Daimler AG Annual Report 2010

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Financial Calendar 2011

Annual Press Conference
February 16, 2011

Analysts’ and Investors’ Conference Call
February 16, 2011

Presentation of the Annual Report 2010
March 2, 2011

Annual Meeting
April 13, 2011
10:00 a.m. CEST | 4:00 a.m. EST
Messe Berlin

Interim Report Q1 2011
April 28, 2011

Interim Report Q2 2011
July 26, 2011

Interim Report Q3 2011
October 26, 2011

The paper used for this Annual Report was produced from
cellulose sourced from certified forestry companies that
operate responsibly and comply with the regulations of the
Forest Stewardship Council.

Daimler AG
Stuttgart, Germany
www.daimler.com
www.daimler.mobi

Key Figures

Daimler Group

Amounts in millions of euros

Revenue

Western Europe

thereof Germany

NAFTA

thereof United States

Asia

thereof China

Other markets

2010

2009

2008

10/09

% change

97,761

38,478

19,281

23,582

20,216

19,659

9,094

16,042

78,924

36,458

18,788

19,380

16,569

12,435

4,349

10,651

98,469

46,276

21,832

23,243

19,956

13,840

3,226

15,110

1
+24

+22

+58

+109

+51

+16
+7

-22

Employees (December 31)

260,100

256,407

273,216

Investment in property, plant and equipment

Research and development expenditure

thereof capitalized

Cash provided by / used for operating activities

EBIT

Value added
(including discontinued operations)

Net profit/loss

Net profit/loss from continuing operations

Earnings/loss per share (in €)

Earnings/loss per share, continuing operations (in €)

Total dividend

Dividend per share (in €)

3,653

4,849
1,373

8,544

7,274

2,773

4,674

4.28

1,971

1.85

2,423

4,181
1,285

10,961

-1,513

-4,644

-2,644

-2.63

0.00

3,559

4,442
1,387

-786

2,730

-1,147

1,414

1,704

1.41

1.71

556

0.60

1 Adjusted for the effects of currency translation and changes in the consolidated group, increase in revenue of 19%.

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Innovation from Tradition. Annual Report 2010.

Daimler’s Divisions >
Daimler at a Glance >

Financial Calendar 2011

Annual Press Conference
February 16, 2011

Analysts’ and Investors’ Conference Call
February 16, 2011

Presentation of the Annual Report 2010
March 2, 2011

Annual Meeting
April 13, 2011
10:00 a.m. CEST | 4:00 a.m. EST
Messe Berlin

Interim Report Q1 2011
April 28, 2011

Interim Report Q2 2011
July 26, 2011

Interim Report Q3 2011
October 26, 2011

The paper used for this Annual Report was produced from
cellulose sourced from certified forestry companies that
operate responsibly and comply with the regulations of the
Forest Stewardship Council.

Daimler AG
Stuttgart, Germany
www.daimler.com
www.daimler.mobi

Key Figures

Daimler Group

Amounts in millions of euros

Revenue

Western Europe

thereof Germany

NAFTA

thereof United States

Asia

thereof China

Other markets

2010

2009

2008

10/09

% change

97,761

38,478

19,281

23,582

20,216

19,659

9,094

16,042

78,924

36,458

18,788

19,380

16,569

12,435

4,349

10,651

98,469

46,276

21,832

23,243

19,956

13,840

3,226

15,110

1
+24

+22

+58

+109

+51

+16
+7

-22

Employees (December 31)

260,100

256,407

273,216

Investment in property, plant and equipment

Research and development expenditure

thereof capitalized

Cash provided by / used for operating activities

EBIT

Value added
(including discontinued operations)

Net profit/loss

Net profit/loss from continuing operations

Earnings/loss per share (in €)

Earnings/loss per share, continuing operations (in €)

Total dividend

Dividend per share (in €)

3,653

4,849
1,373

8,544

7,274

2,773

4,674

4.28

1,971

1.85

2,423

4,181
1,285

10,961

-1,513

-4,644

-2,644

-2.63

0.00

3,559

4,442
1,387

-786

2,730

-1,147

1,414

1,704

1.41

1.71

556

0.60

1 Adjusted for the effects of currency translation and changes in the consolidated group, increase in revenue of 19%.

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Innovation from Tradition. Annual Report 2010.

Daimler’s Divisions >
Daimler at a Glance >

Divisions

Internet | Information | Addresses

Daimler Worldwide

Amounts in millions of euros

Mercedes-Benz Cars
EBIT
Revenue
Return on sales
Investment in property, plant and equipment
Research and development expenditure

thereof capitalized

Unit sales
Employees (December 31)

Daimler Trucks
EBIT
Revenue
Return on sales
Investment in property, plant and equipment
Research and development expenditure

thereof capitalized

Unit sales
Employees (December 31)

Mercedes-Benz Vans
EBIT
Revenue
Return on sales
Investment in property, plant and equipment
Research and development expenditure

thereof capitalized

Unit sales
Employees (December 31)

Daimler Buses
EBIT
Revenue
Return on sales
Investment in property, plant and equipment
Research and development expenditure

thereof capitalized

Unit sales
Employees (December 31)

Daimler Financial Services
EBIT
Revenue
New business
Contract volume
Investment in property, plant and equipment
Employees (December 31)

2010

2009

2008

10/09
% change

4,656
53,426
8.7%
2,457
3,130
940
1,276,827
96,281

-500
41,318
-1.2%
1,618
2,696
913
1,093,905
93,572

2,117
47,772
4.4%
2,246
2,994
1,060
1,273,013
97,303

1,323
24,024
5.5%
1,003
1,282
373
355,263
71,706

451
7,812
5.8%
91
267
29
224,224
14,557

215
4,558
4.7%
95
223
31
39,118
17,134

831
12,788
29,267
63,725
12
6,742

-1,001
18,360
-5.5%
597
1,116
368
259,328
70,699

26
6,215
0.4%
113
193
0
165,576
15,226

183
4,238
4.3%
78
212
5
32,482
17,188

9
11,996
25,066
58,350
14
6,800

1,607
28,572
5.6%
991
1,056
326
472,074
79,415

818
9,479
8.6%
150
228
0
287,198
16,775

406
4,808
8.4%
117
178
1
40,591
18,110

677
11,964
29,514
63,353
41
7,116

.
+29
.
+52
+16
+3
+17
+3

.
+31
.
+68
+15
+1
+37
+1

.
+26
.
-19
+38
.
+35
-4

+17
+8
.
+22
+5
+520
+20
-0

.
+7
+17
+9
-14
-1

Information on the Internet. Special information on our shares
and earnings development can be found in the “Investor Relations”
section of our website. It includes the Group’s annual and interim
reports and the company financial statements of Daimler AG.
You can also find topical reports, presentations, an overview
of various key figures, information on our share price, and other
services.

www.daimler.com/investors

Publications for our shareholders:
– Annual Report (German, English)
– Interim Reports for the 1st, 2nd and 3rd quarters

(German, English)
– Sustainability Report
(German, English)

– Brochure: The Road to Emission-free Mobility

(German, English)

– Brochure: Milestones in Vehicle Safety.

The Vision of Accident-free Driving
(German, English)

www.daimler.com/ir/reports
www.daimler.com/downloads/en

The financial statements of Daimler AG were prepared in
accordance with German accounting principles, and the
consolidated financial statements were prepared in accordance
with the International Financial Reporting Standards (IFRS).
Both sets of financial statements were audited by KPMG AG
Wirtschaftsprüfungsgesellschaft and an unqualified audit
opinion was rendered thereon. These financial statements
will be filed with the operator of the electronic version of
the German Federal Gazette and published in the electronic
version of the German Federal Gazette.

The aforementioned publications can be requested from:
Daimler AG, Investor Relations, HPC 0324, 70546 Stuttgart,
Germany.

The documents can also be ordered by phone or fax using the
following number: +49 711 17 92287.

Daimler AG
70546 Stuttgart
Phone +49 711 17 0
Fax
www.daimler.com
www.daimler.mobi

+49 711 17 22244

Investor Relations
Phone +49 711 17 95277
+49 711 17 92261
+49 711 17 95256
+49 711 17 94075

Fax
ir.dai@daimler.com

Mercedes-Benz
Cars

Daimler Trucks

Mercedes-Benz
Vans

Daimler Buses

Sales
Organization
Automotive
Businesses

Daimler
Financial
Services

Europe
Production locations

Sales outlets

Revenue in millions of euros

Employees

NAFTA
Production locations

Sales outlets

Revenue in millions of euros

Employees

Latin America (excluding Mexico)
Production locations

Sales outlets

Revenue in millions of euros

Employees

Africa
Production locations

Sales outlets

Revenue in millions of euros

Employees

Asia
Production locations

Sales outlets

Revenue in millions of euros

Employees

Australia/Oceania
Production locations

Sales outlets

Revenue in millions of euros

Employees

–

25,486

87,136

–

10,645

3,028

–

614

874

–

1,727

4,710

–

13,964

533

–

994

–

7,953

30,617

–

6,166

15,749

–

3,740

11,434

–

894

1,050

–

4,757

12,856

–

507

–

6,292

13,149

–

457

–

364

1,323

–

171

–

386

–

143

–

2,421

14,566

–

540

1,346

–

1,208

1,222

–

175

–

130

–

3,900

–

40,339

–

1,424

–

3,193

–

601

–

314

–

1,480

–

3,602

–

285

–

1,084

–

5,318

4,199

–

6,026

1,236

–

320

292

–

467

300

–

444

559

–

213

156

Note: Unconsolidated revenue of each division (segment revenue).

