan-
cial Accounting Standards (“SFAS”) 142, “Goodwill and
Other Intangible Assets” (see New Accounting Pro-
nouncements). Goodwill acquired in business combina-
tions that were completed before July 1, 2001, and
intangible assets with an indefinite useful life acquired
before July 1, 2001, were amortized until December 31,
2001.

Property, Plant and Equipment – Property, plant

and equipment is valued at acquisition or manufactur-
ing costs less accumulated depreciation. Depreciation
expense is recognized using either the declining bal-
ance method until the straight-line method yields larger
expenses or the straight-line method. The costs of inter-
nally produced equipment and facilities include all di-
rect costs and allocable manufacturing overhead. Costs
of the construction of certain long-term assets include
capitalized interest which is amortized over the esti-
mated useful life of the related asset. The following use-
ful lives are assumed: buildings – 10 to 50 years; site
improvements – 5 to 33 years; technical equipment
and machinery – 3 to 30 years; and other equipment,
factory and office equipment – 2 to 33 years.

For the Group’s subsidiaries in Germany, depre-

ciation expense for property, plant and equipment
placed in service before January 1, 2001 is being recog-
nized using either the straight-line method or the
declining balance method until the straight-line method
yields larger expenses. Property, plant and equipment
placed in service at these companies after December
31, 2000 is depreciated using the straight-line method
of depreciation. This change in accounting principle for
new additions beginning January 1, 2001 was made to
reflect improvements in the design and flexibility of
manufacturing machinery and equipment and improve-
ments in maintenance practices. These improvements
have resulted in more uniform productive capacities
and maintenance costs over the useful life of an asset,

Notes to Consolidated Financial Statements 81

Inventories – Inventories are valued at the lower of
acquisition or manufacturing cost or market, cost being
generally determined on the basis of an average or
first-in, first-out method (“FIFO”). Certain of the
Group’s U.S. inventories are valued using the last-in,
first-out method (“LIFO”). Manufacturing costs com-
prise direct material and labor and applicable manufac-
turing overheads, including depreciation charges.

Financial Instruments – DaimlerChrysler uses de-
rivative financial instruments such as forward foreign
exchange contracts, swaps, options, futures, swaptions,
forward rate agreements, caps and floors for hedging
purposes. Effective January 1, 2000, DaimlerChrysler
adopted SFAS 133, “Accounting for Derivative Instru-
ments and Hedging Activities,” as amended by SFAS
137 and 138 (see Note 10). SFAS 133 requires that all
derivative instruments are recognized as assets or
liabilities on the balance sheet and measured at fair
value, regardless of the purpose or intent for holding
them. Changes in the fair value of derivative instru-
ments are recognized periodically either in earnings
or stockholders’ equity (as a component of other com-
prehensive income), depending on whether the deriva-
tive is designated as a hedge of changes in fair value or
cash flows. For derivatives designated as fair value
hedges, changes in fair value of the hedged item and
the derivative are recognized currently in earnings. For
derivatives designated as cash flow hedges, fair value
changes of the effective portion of the hedging instru-
ment are recognized in accumulated other comprehen-
sive income on the balance sheet until the hedged item
is recognized in earnings. The ineffective portion of the
fair value changes are recognized in earnings immedi-
ately. SFAS 133 also requires that certain derivative
instruments embedded in host contracts be accounted
for separately as derivatives.

Prior to the adoption of SFAS 133, derivative
instruments which were not designated as hedges of
specific assets, liabilities, or firm commitments were
marked to market and any resulting unrealized gains
or losses recognized in earnings. If there was a direct
connection between a derivative instrument and an
underlying transaction and a derivative was so desig-
nated, a valuation unit was formed. Once allocated,
gains and losses from these valuation units, which
were used to manage interest rate, equity price and
currency risks of identifiable assets, liabilities, or firm
commitments, did not affect earnings until the underly-
ing transaction was realized.

Further information on the Group’s financial

instruments is included in Note 30.

Accrued Liabilities – The valuation of pension and
postretirement benefit liabilities is based upon the pro-
jected unit credit method in accordance with SFAS 87,
“Employers’ Accounting for Pensions,” and SFAS 106,
“Employers’ Accounting for Postretirement Benefits
Other Than Pensions.” An accrued liability for taxes
and other contingencies is recorded when an obligation
to a third party has been incurred, the payment is
probable and the amount can be reasonably estimated.
Accrued liabilities relating to personnel and social costs
are valued at their net present value where appropriate.
Use of Estimates – Preparation of the financial

statements requires management to make estimates
and assumptions that affect the reported amounts of as-
sets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from
those estimates. Due to current economic conditions
and events in 2001, it is possible that these conditions
and events could have a significant effect on such
estimates made by management.

New Accounting Pronouncements – In September

2000, the Financial Accounting Standards Board
(“FASB”) issued SFAS 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishments
of Liabilities – a replacement of FASB Statement No.
125.” This statement revised the standards of account-
ing for securitizations and other transfers of financial
assets and collateral and requires certain financial
statement disclosures. SFAS 140 was effective for
transactions occurring after March 31, 2001. Adoption
of this replacement standard did not have a material
effect on DaimlerChrysler’s consolidated financial
statements (see Note 31).

During 2000, the Emerging Issues Task Force
reached a final consensus on Issue 00-14, “Accounting
for Certain Sales Incentives.” The issue requires that an
entity recognizes sales incentives at the latter of (1) the
date at which the related revenue is recorded by the
entity or (2) the date at which the sales incentive is of-
fered. The issue also requires that when recognized, the
reduction in or refund of the selling price of the product
or service resulting from any cash sales incentive
should be classified as a reduction of revenue. If the
sales incentive is a free product or service delivered at
the time of the sale, the cost of the free product or ser-
vice should be classified as cost of sales. The consensus
reached in the issue was effective for DaimlerChrysler
in its financial statements beginning April 1, 2001.
DaimlerChrysler applied the consensus prospectively
in 2001. The adoption of Issue 00-14 did not have a
material impact on the Group’s consolidated financial
statements.

82 Notes to Consolidated Financial Statements

In July 2001, the FASB issued SFAS 141, “Busi-

In connection with the transitional impairment

ness Combinations,” and SFAS 142. SFAS 141 requires
that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001.
SFAS 141 also specifies the types of acquired intan-
gible assets that are required to be recognized and
reported separately from goodwill and those acquired
intangible assets that are required to be included in
goodwill. SFAS 142 requires that goodwill no longer be
amortized, but instead tested for impairment at least
annually. SFAS 142 also requires recognized intangible
assets with a definite useful life to be amortized over
their respective estimated useful lives and reviewed for
impairment in accordance with SFAS 121 and subse-
quently, SFAS 144 after its adoption (see below). Any
recognized intangible asset determined to have an
indefinite useful life will not be amortized, but instead
tested for impairment in accordance with SFAS 142
until its life is determined to no longer be indefinite.

DaimlerChrysler adopted the provisions of SFAS
141 as of July 1, 2001, and SFAS 142 is effective Janu-
ary 1, 2002. Goodwill that was acquired in a business
combination completed after June 30, 2001, and any in-
tangible asset determined to have an indefinite useful
life that was acquired after June 30, 2001 were not
amortized. Goodwill acquired in business combinations
completed before July 1, 2001, and intangible assets
with indefinite useful lives acquired before July 1,
2001, were amortized until December 31, 2001.

SFAS 142 requires the Group to evaluate its exist-

ing intangible assets and goodwill and to make any
necessary reclassifications in order to conform with the
new separation requirements at the date of adoption.
Upon adoption of SFAS 142, the Group is also required
to reassess the useful lives and residual values of all
intangible assets and make any necessary amortization
period adjustments by March 31, 2002.

evaluation, SFAS 142 requires DaimlerChrysler to per-
form an assessment of whether there is an indication
that goodwill is impaired as of January 1, 2002. To ac-
complish this, DaimlerChrysler is currently (1) identify-
ing its reporting units, (2) determining the carrying
value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intan-
gible assets to those reporting units, and (3) determin-
ing the fair value of each reporting unit. This first step
of the transitional assessment is required to be com-
pleted by June 30, 2002. If the carrying value of any
reporting unit exceeds its fair value, then detailed fair
values for each of the assigned assets (excluding good-
will) and liabilities will be determined to calculate the
amount of goodwill impairment, if any. This second
step is required to be completed as soon as possible,
but no later than December 31, 2002. Any transitional
impairment loss resulting from the adoption will be
recognized as the effect of a change in accounting prin-
ciple in the Group’s statement of income (loss). Because
of the extensiveness of the efforts needed to comply
with the adoption of these statements, it is not practi-
cable to reasonably estimate the impact on the Group’s
financial statements.

In June 2001, the FASB issued SFAS 143, “Ac-

counting for Asset Retirement Obligations.” The state-
ment applies to legal obligations associated with the
retirement of tangible long-lived assets that result from
the acquisition, construction, development and (or) the
normal operation of a long-lived asset, except for cer-
tain obligations of lessees. SFAS 143 requires that the
fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part
of the carrying amount of the long-lived asset and subse-
quently allocated to expense over the asset’s useful life.
The Group expects to adopt SFAS 143 on January 1,
2003. DaimlerChrysler is currently determining the
impact of the adoption of SFAS 143.

Notes to Consolidated Financial Statements 83

3. Equity Method Investments
At December 31, 2001, the significant investments in
companies accounted for under the equity method were
the following:

Company

European Aeronautic Defence and Space
Company EADS N.V. (“EADS”)

Mitsubishi Motors Corporation (“MMC”)

Ownership
percentage

33.0%

37.3%

Further information with respect to the transac-
tions which resulted in the Group’s holdings in EADS
and MMC is presented in Note 4 (Acquisitions and Dis-
positions) and Note 11 (Extraordinary Items). The aggre-
gate quoted market prices as of December 31, 2001, for
DaimlerChrysler’s shares in EADS and MMC were
€3,637 million and €1,056 million, respectively.

The carrying value of the significant investments

exceeded DaimlerChrysler’s share of the underlying
reported net assets by approximately €1,049 million at
December 31, 2001. The excess of the Group’s initial
investment in equity method companies over the
Group’s ownership percentage in the underlying net
assets of those companies is attributed to fair value ad-
justments, if any, with the remaining portion classified
as goodwill. The fair value adjustments and goodwill
are accounted for in the respective equity method
investment balances. Under the equity method, invest-
ments are stated at initial cost and are adjusted for sub-
sequent contributions and DaimlerChrysler’s share of
earnings, losses and distributions. Because the finan-
cial statements of EADS and MMC are not available
sufficiently timely for the Group to apply the equity
method currently, DaimlerChrysler’s share of the
earnings or losses of EADS and MMC are recorded on
a three month lag. Goodwill relating to the Group’s in-
vestments in EADS and MMC was being amortized us-
ing an useful life of 20 years until December 31, 2001.
After December 31, 2001, such goodwill will no longer
be amortized as a result of adopting SFAS 142. The
total investment, including goodwill, will continue to
be evaluated for impairment when conditions indicate
that a decline in fair value below the carrying amount
is other than temporary.

In August 2001, the FASB issued SFAS 144, “Ac-
counting for the Impairment or Disposal of Long-Lived
Assets.” SFAS 144 retains the current requirement to
recognize an impairment loss only if the carrying
amounts of long-lived assets to be held and used are
not recoverable from their expected undiscounted
future cash flows. However, goodwill is no longer
required to be allocated to these long-lived assets when
determining their carrying amounts. SFAS 144 requires
that a long-lived asset to be abandoned, exchanged for
a similar productive asset, or distributed to owners
in a spin-off be considered held and used until it is
disposed. SFAS 144 requires the depreciable life
of an asset to be abandoned be revised. SFAS 144
requires all long-lived assets to be disposed of by sale
be recorded at the lower of its carrying amount or fair
value less cost to sell and to cease depreciation (amorti-
zation). Therefore, discontinued operations are no
longer measured on a net realizable value basis, and
future operating losses are no longer recognized before
they occur. SFAS 144 is effective January 1, 2002. The
adoption of SFAS 144 is not expected to have a material
impact on the Group’s financial statements.

2. Scope of Consolidation
Scope of Consolidation – DaimlerChrysler comprises
470 German and non-German subsidiaries (2000: 485)
and 1 joint venture (2000: 1). A total of 102 (2000: 108)
companies are accounted for in the consolidated finan-
cial statements using the equity method of accounting.
During 2001, 98 subsidiaries were included in the con-
solidated financial statements for the first time. A total
of 113 subsidiaries were no longer included in the con-
solidated group. Significant effects of changes in the
consolidated group on the consolidated balance sheets
and the consolidated statements of income (loss) are
explained further in the notes to the consolidated finan-
cial statements. A total of 296 subsidiaries (“affiliated
companies”) are not consolidated as their combined in-
fluence on the financial position, results of operations,
and cash flows of the Group is not material (2000: 255).
The effect of such non-consolidated subsidiaries for all
years presented on consolidated assets, revenues and
net income (loss) of DaimlerChrysler was approxi-
mately 1%. In addition, 5 (2000: 6) companies adminis-
tering pension funds whose assets are subject to
restrictions have not been included in the consolidated
financial statements. The consolidated financial state-
ments include 96 associated companies (2000: 74) ac-
counted for at cost and recorded under investments in
related companies as these companies are not material
to the respective presentation of the financial position,
results of operations or cash flows of the Group.

84 Notes to Consolidated Financial Statements

4. Acquisitions and Dispositions
On October 18, 2000, DaimlerChrysler acquired a 34%
equity interest in MMC for approximately €2,200 mil-
lion. At the closing date of the transaction, the Group
also purchased MMC bonds with an aggregate face
value of JPY19,200 million and a stated interest rate of
1.7% for €206 million, which are convertible into
shares of MMC stock. The bonds are only convertible
by DaimlerChrysler in the event that its ownership per-
centage would be diluted below 34% upon conversion
of previously issued convertible bonds. To the extent
not converted, the bonds and accrued interest are due
on April 30, 2003. In June 2001, Volvo AB sold its 3.3%
interest in MMC, plus its operational contracts with
MMC, to DaimlerChrysler for $297 million (€343 mil-
lion) increasing DaimlerChrysler’s interest in MMC to
37.3%.

In August 2000, DaimlerChrysler signed a sale
and purchase agreement with the Canadian company
Bombardier Inc. for the sale of DaimlerChrysler Rail
Systems GmbH (“Adtranz”). With the closing of the
transaction on April 30, 2001, control over the opera-
tions of Adtranz was transferred to Bombardier on May
1, 2001. Accordingly, the operating results of Adtranz
are included in the consolidated financial statements of
DaimlerChrysler through April 30, 2001. The sales
price of $725 million was received during 2001. Bom-
bardier has asserted claims for sales price adjustments
under the terms of the sale and purchase agreement as
well as claims for alleged breaches of contract and
misrepresentation, and seeks total damages of approxi-
mately €1 billion. The sale and purchase agreement
limits the amount of such price adjustments to €150
million, and to the extent legally permissible, the
amount of other claims to an additional €150 million.
The Group intends to defend itself vigorously against
such claims. The agreement calls for submission of
disputes to arbitration and Bombardier has notified
DaimlerChrysler that it intends to do this with respect
to its claims. Due to uncertainties with respect to the
ultimate outcome of these claims, the Group has recog-
nized a partial after-tax gain of €237 million on the
sale of Adtranz, representing the maximum possible
adjustment to the sales price and the aforementioned
maximum amount with respect to any further claims
in accordance with the sale and purchase agreement.

The following tables present summarized
U.S. GAAP financial information for EADS and MMC
(amounts shown on a 100% basis in millions of €)
which are the basis for applying the equity method in
the Group’s consolidated financial statements:

EADS

Income statement information:

Revenues

Net income (loss)

Balance sheet information:

Fixed assets

Non-fixed assets

Total assets

Stockholders’ equity

Minority interests

Accrued liabilities

Other liabilities

Total liabilities and stockholders’
equity

MMC

Income statement information:

Revenues

Net loss

Balance sheet information:

Fixed assets

Non-fixed assets

Total assets

Stockholders’ equity

Minority interests

Accrued liabilities

Other liabilities

Total liabilities and stockholders’
equity

For
the period
from
acquisition
to Decem-
ber 31,
2000

Twelve months
ended
December
31,
2001

27,004

10,578

2,598

(482)

At December 31,
2001
2000

26,505

20,563

22,119

21,592

48,624

42,155

11,409

9,262

598

328

11,149

10,450

25,468

22,115

48,624

42,155

For
the period
from
acquisition
to Decem-
ber 31,
2000

Twelve months
ended
December
31,
2001

30,057

7,754

(1,209)

(124)

At December 31,
2001
2000

11,974

12,802

12,697

16,452

24,671

29,254

1,528

2,840

(61)

5,800

5,626

17,404

20,767

24,671

29,254

Notes to Consolidated Financial Statements 85

In April 2001, DaimlerChrysler completed the sale

In September 2000, DaimlerChrysler acquired

100% of the outstanding shares of the Canadian com-
pany Western Star Trucks Holdings Ltd. for approxi-
mately €500 million. The acquisition was accounted for
using the purchase method of accounting and resulted
in goodwill of approximately €380 million, which was
being amortized on a straight-line basis using an useful
life of 20 years until December 31, 2001. After Decem-
ber 31, 2001, goodwill will no longer be amortized, but
instead tested for impairment at least annually.

Information on the exchange of the Group’s con-

trolling interest in DaimlerChrysler Aerospace for
shares of EADS and the related initial public offering of
EADS in July 2000 is included in Note 11.