Daimler Brands

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Innovation from tradition. 125 years ago, Gottlieb Daimler and
Carl Benz invented the automobile – now we are passionately
shaping its future.

As automotive pioneers, we see it as both motivation and a duty
to continue our tradition with groundbreaking technologies and
superior products.

We do our very best for customers who expect the best, and we
live and breathe a culture of operational excellence based on
shared values. Our corporate history features numerous innova-
tions and pioneering achievements; they are the basis and an
ongoing incentive for our claim to leadership in the automotive
industry.

At the same time, our thoughts and actions are guided by the principle
of sustainable mobility: We aim to successfully shape the mobility
of the future. In this way, we want to create lasting added value – for
our shareholders, customers, employees and society in general.

Dieter Zetsche

Wolfgang Bernhard

Christine Hohmann-Dennhardt

Wilfried Porth

Andreas Renschler

Bodo Uebber

Thomas Weber

Innovation Close Up. Pioneering achievements at Daimler have always
started with attention to detail. That’s a tradition at Daimler – and has
been for 125 years. In this Annual Report, we therefore present the topic
of innovation from a new perspective. On pages 26 to 59, you can get
a close-up impression of our latest pioneering achievements.

Contents

2 - 25

To Our Shareholders

136 - 147 Sustainability

4
8
12
14
20
22

Important Events in 2010
Chairman’s Letter
Board of Management
Report of the Supervisory Board
Members of the Supervisory Board
Daimler Shares

26 - 59

Innovation Close Up

60 - 119 Management Report

62
74
89
96
98
102
103
104
114

Business and General Conditions
Profitability
Liquidity and Capital Resources
Financial Position
Daimler AG (condensed version according to HGB)
Overall Assessment of the Economic Situation
Events after the End of the 2010 Financial Year
Risk Report
Outlook

120 - 135 The Divisions

122
126
130
132
134

Mercedes-Benz Cars
Daimler Trucks
Mercedes-Benz Vans
Daimler Buses
Daimler Financial Services

138
140
144
146

Sustainability at Daimler
Innovation, Safety and the Environment
Human Resources
Social Responsibility

148 - 167 Corporate Governance

150
152
158
160
166

Report of the Audit Committee
Remuneration Report
Compliance
Corporate Governance Report
Declaration of Compliance with the
German Corporate Governance Code

168 - 247 Consolidated Financial Statements

170
171
172
173

174
175
176
177

Responsibility Statement
Independent Auditors’ Report
Consolidated Statement of Income/Loss
Consolidated Statement of Comprehensive
Income/Loss
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements

248 - 252 Additional Information

248
250
251
252

Ten Year Summary
Glossary
Index
International Representative Offices
Internet | Information | Addresses
Daimler Worldwide
Financial Calendar 2011

Annual Report 2010 | Contents | 3

Important Events in 2010

First quarter

World premiere of the new E-Class convertible in Detroit.
The four-seat all-year convertible completes the successful
E-Class family and features the AIRCAP wind deflector; this is
a world first and significantly reduces drafts inside the car
when driving with the top down.

British safety price for Mercedes-Benz. The United Kingdom’s
biggest consumer organization for car buyers names Mercedes-
Benz as the winner of its Car of the Year Award 2010 for the best
safety innovation. The prize was given for ATTENTION ASSIST,
which warns drivers who are becoming drowsy.

New Board of Management position at Daimler. Effective
February 18, 2010, the Supervisory Board appoints Dr. Wolfgang
Bernhard to the newly created Board of Management position
with responsibility for Production and Procurement Mercedes-
Benz Cars and Mercedes-Benz Vans.

Pioneering luxury sedan. With the research vehicle F 800 Style,
Mercedes-Benz shows the future of premium automobiles from
a new perspective at Geneva Motor Show 2010.

Daimler sells its stake in Tata Motors. Daimler AG sells all
of its 5.34% equity interest in Indian automotive group Tata
Motors to various groups of investors. Daimler will participate
in the future growth of the Indian market by strengthening its
own activities there.

car2go starts regular operations. After completing the car2go
one-year pilot project in Ulm, Germany, the assessment of the
innovative mobility concept is clearly positive. The newly founded
car2go GmbH (limited liability company) plans to push forward
with international commercialization.

Group EBIT of €1.2 billion in first quarter. The very good
development of earnings is a reflection of the ongoing upward
trend in nearly all divisions.

Second quarter

Settlement with US authorities. Daimler AG reaches a settle-
ment with the US Securities and Exchange Commission and the
US Department of Justice to conclude investigations of possible
violations of the US Foreign Corrupt Practices Act.

Cooperation with Renault-Nissan. Daimler and Renault-Nissan
agree on wide-ranging strategic cooperation. The main shared
projects are a new architecture for the smart, new three- and
four-cylinder engines and small vans.

Start of van production in China. The first Mercedes-Benz
Viano produced by Fujian Daimler Automotive rolls off the assem-
bly line at the new plant in Fuzhou. Fujian Daimler Automotive
is a joint venture established by the Fujian Motors Group, China
Motor Corporation and Daimler in 2007.

End of stock-exchange listing in New York. The Supervisory
Board and the Board of Management of Daimler AG decide to end
the listing of Daimler shares on the New York Stock Exchange.
The Company continues to place great importance on having an
international shareholder base. However, Daimler shares are
mainly traded in Frankfurt, also by international investors.

Daimler Financial Services announces the combination of
its activities in Germany. The worldwide headquarters of Daimler
Financial Services are to be relocated from Berlin to Stuttgart
and brought together under one roof with the headquarters of
Mercedes-Benz Bank. The aim is to create leaner processes and
structures while securing the division’s competitive position.

Joint venture for the development of electric vehicles in
China. BYD and Daimler AG agree to establish a 50:50 joint
venture, Shenzhen BYD Daimler New Technology Co. Ltd., for the
development of electric vehicles for the Chinese market.

Daimler Day in China. Due to the increasing importance of the
Chinese market, Daimler invites investors and analysts to its first
corporate day in Beijing.

Daimler increases equity interest in Kamaz. Daimler increases
its shareholding in Kamaz, thus strengthening the strate gic
partnership with the Russian truck producer. Daimler’s economic
interest in Kamaz is now 15%.

To Our Shareholders | Important Events in 2010 | 5

Third quarter

Daimler is the most popular German company in 2010. This
is the result of a representative survey carried out by TNS Emnid
for accountancy firm PricewaterhouseCoopers (PwC).

First Fuso Canter truck delivered in Russia. Fuso Kamaz
Trucks Russia, a joint venture established in late 2009 as a strategic
partnership between Daimler and Kamaz, is responsible for the
production and distribution of Fuso trucks in Russia.

Mercedes-Benz Citaro is the most successful city bus of all
time. After twelve years of production, the 30,000th Mercedes-
Benz Citaro has been delivered. This production volume is
unique for city buses and demonstrates the success of a flexible
modular design.

Launch of Mercedes-Benz Actros in Brazil. To serve the rising
demand for heavy-duty premium trucks in this growth market,
the Mercedes-Benz Actros is now sold also in Brazil. As of 2012,
the Actros will also be produced in the country at the Juiz de Fora
plant.

Board of Management position for Integrity and Legal Affairs.
The Supervisory Board of Daimler AG decides to enlarge the Com-
pany’s Board of Management. The new position is a logical step
in the further development of the corporate structure and culture.

Mercedes-Benz Atego is “Truck of the Year.” At the IAA Com-
mercial Vehicles show, trade journalists from 23 European coun-
tries recognize the innovative technology of the Mercedes-Benz
Atego. The series-produced Atego 1222 L EEV BlueTec Hybrid
is regarded by the jury as a pioneer for alternative drive systems.

Mercedes-Benz CLS unveiled at the Paris Motor Show.
The new CLS four-door coupe follows in the pioneering footsteps
of its predecessor and is nonetheless a completely new car.
The new CLS combines a strong and self-confident design with
maximum efficiency.

Daimler remains on a successful path. Daimler continues its
positive earnings trend with third-quarter EBIT of €2.4 billion.

Fourth quarter

Daimler and Europcar bring car2go to Hamburg. The innova-
tive mobility concept that has already been successfully tested in
Ulm and Austin is to go into operation in Hamburg starting with
300 smart fortwo cars. Daimler and Europcar establish their own
operating company as a joint venture.

New driving simulator inaugurated at the Sindelfingen plant.
The new simulator is the most powerful in the automotive industry
and is the core of a €160 million investment in advanced technol-
ogy at the facility in Sindelfingen.

Topping out ceremony for the Kecskemét plant. The new plant
in Hungary will be part of a production network with the German
plant in Rastatt. As of 2012, two of the four new Mercedes-Benz
models that will replace today’s A- and B-Class cars will be
produced in Hungary.

New generation of the Fuso Canter presented. Due to its good
fuel efficiency, the entire model series already fulfills the fuel-
consumption limits for trucks that are to apply in Japan as of 2015.
After being launched in Japan, the new truck will also be made
available in Fuso’s worldwide export markets in 2011.

Start of series production of the Actros at the Aksaray plant.
With the availability of its entire product range as well as local
assembly, Daimler Trucks makes a long-term commitment to the
Turkish market and strengthens production links between the
Wörth plant in Germany and the plant at Aksaray in Turkey. The
vehicles produced in Aksaray are destined for the local market
and also for export.

Van production in Russia. Daimler and GAZ, a Russian manu-
facturer of commercial vehicles, sign a memorandum of under-
standing with the goal of producing the Mercedes-Benz Sprinter
in Russ ia. Engines, transmissions, axles and other components
are also to be produced locally.