Due to an initial public offering in March 1999 as

well as to the selling of a substantial portion of its re-
maining interests in September 1999, DaimlerChrysler
Services AG, a wholly-owned subsidiary of
DaimlerChrysler, reduced its remaining interest in
debitel AG to 10% (see Note 11). In January 2001, the
Group sold its remaining 10% interest in debitel AG to
Swisscom for net proceeds of €305 million. The trans-
action resulted in a pretax gain of €292 million which
is included in financial income (expense), net.

In the first quarter of 1999, DaimlerChrysler
acquired the remaining outstanding shares of Adtranz
from Asea Brown Boveri for €441 million.

of 60% of the interest in its Automotive Electronics
activities to Continental AG for €398 million, resulting
in a pretax gain of €209 million. The agreement confers
on Continental the option to acquire from the Group,
and DaimlerChrysler the option to sell to Continental,
the Group’s remaining 40% interest in the Automotive
Electronics activities. The DaimlerChrysler option is
exercisable from April 1, 2002 through July 31, 2004.
The Continental option is exercisable from November 1,
2004 through October 31, 2005. The price for the re-
maining 40% interest ranges from €225 million to €235
million, depending upon when the option is exercised
and various other factors. DaimlerChrysler accounts for
the remaining interest in its Automotive Electronics ac-
tivities using the equity method subsequent to the sale.
In October 2000, DaimlerChrysler acquired all the

remaining outstanding shares of Detroit Diesel Corpo-
ration for approximately €500 million. The acquisition
of the remaining 78.6% interest in Detroit Diesel was
accounted for using the purchase method of accounting
and resulted in goodwill of approximately €310 million,
which was being amortized on a straight-line basis us-
ing an useful life of 20 years until December 31, 2001.
After December 31, 2001, goodwill will no longer be
amortized, but instead tested for impairment at least
annually.

In October 2000, DaimlerChrysler and Deutsche

Telekom combined their information technology
activities in a joint venture. As part of the agreement,
Deutsche Telekom received a 50.1% interest in
T-Systems ITS (formerly debis Systemhaus) through
a capital investment in T-Systems ITS (see Note 11 and
Note 34).

In September 2000, DaimlerChrysler purchased

a 9% equity interest in Hyundai Motor Company for
approximately €450 million. DaimlerChrysler holds
a 10% ownership interest at December 31, 2001 and
is accounting for its investment in Hyundai as an
available-for-sale security.

86 Notes to Consolidated Statements of Income (Loss)

Notes to Consolidated Statements of Income (Loss)

The impairment relates principally to the carrying val-
ues of the manufacturing facility, equipment and tool-
ing. In addition, charges of €255 million were recorded
related to fixed cost reimbursement agreements with
MCC smart suppliers. The charges were recorded in
cost of sales (€494 million) and other expenses (€42
million) for the year 2000.

In 2000, DaimlerChrysler recorded an impairment

charge in cost of sales of approximately €500 million
for certain leased vehicles in the Services segment.
Declining resale prices of used vehicles in the North
American and the U.K. markets required the Group to
re-evaluate the recoverability of the carrying values of
its leased vehicles. This re-evaluation was performed
using product specific cash flow information. As a
result, the carrying values of these leased vehicles
were determined to be impaired as the identifiable
undiscounted future cash flows from such vehicles
were less than their respective carrying values. In ac-
cordance with SFAS 121, the resulting pre-tax impair-
ment charges represent the amount by which the car-
rying values of such vehicles exceeded their respective
fair market values.

Personnel expenses included in the statement of

income (loss) are comprised of:

(in millions of €)

Year ended December 31,
2001
2000
1999

Wages and salaries

20,073

21,836

21,044

Social levies

Net pension cost
(see Note 23a)

Net postretirement benefit
cost (see Note 23a)

Other expenses for pensions
and retirements

3,193

3,428

3,179

630

327

931

1,173

830

783

221

25,095

26,500

26,158

5. Functional Costs and Other Expenses
Selling, administrative and other expenses are com-
prised of the following:

(in millions of €)

Year ended December 31,
2001
2000
1999

Selling expenses

11,823

11,666 10,087

Administration expenses

5,539

5,921

5,333

Goodwill amortization and
write-downs

Other expenses

184

785

279

437

215

428

18,331

18,303 16,063

As discussed in Note 7, the DaimlerChrysler Su-

pervisory Board approved a multi-year turnaround plan
for the Chrysler Group in February 2001. The related
charges are presented as a separate line item on the ac-
companying consolidated statements of income (loss)
and are not reflected in cost of sales or selling, admin-
istrative and other expenses.

In October 2001, the DaimlerChrysler Board of

Management approved a turnaround plan for its North
American truck subsidiary Freightliner. The turn-
around plan is designed to return Freightliner to sus-
tainable profitability and comprises four main ele-
ments: material cost savings, production cost savings,
overhead reductions and improvements to the existing
business model. The implementation of the turnaround
plan resulted in charges of €310 million, reflecting
employee termination benefits of €83 million, asset
impairment charges of €170 million, and other costs
to exit certain activities of €57 million (see Note 23b).
The charges were recorded in cost of sales (€173 mil-
lion) and selling, administrative and other expenses
(€137 million) in 2001. Employee termination benefits
related to voluntary and involuntary severance mea-
sures affect 4,440 hourly and salaried employees.

Based on its investment in MMC and the corre-
sponding strategic alliance entered into in the fourth
quarter 2000, DaimlerChrysler conducted a review of
its compact car strategy in 2000, and concluded that it
was necessary to revise the current strategic plan for
the smart brand, including restructuring of supplier
contracts. As a result, the carrying values of certain of
the brand’s long-lived assets were determined to be
impaired as the identifiable, undiscounted future cash
flows from the operation of such assets were less then
their respective carrying values. In accordance with
SFAS 121, DaimlerChrysler recorded an impairment
charge of €281 million. The impairment charge repre-
sents the amount by which the carrying values of such
assets exceeded their respective fair market values.

Notes to Consolidated Statements of Income (Loss) 87

Number of employees (annual average):

The net charges recorded for the plan in 2001

were €3,064 million (€1,934 million net of taxes) and
are presented as a separate line item on the accompa-
nying consolidated statement of income (loss) (€2,555
million and €509 million would have otherwise been
reflected in cost of sales and selling, administrative and
other expenses, respectively).

The initial charges of €3,047 million were
recorded in February 2001 with the approval of the
turnaround plan. Additional charges of €268 million
resulted from the subsequent impairment and disposal
costs associated with a component plant as well as
costs for a special early retirement program. The return
to income adjustments of €251 million include revi-
sions of estimates based upon information currently
available or actual settlements. These adjustments
reflect lower than anticipated costs associated with
workforce reduction initiatives, including the involun-
tary severance benefits, and favorable resolution of
supplier contract cancellation claims.

The pretax amounts for turnaround plan charges

consisted of the following:

(in millions of €)

Workforce
reductions

Asset
write-
downs

Other
costs

Total

Reserve balance
at January 1, 2001

Initial charges

Additional charges

Adjustments

Net charges

Payments

Amount charged
against assets

Currency translation
adjustment

Reserve balance at
December 31, 2001

–

1,403

(122)

1,374

(211)

–

836

148

–

808

3,047

268

–

(129)

(251)

984

706

3,064

–

(154)

(365)

(695)

(984)

(63)

(1,742)

506

–

510

1,016

Year ended December 31,
2001
2000
1999

Hourly employees

Salaried employees

244,938 270,814 279,124

122,094 165,117 170,539

Trainees/apprentices

12,512

13,663

13,898

379,544 449,594 463,561

In 2001, 28 people (2000: 28 people; 1999:
14,851 people) were employed in joint venture compa-
nies.

In 2001, the total remuneration paid by Group
companies to the members of the Board of Manage-
ment of DaimlerChrysler AG amounted to €22.0 mil-
lion, and the remuneration paid to the members of the
Supervisory Board of DaimlerChrysler AG for services
in all capacities to the Group totaled €2.4 million. Dis-
bursements to former members of the Board of Man-
agement of DaimlerChrysler AG and their survivors
amounted to €14.7 million. An amount of €155.0 mil-
lion has been accrued for pension obligations to former
members of the Board of Management and their
survivors. As of December 31, 2001, no advances or
loans existed to members of the Board of Management
of DaimlerChrysler AG.

6. Other Income
Other income includes gains on sales of property, plant
and equipment (€104 million, €106 million and €132
million in 2001, 2000 and 1999, respectively) and
rental income, other than relating to financial services
leasing activities (€191 million, €178 million and €153
million in 2001, 2000 and 1999, respectively). In 2001,
gains on sales of companies of €465 million were rec-
ognized in other income.

7. Turnaround Plan for the Chrysler Group
The DaimlerChrysler Supervisory Board approved a
multi-year turnaround plan for the Chrysler Group in
February 2001. Key initiatives for the turnaround plan
over the period 2001 through 2003 include a workforce
reduction of 26,000 employees and an elimination of
excess capacity. The workforce reduction is being
achieved through retirements, special programs, attri-
tion and layoffs. The reduction affected represented
and non-represented hourly and salary employees. To
eliminate excess capacity, the Chrysler Group is idling,
closing or disposing of certain manufacturing plants,
eliminating shifts and reducing line speeds at certain
manufacturing facilities, and adjusting volumes at com-
ponent, stamping and powertrain facilities.

88 Notes to Consolidated Statements of Income (Loss)

Workforce reduction charges relate to early retire-

8. Financial Income, net

ment incentive programs (€725 million) and involun-
tary severance benefits (€649 million). The voluntary
early retirement programs, accepted by 9,261 employ-
ees as of December 31, 2001, are formula driven based
on salary levels, age and past service. In addition,
7,174 employees were involuntarily affected by the
plan. The amount of involuntary severance benefits
paid and charged against the liability in 2001 was
€131 million.

As a result of the planned idling, closing or dis-

posal of manufacturing facilities, the carrying values of
the assets held for use at these plants were determined
to be impaired as the identifiable, undiscounted future
cash flows from the operation of such assets were less
than their respective carrying values. In accordance
with the provisions of SFAS 121, the Chrysler Group
recorded an impairment charge of €984 million. The
impairment charge represents the amount by which
the carrying values of the property, plant, equipment
and tooling exceeded their respective fair market
values as determined by third party appraisals or
comparative market analyses developed by the
Chrysler Group.

Other costs primarily include supplier contract

cancellation costs.

Other key initiatives of the plan include additional

cost reduction and revenue enhancing measures. Spe-
cifically, in an effort to reduce costs, suppliers are be-
ing requested to voluntarily reduce the prices charged
for materials and services over the period January 1,
2001 through 2002. Under the revenue enhancement
measures of the turnaround plan, certain dealer pro-
grams were replaced with a new performance-based
incentive program under which dealers may earn cash
payments based on levels of achievement compared
to pre-assigned monthly retail sales objectives.

(in millions of €)

Income (loss) from investments
of which from affiliated
companies €(2) (2000: €24;
1999: €41)

Gains, net from disposals of
investments and shares in
affiliated and associated
companies

Write-down of investments and
shares in affiliated companies

Income (loss) from companies
included at equity

Income (loss) from
investments, net

Other interest and similar
income
of which from affiliated
companies €31
(2000: €20; 1999: €17)

Year ended December 31,
2001
2000
1999

320

(109)

(54)

(19)

(244)

332

(224)

1,483

1,268

1,382

Interest and similar expenses

(1,760)

(988)

(729)

Interest income, net

(277)

280

653

Income from securities and
long-term receivables

Write-down of securities and
long-term receivables

Other, net

Other financial income
(loss), net

291

161

913

(16)

(3)

(17)

(176)

(58)

(1,280)

154

100

156

(384)

333

In 2001, EADS, an equity method investment of
the Group, created a new company, Airbus SAS, and
contributed all of its Airbus activities into the new
company for a 100% ownership interest. Also in 2001,
Airbus SAS issued new shares to BAe Systems in ex-
change for all of its Airbus activities. As a result of this
transaction, EADS’ ownership interest in Airbus SAS,
which is consolidated by EADS, was diluted to 80%.
DaimlerChrysler recognized under U.S. GAAP its share
of the gain resulting from the formation of Airbus SAS
in the amount of €747 million in income (loss) from
companies included at equity.

In 1999, realized and unrealized net losses on

derivative financial instruments of €1,078 million
were included in other, net.

The Group capitalized interest expenses related

to qualifying construction projects of €275 million
(2000: €181 million; 1999: €163 million).

Notes to Consolidated Statements of Income (Loss) 89

9. Income Taxes
Income (loss) before income taxes consists of the
following:

(in millions of €)

Germany

Year ended December 31,
2001
2000
1999

4,498

2,729

2,688

Non-German countries

(5,981)

1,747

6,969

(1,483)

4,476

9,657

Income tax expense (benefit) are comprised of the

following components:

(in millions of €)

Current taxes

Germany

Year ended December 31,
2001
2000
1999

793

(45)

1,074

Non-German countries

(512)

1,160

1,538

Deferred taxes

Germany

637

1,490

836

Non-German countries

(1,695)

(606)

1,085

(777)

1,999

4,533

For German companies, the deferred taxes at De-
cember 31, 2001 are calculated using a federal corpo-
rate tax rate of 25% (2000: 25%; 1999: 40%) plus a soli-
darity surcharge of 5.5% for each year on federal corpo-
rate taxes payable plus the after federal tax benefit rate
for trade tax of 12.125% (2000: 12.125%; 1999: 9.3%).
Including the impact of the surcharge and the trade
tax, the tax rate applied to German deferred taxes
amounts to 38.5% (2000: 38.5%; 1999: 51.5%).

In 2000, the German government enacted new tax

legislation which, among other changes, reduced the
Group’s statutory corporate tax rate for German compa-
nies from 40% on retained earnings and 30% on distrib-
uted earnings to a uniform 25%, effective for the
Group’s year beginning January 1, 2001. The signifi-
cant other tax law change is the exemption from tax for
certain gains and losses from the sale of shares in
affiliated and unaffiliated companies. The effects of the
reduction in the tax rate and other changes on the de-
ferred tax assets and liabilities of the Group’s German
companies were recognized in the year of enactment.
As a result, a net charge of €263 million is included in
the consolidated statement of income (loss) in 2000.
The effects of the reduction in the tax rate resulted in
deferred tax expense of €373 million. The exemption
from tax for certain gains from the sale of shares
resulted in deferred tax benefit of €110 million due to
the elimination of the net deferred tax liabilities on the
net unrealized gains.

In 1999, the tax laws in Germany were changed

including a reduction in the retained corporate income
tax rate from 45% to 40% and the broadening of the tax
base. The effects of the changes in German tax laws
were recognized as a net charge of €812 million in the
consolidated statement of income (loss) in 1999. The ef-
fects of the reduction in the tax rate on the deferred tax
assets and liabilities of the Group’s German companies
as of December 31, 1998 amounted to €290 million.
The broadening of the tax base resulted in tax expense
of €522 million.

The effect of the tax law changes in Germany in
2000 and 1999 are reflected separately in the reconcili-
ations presented below.

For the years ending December 31, 2000 and
1999, the German corporate tax law applied a split-rate
imputation with regard to the taxation of the earnings
of a corporation. In accordance with the tax law in
effect for those fiscal years, retained corporate income
was initially subject to a federal corporate tax of 40%
plus a solidarity surcharge of 5.5% for each year on fed-
eral corporate taxes payable. Including the impact of
the surcharge, the federal corporate tax rate amounted
to 42.2%. Upon distribution of certain retained earnings
generated in Germany to stockholders, the corporate in-
come tax rate on the earnings was adjusted to 30%,
plus a solidarity surcharge of 5.5% for each year on the
distribution corporate tax, for a total of 31.65% for each
year, by means of a refund for taxes previously paid.
Under the new German corporate tax system, during a
15 year transition period beginning on January 1, 2001,
the Group will continue to receive a refund on the
distribution of retained earnings which existed as of
December 31, 2000.

90 Notes to Consolidated Statements of Income (Loss)

A reconciliation of expected income taxes to actual

Deferred income tax assets and liabilities are

income tax expense (benefit) determined using the ap-
plicable German corporate tax rate of 25% (2000: 40%;
1999: 40%) plus a solidarity surcharge of 5.5% on fed-
eral corporate taxes plus the after federal tax benefit
rate for trade taxes of 12.125% (2000: 9.3%; 1999: 9.3%)
for a combined statutory rate of 38.5% in 2001 (2000:
51.5%; 1999: 51.5%) is as follows:

Year ended December 31,
2001
2000
1999

summarized as follows:

(in millions of €)

At December 31,
2000

2001

Property, plant and equipment

365

463

Investments and long-term financial
assets

Equipment on operating leases

Inventories

Receivables

(571)

2,305

4,973

Net operating loss and tax credit
carryforwards

(346)

(966)

Retirement plans

Trade tax rate differential

(50)

(28)

(24)

(191)

–

Other accrued liabilities

Liabilities

Deferred income

Other

(in millions of €)

Expected expense (benefit)
for income taxes

Tax rate differential with non-
German countries

Gains from sales of business
interests (Adtranz, TEMIC,
debitel)

Changes in valuation
allowances on German
deferred tax assets

Tax effect of equity method
investments

Amortization of non-deductible
goodwill

Tax free income and non-
deductible expenses

Effect of changes in German
tax laws

Dividend distribution credit at
DC AG

Other

Actual expense (benefit)
for income taxes

–

(25)

113

(12)

Valuation allowances

Deferred tax assets

(76)

–

263

812

(491)

(505)

163

Property, plant and equipment

Equipment on operating leases

Inventories

Receivables

Securities

Prepaid expenses

Retirement plans

Other accrued liabilities

(777)

1,999

4,533

Taxes on undistributed earnings of
non-German subsidiaries

In 2000 and 1999, income tax credits from
dividend distributions reflected the tax benefits from
the dividend distributions of €2.35 per Ordinary Share
to be paid for those years.

Other

Deferred tax liabilities

Deferred tax liabilities, net

2,135

1,986

689

697

800

664

1,369

1,400

3,078

1,669

3,682

3,442

6,340

4,756

1,113

1,114

1,162

1,330

423

427

21,053 18,051

(145)

(335)

20,908

17,716

(4,095)

(3,609)

(8,286)

(7,569)

(385)

(303)

(2,542)

(2,341)

(448)

(33)

(482)

(481)

(4,794)

(4,409)

(673)

(1,010)

(514)

(486)

(530)

(519)

(22,749) (20,760)

(1,841)

(3,044)

At December 31, 2001, the Group had corporate

and trade tax net operating losses (“NOLs”) amounting
to €4,668 million (2000: €4,061 million) and credit
carryforwards amounting to €1,552 million (2000:
€776 million), determined in accordance with U.S.
GAAP. The corporate tax NOLs and credit
carryforwards relate to losses of non-German compa-
nies and German non-Organschaft companies and are
partly limited in their use to the Group. The valuation
allowances on deferred tax assets of German and non-
German operations decreased by €190 million. The re-
duction in the valuation allowance is mainly due to the
sale of Adtranz. In future periods, depending upon the
financial results, management’s estimate of the amount
of the deferred tax assets considered realizable may
change, and hence the valuation allowances may
increase or decrease.

Net deferred income tax assets and liabilities in

(in millions of €)

the consolidated balance sheets are as follows:

At December 31,
2001
thereof
non-
current

Total

At December 31,
2000
thereof
non-
current

Total

(in millions of €)

Deferred tax assets

3,010

425

2,436

1,576

Deferred tax liabilities

(4,851)

(4,761)

(5,480)

(4,938)

Deferred tax
liabilities, net

(1,841)

(4,336)

(3,044)

(3,362)

DaimlerChrysler recorded deferred tax liabilities

for non-German withholding taxes of €371 million
(2000: €351 million) on €7,421 million (2000: €7,028
million) in cumulative undistributed earnings of non-
German subsidiaries and additional German tax of
€143 million (2000: €135 million) on the future payout
of these foreign dividends because the earnings are not
intended to be permanently reinvested in those opera-
tions.

The Group did not provide income taxes or non-
German withholding taxes on €13,899 million (2000:
€15,543 million) in cumulative earnings of non-German
subsidiaries because the earnings are intended to be in-
definitely reinvested in those operations. It is not prac-
ticable to estimate the amount of unrecognized deferred
tax liabilities for these undistributed foreign earnings.

Including the items charged or credited directly to
related components of stockholders’ equity and the ex-
pense (benefit) for income taxes of extraordinary items
and from changes in accounting principles, the expense
(benefit) for income taxes consists of the following:

Notes to Consolidated Statements of Income (Loss) 91

Year ended December 31,
2001
2000
1999

(777)

1,999

4,533

–

324

470

(53)

–

(31)

(507)

(338)

(155)

(1,284)

1,932

4,817

Expense (benefit) for income
taxes before extraordinary
items

Income tax expense of
extraordinary items

Income tax benefit from
changes in accounting
principles

Stockholders’ equity for
employee stock option
expense in excess of amounts
recognized for financial
purposes

Stockholders’ equity for items
in other comprehensive
income

10. Cumulative Effects of Changes in Accounting

Principles

Beneficial Interests in Securitized Financial Assets: Adop-
tion of EITF 99-20 - As of July 1, 2000, DaimlerChrysler
adopted EITF 99-20 which specifies, among other
things, how a transferor that retains an interest in a
securitization transaction, or an enterprise that pur-
chases a beneficial interest, should account for interest
income and impairment. The cumulative effect of adopt-
ing EITF 99-20 was a charge of €99 million (net of
income tax benefits of €58 million).

Derivative Financial Instruments and Hedging

Activities: Adoption of SFAS 133 and SFAS 138 -
DaimlerChrysler elected to adopt SFAS 133 on January
1, 2000. Upon adoption of this Statement,
DaimlerChrysler recorded a net transition adjustment
gain of €12 million (net of income tax expense of €5
million) in the statement of income (loss) and a net
transition adjustment loss of €349 million (net of in-
come tax benefit of €367 million) in accumulated other
comprehensive income. Adoption of SFAS 138 did not
have an impact on the Group’s consolidated statement
of income (loss).

92 Notes to Consolidated Statements of Income (Loss)

In 2000, Ballard Power Systems Inc., a developer
of fuel cells and related power generation systems, is-
sued additional common shares to its shareholders.
DaimlerChrysler elected not to purchase additional
shares thereby reducing its ownership interest. The
dilution of its ownership interest resulted in an extra-
ordinary gain of €73 million.

In March 1999, DaimlerChrysler Services AG sold
a portion of its interests in debitel AG in an initial pub-
lic offering of its ordinary shares for proceeds of €274
million. In September 1999, DaimlerChrysler Services
AG sold an additional portion of its remaining interests
in debitel AG to Swisscom for proceeds of €924 million.
The sales resulted in an extraordinary after-tax gain of
€659 million (net of income tax expense of €481 mil-
lion) and reduced DaimlerChrysler Services AG’s inter-
est in debitel to 10%. See Note 4 for the sale of the
remaining 10% interest in 2001.

The gains from each of the foregoing transactions
are reported as extraordinary items in the consolidated
statements of income (loss) for the years 1999 and
2000 because U.S. GAAP requires such presentation
when a significant disposition of assets or businesses
occurs within two years subsequent to accounting for a
business combination using the pooling-of-interests
method.

In 1999 the Group extinguished €51 million of

long-term debt resulting in an extraordinary after tax
loss of €19 million (net of income tax benefit of €11
million).

11. Extraordinary Items
In October 2000, Adtranz sold its fixed installations
business which primarily focuses on rail electrification
and traction power to Balfour Beatty for €153 million
resulting in an extraordinary after-tax gain of €89 mil-
lion (net of income tax expense of €52 million).

In October 2000, DaimlerChrysler and Deutsche

Telekom combined their information technology activi-
ties in a joint venture. In accordance with an agreement
announced on March 27, 2000, Deutsche Telekom re-
ceived a 50.1% interest in T-Systems ITS through an in-
vestment of approximately €4.6 billion for new shares
of T-Systems ITS. In 2000, the transaction resulted in
an extraordinary after-tax gain of €2,345 million. The
agreements also confer on Deutsche Telekom the op-
tion to acquire from the Group, and on DaimlerChrysler
the option to sell to Deutsche Telekom, the Group’s
49.9% interest in T-Systems ITS. DaimlerChrysler
accounts for its interest in T-System using the equity
method. The DaimlerChrysler option was exercised in
January 2002 (see Note 34).

In July 2000, the Group exchanged its controlling

interest in DaimlerChrysler Aerospace for shares of
EADS, which subsequently completed its initial public
offering. EADS is a global aerospace and defense
company which was established through a merger of
Aerospatiale Matra S.A., DaimlerChrysler Aerospace
AG and Construcciones Aeronauticas S.A. (“CASA”).
DaimlerChrysler accounted for the shares of EADS
received in the exchange at their fair value on that date
and recorded an extraordinary gain of €3,009 million.
The Group accounts for its 33% interest in EADS using
the equity method of accounting. DaimlerChrysler has
the right to sell all of its ownership interest in EADS to
certain French shareholders. This put option may be
exercised immediately in the event of a voting deadlock
on certain matters or at certain times after three years.
The price is based on the average closing mid-market
price of EADS shares during the 30 trading days prior
to the exercise of the put option.

Notes to Consolidated Balance Sheets

12. Intangible Assets and Property, Plant and

14. Inventories

Notes to Consolidated Balance Sheets 93

Equipment, net

Information with respect to changes in the Group’s in-
tangible assets and property, plant and equipment is
presented in the Consolidated Fixed Assets Schedule
included herein. Intangible assets represent principally
goodwill and intangible pension assets.

Property, plant and equipment includes buildings,

technical equipment and other equipment capitalized
under capital lease agreements of €148 million (2000:
€140 million). Depreciation expense and impairment
charges on assets under capital lease arrangements
were €13 million (2000: €188 million; 1999: €32 mil-
lion).

13. Equipment on Operating Leases, net
Information with respect to changes in the Group’s
equipment on operating leases is presented in the Con-
solidated Fixed Assets Schedule included herein. Of the
total equipment on operating leases, €35,015 million
represent automobiles and commercial vehicles
(2000: €32,639 million).

Noncancellable future lease payments due
from customers for equipment on operating leases at
December 31, 2001 are as follows:

(in millions of €)

Raw materials and manufacturing
supplies

Work-in-process

thereof relating to long-term
contracts and programs in process
€– (2000: €1,967)

Finished goods, parts and products
held for resale

Advance payments to suppliers

Less: Advance payments received
thereof relating to long-term
contracts and programs in process
€110 (2000: €608)

At December 31,
2000

2001

2,251

2,495

3,038

5,232

11,904

10,726

309

17,290

18,762

(536)

(2,479)

16,754

16,283

Certain of the Group’s U.S. inventories are valued

using the LIFO method. If the FIFO method had been
used instead of the LIFO method, inventories would
have been higher by €1,102 million (2000: €1,058 mil-
lion).

(in millions of €)

2002

2003

2004

2005

2006

thereafter

8,560

4,425

2,528

812

244

352

16,921

15. Trade Receivables

(in millions of €)

Receivables from sales of goods and
services

Long-term contracts and programs,
unbilled, net of advance payments
received

Allowance for doubtful accounts

At December 31,
2000

2001

7,052

8,506

200

7,076

8,706

(646)

(711)

6,430

7,995

As of December 31, 2001, €136 million of the
trade receivables mature after more than one year
(2000: €261 million).

94 Notes to Consolidated Balance Sheets

16. Receivables from Financial Services

17. Other Receivables

(in millions of €)

Receivables from:

Sales financing

Finance leases

Initial direct costs

Unearned income

Unguaranteed residual value
of leased assets

At December 31,
2000

2001

(in millions of €)

At December 31,
2000

2001

Receivables from affiliated companies

1,250

1,341

38,882

37,193

Receivables from related companies1)

1,041

1,379

17,400

19,031

56,282

56,224

248

177

(6,833)

(8,021)

1,417

1,183

51,114 49,563

Retained interests in sold receivables
and subordinated asset backed
certificates

5,482

4,816

Other receivables and other assets

9,141

7,817

Allowance for doubtful accounts

16,914

15,353

(726)

(957)

16,188

14,396

Allowance for doubtful accounts

(1,602)

(890)

49,512

48,673

1) Related companies include entities which have a

significant ownership in DaimlerChrysler or entities in
which the Group holds a significant investment.

As of December 31, 2001, €35,551 million of the
financing receivables mature after more than one year
(2000: €28,138 million).

As of December 31, 2001, €2,584 million of the

other receivables mature after more than one year
(2000: €2,101 million).

Sales financing and finance lease receivables
consist of retail installment sales contracts secured by
automobiles and commercial vehicles. Contractual
maturities applicable to receivables from sales financing
and finance leases in each of the years following
December 31, 2001 are as follows:

18. Securities, Investments and Long-Term Financial

Assets

Information with respect to the Group’s investments
and long-term financial assets is presented in the
Consolidated Fixed Assets Schedule included herein.
Securities included in non-fixed assets are comprised
of the following:

(in millions of €)

2002

2003

2004

2005

2006

thereafter

(in millions of €)

Debt securities

Equity securities

Equity-based funds

Debt-based funds

16,820

10,484

9,005

6,932

4,310

8,731

56,282

At December 31,
2000

2001

1,632

2,791

120

601

397

1,234

1,589

3,077

5,378

Actual cash flows will vary from contractual
maturities due to future sales of finance receivables,
prepayments and charge-offs.

Notes to Consolidated Balance Sheets 95

At December 31, 2000

Fair
value

Unrealized

Gain

Loss

Carrying amounts and fair values of debt and
equity securities included in securities and invest-
ments for which fair values are readily determinable
are classified as follows:

At December 31, 2001

(in millions of €)

Available-for-sale

Trading

Securities

Investments and long-term
financial assets available-for-sale

Cost

Fair
value

Unrealized

Gain

Loss

Cost

2,645

2,613

460

464

3,105

3,077

731

987

3,836

4,064

316

356

4,859

4,918

246

187

451

460

–

5,310

5,378

255

187

843

1,304

128

6,153

6,682

737

992

276

463

The aggregate costs, fair values and gross unreal-
ized holding gains and losses per security class are as
follows:

At December 31, 2001

(in millions of €)

Equity securities

Debt securities issued by the German government
and its agencies

Municipal securities

Debt securities issued by non-German governments

Corporate debt securities

Equity-based funds

Debt-based funds

Asset-backed securities

Other marketable debt securities

Available-for-sale

Trading

Cost

Fair
value

Unrealized

Gain

Loss

Cost

At December 31, 2000
Fair
value

Unrealized

Gain

Loss

819

1,083

333

1,333

1,880

855

308

112

131

301

112

134

305

1,239

1,234

241

410

247

367

–

122

652

536

323

123

656

537

397

1,692

1,590

178

842

180

834

–

116

3,376

3,600

350

126

5,702

6,222

983

463

460

464

451

460

–

3,836

4,064

356

128

6,153

6,682

992

463

The estimated fair values of investments in debt
securities, by contractual maturity, are shown below.
Expected maturities may differ from contractual matu-
rities because borrowers may have the right to call or
prepay obligations with or without penalty.

(in millions of €)
Available-for-sale

Due within one year

Due after one year through five years

Due after five years through ten years

Due after ten years

At December 31,
2000

2001

1,412

2,704

390

422

202

735

430

2,426

3,945

96 Notes to Consolidated Balance Sheets

Proceeds from disposals of available-for-sale secu-
rities were €2,432 million (2000: €9,422 million; 1999:
€2,481 million). Gross realized gains from sales of
available-for-sale securities were €419 million (2000:
€275 million; 1999: €627 million), while gross realized
losses were €144 million (2000: €140 million; 1999: €4
million). DaimlerChrysler uses the specific identifica-
tion method as a basis for determining cost and calcu-
lating realized gains and losses.

Other securities classified as cash equivalents
were approximately €7.3 billion and €4.3 billion at De-
cember 31, 2001 and 2000, respectively, and consisted
primarily of purchase agreements, commercial paper
and certificates of deposit.

19. Liquid Assets
Liquid assets recorded under various balance sheet
captions are as follows:

(in millions of €)

At December 31,
1999

2000

2001

Cash and cash equivalents*)

originally maturing within
3 months

originally maturing after
3 months

11,397

7,082

8,761

338

Total cash and cash equivalents

11,428

7,127

9,099

Securities

Other

3,077

5,378

8,969

133

14,525

12,510

18,201

*) Cash and cash equivalents are mainly comprised of cash

at banks, cash on hand and checks in transit

The following represents supplemental informa-

tion with respect to cash flows:

(in millions of €)

Interest paid

Year ended December 31,
2000
2001
1999

4,616

5,629

3,315

Income taxes paid (refunded)

(624)

775

1,883

20. Prepaid Expenses
Prepaid expenses are comprised of the following:

(in millions of €)

Prepaid pension cost

Other prepaid expenses

At December 31,
2000

2001

7,584

6,799

1,022

1,108

8,606

7,907

As of December 31, 2001, €7,632 million of the

total prepaid expenses mature after more than one
year (2000: €6,819 million).

21. Stockholders’ Equity
Number of Shares Issued and Outstanding
DaimlerChrysler had issued and outstanding
1,003,271,998 registered Ordinary Shares of no par
value at December 31, 2001 (2000: 1,003,271,911).
Each share represents a nominal value of €2.60
of capital stock.

Treasury Stock
In 2001, DaimlerChrysler purchased approximately 1.4
million (2000: 1.4 million; 1999: 1.2 million) Ordinary
Shares in connection with an employee share purchase
plan, of which 1.2 million (2000: 1.4 million; 1999: 1.2
million) were re-issued to employees and the remaining
0.2 million in 2001 were resold in the market.

Authorized and Conditional Capital
Through April 30, 2003, the Board of Management is
authorized, upon approval of the Supervisory Board, to
increase capital stock by a total of up to an aggregate
nominal amount of €256 million and to issue Ordinary
Shares of up to an aggregate nominal amount of
€26 million to employees.

In April 2000, the Group’s shareholders agreed to
increase the nominal amount of capital stock per share
from approximately €2.56 (originating from the conver-
sion of Deutsche Marks into euros) to €2.60. This re-
sulted in an increase of capital stock and an equivalent
decrease of additional paid-in capital of €44 million.
The conditional and authorized capital as described in
the Articles of Association were adjusted accordingly.
DaimlerChrysler is authorized to issue convertible
bonds and notes with warrants in a nominal volume of
up to €15 billion with a term of up to 20 years by April
18, 2005. The convertible bonds and notes with
warrants shall grant to the holders or creditors option
or conversion rights for new shares in DaimlerChrysler
in a nominal amount not to exceed €300 million of
capital stock. DaimlerChrysler is also entitled to grant
up to 96,000,000 rights (representing up to a nominal
amount of approximately €250 million of capital stock)
with respect to the DaimlerChrysler Stock Option Plan
by April 18, 2005.