To Our Shareholders | Important Events in 2010 | 7

“We look back on an excellent year - and our goals for this year are
equally ambitious. 125 years after the invention of Daimler and Benz,
we continue to take the lead in shaping the future of the automobile.”

2010 was a very successful year for your company. After the financial and economic crisis of

2008/2009 had led to massive market slumps, we succeeded in making an excellent comeback last

year with double-digit growth rates in all our divisions. Demand for our products is strong, our order

books are full. Many of our plants are operating at the limits of their capacity.

Last year, the Group achieved total EBIT of 7.3 billion euros. Net profit amounted to 4.7 billion euros.

And Daimler will be paying you, our shareholders, a dividend of €1.85 per share for 2010.

Let me briefly explain the most important developments in the individual divisions:

At Mercedes-Benz Cars we achieved the second-highest unit sales in our company’s history.

In China, we actually sold 137 percent more cars than in the previous year. In many segments

worldwide our competition was looking at our tail lights: Our S-, E- and C-Class sedans were

the global market leaders. And it’s not just about the numbers. Customers and the trade press

were delighted with new models such as the SLS and the new CLS. Surveys and awards tell the

same story: The three-pointed star is shining bright. We are serious about “The best or nothing.”

Daimler Trucks also made excellent progress in 2010. We sold 37 percent more trucks worldwide

than in 2009. The new Mercedes-Benz Atego and Atego BlueTec Hybrid were voted “Truck of

the Year 2011.” At Fuso we updated nearly the entire model range, and at Freightliner we launched

sales of the new Coronado heavy-duty truck.

Mercedes-Benz Vans, with a 35 percent increase in unit sales, grew at a similar rate to our trucks

division. The Sprinter’s market share in Europe was higher than ever. With the new Vito, we offer a

medium-duty van for commercial use; while the new Viano is a superior multi-passenger van.

Daimler Buses once again maintained its global market leadership in the segment for buses above

eight tons. Our bus division increased its unit sales by more than 20 percent – primarily due to

strong demand in Latin America.

To Our Shareholders | Chairman’s Letter | 9

This very pleasing overall picture is completed by the positive development at Daimler Financial

Services: New business and contract volume increased significantly. Above all, our business

with van and truck fleet operators and other commercial customers made very good progress.

There’s no doubt about it: We can look back on an excellent year. Our goals for this year are

equally ambitious – even more so as the automobile celebrates a special birthday in 2011. In this

anniversary year we want to make it clear that 125 years after the invention of Daimler and Benz,

we continue to take the lead in shaping the future of the automobile. And we can back up that

claim with hard facts:

At Mercedes-Benz Cars, we are continuing our model offensive – with the new SLK, the new

generation of the C-Class, the new C-Class coupe and the new M-Class. At the same time,

we are also taking on the compact segment. We begin in autumn with the new B-Class, to be

followed by several other models of our new compact car family.

The replacement of our model range is in full swing also at Daimler Trucks and Daimler Buses:

This year, the new-generation Mercedes-Benz Citaro city bus will be launched and the new Fuso

Canter truck will be available in Fuso’s worldwide export markets.

In general, we are well-positioned with our product portfolio to benefit disproportionately from the

global growth of the automotive industry. That applies to our traditional core markets as well as

to growth markets, where we continue to develop our local presence. In China, for example, demand

for the Mercedes-Benz brand is so strong that we are now building our first car engine plant

outside of Germany there. We also intend to produce additional model series locally – including

the GLK. In Russia, intensive preparations are underway for local production of the Sprinter.

In India, we will soon launch the new “BharatBenz” truck brand. In Brazil, where we have had a very

strong market position for many decades, we plan to expand our production capacity once again.

We expect to make further important progress in 2011 with the development of pioneering

green technologies, enabling us to reduce the CO2 emissions of our vehicle fleet by a significant
margin once again, to introduce the first E-Class with diesel hybrid, and to reach new milestones

on the road to driving with zero local emissions. The countdown for large-series production of the

electric smart has begun and the A-Class E-Cell will be delivered to customers as of this spring.

2011 is also an important year for fuel-cell drive. Three B-Class cars powered by fuel cells are

making a trip around the world to demonstrate that this technology works. What’s missing is the

infrastructure. That still needs to be put in place.

At the same time, we are well aware that sustainable success is ultimately based on a corporate

culture of excellence and integrity. That’s why we are systematically working on anchoring

exemplary global business ethics throughout our Group – in part by creating a Board of Management

position for the area of Integrity and Legal Affairs held by the first-class legal expert and former

judge at the German Constitutional Court, Dr. Christine Hohmann-Dennhardt. This appointment also

sends a clear signal that top performance is not a question of gender. We want to place more

women in leading positions – and we are doing something about it.

As Chancellor Angela Merkel recently congratulated your company on the 125th anniversary of

the invention of the automobile, she defined in her speech “the essence of what Daimler and Benz

teach us: Never stand still, keep moving forward, keep dreaming and keep opening up new

frontiers.” This ability of continual renewal is indeed the key to our success – and for many of you

probably an important reason to invest in Daimler. I would like to thank you for that trust on

behalf of the entire Board of Management team.

“Innovation from Tradition” – that’s more than just the title of this Annual Report. It’s also a

principle that more than a quarter of a million Daimler employees all over the world want to live up

to once again in 2011. Together, we will continue to do everything possible to justify your trust.

Sincerely,

Dieter Zetsche

To Our Shareholders | Chairman’s Letter | 11

Board of Management

From the left to the right

Thomas Weber | 56
Group Research & Mercedes-Benz Cars Development
Appointed until December 2013

Bodo Uebber | 51
Finance & Controlling, Daimler Financial Services
Appointed until December 2014

Dieter Zetsche | 57
Chairman of the Board of Management,
Head of Mercedes-Benz Cars
Appointed until December 2013

Wilfried Porth | 52
Human Resources & Labor Relations Director
Appointed until April 2012

Andreas Renschler | 52
Daimler Trucks
Appointed until September 2013

Wolfgang Bernhard | 50
Manufacturing and Procurement Mercedes-Benz Cars &
Mercedes-Benz Vans
Appointed until February 2013

Member of the Board of Management since
February 16, 2011:
Christine Hohmann-Dennhardt | 60
Integrity and Legal Affairs
Appointed until February 2014

To Our Shareholders | Board of Management | 13

Report of the Supervisory Board

Dear Shareholders, the Supervisory Board dealt in detail with the operational and strategic
development of the Daimler Group in eight meetings during the 2010 financial year.

The Supervisory Board had to make decisions on numerous special
topics in 2010, such as cooperation projects, capital measures,
investments, the conclusion of agreements, Board of Management
matters, details of the Articles of Incorporation etc. The Board
of Management also informed the Supervisory Board about a large
number of transactions not requiring the Supervisory Board’s
consent and the two boards discussed those matters together,
for example the development of sales structures, appoint-
ments to the top management level and the expansion and
restructuring of the Internal Auditing and Compliance departments.
The Supervisory Board discussed the information and evalua-
tions that were important for its decisions or recommen dations
together with the Board of Management. The Supervisory Board
meetings were regularly prepared in separate discussions by
the members representing the employees and the members
representing the shareholders.

While the beginning of 2010 was still affected by the deep recession
of the prior year, as the year progressed, there was a significant
and continuous upward trend for all key figures of unit sales, reve-
nue and earnings. This positive development was due partially
to the market recovery of some major sales markets, but above
all to the market success of Daimler’s products and services.
Another factor with a sustained positive impact on earnings was
the package of measures taken to enhance efficiency and reduce
costs, which had been initiated by the Board of Management and
monitored by the Supervisory Board since the beginning of the
financial and economic crisis. Figures for the free cash flow and
equity ratio of the industrial business demonstrate the Group’s
sound financial position.

The Supervisory Board had a thoroughly positive assessment of
that pleasing development, while considering that it was not yet
possible to regard the trend as dependably stable. Risk factors or
uncertainty factors resulted for example from the economic
situation in the United States, where experts were of the opinion
that a renewed economic slump during the year 2010 could not be
excluded. In China, another key market for Daimler, it was
necessary to consider the possibility of a growth slowdown. In the
euro zone, high levels of government debt came to be seen as
a significantly negative factor at the beginning of the year,
mainly triggered by the situation in Greece. Against this backdrop,
the Supervisory Board supported the risk-aware approach of
the Board of Management as the year progressed.

Other issues about which the Board of Management continually
informed the Supervisory Board, in addition to providing the
usual key figures, included:
– the Group’s profitability and liquidity,
– the internal control and risk management system,
– the cost of risk in the financial services business,
– vehicles’ residual values,
– the development of raw-material prices, and
– the situation of suppliers.

Detailed discussions were held in the year 2010 also about safe-
guarding the Group’s long-term competitiveness, fundamental
questions of corporate planning including financial, investment
and human resources planning, developments in the companies of
the Group, and the implementation of measures already initiated
to secure pioneering and sustainable mobility for the future.
The Supervisory Board occupied itself with those topics in close
consultation with the Board of Management, and particularly
intensively in a two-day strategy workshop.

Dr. Manfred Bischoff, Chairman of the Supervisory Board.

Cooperation between the Supervisory Board and the Board
of Management. In all of the Supervisory Board meetings, there
was an intensive and open exchange of opinions and information
concerning the position of the Group, business and financial
developments, fundamental issues of corporate policy and strat-
egy, and development opportunities in important growth markets
as well as compliance issues. The members of the Supervisory
Board regularly prepared for resolutions on transactions requir-
ing Supervisory Board consent on the basis of documentation
provided in advance by the Board of Management. They were
supported by the relevant committees, and discussed the projects
upon which decisions were to be taken with the Board of Manage-
ment. All the members of the Board of Management attended all
the meetings of the Supervisory Board. Furthermore, the Board of
Management informed the Supervisory Board with the use of
monthly reports and quarterly risk reports about the most impor-
tant performance figures and submitted the interim reports to the
Supervisory Board. The Supervisory Board was kept fully
informed of specific matters also between its meetings, and, as
required in individual cases, following consultation with the
Chairman of the Supervisory Board it was requested to pass its
resolutions in writing. In addition, the Chairman of the Board
of Management informed the Chairman of the Supervisory Board
in regular discussions about all important developments and
upcoming decisions.

Issues discussed at the meetings in 2010. In a meeting in
February 2010, the Supervisory Board dealt with personnel mat-
ters of the Board of Management. In the presence of the external
auditors, the preliminary key figures of the company financial
statements and the consolidated financial statements were dis-
cussed, as well as possible alternatives for the dividend proposal
to be made at the Annual Shareholders’ Meeting. In view of the
exceptional crisis conditions in 2009 and the Group’s net loss
for that year, the Supervisory Board resolved to follow the recom-
mendation of the Board of Management and not to make a divi-
dend proposal at the Annual Shareholders’ Meeting. The prelimi-
nary key figures were published at the Annual Press Conference
on February 18, 2010.

After the Supervisory Board had dealt in detail with the condi-
tions, in February 2010, it granted its approval to the termination
by mutual agreement of investigations of possible violations of
the US Foreign Corrupt Practices Act by the US Securities & Exchange
Commission (SEC) and the US Department of Justice (DOJ).
The final settlement was then reached with the US authorities
on April 1, 2010.

To Our Shareholders | Report of the Supervisory Board | 15

In early March 2010, the Supervisory Board dealt with the audited
2009 financial statements of the Company, the 2009 consoli-
dated financial statements, and the combined management report
for Daimler AG and the Daimler Group. As preparation, the
members of the Supervisory Board were provided with compre-
hensive documentation, some of it in draft form, including the
Annual Report, the audit reports from KPMG on the financial
statements of Daimler AG and the consolidated financial state-
ments according to IFRS, the combined management report of
Daimler AG and the Group, as well as drafts of the reports of
the Supervisory Board and of the Audit Committee and the annual
report according to Form 20-F.

The Audit Committee and the Supervisory Board dealt in detail
with those documents and discussed them in the presence of the
auditors, who reported on the results of their audit. The Super-
visory Board declared its agreement with the results of the audit,
established in the framework of its own review that no objections
were to be raised, and approved the financial statements presented
by the Board of Management. The company financial statements
of Daimler AG were thereby adopted. Subsequently, the Supervisory
Board consented to the proposal made by the Board of Manage-
ment that the loss for the year of Daimler AG should be offset by
a withdrawal from the capital reserves and that no dividend
proposal should be made at the Annual Shareholders’ Meeting.
The Supervisory Board also approved the report of the Super-
visory Board in its current draft. Other items dealt with were the
agenda for the Annual Shareholders’ Meeting, including the
proposal of a candidate to be elected as a representative of the
shareholders and the updated version of the declaration of
compliance. Finally, the Supervisory Board approved the external
board positions and sideline business activities of the members
of the Board of Management as presented in the meeting.

In an extraordinary meeting held in March 2010, the Supervisory
Board dealt with the status of cooperation talks with Renault-
Nissan on possible cooperation in the areas of the small-car seg-
ment, electric mobility, vans and light commercial vehicles, and
small engines. Another subject of discussion was the classification
of cooperation opportunities in the corporate and divisional
strategy, including their financial and legal aspects. Furthermore,
a cross-shareholding with Renault-Nissan was discussed with
the goal of supporting these cooperation opportunities. In this
context, the Supervisory Board approved the transfer of treasury
shares equivalent to approximately a 3% equity interest in Daimler
to Renault and/or Nissan in return for an equity interest of
approximately 3% in each of Renault and Nissan. Other terms and
conditions for the cross-shareholding were also decided upon.

Two Supervisory Board meetings were held in April. In the first
of those two meetings, in accordance with a proposal by the
Presidential Committee, the Supervisory Board decided on two
changes to the system of remuneration of the Board of Manage-
ment members, taking effect on January 1, 2011. The total amount
of base salary and annual bonus fundamentally remains
unchanged, but is now split equally between the two components.
Taking into consideration the review of remuneration in December,
this change will have the effect of a neutral shift in target
remuneration from the annual bonus to the fixed salary. As a result,
the target annual bonus has now been reduced from 1.5 times
the base salary to the same amount as the base salary. In addition,
the annual bonus will no longer be paid out after the end of the
financial year in full, but only 50%. The rest is due to be paid out
a year later depending on the development of Daimler’s share
price compared with the index Dow Jones STOXX Automobiles
& Parts, which Daimler AG uses as a benchmark for the relative
development of its own share price. These changes were
reported in the 2010 Annual Shareholders’ Meeting.

In the second meeting of April 2010, the Supervisory Board dealt
with the course of business and results of the first quarter, as
well as with the legal settlement meanwhile reached with the US
authorities. In this meeting, the Supervisory Board welcomed
former US federal judge Louis Freeh in his function as the Daimler
Monitor appointed in the context of the settlement, and took
note of his explanation of important fundamental principles for
the ongoing cooperation as he saw them.

In May, among other matters, the Supervisory Board consented
to the proposal by the Board of Management to terminate the
listing of Daimler shares on the New York Stock Exchange and to
apply for deregistration of all securities with the US Securities
and Exchange Commission.

After discussing the business development and results of the second
quarter, the Supervisory Board authorized the Board of Manage-
ment in its meeting in July to carry out a capital increase at Mit-
subishi Fuso Truck and Bus Corporation, a company of the
Group. In the same meeting, the Monitor provided information
on the results of his first review.

During the two-day strategy workshop in September, the Super-
visory Board once again received detailed information on the sta-
tus of compliance at the Group. In addition, it dealt in detail
with the stage of implementation of the strategic goals set by the
Board of Management for Daimler AG and the individual divisions
in previous years. Against the backdrop of the current economic
situation, the Supervisory Board discussed the stage of imple-
mentation of projects initiated by the divisions, the positioning
of the Group and its divisions with regard to the competition, and
the brand and product strategies.

Other key points included:

– growth opportunities in the various markets,
– analyses of competitors,
– the latest trends in customer behavior, also with regard

to the future development of urban mobility,
– the overall technology and market strategy for

safeguarding sustainable mobility,

– the technological development of internal-combustion engines,
– electric, hybrid and hydrogen drive systems,
– management capacities and other human resources issues,

and

– other strategic topics.

In December, the Supervisory Board dealt in detail on the basis
of comprehensive documentation with the operational planning
for the years 2011/2012, including discussion of existing oppor-
tunities and risks and the Group’s risk management. The Super-
visory Board also decided on the financing limits for the year 2011.
Other matters discussed in the December meeting included corpo-
rate governance and Board of Management remuneration. In this
meeting, the Supervisory Board decided on specific quantitative
targets for its own composition in addition to existing qualitative
targets, in particular with regard to appropriate participation by
women.

Corporate governance. During 2010, the Supervisory Board was
continually occupied with the further development of corporate
governance, giving due consideration to legislative changes and
developments.

Since the renewal of the directors’ and officers’ insurance cover
(D&O insurance) on April 1, 2010, a deductible is included for
members of the Supervisory Board in the case of negligent breaches
of duty in the amount of 50% of a member’s annual remuneration.

To Our Shareholders | Report of the Supervisory Board | 17

In its December meeting, the Supervisory Board updated the
rules of procedure of the Supervisory Board and its committees
and, pursuant to Section 161 of the German Stock Corporation
Act (AktG), approved the 2010 declaration of compliance with the
German Corporate Governance Code as amended on May 26,
2010.

An important precondition for effective cooperation in the Super-
visory Board is not only the prioritized specialist expertise, but
also diversity of the members in terms of their gender, ethnic origin
and other personal characteristics, appropriate to the Company’s
size and internationality. In connection with future proposals on
candidates for election to the Supervisory Board of Daimler AG,
the Supervisory Board will therefore pay due attention to achieving
a balance, in particular with regard to gender and sees this as
a contribution to strengthening Daimler’s claim to leadership in the
automotive industry. A guideline for balance in terms of gender
is the Group’s target of having 20% of top executive positions
occupied by women by the year 2020.

In each Supervisory Board meeting, there was a so-called executive
session, in which the members of the Supervisory Board were
able to discuss topics in the absence of the members of the Board
of Management.

The Supervisory Board arranged for an externally moderated
efficiency review to be carried out during the year 2010, thus
fulfilling the requirement to carry out a regular review of its
efficiency in accordance with its own rules of procedure and the
German Corporate Governance Code.

The members of the Supervisory Board of Daimler AG are obliged
to disclose potential conflicts of interest to the entire Super visory
Board and not to participate in discussing or voting on topics
which could lead to a conflict of interest. There were no indications
of any such potential conflicts of interest in 2010.

The member of the Supervisory Board who stood down as of the
end of the Annual Shareholders’ Meeting on April 14, 2010,
Arnaud Lagardère, was only able to attend fewer than half the
meetings between the beginning of 2010 and his departure,
due to other urgent commitments.

Report on the work of the committees

The Presidential Committee convened three times in 2010.
It dealt primarily with corporate governance issues and questions
of remuneration, as well as personnel matters of the Board of
Management. As in previous years, compliance targets were
included in the individual target agreements of the members
of the Board of Management.

The Audit Committee met seven times in 2010. Details of those
meetings are provided in a separate report of this committee
(see page 150 f).