DaimlerChrysler is authorized through October

11, 2002, to acquire treasury stock for certain defined
purposes up to a maximum nominal amount of €260
million of capital stock, representing approximately
10% of issued and outstanding capital stock.

Notes to Consolidated Balance Sheets 97

Convertible Notes
In June 1997, DaimlerChrysler issued 5.75% subordi-
nated mandatory convertible notes due June 14, 2002
with a nominal amount of €66.83 per note. These con-
vertible notes represent at the date of issue a nominal
amount of €508 million including 7,600,000 notes
which may be converted into 0.86631 newly issuable
shares of DaimlerChrysler AG before June 4, 2002.
Notes not converted by this date will be mandatorily
converted at a conversion rate between 0.86631 and
1.25625 Ordinary Shares of DaimlerChrysler AG per
note to be determined on the basis of the average mar-
ket price for the shares during the last 20 trading days
before June 8, 2002. During 2001, 87 (2000: 92; 1999:
665) DaimlerChrysler Ordinary Shares were issued
upon exercise.

During 1996, DaimlerChrysler Luxembourg Capi-
tal S.A., a wholly-owned subsidiary of DaimlerChrysler,
issued 4.125% bearer notes with appertaining warrants
due July 5, 2003, in the amount of €613 million (with a
nominal value of €511 each) entitling the bond holders
to subscribe for a total of 12,366,324 shares (7,728,048
of which represent newly issued shares totaling €383
million) of DaimlerChrysler. According to the note
agreements the option price per share is €42.67 in con-
sideration of exchange of the notes or €44.49 in cash.
During 2001, no options for the subscription of newly
issued DaimlerChrysler Ordinary Shares (2000: 10,416;
1999: 1,517,468) were exercised.

Comprehensive Income
The changes in the components of other comprehensive
income (loss) are as follows:

(in millions of €)

Unrealized gains (losses) on securities:

Year ended December 31,

2001
Tax
effect

Pretax

Net

Pretax

2000
Tax
effect

Net

Pretax

1999
Tax
effect

Net

Unrealized holding gains (losses)

(129)

149

(250)

(204)

292

(163)

129

Reclassification adjustments for (gains)
losses included in net income (loss)

(46)

(111)

(157)

Net unrealized gains (losses)

(175)

(137)

(189)

(6)

(623)

(149)

(331)

313

150

(310)

(181)

Net gains (losses) on derivatives hedging
variability of cash flows:

Unrealized derivative gains (losses)

(708)

257

(451)

(1,932)

978

(954)

Reclassification adjustments for (gains)
losses included in net income (loss)

Net derivative gains (losses)

Foreign currency translation adjustments

Minimum pension liability adjustments

Other comprehensive income (loss)

829

121

598

(1,436)

(892)

(50)

(33)

552

507

(307)

522

1,113

(567)

546

(819)

411

(408)

565

1,474

(111)

1,363

2,431

(884)

(385)

474

(2)

338

(13)

812

2,087

155

2,242

–

2,431

(8)

Miscellaneous
The minority stockholders of Dornier GmbH, a subsid-
iary of DADC Luft- und Raumfahrt Beteiligungs AG,
have the right, exercisable at any time, to exchange
their shareholdings in Dornier for cash or holdings in
DaimlerChrysler AG or its subsidiary DaimlerChrysler
Luft- und Raumfahrt Holding Aktiengesellschaft. Some
of the Dornier minority stockholders partially
exercised this right in 2001 and exchanged some of
their shareholdings in Dornier for cash and/or holdings
in DaimlerChrysler Luft- und Raumfahrt Holding
Aktiengesellschaft. To the extent that they have made
use of their right to exchange their shareholdings for
holdings of DaimlerChrysler Luft- und Raumfahrt Hold-
ing Aktiengesellschaft, they have the right to exchange

this new shareholding for cash or for DaimlerChrysler
Ordinary Shares. This right has already been partially
exercised.

Under the German corporation law (Aktiengesetz),

the amount of dividends available for distribution to
shareholders is based upon the unappropriated accu-
mulated earnings of DaimlerChrysler AG (parent com-
pany only) as reported in its statutory financial state-
ments determined in accordance with the German com-
mercial code (Handelsgesetzbuch). For the year ended
December 31, 2001, DaimlerChrysler management has
proposed a distribution of €1,003 million (€1 per share)
of the 2001 earnings of DaimlerChrysler AG as a
dividend to the stockholders.

98 Notes to Consolidated Balance Sheets

22. Stock-Based Compensation
The Group currently has various stock appreciation
rights (“SARs”) plans, two stock option plans and
a performance-based stock award plan.

Stock Appreciation-Based Plans
In 1999, DaimlerChrysler established a stock apprecia-
tion rights plan (the “SAR Plan 1999”) which provides
eligible employees of the Group with the right to re-
ceive cash equal to the appreciation of DaimlerChrysler
Ordinary Shares subsequent to the date of grant. The
stock appreciation rights granted under the SAR Plan
1999 vest in equal installments on the second and third
anniversaries from the date of grant. All unexercised
SARs expire ten years from the grant date. The exercise
price of a SAR is equal to the fair market value of
DaimlerChrysler’s Ordinary Shares on the date of grant.
On February 24, 1999, the Group issued 11.4 million
SARs at an exercise price of €89.70.

Outstanding at beginning of year

Granted

Exchange of stock Options for SARs

Exercised

Forfeited

Outstanding at year-end

SARs exercisable at year-end

The Group grants performance-based stock
awards to certain eligible employees with performance
periods of three years and track the value of
DaimlerChrysler Ordinary Shares. The amount ulti-
mately earned in cash compensation at the end of a
performance period is based on the degree of achieve-
ment of corporate goals. The Group issued 0.9 million
performance-based stock awards in 2001 (2000: 0.7
million; 1999: 0.7 million).

As discussed below, in the second quarter of 1999

DaimlerChrysler converted all options granted under
its existing stock option plans from 1997 and 1998 into
SARs.

In conjunction with the consummation of the
merger between Daimler-Benz and Chrysler in 1998,
the Group implemented a SAR plan through which 22.3
million SARs were issued at an exercise price of $75.56
each. The initial grant of SARs replaced Chrysler fixed
stock options that were converted to DaimlerChrysler
Ordinary Shares as of the consummation of the merger.
SARs which replaced stock options that were exercis-
able at the time of the consummation of the merger
were immediately exercisable at the date of grant.
SARs related to stock options that were not exercisable
at the date of consummation of the merger became ex-
ercisable in two installments; 50% on the six-month and
one-year anniversaries of the consummation date.

A summary of the activity related to the Group’s
SAR plans as of and for the years ended December 31,
2001, 2000 and 1999 is presented below (SARs in
millions):

2001
Weighted-
average
exercise
price

Number
of SARs

2000
Weighted-
average
exercise
price

1999
Weighted-
average
exercise
price

Number
of SARs

44.5

€82.87

45.8

€80.25

22.2

€64.58

–

11.4

89.70

15.2

79.79

(2.2)

64.91

(2.0)

85.93

(1.3)

78.52

(0.8)

76.07

42.5

84.75

44.5

82.87

45.8

80.25

42.5

€84.75

33.6

€80.63

26.8

€72.77

Compensation expense or benefit (representing
the reversal of previously recognized expense) on SARs
and performance-based stock awards is recorded based
on changes in the market price of DaimlerChrysler
Ordinary Shares and, in the case of performance-based
stock awards, the attainment of certain performance
goals. For the year ended December 31, 2001, the
Group recognized compensation expense of €17 million
and for the years ended December 31, 2000 and 1999,
the Group recognized compensation benefits of €44
million and €106 million, respectively, for SARs and
performance-based stock awards.

Notes to Consolidated Balance Sheets 99

Stock Option Plans
In April 2000, the Group’s shareholders approved the
DaimlerChrysler Stock Option Plan 2000 which pro-
vides for the granting of stock options for the purchase
of DaimlerChrysler Ordinary Shares to eligible
employees. Options granted under the Stock Option
Plan 2000 are exercisable at a reference price per
DaimlerChrysler Ordinary Share determined in ad-
vance plus a 20% premium. The options become exer-
cisable in equal installments on the second and third
anniversaries from the date of grant. All unexercised
options expire ten years from the date of grant. If the
market price per DaimlerChrysler Ordinary Share on
the date of exercise is at least 20% higher than the
reference price, the holder is entitled to receive a cash
payment equal to the original exercise premium of 20%.
In May 2000, certain shareholders challenged the ap-
proval of the Stock Option Plan 2000 at the stockhold-
ers’ meeting on April 19, 2000. In October 2000, the
Stuttgart District Court (Landgericht Stuttgart) dis-
missed the case and the Stuttgart Court of Appeals
(Oberlandesgericht Stuttgart) dismissed an appeal in
June 2001. The shareholders appealed the decision of
the Stuttgart Court of Appeals (a Revision) to the Fed-
eral Supreme Court (Bundesgerichtshof) in July 2001.
Since the approval of the Stock Option Plan 2000, the
Group issued 33.9 million options during the years
2001 and 2000 at reference prices of €55.80 and
€62.30, respectively.

DaimlerChrysler established, based on share-
holder approvals, the 1998, 1997 and 1996 Stock
Option Plans (former Daimler-Benz plans), which
provide for the granting of options for the purchase of

DaimlerChrysler Ordinary Shares to certain members
of management. The options granted under the plans
are evidenced by non-transferable convertible bonds
with a principal amount of €511 per bond due ten years
after issuance. During certain specified periods each
year, each convertible bond may be converted into 201
DaimlerChrysler Ordinary Shares, if the market price
per share on the day of conversion is at least 15 %
higher than the predetermined conversion price and
the options (granted in 1998 and 1997) have been held
for a 24 month waiting period. The specific terms of
these plans are as follows:

Bonds granted in

1996

1997

1998

Stated
interest
rate

Conver-
sion
price

Due

July 2006

5.9% €42.62

July 2007

5.3% €65.90

July 2008

4.4% €92.30

In the second quarter of 1999, DaimlerChrysler
converted all options granted under the 1998 and 1997
Stock Option Plans into SARs. All terms and conditions
of the new SARs are identical to the stock options
which were replaced, except that the holder of a SAR
has the right to receive cash equal to the difference
between the exercise price of the original option and
the fair value of the Group’s stock at the exercise date
rather than receiving DaimlerChrysler Ordinary Shares.
Analysis of the stock options issued to eligible

employees is as follows (options in millions):

Balance at beginning of year

Options granted

Bonds sold

Converted

Forfeited

Repayment

Exchanged for SARs

Outstanding at year-end

Exercisable at year-end

2001
Average
conversion
price per
share

Number
of stock
options

2000
Average
conversion
price per
share

Number
of stock
options

1999
Average
conversion
price per
share

Number
of stock
options

15.3

€74.65

0.1

€42.62

15.5

€79.63

18.7

66.96

15.2

74.76

–

(0.4)

70.08

–

(0.2)

79.10

(15.2)

79.79

33.6

70.43

15.3

74.65

0.1

42.62

0.1

€42.62

0.1

€42.62

0.1

€42.62

100 Notes to Consolidated Balance Sheets

a) Pension Plans and Similar Obligations
Pension plans and similar obligations are comprised of
the following components:

(in millions of €)

At December 31,
2000

2001

Pension liabilities (pension plans)

2,612

1,838

Accrued postretirement health and
life insurance benefits

Other benefit liabilities

9,442

8,636

593

677

12,647

11,151

As described in Note 5 and Note 7,

DaimlerChrysler implemented in 2001 restructuring
plans at Freightliner and Chrysler Group, including
certain workforce reduction initiatives. The impacts
from settlements and curtailments of these turnaround
plans on the pension and postretirement obligations
are contained in the following disclosures.

Pension Plans
The Group provides pension benefits to substantially all
of its hourly and salaried employees. Plan benefits are
principally based upon years of service. Certain pen-
sion plans are based on salary earned in the last year
or last five years of employment while others are fixed
plans depending on ranking (both wage level and
position).

At December 31, 2001, plan assets were invested
in diversified portfolios that consisted primarily of debt
and equity securities, including 2.0 million shares of
DaimlerChrysler Ordinary Shares with a market value
of €93 million in a U.S. plan. Assets and income accru-
ing on all pension trust and relief funds are used solely
to pay pension benefits and administer the plans.

Compensation expense of €19 million was recog-

nized in 2001 in connection with the stock option
plans (2000: expense of €13 million). No compensa-
tion expense was recognized in 1999.

Miscellaneous

DaimlerChrysler applies APB Opinion 25, “Ac-
counting for Stock Issued to Employees,” and related
interpretations in accounting for its stock-based com-
pensation plans. If compensation expense had been
based upon the fair value at the grant date, consistent
with the methodology prescribed under SFAS 123, “Ac-
counting for Stock Based Compensation,” the Group’s
net loss and basic and diluted loss per share in 2001
would have increased by approximately €72 million
(basic loss per share: €0.07; diluted earnings loss per
share: €0.07). In 2000, the Group’s net income and
basic and diluted earnings per share would have been
reduced by approximately €12 million (basic earnings
per share: €0.01; diluted earnings per share: €0.01).
No additional compensation expense would have been
recorded for the year ended December 31,1999 under
SFAS 123.

The fair value of the DaimlerChrysler stock op-
tions issued in 2001 and 2000 was calculated at the
grant date based on a trinomial tree option pricing
model which considers the terms of the issuance. The
underlying assumptions and the resulting fair value
per option are as follows (at grant dates):

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected lives (in years)

Fair value per option

2001

2000

4.6 %

3.8 %

33.0 % 25.0 %

4.2 %

4.8 %

€12.15

€9.50

23. Accrued Liabilities
Accrued liabilities are comprised of the following:

(in millions of €)

Pension plans and
similar obligations
(see Note 23a)

Income and other
taxes

Other accrued
liabilities
(see Note 23b)

2001
Due after
one year

Total

At December 31,
2000
Due after
one year

Total

12,647

11,650

11,151

10,200

2,393

651

2,192

474

26,530

10,104

23,098

7,901

41,570

22,405

36,441

18,575

Notes to Consolidated Balance Sheets 101

The following information with respect to the
Group’s pension plans is presented by German Plans
and non-German Plans (principally comprised of plans
in the U.S.):

A reconciliation of the funded status to the
amounts recognized in the consolidated balance sheets
is as follows:

At December 31,
2001
Non-
German
Plans

German
Plans

At December 31,
2000
Non-
German
Plans

German
Plans

(in millions of €)

At December 31,
2001
Non-
German
Plans

German
Plans

At December 31,
2000
Non-
German
Plans

German
Plans

Funded status*)

2,980

1,671 (4,084)

(in millions of €)

Change in projected
benefit obligations:

Projected benefit
obligations at
beginning of year

Foreign currency
exchange rate
changes

Service cost

Interest cost

9,579

21,878

13,123

19,578

–

1,026

–

1,403

198

404

612

1,696

242

696

433

1,570

Plan amendments

109

148

Actuarial (gains)
losses

Dispositions

Acquisitions and
other

Settlement/
curtailment loss

Benefits paid

613

563

(732)

(257)

(179)

(765)

(3,365)

(31)

140

144

411

964

–

(483)

(1,761)

(531)

(1,377)

Projected benefit obli-
gations at end of year

10,483

24,139

9,579

21,878

Unrecognized
actuarial net gains
(losses)

Unrecognized prior
service cost

Unrecognized net
obligation at date of
initial application

Net liability (asset)
recognized

Amounts recognized
in the consolidated
balance sheets
consist of:

Prepaid pension
cost

Accrued pension
liability

Accumulated other
comprehensive
income

Net liability (asset)
recognized

(2,168)

(4,112)

(123)

1,102

(5)

(3,261)

(8)

(3,496)

–

(24)

–

(153)

807

(7,383)

1,540

(6,631)

–

(7,584)

–

(6,799)

298

(95)

(35)

–

(1,357)

(110)

807

(7,383)

1,540

(6,631)

2,164

448

1,540

Intangible assets

–

(137)

Change in plan assets:

Fair value of plan
assets at beginning
of year

Foreign currency
exchange rate
changes

Actual return on
plan assets

Employer
contributions

Plan participant
contributions

Dispositions

Acquisitions and
other

7,908

25,962

7,034

25,823

*) Difference between the projected benefit obligations and

the fair value of plan assets.