The Nomination Committee convened once in 2010. In that meet-
ing, it prepared a recommendation for the Supervisory Board’s
proposal on a candidate for election to the Supervisory Board of
Daimler AG representing the shareholders. The proposal was
prepared on the basis of specifications regarding the structure,
orientation and qualification profile of the members of the Super-
visory Board representing the shareholders and with due consid-
eration of corporate governance requirements.

As in previous years, the Mediation Committee, a body required
by the provisions of the German Codetermination Act, had no
occasion to take any action in 2010.

The chairmen of the committees continually informed the members
of the Supervisory Board about the activities of the committees
and their decisions, in each case in the Supervisory Board meeting
following such decisions.

Personnel changes in the Supervisory Board. After the end of
the Annual Shareholders’ Meeting held on April 14, 2010, a mem-
ber representing the shareholders, Arnaud Lagardère, stepped
down from the Supervisory Board of Daimler AG. As proposed
by the Supervisory Board, Dr. Paul Achleitner was elected as
a member of the Supervisory Board representing the share-
holders with effect as of the end of that Annual Shareholders’
Meeting. The election proposal of the Supervisory Board was
based on a recommendation made by the Nomination Committee
of the Supervisory Board and a resolution by the members of
the Supervisory Board representing the shareholders.

Personnel changes in the Board of Management. In a Super-
visory Board meeting in February 2010, the Supervisory Board
resolved to reappoint Dr. Dieter Zetsche and Dr. Thomas Weber as
members of the Board of Management, in each case as of January 1,
2011 for three years, in accordance with resolutions of the
Supervisory Board passed in the year 2006. In addition, the Super-
visory Board resolved to expand the Board of Management with
the addition of one position and to appoint Dr. Wolfgang Bernhard
as a member of the Board of Management of Daimler AG with
responsibility for Production and Procurement Mercedes-Benz
Cars and for the Mercedes-Benz Vans division for three years
as of February 18, 2010.

In a Supervisory Board meeting in September 2010, the Super-
visory Board passed a resolution on the future expansion of the
Board of Management and the creation of a new Board of
Management position with responsibility for Integrity and Legal
Affairs.

In a meeting dealing with the expansion of the Board of Management
through the addition of a position for Integrity and Legal in
mid-February 2011, the Supervisory Board resolved to appoint
Dr. Christine Hohmann-Dennhardt, a former judge at Germany’s
Federal Constitutional Court, as a member of the Board of Man-
agement for a period of three years as of February 16, 2011,
to make her responsible for Integrity and Legal, and to adjust the
schedule of responsibilities of the Board of Management accord-
ingly. In addition, the Supervisory Board resolved to reappoint
Bodo Uebber as the member of the Board of Management
responsible for Finance & Controlling and Daimler Financial Services
for a period of three years as of December 16, 2011, in accor-
dance with the relevant resolution of the Supervisory Board of the
year 2006. Also in this meeting, in the presence of the external
auditors, the Supervisory Board dealt with the preliminary key
figures of the company and consolidated financial statements
and the dividend proposal to be made to the shareholders at the
Annual Meeting. The preliminary key figures were disclosed at
the Annual Press Conference on February 16, 2011.

Audit of the 2010 financial statements. The financial statements
of Daimler AG and the combined management report for the
Company and the Group for 2010 were duly audited by KPMG AG,
Wirtschaftsprüfungsgesellschaft, Berlin, and were given an
unqualified audit opinion. The same applies to the consolidated
financial statements for 2010 prepared according to IFRS, which
were supplemented with the combined management report and
additional notes. The financial statements, the Board of Manage-
ment’s proposal on the appropriation of profits and the auditors’
reports were submitted to the Supervisory Board for its review.

In preparation, the members of the Supervisory Board were pro-
vided with comprehensive documentation – some of it in draft
form – including the Annual Report, the audit reports of KPMG on
the company financial statements of Daimler AG and the consoli-
dated financial statements according to IFRS, and the combined
management report for Daimler AG and the Group, as well as
drafts of the reports of the Supervisory Board and the Audit Com-
mittee. A Form 20-F report no longer had to be prepared due to
the delisting and deregulation in the United States. The documents
presented were dealt with in detail in a meeting at the end of
February, first by the Audit Committee and then by the Supervisory
Board, and were discussed in the presence of the auditors,
who reported on the results of their audit. The Supervisory Board
declared its agreement with the results of the audit, established
in the framework of its own review that no objections were to be
raised, and approved the financial statements presented by
the Board of Management. The company financial statements of
Daimler AG are thereby adopted. The Supervisory Board also
discussed the situation of the EU Commission’s antitrust investi-
gations of European manufacturers of commercial vehicles, dealt
with the Board of Management’s proposal on the appropriation of
profits and approved that proposal. It also approved the report
of the Supervisory Board in its current draft and approved the
agenda for the Annual Shareholders’ Meeting in 2011.

Appreciation. The Supervisory Board thanks all of the employees
of the Daimler Group, the management and the departing member
of the Supervisory Board for their personal contributions and
special efforts, as a result of which the Group performed very
well already in the first year after successfully meeting the chal-
lenges of crisis year 2009.

Stuttgart, February 2011

The Supervisory Board

Dr. Manfred Bischoff
Chairman

To Our Shareholders | Report of the Supervisory Board | 19

Members of the Supervisory Board

Dr. Manfred Bischoff
Munich
Chairman of the Supervisory Board of Daimler AG
Other supervisory board memberships/directorships:
Fraport AG
Royal KPN N.V.
SMS GmbH – Chairman
UniCredit S.p.A.
Voith GmbH – Chairman

Erich Klemm*
Sindelfingen
Chairman of the General Works Council, Daimler Group and
Daimler AG;
Deputy Chairman of the Supervisory Board of Daimler AG

Dr. Paul Achleitner
Munich
Member of the Board of Management of Allianz SE
(since April 14, 2010)
Other supervisory board memberships/directorships:
Bayer AG
RWE AG
Allianz Investment Management SE – Chairman
Allianz Global Investors AG

Sari Baldauf
Helsinki
Former Executive Vice President and General Manager
of the Networks Business Group of Nokia Corporation
Other supervisory board memberships/directorships:
Hewlett-Packard Company
F-Secure Corporation
CapMan OYj
Fortum OYj

Dr. Clemens Börsig
Frankfurt am Main
Chairman of the Supervisory Board of Deutsche Bank AG
Other supervisory board memberships/directorships:
Linde AG
Bayer AG
Emerson Electric Co.

Prof. Dr. Heinrich Flegel*
Stuttgart
Director Research Materials, Lightweight Design and
Manufacturing, Daimler AG; Chairman of the Management
Representative Committee, Daimler Group

Dr. Jürgen Hambrecht
Ludwigshafen
Chairman of the Board of Executive Directors of BASF SE
Other supervisory board memberships/directorships:
Deutsche Lufthansa AG

Jörg Hofmann*
Stuttgart
German Metalworkers’ Union (IG Metall), District Manager,
Baden-Württemberg
Other supervisory board memberships/directorships:
Robert Bosch GmbH
Heidelberger Druckmaschinen AG

Dr. Thomas Klebe*
Frankfurt am Main
General Counsel of the German Metalworkers’ Union (IG Metall)
Other supervisory board memberships/directorships:
Daimler Luft- und Raumfahrt Holding AG
ThyssenKrupp Materials International GmbH

Gerard Kleisterlee
Amsterdam
President and CEO of Royal Philips Electronics N.V.
Other supervisory board memberships/directorships:
De Nederlandsche Bank N.V.
Royal Dutch Shell Plc.

Jürgen Langer*
Frankfurt am Main
Chairman of the Works Council of the Frankfurt/Offenbach
Dealership, Daimler AG

Ansgar Osseforth*
Sindelfingen
Manager Mercedes-Benz Research and Development;
Member of the Works Council, Sindelfingen Plant, Daimler AG

Valter Sanches*
São Paulo
Secretary of International Relations of Confederação
Nacional dos Metalúrgicos/CUT

Dr. Manfred Schneider
Leverkusen
Chairman of the Supervisory Board of Bayer AG
Other supervisory board memberships/directorships:
Linde AG – Chairman
RWE AG – Chairman
TUI AG

Stefan Schwaab*
Gaggenau
Vice Chairman of the General Works Council, Daimler Group
and Daimler AG;
Vice Chairman of the Works Council, Gaggenau Plant,
Daimler AG

Jörg Spies*
Stuttgart
Chairman of the Works Council, Headquarters, Daimler AG
(since January 5, 2010)

Lloyd G. Trotter
Plainville
Former Vice Chairman General Electric;
President & CEO of the General Electric Group’s Industrial
Division;
Managing Partner, Founder, GenNx360 Capital Partners
Other supervisory board memberships/directorships:
PepsiCo Inc.
Textron Inc.