–

1,199

–

1,897

(720)

(1,309)

458

(755)

713

843

1,419

–

(865)

(579)

–

(15)

303

Benefits paid

(398)

(1,747)

(409)

(1,365)

Fair value of plan
assets at end of year

7,503

24,125

7,908 25,962

102 Notes to Consolidated Balance Sheets

The measurement dates for the Group’s pension

plans in Germany are September 30 and in the U.S. are
November 30 or December 31. Assumed discount rates
and rates of increase in remuneration used in calculat-
ing the projected benefit obligations together with long-

term rates of return on plan assets vary according to
the economic conditions of the country in which the
pension plans are situated. The weighted-average as-
sumptions used in calculating the actuarial values for
the principal pension plans were as follows (in %):

German Plans
2000

2001

1999

Non-German Plans
2000

2001

1999

Weighted-average assumptions:

Discount rate

Expected return on plan assets

Rate of compensation increase

6.0

7.9

3.0

6.5

7.9

3.0

6.0

7.7

2.8

7.4

10.1

5.4

7.7

10.2

5.5

7.5

9.8

5.9

The components of net pension cost were as follows for
the years ended December 31, 2001, 2000 and 1999:

2001
Non-
German
Plans

German
Plans

2000
Non-
German
Plans

German
Plans

1999
Non-
German
Plans

German
Plans

198

404

612

1,696

242

696

433

1,570

267

756

430

1,185

(649)

(2,750)

(625)

(2,487)

(223)

(1,872)

–

(11)

356

148

–

161

(157)

162

625

468

–

318

–

318

(18)

371

146

(6)

–

214

129

802

129

–

802

129

(in millions of €)

Service cost

Interest cost

Expected return on plan assets

Amortization of:

Unrecognized net actuarial (gains) losses

Unrecognized prior service cost

Unrecognized net obligation

Other

Net periodic pension cost (benefit)

Settlement/curtailment loss

Net pension cost

The accumulated benefit obligations and fair value

of plan assets for pension plans with accumulated
benefit obligations in excess of plan assets were €10,224
million and €7,934 million, respectively, as of Decem-
ber 31, 2001 and €1,697 million and €343 million,
respectively, as of December 31, 2000.

Other Postretirement Benefits
Certain DaimlerChrysler operations in the U.S. and
Canada provide postretirement health and life insur-
ance benefits to their employees. Upon retirement from
DaimlerChrysler the employees may become eligible
for continuation of these benefits. The benefits and
eligibility rules may be modified periodically.

At December 31, 2001, plan assets were invested
in diversified portfolios that consisted primarily of debt
and equity securities.

Notes to Consolidated Balance Sheets 103

The following information is presented with
respect to the Group’s postretirement benefit plans:

(in millions of €)

At December 31,
2000

2001

Change in accumulated postretirement
benefit obligations:

Accumulated postretirement benefit
obligations at beginning of year

12,857

10,527

Assumed discount rates and rates of increase in

remuneration used in calculating the accumulated
postretirement benefit obligations together with long-
term rates of return on plan assets vary according to
the economic conditions of the country in which the
plans are situated. The weighted-average assumptions
used in calculating the actuarial values for the
postretirement benefit plans were as follows (in %):

2001

2000

1999

Weighted-average assumptions
at December 31:

Discount rate

7.4

7.7

Expected return on plan
assets

Health care inflation rate in
following (or “base”) year

Ultimate health care
inflation rate (2005)

10.5

10.4

10.0

6.9

7.5

5.8

5.0

The components of net postretirement benefit cost

were as follows for the years ended December 31,
2001, 2000 and 1999:

(in millions of €)

2001

2000

1999

Service cost

Interest cost

257

1,033

208

873

209

702

Expected return on plan assets

(346)

(308)

(169)

Amortization of:

Unrecognized net actuarial
(gains) losses

Unrecognized prior service
cost

Other

Net periodic postretirement
benefit cost

(7)

–

(2)

–

1,019

830

783

Settlement/curtailment loss

154

–

Net postretirement benefit
cost

1,173

830

783

Foreign currency exchange rate
changes

Service cost

Interest cost

Plan amendments

Actuarial losses

Settlement/curtailment loss

Acquisitions and other

Benefits paid

Accumulated postretirement benefit
obligations at end of year

652

257

1,033

(18)

941

186

(13)

829

208

873

444

523

–

107

(800)

(654)

15,095

12,857

Change in plan assets:

Fair value of plan assets at beginning
of year

2,995

2,816

Foreign currency exchange rate
changes

Actual losses on plan assets

Employer contributions

Benefits paid

167

(181)

(8)

224

(55)

(6)

Fair value of plan assets at end of year

2,982

2,995

A reconciliation of the funded status to the liabil-

ity recognized for accrued postretirement health and
life insurance benefits in pension plans and similar
obligations is as follows:

(in millions of €)

Funded status*)

At December 31,
2000

2001

12,113

9,862

Unrecognized actuarial net losses

(1,828)

(270)

Unrecognized prior service cost

Net liability recognized

(843)

(956)

9,442

8,636

*) Difference between the accumulated postretirement

obligations and the fair value of plan assets.

104 Notes to Consolidated Balance Sheets

The following schedule presents the effects of a
one-percentage-point change in assumed health care
cost trend rates:

(in millions of €)

Effect on total of service and interest
cost components

Effect on accumulated postretirement
benefit obligations

Prepaid Employee Benefits
In 1996 DaimlerChrysler established a Voluntary
Employees’ Beneficiary Association (“VEBA”) trust for
payment of non-pension employee benefits. At Decem-
ber 31, 2001 and 2000, the VEBA had a balance of
€3,648 million and €3,586 million, respectively, of
which €2,848 million and €2,864 million, respectively,
were designated and restricted for the payment of
postretirement health care benefits. Contributions to
the VEBA trust during the year ended December 31,
1999 were €727 million. No contributions to the VEBA
trust were made in 2001 and 2000.

b) Other Accrued Liabilities
Other accrued liabilities consisted of the following:

(in millions of €)

At December 31,
2000

2001

Accrued warranty costs and price risks

9,213

7,715

Accrued losses on uncompleted
contracts

Restructuring

549

1,190

804

260

Accrued personnel and social costs

2,386

2,503

Accrued sales incentives

Other

3,771

3,588

9,421

8,228

26,530

23,098

Accruals for restructuring comprise certain

employee termination benefits and costs which are
directly associated with plans to exit specified activities.
The changes in these provisions are summarized as
follows:

(in millions of €)

Termination
benefits

Exit
costs

Total
liabilities

1-Percen-
tage
Point
Increase

1-Percen-
tage
Point
Decrease

170

(140)

Balance at January 1, 1999

Utilizations and transfers

1,681

(1,421)

Reductions

Additions

Balance at December 31, 1999

Utilizations and transfers

Reductions

Additions

Balance at December 31, 2000

560

(321)

(15)

183

407

(229)

(43)

151

(9)

101

188

(56)

(34)

109

635

(300)

(24)

284

595

(285)

(77)

260

Utilizations and transfers

(947)

(275)

(1,222)

Reductions

Additions

Balance at December 31, 2001

(135)

(144)

(279)

1,504

573

927

617

2,431

1,190

In connection with the Group’s restructuring,

provisions were recorded for termination benefits of
€1,504 million (2000: €16 million; 1999: €183 million),
in 2001 principally within Chrysler Group (see Note 7)
and Freightliner (see Note 5), in 2000 principally
within Mercedes-Benz Passenger Cars & smart and
Commercial Vehicles and in 1999 principally within in-
dustrial businesses and DaimlerChrysler Aerospace. In
connection with these restructuring efforts, the Group
effected workforce reductions of approximately 17,700
employees (2000: 2,600; 1999: 2,400) and paid termi-
nation benefits of €269 million (2000: €135 million;
1999: €239 million), of which €227 million (2000: €120
million; 1999: €168 million) were charged against pre-
viously established liabilities. At December 31, 2001
the Group had liabilities for estimated future termina-
tions for approximately 6,800 employees.

Exit costs in 2001 primarily result from the
restructuring within Chrysler Group and Freightliner.
In 2000 and 1999 exit costs primarily result from the
restructuring of industrial businesses.

Notes to Consolidated Balance Sheets 105

Aggregate nominal amounts of financial liabilities
maturing during the next five years and thereafter are
as follows:

(in millions
of €)

Financial
liabilities

2002

2003

2004

2005

2006

there-
after

33,900 15,953

9,372

8,849

8,421 13,615

At December 31, 2001, the Group had unused

short-term credit lines of €5,796 million (2000:
€15,216 million) and unused long-term credit lines of
€20,322 million (2000: €12,819 million). The credit
lines include an $18 billion revolving credit facility
with a syndicate of international banks. The credit
agreement is comprised of a multi-currency revolving
credit facility which allows DaimlerChrysler AG and
several subsidiaries to borrow up to $5 billion until
2006, a U.S. dollar revolving credit facility which al-
lows DaimlerChrysler North America Holding Corpora-
tion, a wholly-owned subsidiary of DaimlerChrysler
AG, to borrow up to $6 billion available until 2004, and
a multi-currency revolving credit facility for working
capital purposes which allows DaimlerChrysler AG and
several subsidiaries to borrow up to $7 billion until
2003. A part of the $18 billion facility serves as a
back-up for commercial paper drawings.

24. Financial Liabilities

(in millions of €)

Notes/Bonds

Commercial paper

Liabilities to financial
institutions

Liabilities to affiliated
companies

Loans, other financial liabilities

Liabilities from capital lease
and residual value guarantees

Short-term financial liabilities
(due within one year)

Notes/Bonds

of which due in more than
five years: €10,712 (2000:
€7,673)

Liabilities to financial
institutions

of which due in more
than five years:
€2,702 (2000: €2,088)

Liabilities to affiliated
companies

of which due in more than
five years: €– (2000: €–)

Loans, other financial liabilities
of which due in more than
five years: €66 (2000: €51)

Liabilities from capital lease
and residual value guarantees
of which due in more than
five years €209
(2000: €226)

Long-term financial liabilities

At December 31,
2000

2001

17,726

8,094

7,480

19,917

7,183

6,294

361

345

205

1,106

985

33,942

35,840

47,632

40,773

Maturities
2003–
2097

2003–
2019

8,194

6,800

149

118

987

1,103

56,966

48,943

90,908

84,783

Weighted average interest rates for notes/bonds,

commercial paper and liabilities to financial institutions
are 6.3%, 3.3% and 5.4%, respectively, at December 31,
2001.

Commercial paper is denominated in euros and
U.S. dollars and includes accrued interest. Bonds and li-
abilities to financial institutions are largely secured by
mortgage conveyance, liens and assignment of receiv-
ables of approximately €1,804 million (2000: €1,858
million).

106 Notes to Consolidated Balance Sheets

25. Trade Liabilities

(in millions of €)

Trade liabilities

26. Other Liabilities

(in millions of €)

Liabilities to affiliated companies

Liabilities to related companies

Other liabilities

As of December 31, 2001, other liabilities include
tax liabilities of €620 million (2000: €683 million) and
social benefits due of €877 million (2000: €713 million).

27. Deferred Income
As of December 31, 2001, €1,911 million of the total
deferred income is to be recognized after more than
one year (2000: €1,057 million).

At December 31, 2001
Due after
five years

Due after
one year

Total

At December 31, 2000
Due after
five years

Due after
one year

Total

14,157

15,257

At December 31, 2001
Due after
five years

Due after
one year

Total

At December 31, 2000
Due after
five years

Due after
one year

Total

416

293

9,553

10,262

828

–

232

536

794

–

8,291

1,283

9,621

1,284

–

161

162

Other Notes 107

Other Notes

28. Litigation and Claims
A number of shareholder lawsuits, including a class ac-
tion lawsuit, are pending in the United States against
DaimlerChrysler and certain members of its Supervi-
sory Board and Board of Management. The lawsuits
allege that the defendants violated U.S. securities law
and committed fraud in obtaining approval from
Chrysler stockholders for the business combination
between Chrysler and Daimler-Benz AG in 1998. The
class action lawsuit also alleges that DaimlerChrysler
made false and misleading statements in 1999 and
2000 regarding its prospects for the year 2000. The
complaints seek relief ranging from substantial mon-
etary damages to rescinding the business combination.
DaimlerChrysler believes that these claims are without
merit and is defending itself against them vigorously.
Motions to dismiss all lawsuits are pending before the
court.

Various other claims and legal proceedings have

been asserted or instituted against the Group, including
product liability and other lawsuits, some of which
purport to be class actions. In the event of adverse deci-
sions in these proceedings, DaimlerChrysler could be
required to pay substantial compensatory and punitive
damages, or undertake service actions, recall cam-
paigns or other costly actions. Litigation is subject to
many uncertainties, and the outcome of individual mat-
ters is not predictable with assurance. It is reasonably
possible that the final resolution of some of these mat-
ters may require the Group to make expenditures, in
excess of established reserves, over an extended period
of time and in a range of amounts that cannot be rea-
sonably estimated. The term “reasonably possible” is
used herein to mean that the chance of a future trans-
action or event occurring is more than remote but less
than likely. Although the final resolution of any such
matters could have a material effect on the Group’s con-
solidated operating results for the particular reporting
period in which an adjustment of the estimated reserve
is recorded, the Group believes that any resulting
adjustment should not materially affect its consolidated
financial position.

29. Commitments and Contingencies
Contingent liabilities not recognized on the consoli-
dated balance sheets are presented at their contractual
values and include the following:

(in millions of €)

Guarantees

Notes payable

Contractual guarantees

Pledges of indebtedness of others

At December 31,
2000

2001

3,669

8,018

408

430

354

455

4,539

8,848

Contingent liabilities principally represent guaran-
tees of indebtedness of non-consolidated affiliated com-
panies and third parties and commitments by Group
companies as to contractual performance by joint ven-
ture companies and certain non-incorporated compa-
nies, partnerships and project groups.

DaimlerChrysler is subject to potential liability

under government regulations and various claims and
legal actions which are pending or may be asserted
against DaimlerChrysler concerning environmental
matters. Estimates of future costs of such environmen-
tal matters are inevitably imprecise due to numerous
uncertainties, including the enactment of new laws and
regulations, the development and application of new
technologies, the identification of new sites for which
DaimlerChrysler may have remediation responsibility
and the apportionment and collectibility of remediation
costs among responsible parties.

DaimlerChrysler establishes reserves for these
environmental matters when a loss is probable and
reasonably estimable. It is reasonably possible that the
final resolution of some of these matters may require
DaimlerChrysler to make expenditures, in excess of es-
tablished reserves, over an extended period of time and
in a range of amounts that cannot be reasonably esti-
mated. Although the final resolution of any such mat-
ters could have a material effect on DaimlerChrysler’s
consolidated operating results for the particular report-
ing period in which an adjustment of the estimated
reserve is recorded, DaimlerChrysler believes that any
resulting adjustment should not materially affect its
consolidated financial position.

DaimlerChrysler periodically initiates voluntary
service actions and recall actions to address various
customer satisfaction, safety and emissions issues
related to vehicles it sells. DaimlerChrysler establishes
reserves for product warranty, including the estimated
cost of these service and recall actions, when the re-
lated sale is recognized. The estimated future costs of
these actions are based primarily on prior experience.
Estimates of the future costs of these actions are inevi-
tably imprecise due to numerous uncertainties, includ-
ing the enactment of new laws and regulations, the
number of vehicles affected by a service or recall ac-
tion, and the nature of the corrective action which may
result in adjustments to the established reserves. It is
reasonably possible that the ultimate cost of these ser-
vice and recall actions may require DaimlerChrysler to
make expenditures, in excess of established reserves,
over an extended period of time and in a range of
amounts that cannot be reasonably estimated. Although
the ultimate cost of these service and recall actions
could have a material effect on DaimlerChrysler’s con-
solidated operating results for the particular reporting

108 Other Notes

period in which an adjustment of the estimated reserve
is recorded, DaimlerChrysler believes that any such
adjustment should not materially affect its consolidated
financial position.

In connection with certain production programs
the Group has committed to certain levels of outsourced
manufactured parts and components over extended
periods at market prices. The Group may be required
to compensate suppliers in the event the committed vol-
umes are not purchased. The Group has also committed
to investments in the construction and maintenance of
production facilities to a usual extent.

Total rentals under operating leases, charged as
an expense in the statement of income (loss), amounted
to €819 million (2000: €881 million; 1999: €964 mil-
lion). Future minimum lease payments under noncan-
cellable rental and lease agreements which have initial
or remaining terms in excess of one year at
December 31, 2001 are as follows:

(in millions of €)

2002

2003

2004

2005

2006

thereafter

Operating
leases

603

457

369

307

279

813

30. Information About Financial Instruments and

Derivatives

a) Use of Financial Instruments
The Group conducts business on a global basis in nu-
merous major international currencies and is, therefore,
exposed to adverse movements in foreign currency ex-
change rates. The Group also issues bonds, commercial
paper and medium-term-notes in various currencies.
As a consequence of issuing these types of financial in-
struments, the Group is exposed to risks from changes
in interest and foreign currency exchange rates.
DaimlerChrysler holds financial instruments, such as
financial investments, variable- and fixed-interest bear-
ing securities and equity securities that subject the
Group to risks from changes in interest rates and mar-
ket prices. DaimlerChrysler manages the various types
of market risks by using derivative financial instru-
ments. Without these instruments, the Group’s market
risks would be higher.

Based on regulations issued by regulatory authori-
ties for financial institutions, the Group has established
guidelines for risk controlling procedures and for the
use of financial instruments, including a clear segrega-
tion of duties with regard to operating financial activi-
ties, settlement, accounting and controlling.

Market risks are quantified according to the
“value-at-risk” method, which is commonly used among
banks. Using historical variability of market data,
potential changes in value resulting from changes of
market prices are calculated on the basis of statistical
methods.

b) Fair value of Financial Instruments
The fair value of a financial instrument is the price at
which one party would assume the rights and/or duties
of another party. Fair values of financial instruments
have been determined with reference to available mar-
ket information at the balance sheet date and the valua-
tion methodologies discussed below. Considering the
variability of their value-determining factors, the fair
values presented herein are only an estimation of the
amounts that the Group could realize under current
market conditions.

The carrying amounts and fair values of the

Group’s financial instruments are as follows:

At December 31,
2001
Fair
value

Carrying
amount

At December 31,
2000
Fair
value

Carrying
amount

(in millions of €)

Financial instruments
(other than derivative
instruments):

Assets:

Financial assets

1,209

1,930

Receivables
from financial
services

Securities

Cash and cash
equivalents

Other

Liabilities:

Financial
liabilities

Derivative
instruments:

Assets:

Currency
contracts

Interest rate
contracts

49,512

49,678

48,673

49,377

3,007

5,378

11,428

7,127

90,908

94,513

84,783

86,265

477

306

1,011

556

Equity contracts

Liabilities:

Currency
contracts

Interest rate
contracts

806

1,257

1,434

1,004

Equity contracts

Other Notes 109

The carrying amounts of cash and other receiv-
ables approximate fair values due to the short-term
maturities of these instruments.

The methods and assumptions used to determine
the fair values of other financial instruments are sum-
marized below:

Financial Assets and Securities – The fair values of
securities were estimated using quoted market prices.
The Group has certain equity investments in related
and affiliated companies not presented in the table, as
these investments are not publicly traded and determi-
nation of fair values is impracticable.

c) Credit Risk
The Group is exposed to credit-related losses in the
event of non-performance by counterparties to financial
instruments. Counterparties to the Group’s financial in-
struments represent, in general, international financial
institutions. DaimlerChrysler does not have a signifi-
cant exposure to any individual counterparty, based on
the rating of the counterparties performed by estab-
lished rating agencies. The Group believes the overall
credit risk related to utilized derivatives is insignifi-
cant.

Receivables from Financial Services – The carrying

d) Accounting for and Reporting of Financial

amounts of variable rate finance receivables were
estimated to approximate their fair values since the
contract rates of those receivables approximate current
market rates. The fair values of fixed rate finance re-
ceivables were estimated by discounting expected cash
flows using the current interest rates at which compa-
rable loans with identical maturity would be made as of
December 31, 2001 and 2000.

The fair values of residual cash flows and other

subordinated amounts arising from receivable sale
transactions were estimated by discounting expected
cash flows at current interest rates.

Financial Liabilities – The fair value of publicly
traded debt was estimated using quoted market prices.
The fair values of other long-term notes and bonds were
estimated by discounting future cash flows using mar-
ket interest rates. The carrying amounts of commercial
paper and borrowings under revolving credit facilities
were assumed to approximate fair value due to their
short maturities.

Interest Rate Contracts – The fair values of existing

instruments to hedge interest rate risks (e.g. interest
rate swap agreements) were estimated by discounting
expected cash flows using market interest rates over
the remaining term of the instrument. Interest rate
options are valued on the basis of quoted market prices
or on estimates based on option pricing models.

Currency Contracts – The fair values of forward
foreign exchange contracts were based on European
Central Bank reference exchange rates adjusted for
the respective interest rate differentials (premiums
or discounts). Currency options were valued on the
basis of quoted market prices or on estimates based
on option pricing models.

Equity Contracts – The fair values of existing

instruments to hedge equity price risk (e. g. futures
or options) were determined on the basis of quoted
market prices or on estimates based on option pricing
models.

Instruments (Other than Derivative Instruments)
The income or expense of the Group’s financial instru-
ments (other than derivative instruments), with the
exception of receivables from financial services and fi-
nancial liabilities related to leasing and sales financing
activities, is recognized in financial income, net. Inter-
est income on receivables from financial services and
gains and losses from sales of receivables are recog-
nized as revenues. Interest expense on financial liabili-
ties related to leasing and sales financing activities are
recognized as cost of sales. The carrying amounts of
the financial instruments (other than derivative instru-
ments) are included in the consolidated balance sheets
under their related captions.

e) Accounting for and Reporting of Derivative

Instruments and Hedging Activities

Foreign Currency Risk Management
As a consequence of the global nature of
DaimlerChrysler’s businesses, its operations and its re-
ported financial results and cash flows are exposed to
the risks associated with fluctuations in the exchange
rates of the U.S. dollar, the euro and other world cur-
rencies. The Group’s businesses are exposed to trans-
action risk whenever revenues of a business are
denominated in a currency other than the currency
in which the business incurs the costs relating to those
revenues. This risk exposure primarily affects the
Mercedes-Benz Passenger Cars & smart segment.
The Mercedes-Benz Passenger Cars & smart segment
generates its revenues mainly in the currencies of the
countries in which cars are sold, but it incurs
manufacturing costs primarily in euros.

110 Other Notes

In order to mitigate the impact of currency ex-

change rate fluctuations, DaimlerChrysler continually
assesses its exposure to currency risks and hedges a
portion of those risks through the use of derivative
financial instruments. Responsibility for managing
DaimlerChrysler’s currency exposures and use of
currency derivatives is centralized within the Group’s
Currency Committee. The Currency Committee, which
consists of two separate subgroups, one for the Group’s
vehicle businesses and one for MTU Aero Engines, is
comprised of members of senior management from
each of the respective businesses as well as from Cor-
porate Treasury and Risk Controlling. Corporate Trea-
sury implements decisions concerning foreign currency
hedging taken by the Currency Committee. Risk Con-
trolling regularly informs the Board of Management of
the actions of Corporate Treasury based on the deci-
sions of the Currency Committee.

Interest Rate and Equity Price Risk Management
DaimlerChrysler holds a variety of interest rate sensi-
tive assets and liabilities to manage the liquidity and
cash needs of its day-to-day operations. In addition a
substantial volume of interest rate sensitive assets and
liabilities is related to the leasing and sales financing
business which is operated by DaimlerChrysler
Services. In particular, the Group’s leasing and sales
financing business enters into transactions with
customers, primarily resulting in fixed rate receivables.
DaimlerChrysler’s general policy is to match funding in
terms of maturities and interest rates. However, for a
limited portion of the receivables portfolio funding does
not match in terms of maturities and interest rates. As
a result, DaimlerChrysler is exposed to risks due to
changes in interest rates. DaimlerChrysler coordinates
funding activities of the industrial business and finan-
cial services on the group level. The Group uses inter-
est rate derivative instruments such as interest rate
swaps, forward rate agreements, swaptions, caps and
floors to achieve the desired interest rate maturities
and asset/liability structures.

DaimlerChrysler does not enter into these types of

derivative financial instruments for purposes other
than risk management.

The Group assesses interest rate risk by continu-

ally identifying and monitoring changes in interest rate
exposures that may adversely impact expected future
cash flows and by evaluating hedging opportunities.

The Group maintains risk management control
systems independent of Corporate Treasury to monitor
interest rate risk attributable to both DaimlerChrysler’s
outstanding or forecasted interest rate exposures as
well as its offsetting hedge positions. The risk manage-
ment control systems involve the use of analytical tech-
niques, including value-at-risk analyses, to estimate the
expected impact of changes in interest rates on the
Group’s future cash flows.

DaimlerChrysler also holds investments in equity
securities. These securities subject DaimlerChrysler to
risks due to changes in quoted market prices.
DaimlerChrysler uses derivative financial instruments
including futures and options to manage the risks
arising from changes in equity prices.

The Group assesses equity price risk by continu-
ally monitoring changes in key economic, industry and
market information and maintains risk management
control systems independent of Corporate Treasury to
monitor risks attributable to both DaimlerChrysler’s in-
vestments as well as its offsetting hedge positions. The
risk management control systems involve the use of
analytical techniques, including value-at-risk analyses,
to estimate the potential loss and manage the risks of
the Group’s investments.

Information with Respect to Fair Value Hedges
Gains and losses in fair value of recognized assets and
liabilities and firm commitments of operating transac-
tions as well as gains and losses on derivative financial
instruments designated as fair value hedges of these
recognized assets and liabilities and firm commitments
are principally recognized currently in revenues, as the
principal transactions being hedged involve sales of the
Group’s products. Net gains and losses in fair value of
both recognized financial assets and liabilities and de-
rivative financial instruments designated as fair value
hedges of these financial assets and liabilities are
recognized currently in financial income, net.

For the year ended December 31, 2001, net losses

of €17 million (2000: net gains of €15 million) were
recognized in revenues and financial income, net, re-
presenting principally the component of the derivative
instruments’ gain or loss excluded from the assessment
of hedge effectiveness and the amount of hedging
ineffectiveness.

Other Notes 111

Information with Respect to Cash Flow Hedges
Changes in the value of forward foreign currency ex-
change contracts and currency options designated and
qualifying as cash flow hedges of forecasted transac-
tions are reported in accumulated other comprehensive
income. These amounts are subsequently reclassified
into earnings, as a component of the value of the fore-
casted transaction, in the same period as the forecasted
transaction affects earnings. Changes in the fair value
of interest rate swaps designated as hedging instru-
ments of variability of cash flows associated with vari-
able-rate long-term debt are also reported in accumu-
lated other comprehensive income. These amounts are
subsequently reclassified into financial income, net,
as a yield adjustment in the same period in which the
related interest on the floating-rate debt obligations
affect earnings.

For the year ended December 31, 2001, net losses

of €12 million (2000: net losses of €3 million), repre-
senting principally the component of the derivative in-
struments’ gain/loss excluded from the assessment of
the hedge effectiveness and the amount of hedge inef-
fectiveness, were recognized in revenues and financial
income, net.

Also included in earnings are gains of €1 million
for the year ended December 31, 2001 (2000: gains of
€2 million), reclassified from accumulated other com-
prehensive income as a result of the discontinuance of
foreign currency cash flow hedges because it was
probable that the original forecasted transaction would
not occur.

It is anticipated that €101 million of net losses in-
cluded in accumulated other comprehensive income at
December 31, 2001, will be reclassified into earnings
during the next year.

As of December 31, 2001, DaimlerChrysler held

derivative financial instruments with a maximum
maturity of 44 months to hedge its exposure to the
variability in future cash flows from foreign currency
forecasted transactions.

Information with Respect to Hedges of the Net Investment
in a Foreign Operation
In specific circumstances, DaimlerChrysler seeks to
hedge the currency risk inherent in certain of its long-
term investments, where the functional currency is
other than the euro, through the use of derivative and
non-derivative financial instruments. For the year
ended December 31, 2001, net gains of €53 million
(2000: net gains of €104 million) hedging the Group’s
net investments in certain foreign operations were
included in the cumulative translation adjustment.

f) Accounting for and Reporting of Financial

Instruments (Prior to Adoption of SFAS 133)

For periods prior to January 1, 2000, financial instru-
ments, including derivatives, purchased to offset the
Group’s exposure to identifiable and committed trans-
actions with price, interest or currency risks were
accounted for together with the underlying business
transactions (“hedge accounting”). Gains and losses on
forward contracts and options hedging firm foreign
currency commitments were deferred off-balance sheet
and were recognized as a component of the related
transactions, when recorded (the “deferral method”).
However, a loss was not deferred if deferral would have
lead to the recognition of a loss in future periods.

In the event of an early termination of a currency
exchange agreement designated as a hedge, the gain or
loss continued to be deferred and was included in the
settlement of the underlying transaction.

Interest differentials paid or received under
interest rate swaps purchased to hedge interest risks
on debt were recorded as adjustments to the effective
yields of the underlying debt (“accrual method”).

In the event of an early termination of an interest
rate related derivative designated as a hedge, the gain
or loss was deferred and recorded as an adjustment to
interest income, net over the remaining term of the
underlying financial instrument.

All other financial instruments, including deriva-
tives, purchased to offset the Group’s net exposure to
price, interest or currency risks, but which were not
designated as hedges of specific assets, liabilities or
firm commitments were marked to market and any
resulting unrealized gains and losses were recognized
currently in financial income, net. The carrying
amounts of derivative instruments were included
under other assets and accrued liabilities.

Derivatives purchased by the Group under macro-

hedging techniques, as well as those purchased to
offset the Group’s exposure to anticipated cash flows,
did not generally meet the requirements for applying
hedge accounting and were, accordingly marked to
market at each reporting period with unrealized gains
and losses recognized in financial income, net. When
the Group met the requirements for hedge accounting
and designated the derivative financial instrument as a
hedge of a committed transaction, subsequent unreal-
ized gains and losses were deferred and recognized
along with the effects of the underlying transaction.

112 Other Notes

31. Retained Interests in Sold Receivables and Sales of

Actual and projected credit losses for receivables

Finance Receivables

securitized were as follows:

The fair value of retained interests in sold receivables
was as follows:

(in millions of €)

At December 31,
2000

2001

Fair value of estimated residual cash
flows, net of prepayments, from sold
receivables, before expected future net
credit losses

Expected future net credit losses
on sold receivables

Fair value of net residual cash flows
from sold receivables

Restricted cash accounts

Retained subordinated securities

Retained interests in sold receivables,
at fair value

5,311

4,319

(787)

(389)

4,524

3,930

956

202

684

Actual and projected
credit losses
Percentages as of:

1998

Receivables securitized in
2000
2001
1999

December 31, 2001

2.8%

2.2%

December 31, 2000

December 31, 1999

2.1%

1.6%

1.1%

1.0%

2.4%

1.7%

1.2%

Static pool losses are calculated by summing the
actual and projected future credit losses and dividing
them by the original balance of each pool of assets.
The amount shown above for each year is a weighted
average for all securitizations during that year and
outstanding at December 31, 2001.

Certain cash flows received and paid to

5,482

4,816

securitization trusts were as follows:

(in millions of €)

2001

2000

Proceeds from new securitizations

18,219

15,883

Proceeds from collections reinvested in
previous wholesale securitizations

56,040

46,285

Amounts reinvested in previous
wholesale securitizations

Servicing fees received

Receipt of cash flows on retained
interest in securitized receivables

(56,040)

(46,122)

353

283

580

435

At December 31, 2001, the significant assump-
tions used in estimating the residual cash flows from
sold receivables and the sensitivity of the current fair
value to immediate 10% and 20% adverse changes are
as follows:

(in millions of €)

Impact on fair value
based on adverse
10%
change

20%
change

Assumption
percentage

Prepayment speed, monthly

1.5%

(8)

(14)

Estimated net credit losses as
a percentage of receivables
sold

Residual cash flow discount
rate, annualized

1.3%

(66)

(132)

12.0%

(65)

(127)

These sensitivities are hypothetical and should be
used with caution. The effect of a variation in a particu-
lar assumption on the fair value of the retained interest
is calculated without changing any other assumption;
in reality, changes in one assumption may result in
changes in another, which might magnify or counteract
the sensitivities.

Other Notes 113

The outstanding balance, delinquencies and net
credit losses of sold receivables and other receivables,
of those financial services businesses that sell receiv-
ables, as of and for the years ended December 31, 2001
and 2000, respectively, were as follows:

Retail receivables

Wholesale receivables

Total receivables managed

Less: receivables sold

Receivables held in portfolio

Outstanding
balance at
2000

2001

Delinquencies
> 60 days at
2000

2001

Net credit losses
for the year ended
2000

2001

58,224

46,377

17,448

17,747

75,672

64,124

584

608

232

251

691

709

576

578

(42,763)

(37,904)

(182)

(117)

(310)

(251)

32,909

26,220

426

134

399

327

During the year ended December 31, 2001,
DaimlerChrysler sold €19,290 million (2000: €17,122
million) and €57,372 million (2000: €38,778 million)
retail and wholesale receivables, respectively. From
these transactions, the Group recognized gains of €414
million (2000: €181 million) and €182 million
(2000: €156 million) on sales of retail and wholesale
receivables, respectively.

Significant assumptions used in measuring the
residual interest resulting from the sale of retail and
wholesale receivables, were as follows (weighted aver-
age rates for securitizations completed during the year)
at December 31, 2001 and 2000:

2001

Retail
2000

Wholesale
2000

2001

Prepayment speed
assumption (monthly
rate)

Estimated remaining
lifetime net credit
losses (an average
percentage of sold
receivables)

Residual cash flows
discount rate (annual
rate)

1.0-1.5% 1.0-1.5%

2.4%

1.2%

0.0%

12.0%

10.0%

*) For the calculation of wholesale gains, the Group

estimated the average wholesale loan liquidated in 210 days.

32. Segment Reporting
In 2001, DaimlerChrysler reorganized some of its busi-
ness segments resulting in changes in the composition
of its reportable segments. Following the exchange in
July 2000 of the Group’s controlling interest in
DaimlerChrysler Aerospace for a non-controlling equity
method interest in EADS, DaimlerChrysler transferred
the remaining businesses of the former Aerospace seg-
ment and the investment in EADS to the Other Activi-

ties segment. In January 2001, DaimlerChrysler com-
bined the operations of MTU/Diesel Engines, which
was previously part of the Other Activities segment,
with the Mercedes-Benz powertrain business in a new
Powersystems business unit within Commercial Ve-
hicles segment. DaimlerChrysler has reclassified prior
period amounts to conform its segment presentation to
the new structure. Information with respect to the
Group’s industry segments follows:

Mercedes-Benz Passenger Cars & smart. This seg-

ment includes activities related mainly to the develop-
ment, manufacture and sale of passenger cars and off-
road vehicles under the brand names Mercedes-Benz
and smart as well as related parts and accessories.
Chrysler Group. This segment includes the re-
search, design, manufacture, assembly and sale of cars
and trucks under the brand names Chrysler, Jeep® and
Dodge and related automotive parts and accessories.
Commercial Vehicles. This segment is involved in

the development, manufacture and sale of vans, trucks,
buses and Unimogs as well as related parts and acces-
sories. The products are sold mainly under the brand
names Mercedes-Benz and Freightliner.

Services. The activities in this segment extend to
the marketing of services related to financial services
(principally retail and lease financing for vehicles and
dealer financing), insurance brokerage, trading and in-
formation technology. In October 2000, the information
technology activities were contributed into a joint
venture. The Group’s 49.9% interest in T-Systems ITS
is included at equity subsequent to that date. For the
exercise in January 2002 of DaimlerChrysler’s option
to sell its interest, see Note 34.