Dr. h.c. Bernhard Walter
Frankfurt am Main
Former Spokesman of the Board of Management of
Dresdner Bank AG
Other supervisory board memberships/directorships:
Bilfinger Berger SE – Chairman
Deutsche Telekom AG
Henkel AG & Co. KGaA

Uwe Werner*
Bremen
Chairman of the Works Council, Bremen Plant, Daimler AG

Lynton R. Wilson
Toronto
Chairman of the Board of CAE Inc.;
Chancellor, McMaster University

Retired from the Supervisory Board:

Arnaud Lagardère
Paris
General Partner and CEO of Lagardère SCA
(retired April 14, 2010)

Helmut Lense*
Stuttgart
Chairman of the Works Council, Untertürkheim Plant,
Daimler AG
(retired December 31, 2009)

Committees of the Supervisory Board:

Committee pursuant to Section 27 Subsection 3 of the
German Codetermination Act (MitbestG)
Dr. Manfred Bischoff – Chairman
Erich Klemm*
Dr. Manfred Schneider
Dr. Thomas Klebe*

Presidential Committee
Dr. Manfred Bischoff – Chairman
Erich Klemm*
Dr. Manfred Schneider
Dr. Thomas Klebe*

Audit Committee
Dr. h.c. Bernhard Walter – Chairman
Dr. Clemens Börsig
Erich Klemm*
Stefan Schwaab*

Nomination Committee
Dr. Manfred Bischoff – Chairman
Dr. Manfred Schneider
Lynton R. Wilson

* Representative of the employees

To Our Shareholders | Members of the Supervisory Board | 21

Daimler Shares

Daimler’s share price profited in 2010 from the very positive development of the Group’s business
operations and developed significantly better than the DAX. We provide analysts and investors
with information in the context of comprehensive investor relations activities. Board of Management
and Supervisory Board propose dividend payment of €1.85 per share.

Development of Daimler’s share price and major indices

Key figures per share

End of 2010

End of 2009

10/09

% change

In euros

2010

2009

10/09

% change

Daimler’s share price (in euros)

50.73

37.23

+36

Net profit/loss (basic)

DAX 30

Dow Jones Euro STOXX 50

Dow Jones Industrial Average

Nikkei

Dow Jones STOXX Auto Index

6,914

2,793

11,578

10,229

341

5,957

2,966

10,428

10,546

236

+16

-6

+11

-3

+44

Net profit/loss (diluted)

Dividend

Equity (December 31)
Xetra share price: year-end 1

Highest 1
Lowest 1

1 Closing prices

4.28

1.85

35.62

50.73

54.87

30.35

-2.63

0.00

29.99

37.23

37.65

17.44

+19

+36

+46

+74

Unsettled developments on global stock exchanges. Stock
markets worldwide continued their volatile and varied develop-
ment in 2010. Against the backdrop of a debate about public-sector
debt and the high budget deficits of some countries in the euro
zone, investors at first adopted a wait-and-see approach and inter-
national stock markets moved sideways. In view of increasing
fears of a possible return to recession or a double dip, especially
of the US economy, share prices fell to their lowest levels for
the year in the summer months. Following the publication of com-
panies’ half-year figures and good economic data, sentiment
on international stock exchanges started to improve and the most
important indices began to climb again in the second half
of 2010. Share prices also benefited from the announcement of
another program of quantitative easing in the United States
and the gradually decreasing risk of a renewed economic slump.

Widely differing economic developments in various regions were
reflected in share-price movements during the year. The index of
the most important stocks in the euro zone, the Dow Jones Euro
STOXX 50, fell by 6% over 2010 as a whole. But Germany’s main
index, the DAX, developed very positively with a plus of 16%. In
addition to the robust German economy, this reflected the fact
that companies with major operations outside Europe were prof-
iting from the weakness of the euro. After US share prices were
at first depressed by concerns about a possible double-dip of the
economy, there was a distinct upward trend in the second half
of the year, so the Dow Jones also gained 11% in 2010. In Japan,
share-price gains in the last two months of the year were not
sufficient to give the Nikkei index an overall gain for the year (-3%).

Daimler shares gain substantial value during 2010 (+36%).
Daimler’s share price started the year 2010 at a price of approxi-
mately €37. Prices of cyclical stocks such as Daimler’s suffered
in the first two months of the year from investors’ caution follow-
ing the announcement of a more restrictive monetary policy
by the Chinese central bank and the debt crisis in Greece. As a
result of increased selling after the announcement that no divi-
dend would be paid for the year 2009, Daimler’s share price fell
to its low for the year of €30.35 on February 25.

Daimler share price (high/low), 2010
In euros

Share price index

60
55

160

150

140

130

120

110

100

Daimler AG
Dow Jones STOXX Auto Index
DAX

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/10

11/10

12/10

12/31/09 2/26/10

4/30/10

6/30/10

8/31/10

10/29/10 12/31/10

A long phase of recovery set in after that. Demand for Daimler
shares was boosted by investors’ growing confidence that the
world economy would revive quickly and by a significant increase
in car unit sales. At an analysts’ and investors’ day in Beijing at
the end of May, we explained the strategy of the coming years for
Mercedes-Benz Cars and announced an outlook for a sustained
profitability target of 10% over our business cycle as of the year
2013. This provided further support for our share price. After
very volatile movements during the second quarter, it reached a
high for the first half of 2010 of €44.50 on June 21.

Although the half-year results and the increased earnings guid-
ance confirmed the capital market’s positive expectations for our
stock, its price was reduced by profit-taking as the year pro-
gressed. But a new upswing set in along with the good develop-
ment of business in September. Third-quarter results and the
renewed increase in earnings guidance for full-year 2010 empha-
sized the long-term nature of the recovery.

Following an analysts’ and investors’ day and the presentation
of the mid-term outlook for Daimler’s commercial-vehicles business
at our truck plant in Wörth at the end of November, and a gener-
ally positive development of auto stocks, our share price stabilized
at above the €50 mark. On December 10, it reached its high
for the year of €54.87. During the last trading days of the year,
Daimler’s share price came under pressure due to temporary
concerns about the outlook for the Chinese car market for the
year 2011, and closed for the year in Xetra trading at €50.73.
Our market capitalization at the end of 2010 was €54.0 billion.

Over the year as a whole, Daimler’s share price increased by
€13.50 or approximately 36%. With this strong performance,
Daimler shares developed significantly better than the DAX (+16%),
but did not quite match the growth rate of the Dow Jones STOXX
Auto Index (+44%).

Dividend of €1.85 per share. The Board of Management and
the Supervisory Board will propose to the Annual Shareholders’
Meeting that a dividend of €1.85 per share be distributed for the
year 2010. The total dividend payout will amount to €1,971 million.

End of listing on the New York Stock Exchange (NYSE). On
May 14, 2010, Daimler informed the New York Stock Exchange
(NYSE) and the general public of its intention to discontinue the
listing of Daimler shares and of the 8.5% US-dollar bond issued
by Daimler Finance North America LLC and due on January 18,
2031, as well as the related Daimler guarantee, and to apply for
deregistration with the US Securities and Exchange Commission
(SEC). Since the delisting took effect on June 7, 2010 and all
securities were deregistered effective September 7, 2010, we no
longer have any reporting duties pursuant to the US Securities
Exchange Act 1934. The main reason for ending the NYSE listing
and deregistering with the SEC is a significant change in the
behavior of investors, who now trade in Daimler shares primarily
in Germany and on electronic trading platforms. Another reason
was to reduce the complexity of financial reporting as well as
administrative costs and fees. Irrespective of the delisting and
deregistration, Daimler will maintain a high degree of transpar-
ency in its financial reporting and will continue to fulfill the
requirements of international investors.

To Our Shareholders | Daimler Shares | 23

Key figures

Stock-exchange data for Daimler shares

End of 2010

End of 2009

10/09

% change

ISIN

-99

+42

-20

Share capital (in millions of €)

3,058

3,045

Number of shares
(in millions)

thereof treasury shares

Market capitalization
(in billions of euros)

Number of shareholders
(in millions)

Weighting in share indices

DAX 30

Dow Jones Euro STOXX 50

Long-term credit ratings

Standard & Poor’s

Moody’s

Fitch

DBRS

1,065.6

0.2

1,061.2

37.1

54.0

1.0

7.51%

2.88%

BBB+

A (low)

38.1

1.2

5.98%

2.05%

BBB+

A (low)

Launch of American depositary receipt (ADR) program in
the United States. In September 2010, we started a sponsored
Level 1 ADR program in the United States. The ADRs are traded
over the counter in the USA under the symbol DDAIY. The ratio
of the ADRs to the underlying ordinary shares is 1:1, i. e. one
Daimler ADR represents one Daimler share. Deutsche Bank Trust
Company is acting as the depositary bank for the ADR program.

International shareholder structure with stable major
shareholders. Daimler continues to have a broad shareholder
base of approximately 1.0 million shareholders. Shareholder
numbers are still decreasing because private investors in particular
are reducing their portfolios. The proportion of institutional
investors increased again in 2010. Aabar Investments PJSC,
Abu Dhabi, holds 9.0% of Daimler’s stock and is thus still our
biggest investor. The second-largest shareholder is still the Kuwait
Investment Authority with 6.9% of our shares. In April 2010,
Daimler AG and the Renault-Nissan Alliance agreed not only on
wide-ranging strategic cooperation but also on a cross-share-
holding. The Renault-Nissan Alliance received a 3.1% equity inter-
est in Daimler, served from our treasury shares. As a result,
the proportion of treasury shares held by Daimler fell below the
disclosure threshold of 3%. At the end of the year, we held
221,418 treasury shares (0.02%).

Capital Research and Management Company, Los Angeles, noti-
fied us that it held 3.1% of Daimler’s shares as of May 26, 2010.
BlackRock Inc., New York, informed us that it held 3.9% of our
shares as of December 2009 and is still above the 3% notification
threshold for large shareholders as defined by Germany’s Securi-
ties Trading Act (WpHG).

German securities identification number

Stock-exchange symbol

Reuters ticker symbol

Bloomberg ticker symbol

DE0007100000

710000

DAI

DAIGn.DE

DAI:GR

In total, institutional investors held 62% of our share capital
at the end of 2010 and private investors held 19%. Approximately
65% of our equity was in the hands of European investors and
approximately 15% was held by U S investors.