Other Activities. Represents principally the indus-
trial businesses including MTU Aero Engines and the
Group’s equity method investments in MMC, EADS and
Automotive Electronics. Other Activities also contains
corporate research, real estate activities and holding
and financing companies.

114 Other Notes

The Group’s management reporting and control-

Sales and revenues related to transactions be-

ling systems are substantially the same as those de-
scribed in Note 1 in the summary of significant account-
ing policies (U.S. GAAP). The Group measures the per-
formance of its operating segments through “Operating
Profit.” Segment Operating Profit is defined as income
(loss) before financial income included in the consoli-
dated statement of income (loss), modified to exclude
pension and postretirement benefit expenses other
than service costs, to include pretax operating income
(loss) from affiliated and associated companies, to in-
clude financial income (loss) from related companies,
and to include or exclude certain miscellaneous items.

tween segments are generally recorded at values that
approximate third-party selling prices.

Revenues are allocated to countries based on the
location of the customer; long-term assets are allocated
according to the location of the respective units.

Capital expenditures represent the purchase of

property, plant and equipment.

Segment information as of and for the years

ended December 31, 2001, 2000 and 1999 follows:

(in millions of €)

2001

Revenues

Intersegment sales

Total revenues

Operating Profit (Loss)

Identifiable segment assets

Capital expenditures

Depreciation and amortization

2000

Revenues

Intersegment sales

Total revenues

Operating Profit (Loss)

Identifiable segment assets

Capital expenditures

Depreciation and amortization

1999

Revenues

Intersegment sales

Total revenues

Operating Profit (Loss)

Identifiable segment assets

Capital expenditures

Depreciation and amortization

Mercedes-Benz
Passenger Cars
& smart

Chrysler
Group

Com-
mercial
Vehicles

Services

Other
Activities

Elimi-
nations

Consoli-
dated

44,002

62,676

27,084

14,975

4,136

– 152,873

3,703

807

1,488

1,876

371 (8,245)

–

47,705

63,483

28,572

16,851

4,507 (8,245) 152,873

2,951

(5,281)

(514)

612

1,181

(267)

(1,318)

20,558

63,325

16,232 100,570

31,200 (24,475) 207,410

2,061

5,083

1,484

112

1,853

5,364

922

7,071

168

197

(12)

8,896

(217)

15,190

40,822

67,405

28,521

15,322

10,314

– 162,384

2,878

967

1,283

2,204

301

(7,633)

–

43,700

68,372

29,804

17,526

10,615

(7,633) 162,384

2,145

501

1,212

2,457

3,590

(153)

9,752

19,355

53,660

15,879

94,369

34,298 (18,287) 199,274

2,096

6,339

1,128

282

2,038

3,878

847

6,603

547

425

– 10,392

(204) 13,587

35,592

63,666

26,328

10,662

13,737

– 149,985

2,508

419

1,281

2,270

347 (6,825)

–

38,100

64,085

27,609

12,932

14,084 (6,825) 149,985

2,703

5,051

1,157

2,039

241

(179)

11,012

17,611

49,825

12,498

77,266

37,955 (20,488) 174,667

2,228

5,224

809

324

1,580

3,346

715

3,348

886

527

(1)

9,470

(187)

9,329

Other Notes 115

Capital expenditures for equipment on operating

leases for 2001, 2000 and 1999 for the Services seg-
ment amounted to €14,334 million, €15,551 million
and €16,401 million, respectively.

The Operating Profit of the Mercedes-Benz
Passenger Cars & smart segment for the year ended
December 31, 2000, includes €470 million of non-cash
charges related to the adoption of the European
Union’s directive regarding end-of-life vehicles and
related to fixed cost reimbursement agreements with
MCC smart suppliers.

For the year ended December 31, 2001, Operating

Loss of the Chrysler Group segment includes €1,715
million of non-cash turnaround plan charges, other
than depreciation and amortization.

The Operating Loss of the Commercial Vehicles

segment for the year ended December 31, 2001,
includes €353 million of non-cash turnaround plan
and other charges, other than depreciation and amorti-
zation.

For the years ended December 31, 2001 and 2000,

Operating Profit of the Services segment includes €41
million and €1 million, respectively, from the equity
investment in T-Systems ITS, representing the Group’s
percentage share of the Operating Profit of T-Systems

ITS. In addition, Operating Profit of the Services seg-
ment for the year ended December 31, 2000, includes a
€2,315 million gain on the transaction involving T-Sys-
tems ITS (see Note 11). For the year ended December
31, 1999, Operating Profit of the Services segment
includes pretax gains on the sales of shares in debitel
of €1,140 million (see Note 11). At December 31, 2001
and 2000, the identifiable assets of the Services
segment includes €2,193 million and €2,152 million,
respectively, of the investment in T-Systems ITS.

For the year ended December 31, 2001, Operating

Profit of the Other Activities segment includes €694
million from EADS and MMC, the significant compa-
nies accounted for using the equity method, including
a €876 million gain from the formation of Airbus SAS.
For the year ended December 31, 2000, Operating
Profit of the Other Activities segment includes €3,259
million from EADS and MMC, including a €3,303 mil-
lion gain in connection with the exchange of the
Group’s controlling interest in DaimlerChrysler Aero-
space for shares in EADS (see Note 11). At December
31, 2001 and 2000, the identifiable assets of the Other
Activities segment includes €5,393 million and €5,143
million, respectively, of investments in these equity
method investees.

A reconciliation to Operating Profit (Loss) follows:

(in millions of €)

2001

2000

1999

Income (loss) before financial
income

(1,637)

4,320

9,324

Pension and postretirement
benefit expenses other than
service costs

Operating income (loss)
from affiliated, associated
and related companies

Gains on disposals of
businesses

Miscellaneous

(450)

(228)

379

516

(35)

292

5,832

1,140

(39)

(137)

152

Consolidated operating Profit
(loss)

(1,318)

9,752

11,012

Revenues from external customers presented by

geographic region are as follows:

(in millions of €)

2001

2000

1999

*) Excluding Germany.

Germany

European
Union*)

United
States

Other
American
countries

Other
countries

Consoli-
dated

Asia

23,157

22,483

81,132

13,585

6,208

6,308 152,873

25,988

24,360

84,503

14,762

5,892

6,879 162,384

28,393

21,567

78,104

11,727

4,796

5,398 149,985

116 Other Notes

Germany accounts for €20,584 million of long-
term assets (2000: €17,450 million; 1999: €14,711 mil-
lion), the United States for €58,850 million (2000:
€51,996 million; 1999: €43,036 million) and other
countries for €12,971 million (2000: €19,633 million;
1999: €12,701 million).

33. Earnings (Loss) per Share
The computation of basic and diluted earnings (loss)
per share for “Income (loss) before extraordinary items
and cumulative effects of changes in accounting
principles” is as follows:

(in millions of € or millions of shares
except earnings (loss) per share)

Year ended December 31,
1999
2001
2000

Stock options issued in 2001 and 2000 were not

included in the computation of diluted earnings per
share for the years ended December 31, 2001 and
2000, because the options’ underlying exercise prices
were greater than the average market prices for
DaimlerChrysler Ordinary Shares on December 31,
2001 and 2000, respectively.

Income tax charges of €263 million and €812 mil-

lion relating to changes in German tax laws were in-
cluded in the consolidated statement of income (loss)
for the years ended December 31, 2000 and 1999,
respectively, and resulted in a reduction of basic and
diluted earnings per share of €0.26 and €0.26 in 2000
and €0.81 and €0.80 in 1999, respectively (see Note 9).

34. Subsequent Events
In January 2002, DaimlerChrysler exercised its option
to sell to Deutsche Telekom the Group’s 49.9% interest
in T-Systems ITS for proceeds of €4.7 billion. The sale
is expected to close in March 2002 with the termina-
tion of the joint venture.

Following a decision of DaimlerChrysler’s
Board of Management in 2001, DaimlerChrysler and
GE Capital reached an agreement in January 2002
for GE Capital to purchase a portion of the
DaimlerChrysler’s Capital Services portfolio in the
United States. DaimlerChrysler will receive approxi-
mately €1.3 billion for the sale. The transaction is
expected to be completed in the first quarter of 2002.

Income (loss) before extra-
ordinary items and cumulative
effects of changes in account-
ing principles – basic

Interest expense on
convertible bonds and notes
(net of tax)

Income (loss) before extra-
ordinary items and cumulative
effects of changes in account-
ing principles – diluted

(662)

2,465

5,106

–

(662)

2,483

5,124

Weighted average number of
shares outstanding – basic

Dilutive effect of convertible
bonds and notes

Weighted average number of
shares outstanding – diluted

1,003.2 1,003.2 1,002.9

–

10.7

1,003.2 1,013.9 1,013.6

Earnings (loss) per share
before extraordinary items
and cumulative effects of
changes in accounting
principles

Basic

Diluted

(0.66)

2.46

2.45

5.09

5.06

Because the Group reported a loss before extraor-

dinary items and cumulative effects of changes in
accounting principles for the year ended December 31,
2001 the diluted loss per share does not include the
antidilutive effects of convertible bonds and notes. Had
the company reported income before extraordinary
items and cumulative effects of changes in accounting
principles for the year ended December 31, 2001, the
weighted average number of shares outstanding would
have potentially been diluted by 10.7 million shares
resulting from the conversion of bonds and notes.

Members of the Supervisory Board

Hilmar Kopper
Frankfurt am Main
Chairman of the Supervisory Board of
Deutsche Bank AG
Chairman

Udo Richter*)
Bremen
Chairman of the Works Council,
Bremen Plant, DaimlerChrysler AG
(since December 14, 2001)

Members of the Supervisory Board 117

Stephen P. Yokich *)
Detroit
President of International Union United
Automobile, Aerospace and
Agricultural Implement Workers of
America (UAW)

Committees of the
Supervisory Board:

Committee pursuant to Section 27,
Subsection 3 of the German
Codetermination Act
Hilmar Kopper (Chairman)
Erich Klemm
Dr. rer. pol. Manfred Schneider
Bernhard Wurl

Presidential Committee
Hilmar Kopper (Chairman)
Erich Klemm
Dr. rer. pol. Manfred Schneider
Bernhard Wurl

Financial Audit Committee
Hilmar Kopper (Chairman)
Erich Klemm
Stefan Schwaab
Bernhard Walter

Retired from the
Supervisory Board:

Wolf Jürgen Röder *)
Frankfurt am Main
Member of the Executive Council of
German Metalworkers’ Union

Dr. rer. pol. Manfred Schneider
Leverkusen
Chairman of the Board of Management
of Bayer AG

Peter Schönfelder *)
Augsburg
Chairman of the Works Council,
Augsburg Plant,
EADS Deutschland GmbH

Stefan Schwaab *)
Gaggenau
Vice Chairman of the Corporate Works
Council, DaimlerChrysler AG,
Vice Chairman of the Works Council,
Gaggenau Plant, DaimlerChrysler AG

G. Richard Thoman
Stamford
Former President and former Chief
Executive Officer of Xerox Corporation,
Senior Advisor to Evercore Partners

Bernhard Walter
Frankfurt am Main
Former Chairman of the Board of
Managing Directors of Dresdner Bank AG

Robert E. Allen
Short Hills, N.J.
Retired Chairman of the Board and
Chief Executive Officer of AT&T Corp.
retired April 11, 2001

Lynton R. Wilson
Toronto
Chairman of the Board of CAE Inc.;
Chairman of the Board of Nortel
Networks Corporation

Dr.-Ing. Mark Wössner
Gütersloh
Former CEO and former Chairman of the
Supervisory Board of Bertelsmann AG

Bernhard Wurl *)
Frankfurt am Main
Head of Department reporting to the
Executive Council, German Metalworkers’
Union

Willi Böhm *)
Wörth
Senior Manager Wage Accounting,
Member of the Works Council,
Wörth Plant, DaimlerChrysler AG
retired December 13, 2001

Lord Browne of Madingley
London
Group Chief Executive
of BP p.l.c.
retired April 11, 2001

*) Representative of the employees

Erich Klemm *)
Sindelfingen
Chairman of the Corporate Works
Council, DaimlerChrysler Group
and DaimlerChrysler AG
Deputy Chairman

Manfred Göbels *)
Stuttgart
Director, Services and Mobility
Concept, Chairman of the Management
Representative Committee,
DaimlerChrysler Group

Earl G. Graves
New York
Chairman and CEO of
Earl G. Graves Ltd.
(since April 12, 2001)

Prof. Victor Halberstadt
Amsterdam
Professor of Public Economics at Leiden
University,
Netherlands
(since April 12, 2001)

Robert J. Lanigan
Toledo
Chairman Emeritus of Owens-Illinois,
Inc.; Founder Partner, Palladium Equity
Partners

Helmut Lense *)
Stuttgart
Chairman of the Works Council,
Untertürkheim Plant,
DaimlerChrysler AG

Peter A. Magowan
San Francisco
President of San Francisco Giants

Gerd Rheude *)
Wörth
Chairman of the Works Council,
Wörth Plant, DaimlerChrysler AG

118 Report of the Supervisory Board

Report of the Supervisory Board

The Supervisory Board and the Board of Manage-

ment met in five meetings during the 2001 financial
year to discuss intensively the business situation of
DaimlerChrysler, the future strategic development of
the Group and its divisions, and various other issues.
The Presidential Committee met four times
in 2001, primarily to deal with Board of Management
issues, and to prepare the meetings of the Supervisory
Board. The Financial Audit Committee convened twice
with the independent auditors to discuss the financial
statements for 2000 and the financial statements for
the first half of 2001. The Committee engaged KPMG
Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft, an auditing firm,
for the annual audit, and also determined the audit
emphasis for 2001. The Mediation Committee, a body
stipulated by the German Law of Industrial
Codetermination, was not required to convene in 2001.
In each of its meetings the Supervisory Board was
fully informed by the Board of Management regarding
the situation of the company, particularly its business
and financial status, the personnel situation, business
developments at the company and its holdings,
investment plans and basic business-policy questions.
In addition, there was regular monthly reporting in
which the company’s key performance figures were
presented, and written reports were submitted on
special matters. The Chairman of the Supervisory
Board was also regularly kept informed through
separate discussions with the Board of Management.
In 2001, the agendas of the Supervisory Board

were dominated by the further implementation of the
strategy pursued since 1995 of concentration on the
automotive business and related services. The course
was set for the company’s future also in terms of per-
sonnel with the reappointment of Jürgen E. Schrempp
and Jürgen Hubbert, and the continuity and stability of
top management were secured. Another major topic
was the implementation of restructuring measures in
various business units. After the terrorist attacks of
September 11, their consequences for DaimlerChrysler
were discussed in detail. Some of the other matters that
were dealt with were personnel questions and the
planned successors to important positions, as well as
corporate governance at the DaimlerChrysler Group.

The meeting in February 2001 dealt with the 2000
consolidated and individual financial statements, prepa-
rations for the Annual Meeting, and medium-term
planning including the extent of refinancing for 2001.
Particular attention was paid to Chrysler Group’s
turnaround plan, and the Supervisory Board received
detailed reports on the situation at Mitsubishi Motors
Corporation (MMC). The current stage of plans to build
a small car with MMC was also discussed in this
context. Furthermore, the Supervisory Board consented
to the sale of a majority interest in the TEMIC Group
to Continental AG.

In April 2001, the strategy of the Mercedes-Benz
Passenger Cars & smart division was discussed inten-
sively. There was also a detailed report on the imple-
mentation of the turnaround plan at Chrysler Group. In
addition, the Supervisory Board consented to the acqui-
sition of a 3.3% equity interest in MMC from Volvo and
the continuation of existing contracts between Volvo
and MMC. This made it possible to extend the strategi-
cally important cooperation with MMC from passenger
cars to commercial vehicles.

In the July meeting, the Supervisory Board dis-

cussed the future strategy of the Commercial Vehicles
division, with a focus on the cooperation in Asia with
MMC and the South Korean Hyundai Motor Company,
particularly in the engine business. The interim report
on the first half of 2001 was presented, and information
was given on the appointment of KPMG as independent
auditors for the 2001 financial year and on the main
areas of this audit. At the end of the meeting the Super-
visory Board consented to the restructuring of the
fuel-cell alliance with Ford and Ballard Power Systems
in order to simplify future cooperation in this field.

The meeting at the end of September was domi-
nated by discussion of the consequences of the terrorist
attacks in the United States. The Supervisory Board
expressed its deep shock and sadness, and emphasized
its feelings of solidarity with the victims of the attacks.
Future political and economic developments and their
significance for the company were intensively dis-
cussed with the Board of Management. The situation of
the aerospace activities were also on the agenda. In ad-
dition, the Supervisory Board was informed of manage-
ment developments within the Group. In this meeting

Report of the Supervisory Board 119

the Supervisory Board unanimously extended into the
year 2005 the appointments of Jürgen E. Schrempp as
Chairman of the Board of Management and Jürgen
Hubbert as member of the Board of Management with
responsibility for the Mercedes-Benz Passenger Cars &
smart division. Rüdiger Grube was appointed as deputy
member of the Board of Management for a period of
three years with responsibility for corporate develop-
ment.

In December, the Supervisory Board discussed the

premises for economic developments in the following
years in order to create a basis for the next medium-
term planning in February 2002. There was also a pre-
sentation on the work of the newly established Execu-
tive Automotive Committee (EAC). This focused mainly
on the potential for further intensive cooperation
between the individual brands and divisions.