The weighting of Daimler shares in major indices increased
during 2010 due to the positive development of our share price.
In the German DAX 30 index, our stock was ranked in 3rd
position with a weighting of 7.51% at the end of the year (end of
2009: 5.98%). In the Dow Jones Euro STOXX 50 index, Daimler
shares were represented with a weighting of 2.88% (end of 2009:
2.05%). Daimler shares are listed in Frankfurt and Stuttgart.
Stock-exchange trading in Germany in the year 2010 amounted
to 1,492 million shares (2009: 1,830 million). In addition,
Daimler shares were increasingly traded on newly created multi-
lateral trading platforms and in the over-the-counter market.

Resumption of employee share program. In May 2010, eligible
members of the workforce were once again able to acquire
employee shares and make use of the newly increased tax-exempt
amount. As a result, 19,400 employees acquired a total of
350,700 shares.

Annual Shareholders’ Meeting affirms management’s
proposals with large majorities. Our Annual Shareholders’
Meeting held on April 14, 2010 at the Berlin International
Congress Centrum (ICC) was visited by approximately 4,700 share -
holders (2009: 7,000). With 40.3% of the share capital repre-
sented at the Annual Meeting, shareholder representation was
close to the level of the prior year (2009: 41.6%). In the voting
on the items of the agenda, the shareholders adopted the recom-
mendations of the management with large majorities.

The shareholders are able to exercise their voting rights at the
Annual Meeting either in person or through a proxy of their own
choice or through a proxy appointed by Daimler who is bound
by their voting instructions. For Annual Shareholders’ Meeting 2011,
we intend to offer the possibility of absentee voting for the first time.
All documents and information on the Annual Meeting are available
at www.daimler.com/ir/am.

Daimler once again utilized the exhibition space at the ICC
to demonstrate to the shareholders the Group’s broad spectrum
of products and technological expertise, especially in the area
of sustainable mobility.

Shareholder structure as of December 31, 2010
By type of shareholder

Shareholder structure as of December 31, 2010
By region

Aabar Investments PJSC

Kuwait Investment Authority

Renault-Nissan

Institutional investors

Retail investors

9.0%

6.9%

3.1%

61.9%

19.1%

Germany

Europe, excluding Germany

USA

United Arab Emirates

Kuwait

Asia

Rest of the world

28.2%

36.9%

15.4%

9.0%

6.9%

3.0%

0.6%

Comprehensive investor relations activities. In the year 2010,
the Investor Relations department once again provided timely
information on the development of the Group to institutional
investors, analysts, rating agencies and retail investors. Our com-
munication activities for institutional investors and analysts
included roadshows in the major financial centers of Europe,
North America, Asia and Australia, as well as large numbers
of one-on-one meetings. We carried out presentations of the Group
in the context of investor conferences, in particular during the
international motor shows in Geneva, Paris and Hanover. We regu-
larly reported on our quarterly results via conference calls and
Internet broadcasts. The presentations can be seen on our web-
site at http://www.daimler.com/ir/event/e. The focus of
discussions with analysts and investors was on current earnings
expectations for the year 2010 as well as business developments
and profitability in the various divisions and regions.

Three of last year’s events are particularly noteworthy: On April 7,
2010, Daimler announced its strategic alliance with Renault-
Nissan at a joint press conference. Capital-market players were
informed about the cooperation with a live video broadcast on
the Internet and a separate conference call with the two CEOs.
On May 28, 2010, we held an analysts’ and investors’ day in
Beijing with speeches and discussions on the outlook and goals
of Mercedes-Benz Cars in China. On November 30, 2010, we
hosted approximately 160 analysts, investors and bank represen-
tatives at our truck plant in Wörth and informed them about
the outlook and goals of Daimler Trucks and Daimler Buses in
the various regions of the world.

Internet website makes use of new possibilities. Following
the thorough modernization of the Daimler Group’s website,
a wide range of corporate topics were presented in 2010. Users
are encouraged to take a closer look by an innovative, multi-
media form of presentation with informative texts, schematic ani-
mations and a lot of film material. We also revised our mobile
website so that it can now be accessed optimally by mobile devices
such as smart phones. In addition to the existing investor rela-
tions content, all current information on Daimler’s brands and
products as well as technological and innovation topics can
be accessed quickly and conveniently when on the move at
www.daimler.mobi. Furthermore, a new Daimler app is now
available for iPhone™ and iPad™ users. They can optimally access
multimedia specials, for example on the Group’s brands, products,
technologies or events.

Our interactive Annual Report 2009 was honored by the League
of American Communications Professionals LLC (LACP) with
an LACP Award in Silver. The jury particularly praised the visual
design and the perceived relevance of the information to the
target group.

Number of online shareholders remains at a high level. Our
electronic information and communication service was as popular
as ever in 2010. The number of shareholders who received
their invitations to the Annual Meeting by e-mail instead of by
post increased from 85,000 to 90,000. We thank those share-
holders for helping us to protect the environment and reduce costs.
Once again in 2010, we held a lottery among the participating
shareholders with 50 attractive prizes for the winners. Access
and further information on the e-service for shareholders can
be found on our website at https://register.daimler.com.

After the optimization of our electronic annual meeting services,
our online shareholders were able for the first time to print out
their tickets themselves for Annual Meeting 2010. Approximately
1,400 shareholders made use of this service.

To Our Shareholders | Daimler Shares | 25

The success story of motorized and
individual transport began 125 years ago
with the invention of the automobile
by our pioneers, Gottlieb Daimler and
Carl Benz. This anniversary is especially
significant for Daimler. In the tradition
of our company’s founders, we have
put numerous technical achievements
on the road since then. Daimler has
always played a pioneering role and will
continue to shape the future of mobility
with groundbreaking innovations for
automobiles and commercial vehicles.

Innovation Close Up.
Every pioneering achievement
begins with attention to detail.

The most appealing
form of efficiency

Thanks to an innovative technology package, the new
Mercedes-Benz V6 and V8 gasoline engines achieve out-
standing performance combined with low fuel consumption.
Clean and efficient internal-combustion engines will form
the basis of mobility for a long time to come – also for
vehicles with hybrid drive. Mercedes-Benz models such as
the new CLS put that new efficiency on the road in style.

Cylinder liner of the new

V6 and V8 engines.

Innovation Close Up | 29

With its unique design, refined sportiness
and maximum efficiency, the all-new
Mercedes-Benz CLS has admirers all over
the world.

I t has been an exciting newcomer right from the start: the Mercedes-Benz CLS established a

completely new automobile segment when the first version was launched as the world’s first

four-door coupe in 2003. The new version of the CLS was unveiled in 2010. Like its predecessor,

the second generation also communicates sensuousness and discernment, design and technology

in a very special way. The silhouette of the CLS has become even more emotive with a new com-

bination of lines and surfaces. The interior features timeless design and innovative details. The

dynamism of the CLS is enhanced by its lightweight construction and efficient V6 and V8 engines

that reduce fuel consumption by up to 25 percent while delivering even more power than their

predecessors. So it was no surprise that the style icon was awarded the Golden Steering Wheel

2010 by the jury and readers of “Auto Bild,” “Bild am Sonntag” and other European car magazines.

“Outstanding design and a highly efficient powertrain

give the new CLS its unique character.”

Hubert Lee, Creative Director, Mercedes-Benz Research & Development,
Advanced Design, Carlsbad, California

Design trendsetter and efficiency

pioneer. All four V6 and V8 engines

available in the Mercedes-Benz CLS

offer more power and lower fuel

consumption than their predecessors.

Innovation Close Up | 31

The efficient E-Class convertible
doesn’t follow the flow, it defines it.

T he Mercedes-Benz E-Class convertible has a universal

appeal. Of the new cars launched in 2010, it was voted

“most beautiful convertible of 2010” by the readers of Germany’s

“auto motor und sport” magazine. This open four-seater with a

traditional soft top also won the Autonis design prize for its pure

convertible feeling and style. The E-Class convertible appeals

with clear proportions and an elegant silhouette. It is also unique

“The beauty and elegance of my

E-Class convertible delight me

again and again. The same applies

to its outstanding efficiency.”

for its level of safety and excellent all-year comfort with its

Stefan von Wallfeld, entrepreneur, Stuttgart

innovative AIRCAP wind deflector, AIRSCARF neck-level heating,

and a sound-absorbing cloth roof. The convertible awakens

emotions – not only with its pioneering design and comfort but

also with its engines: The next-generation V6 and V8 technology

makes the open four-seater even more powerful, but at the

same time cleaner and more economical. So the Mercedes-Benz

E-Class convertible is the open-air star of all four seasons.

A wind of change for more efficiency.

Innovative direct gasoline-injection

engines in the Mercedes-Benz E-Class

convertible provide abundant power

while reducing fuel consumption and

emissions.

Innovation Close Up | 33

Honeycomb structure of an SCR catalytic converter

as a module for reducing nitrogen oxides.

Fit for the future
down to the last
detail.

SCR technology makes economical diesel engines so clean
that they fulfill the world’s most stringent emission limits.
As a pioneer, Daimler introduced this revolutionary exhaust
technology under the name of “BLUETEC” in commercial
vehicles in 2005 and in cars in 2006. Now the new Freightliner
Cascadia trucks are traveling the US highways with SCR
catalytic convertors.

Innovation Close Up | 35

“The Freightliner Cascadia with

SCR technology is my first choice

to fulfill the stringent EPA 2010

emission limits in the USA.”