The DaimlerChrysler financial statements for
2001 and the business review report were audited by
KPMG Deutsche Treuhand-Gesellschaft Aktiengesell-
schaft Wirtschaftsprüfungsgesellschaft, Berlin and
Frankfurt/Main, and certified without qualification.
The same applies to the consolidated financial
statements according to US GAAP. These are prepared
in euros and supplemented by a business review report
and additional notes pursuant to Section 292a of the
German Commercial Code (HGB). In accordance with
Section 292a of the HGB, the US GAAP consolidated
financial statements presented in this report grant
exemption from the obligation to produce consolidated
financial statements according to German law.

All financial statements and the appropriation of

earnings proposed by the Board of Management, as
well as the auditors’ reports, were submitted to the
Supervisory Board. They were inspected by the
Financial Audit Committee and the Supervisory Board
and discussed in the presence of the auditors. The
Supervisory Board has declared itself in agreement with
the results of the statutory audit and has established
that there are no objections to be made.

In its meeting on February 19, 2002, the Supervi-
sory Board took note of the consolidated financial state-
ments for 2001, approved, and thereby adopted, the
financial statements of DaimlerChrysler AG for 2001,
and consented to the appropriation of earnings pro-
posed by the Board of Management. Further major top-
ics at that meeting were the medium-term corporate
planning for 2002-2004, including investment, human
resources and earnings objectives, as well as the scope
of financing limits for the year 2002.

In April 2001, Mr. Robert E. Allen and Lord
Browne of Madingley retired from their positions as
members of the Supervisory Board representing the
shareholders. In the 2001 Annual Meeting Mr. Earl G.
Graves and Prof. Victor Halberstadt were elected as
their successors. In December 2001, Mr. Willi Böhm
retired from the Supervisory Board after many years
as a representative of the employees. Mr. Udo Richter
was appointed as his successor.

The Supervisory Board expresses its gratitude to

the retired members, the DaimlerChrysler Board of
Management and the company’s employees for their
exceptional individual efforts in the year 2001.

Stuttgart-Möhringen, February 2002

The Supervisory Board

Hilmar Kopper
Chairman

120 Major Subsidiaries of the DaimlerChrysler Group

Major Subsidiaries of the DaimlerChrysler Group

Ownership1)
in %

Stockholders’
equity in
millions2)
of €

Revenues3)
in millions of €

Employment
at year-end

2001

2000

2001

2000

Mercedes-Benz Passenger Cars & smart

Micro Compact Car smart GmbH, Renningen

Mercedes-Benz U.S. International, Inc., Tuscaloosa

DaimlerChrysler India Private Limited, Poona

DaimlerChrysler South Africa (Pty.) Ltd., Pretoria4)

100.0

277

221

996

775

3,155

3,025

1,037

1,888

347

728

1,795

329

1,807

1,325

4,450

4,395

Chrysler Group

DaimlerChrysler Corporation, Auburn Hills4)

100.0

17,098

63,483

68,372

107,369

125,953

DaimlerChrysler Canada Inc., Windsor

DaimlerChrysler de Mexico S.A. de C.V., Mexico City

100.0

15,692

16,2775)

13,052

17,242

9,414

8,5915)

10,287

10,919

Commercial Vehicles

EvoBus GmbH, Stuttgart4)

Mercedes-Benz Lenkungen GmbH, Düsseldorf

Mercedes-Benz España S.A., Madrid

Detroit Diesel Corporation, Detroit

Freightliner LLC, Portland4)

Mercedes-Benz Mexico S.A. de C.V., Mexico City4)

DaimlerChrysler do Brasil Ltda., São Bernardo do Campo

DaimlerChrysler Argentina S.A., Buenos Aires4)

P.T. DaimlerChrysler Indonesia, Jakarta4)

Mercedes-Benz Türk A.S., Istanbul

MTU Friedrichshafen GmbH, Friedrichshafen

100.0

95.0

66.9

88.4

274

250

484

355

366

121

442

1,986

2,036

10,969

11,302

261

2,752

1,849

8,072

626

259

2,601

2,075

1,295

5,262

6,342

1,308

4,950

6,238

9,945

12,810

16,332

778

967

1,197

1,731

2,018

10,958

10,865

322

153

478

698

138

827

1,128

1,034

957

1,231

3,364

6,200

1,143

1,251

4,175

6,028

Major Subsidiaries of the DaimlerChrysler Group 121

Vehicle Sales Organization

Mercedes-Benz USA, Inc., Montvale4)

DaimlerChrysler France S.A.S., Le Chesnay4)

DaimlerChrysler Belgium Luxembourg S.A., Brussels

DaimlerChrysler Nederland B.V., Utrecht4)

DaimlerChrysler UK Ltd., Milton Keynes4)

DaimlerChrysler Danmark AS, Copenhagen

DaimlerChrysler Sverige AB, Malmo

DaimlerChrysler Italia S.p.A., Rome4)

DaimlerChrysler Schweiz AG, Zurich

Mercedes-Benz Hellas S.A., Athens

DaimlerChrysler Japan Co., Ltd., Tokyo

Ownership1)
in %

Stockholders‘
equity in
millions2)
of €

Revenues3)
in millions of €

Employment
at year-end

2001

2000

2001

2000

100.0

272

171

128

199

11,396

10,907

3,252

1,160

1,193

4,769

289

459

2,934

1,128

199

3,002

1,135

1,148

3,957

286

478

2,676

1,072

222

2,511

2,705

1,549

2,190

655

679

1,508

1,990

622

647

1,535

1,120

361

439

537

419

157

457

344

421

528

397

157

412

DaimlerChrysler Australia/Pacific Pty. Ltd., Mulgrave/
Melbourne4)

100.0

187

967

1,001

729

834

Services

DaimlerChrysler Services AG, Berlin

DaimlerChrysler Bank GmbH, Stuttgart

DaimlerChrysler Services Leasing GmbH, Stuttgart

DaimlerChrysler Services North America L.L.C., Southfield

Chrysler Capital Company L.L.C., Stamford

DaimlerChrysler Insurance Company, Southfield

debis Financial Services Inc., Norwalk

100.0

989

545

342

1,712

7,654

11,200

944

173

206

112

121

348

280

1,557

4,799

207

330

314

309

1,483

1,024

4,341

4,059

152

134

185

Other Activities

MTU Aero Engines GmbH, Munich4)

100.0

489

2,487

2,106

7,839

7,162

European Aeronautic Defence and Space Company EADS,
N.V., Amsterdam7)

33.0

9,852

14,043

10,585

100,187

88,028

Mitsubishi Motors Corporation, Tokyo8)

37.3

1,990

14,176

15,296

66,700

72,000

1) Relating to the respective parent company.
2) Stockholders’ equity taken from national financial statements; stockholders’ equity converted at year-end exchange rates.
3) Converted at average annual exchange rates.
4) Preconsolidated financial statements.
5) Included in the revenues of the preconsolidated financial statements.
6) Included in the consolidated financial statements of the parent company.
7) Details based on the financial statements of the group of June 30, 2001

(stockholders’ equity at June 30, 2001; revenues in first half of 2001 resp. 2000; employees at June 30, 2001 resp. June 30, 2000)

8) Details based on the financial statements of the group of September 30, 2001

(stockholders’ equity at September 30, 2001; revenues April through September 2001 resp. 2000; employees at September 30, 2001
resp. September 30, 2000)

122 Six-Year Summary

Six-Year Summary

Amounts in millions of €

1996

1997

1998

1999

2000

2001

From the statements of income:
Revenues
Personnel expenses
of which: Wages and salaries
Research and development costs
Operating profit (loss)
Operating margin
Financial results
Income (loss) before income taxes and extraordinary items
Net operating income
Net operating income as % of net assets (RONA)
Net income (loss)
Net income (loss) per share (€)
Diluted net income (loss) per share (€)
Net income per share (excluding one-time effects) (€)
Diluted net income per share (excluding one-time effects) (€)
Cash dividend
Cash dividend per share (€)
Cash dividend including tax credit2) per share (€)
From the balance sheets:
Property, plant and equipment
Leased equipment
Current assets
of which: Liquid assets
Total assets
Stockholders’ equity
of which: Capital stock
Accrued liabilities
Liabilities
of which: Financial liabilities
Debt-to-equity ratio
Mid- and long-term provisions and liabilities
Short-term provisions and liabilities
Current ratio
Net assets (average of the year)
Credit rating, long-term
Standard & Poor’s
Moody’s

From the statements of cash flows:
Investments in property, plant and equipment
Investments in leased equipment
Depreciation on property, plant and equipment
Depreciation on leased equipment
Cash provided by operating activities
Cash used for investing activities
From the stock exchanges:
Share price at year-end Frankfurt (€)

New York (US $)
Average shares outstanding (in millions)
Average dilutive shares outstanding (in millions)
Average annual number of employees

101,415

117,572

131,782

149,985

162,384 152,873

21,648

23,370

25,033

26,158

26,500

25,095

17,143

18,656

19,982

21,044

21,836

20,073

5,751

6,212

6.1%

408

5,693

–

4,022

4.09

4.05

4.24

4.20

–

6,501

6,230

5.3%

633

6,145

4,946

10.9%

6,547

4.281)

4.211)

4.28

4.21

–

6,693

8,593

6.5%

763

8,093

6,359

12.7%

4,820

5.03

4.91

5.58

5.45

7,575

11,012

7.3%

333

9,657

7,032

13.2%

5,746

5.73

5.69

6.21

6.16

7,395

6,008

9,752

(1,318)

6.0%

(0.9%)

156

154

4,476

(1,483)

4,383

7.4%

7,894

7.87

7.80

3.47

3.45

1,647

2.5%

(662)

(0.66)

0.73

2,356

2,358

1,003

2.35

3.36

2.35

3.36

2.35

3.36

1.00

–

23,111

28,558

29,532

36,434

40,145

41,165

7,905

11,092

14,662

27,249

33,714

36,002

54,888

68,244

75,393

93,199

99,852 103,389

12,851

17,325

19,073

18,201

12,510

14,525

101,294

124,831

136,149

174,667

199,274 207,410

22,355

27,960

30,367

36,060

42,409

39,004

2,444

2,391

2,561

2,565

2,609

31,988

35,787

34,629

37,695

36,441

41,570

41,672

54,313

62,527

90,560

109,661 115,327

25,496

34,375

40,430

64,488

84,783

90,908

114%

123%

133%

179%

200%

233%

36,989

45,953

47,601

55,291

75,349

87,532

41,950

50,918

58,181

83,315

81,516

80,874

–

85%

79%

66%

67%

64%

45,252

50,062

53,174

59,489

65,882

–

A +

A 1

A +

A 1

A 2

BBB+

6,721

4,891

4,427

1,159

8,051

7,225

5,683

1,456

8,155

9,470

10,392

8,896

10,245

19,336

19,117

17,951

4,937

1,972

5,655

3,315

6,645

6,487

7,580

7,254

9,956

12,337

16,681

18,023

16,017

15,944

(8,745)

(14,530)

(23,445)

(32,110)

(32,709)

(13,287)

–
–

981.6

994.0

–
–

83.60
96.06

77.00
78.25

44.74
41.20

48.35
41.67

949.3

968.2

959.3

1,002.9

1,003.2

987.1

1,013.6

1,013.9

1,003.2

419,758

421,661

433,939

463,561

449,594

379,544

1) Excluding one-time positive tax effects, especially due to extra distribution of €10.23 per share.
2) For our stockholders who are taxable in Germany. There is no tax credit from 2001 due to a change in the corporate income tax system.

International Representative Offices 123

International Representative Offices

Berlin
Phone +49 30 25 94 11 00
+49 30 25 94 11 09
Fax

Abidjan
Phone +225 21 75 1001
+225 21 75 1090
Fax

Abu Dhabi
Phone +97 14 8833 200
+97 14 8833 201
Fax

Kiev
Phone +380 44 235 5251
+380 44 235 5288
Fax

Ljubljana
Phone +386 61 1883 797
+386 61 1883 799
Fax

London
Phone +44 193 28 67 350
+44 193 28 60 738
Fax

Bangkok
Phone +662 676 6222 1000
+662 676 5550
Fax

Madrid
Phone +34 91 484 6161
+34 91 484 6019
Fax

Beijing
Phone +86 10 6590 0158
+86 10 6590 6237
Fax

Brussels
Phone +32 2 23311 33
+32 2 23311 80
Fax

Budapest
Phone +361 451 2233
+361 451 2201
Fax

Buenos Aires
Phone +54 11 4801 3585
+54 11 4808 8702
Fax

Cairo
Phone +20 2 524 6127
+20 2 524 6700
Fax

Caracas
Phone +58 241 87 444 60
+58 241 87 444 62
Fax

Hanoi
Phone +84 8 8958 710
+84 8 8958 714
Fax

Hong Kong
Phone +85 2 2594 8876
+85 2 2594 8801
Fax

Istanbul
Phone +90 212 482 3500
+90 212 482 3521
Fax

Melbourne
Phone +61 39 566 9104
+61 39 566 6210
Fax

Mexico City
Phone +52 5081 7376
+52 5081 7674
Fax

Moscow
Phone +7 095 797 5350
+7 095 797 5352
Fax

New Delhi
Phone +91 1 1410 4959
+91 1 1410 5226
Fax

Paris
Phone +33 1 39 23 5400
+33 1 39 23 5442
Fax

Pretoria
Phone +27 12 677 1502
+27 12 666 8191
Fax

Rome
Phone +39 06 4144 2405
+39 06 4121 9097
Fax

São Paulo
Phone +55 11 4173 7171
+55 11 4173 7118
Fax

Sarajevo
Phone +387 33 664 376
+387 33 664 469
Fax

Seoul
Phone +82 2 735 3496
+82 2 737 8965
Fax

Singapore
Phone +65 849 8321
+65 849 8493
Fax

Skopje
Phone +389 2 114 016
+389 2 114 754
Fax

Sofia
Phone +359 2 91 988
Fax

+359 2 945 40 14

Taipei
Phone +886 2 2783 9745
+886 2 2788 6965
Fax

Tashkent
Phone +998 71 120 6374
+998 71 120 6674
Fax

Teheran
Phone +98 21 204 6047
+98 21 204 6126
Fax

Tel Aviv
Phone +972 9957 9091
+972 9957 6872
Fax

Tokyo
Phone +81 3 5572 7172
+81 3 5572 7126
Fax

Warsaw
Phone +48 22 697 7040
+48 22 654 8633
Fax

Washington D.C.
Phone +1 202 414 6747
+1 202 414 6716
Fax

Windsor, Ontario
Phone +1 519 973 2851
+1 519 973 2460
Fax

Zagreb
Phone +38 51 489 1500
+38 51 489 1501
Fax

124 Addresses & Information

Addresses

DaimlerChrysler AG
70546 Stuttgart
Germany
Phone
Fax
www.daimlerchrysler.com

+49 711 17 0
+49 711 17 94022

DaimlerChrysler Corporation
Auburn Hills, MI 48326-2766
USA
Phone
www.daimlerchrysler.com

+1 248 576 5741

DaimlerChrysler Services AG
10875 Berlin
Germany
Phone
Fax
www.daimlerchryslerservices.com

+49 30 2554 0
+49 30 2554 2525

MTU Aero Engines GmbH
Postfach 500640
80976 Munich
Germany
Phone
Fax
www.mtu.de

+49 89 1489 0
+49 89 1489 5500

Information

Publications for our shareholders:

DaimlerChrysler Annual Report
(German, English)

Form 20-F
(English)

DaimlerChrysler Interim Reports for 1st, 2nd and
3rd quarters (German, English)

DaimlerChrysler Environment Report
(German and English)

The financial statements of DaimlerChrysler
Aktiengesellschaft prepared in accordance with
German GAAP were audited by KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft,
Wirtschaftsprüfungsgesellschaft, and an unqualified
opinion was rendered thereon.
These financial statements will be published in
the Bundesanzeiger (Federal Official Gazette)
and filed at the Commercial Register in Stuttgart.
The financial statements may be obtained from
DaimlerChrysler free of charge.

These publications can be requested from:

DaimlerChrysler AG
70546 Stuttgart
Germany

The information can also be ordered by phone
or fax under the following number:
+49 711 17 92287

The complete Annual Report, Form 20-F and
the interim reports are available on the Internet.
The most important financial charts can also
be accessed. Our address is:

www.daimlerchrysler.com

DaimlerChrysler online

Additional information on DaimlerChrysler is available on the Internet: www.daimlerchrysler.com

Financial Diary
2002

Annual Results Press Conference
February 20, 2002
10:00 a.m.
Mercedes-Benz Technology Center (MBTC)
Sindelfingen

Analysts’ and Investors’ Conference
February 20, 2002
3:00 p.m.
Stuttgart-Möhringen

Annual Meeting
April 10, 2002
10:00 a.m.
Messe Berlin (Berlin Exhibition Center)

Interim Report Q1 2002
April 30, 2002

Interim Report Q2 2002
July 18, 2002

Interim Report Q3 2002
October 23, 2002

Investor Relations
contact

Stuttgart

Phone

Fax

New York

+49 711 17 92261
17 95277
+49 711 17 94075
17 94109

Phone
Fax

+1 212 909 9081
+1 212 909 9085

Auburn Hills

Phone
Fax

+1 248 512 2950
+1 248 512 2912

DaimlerChrysler AG
Stuttgart, Germany
Auburn Hills, USA
www.daimlerchrysler.com