P erfectly prepared for a clean future. After receiving several

major orders, Daimler Trucks North America (DTNA) already

sold approximately 20,000 BlueTec trucks of the Freightliner and

Western Star brands in 2010. One of the orders was from Schneider

National, Inc., one of the biggest transportation companies in the

United States. Since 1996, Schneider has been using engines

from Daimler subsidiary Detroit Diesel Corporation, which already

Chris Lofgren, CEO Schneider National, Inc., Green Bay, Wisconsin

introduced SCR technology in 2005. The innovative Detroit Diesel

engines are now the most popular engines in new Freightliner

trucks. Under the name of BlueTec, DTNA launched SCR exhaust

treatment systems to fulfill the stringent EPA 2010 emission limits

in the USA, as this technology has proven to be the most effective

in reducing the emission of pollutants. With SCR catalytic con-

verters, Freightliner is making use of the experience gained with

Mercedes-Benz BlueTec trucks, which have already covered many

millions of kilometers in Europe - safely, reliably and economically.

In 2009, Schneider took part in tests of SCR technology in every-

day conditions with two Cascadias, the flagship of Freightliner’s

heavy-duty truck class. The transportation company has now

ordered additional Cascadias with SCR exhaust systems, to help

keep the wheels of the North American economy turning while

protecting the environment.

Freightliner Trucks with clean
SCR technology are on the way up.

Strong performance: All new Freightliner Cascadia

trucks are available with SCR exhaust treatment

systems. In Europe, BlueTec trucks from Mercedes-

Benz have already covered more than 20 million

kilometers with the innovative SCR technology.

Innovation Close Up | 37

A pioneering
combination.

Hybrid drive systems combine combustion engines with electric
motors and represent a milestone in the further improvement of
automotive efficiency. Daimler has developed a modular hybrid kit
that can be used to create many versions of hybrid drive depending
on performance and range of application. The Mercedes-Benz Atego
BlueTec Hybrid and the Mercedes-Benz Citaro FuelCELL-Hybrid
have proven their innovative strengths in practical use.

A pioneering

combination.

The lacquered copper windings of an

electric motor in a hybrid drive system.

Innovation Close Up | 39

The Atego BlueTec Hybrid
delivers top performance.
Also in terms of environmental
protection.

At the top. As “Truck of the Year 2011,” the

Mercedes-Benz BlueTec Hybrid impresses

customers with its environmentally friendly

drive system – but also with its contribution

to sustainable local deliveries.

“We have put all of our passion

for trucks on the road in the

Atego BlueTec Hybrid. And our

expertise for economy and

sustainability.”

Georg Klohr, Head of Prototype Construction/Production Mercedes-Benz
Atego BlueTec Hybrid, Mercedes-Benz Plant Mannheim

C leanliness, safety, practicality and comfort – those are the

key product features of the Mercedes-Benz Atego BlueTec

Hybrid. That’s why an international jury of experts voted this

innovative multi-talent as “Truck of the Year 2011.” Not only in

the hybrid version, but in all models of the medium-duty delivery

truck, drivers today enjoy a level of equipment that was previ-

ously reserved for their long-haulage colleagues. In addition, the

advanced parallel hybrid drive reduces fuel consumption and CO2

emissions by 10 to 15 percent. With the parallel hybrid, Daimler

as the leading producer of commercial vehicles has also created

the international standard for hybrid architecture. Following

successful fleet applications, the first 50 Mercedes-Benz Atego

BlueTec Hybrid of the next stage of evolution were sold to cus-

tomers in late 2010. With this environmentally friendly truck,

Mercedes-Benz has made progress on commercial vehicles with

hybrid drive with a worldwide impact. The series-produced Atego

BlueTec Hybrid is regarded as a trailblazer for alternative drive

systems in delivery vehicles and was therefore rewarded in the

autumn of 2010 with the “German Sustainability Prize” in the

product category.

Innovation Close Up | 41

“Economical, safe, clean. That’s the future of public transport –

in Hamburg with the Citaro FuelCELL-Hybrid.”

Günter Elste, CEO of Hamburger Hochbahn (public-transport company), Hamburg

Environmentally friendly by design.
The Citaro FuelCELL-Hybrid provides
urban mobility without any local emissions.

A win-win situation. The Mercedes-Benz Citaro FuelCELL-Hybrid fulfills urban mobility requirements

with a high standard of environmental compatibility and extremely good economy.

C ities and urban areas can take a deep breath. Without any

local emissions but with very good economy, the Mercedes-

hybrid urban bus has arrived. The Citaro FuelCELL-Hybrid is also

on time for the EU-supported project CHIC (Clean Hydrogen in

Benz Citaro FuelCELL-Hybrid is at the forefront of sustainable

European Cities), which started in Cologne in 2010. The goal is to

mobility. The latest generation of environmentally friendly,

integrate 26 fuel-cell buses into regular daily service in the five

energy-efficient fuel-cell hybrid buses will set a benchmark for

cities of Aarau, Bolzano, Milan, London and Oslo. This project

public transport as of spring 2011, also as part of the NaBuZ

will benefit from the experience gained in successful predeces-

project (Sustainable Bus Systems of the Future) in Hamburg.

sor projects in Berlin, Hamburg, Cologne and Whistler, Canada.

Thanks to further improved fuel cells and hybridization with

Daimler is participating in the large-scale CHIC fleet tests with

lithium-ion batteries, the pioneering Citaro FuelCELL-Hybrid has

the next-generation Mercedes-Benz Citaro FuelCELL-Hybrid and

a range of approximately 250 kilometers and consumes only

is thus shaping the future of locally emission-free public

about half as much hydrogen as its predecessor: The outstanding

transport.

Innovation Close Up | 43

A connection for
moving moments.

Locally emission-free vehicles will only become properly mobile
when we have a standardized battery-charging infrastructure.
Together with small and medium-sized companies, Daimler has
developed a uniform charging plug for all German producers. It
makes battery charging and paying for the electricity as safe and
easy for customers as using a mobile phone. The Mercedes-Benz
Vito E- CELL and the smart fortwo electric drive are already using it.

Detail of the innovative charging

plug of an electric vehicle.

Innovation Close Up | 45

Intelligent battery charging:
The Vito E-CELL charges its batteries with
green electricity for a better quality of life.

Emission-free driving ex-factory.

The Mercedes-Benz Vito E-CELL is in

use with customers as the world’s

first series-produced electric van.

“On each of its journeys, the

Vito E-CELL also transports

a significant degree of innovative

spirit and responsibility. Qualities

that benefit its owners as well

as the environment.”

Dr. Joachim Wessels, Executive Board Member for Letters,
Deutsche Post AG, Bonn

E volution in the city. The Mercedes-Benz Vito E-CELL is ringing

in a new era of clean urban transport. In 2010, Mercedes-

Benz delivered the first E-CELL vans to customers in Berlin. They

were from the first series of vans with electric drive to roll off the

assembly line. Daimler is pushing forward with electric mobility

together with companies, energy suppliers and politicians. With

the Vito E-CELL, locally emission-free electric vans are now a real-

ity on our roads. The pioneers of electric mobility in commercial

use include Deutsche Post DHL, which uses the Vito E-CELL in

every-day deliveries. A precondition for economical and environ-

mentally friendly operation is an intelligent battery-charging

system allowing customers to decide when to charge their vehicles

themselves. The Vito E-CELL meets this requirement with its

Smart Charge Communication Unit (SCCU), which enables users

to charge their lithium-ion batteries when “green” and less expen-

sive electricity is available. That reduces emissions and costs.

A genuine benefit for the environment – and for the Vito E-CELL.

It has received several prizes for its groundbreaking technology

such as “Postal Technology Award 2010” and “Green Commercial

of the Year” from the Irish “Fleet Transport” magazine.

Innovation Close Up | 47

“More than ten years ago, the smart changed the face

of cities all over the world. Today, we are pioneers of

urban mobility – with our smart fortwo electric drive.”

Maja Affeldt, biotech engineer, and Julian Affeldt, primary school teacher, Kleinmachnow, Berlin

One hundred
percent fun
and zero local
emissions with
the smart fortwo
electric drive.

T he new smart fortwo electric drive is electrifying Europe’s

metropolises. The first fleet already caused a stir in London

in 2007 and the second generation has been very popular since

its launch in late 2009. Since the first of the electrically powered

city cars were handed over to customers in Berlin, it has also

become part of the urban lifestyle in Rome, Madrid, Zurich, Paris

and London. But the environmentally friendly cosmopolitan will

also demonstrate its practicality in other major cities of Europe,

North America and Asia. As of 2012, the locally emission-free

smart fortwo electric drive will be generally available in approxi-

mately 40 smart markets, with a production volume in excess

of 10,000 units.

The fun of driving this car starts with a standard electric socket,

which can be used to charge the lithium-ion batteries of the

smart fortwo electric drive in just three hours. That gives the car

a range of approximately 135 kilometers, more than enough for

typical urban driving. The smart fortwo electric drive has a highly

responsive rear-mounted 30kW electric motor, whose torque

is fully available immediately after starting. More than 1,500 of

these zero-emission trendsetters will at first be produced at the

plant in Hambach, France, by the end of 2011.

With the smart fortwo electric drive, the cult brand plays a pioneering

role also in terms of emission-free metropolitan driving.

Innovation Close Up | 49

Camera lens of Night Vision Assistant PLUS

in the car windscreen.

A first-class
outlook for
safety.

The infrared camera of Night View Assistant PLUS from
Mercedes-Benz shows what’s going on ahead of the car on a
dashboard display. Intelligent assistance systems make the
automobile into a partner that can see, think ahead and react.
This allows the driver to avoid accidents. Safety at the highest
level can be experienced in the Mercedes-Benz S- Class.

Innovation Close Up | 51

“For me, success is when I achieve

my goals. And others win as well.

The safety concept of my S-Class

also takes full consideration of all

interests.”

Shen Li, entrepreneur, Shanghai

D riving at night will be safer in the future: with the new

Active Night Vision Assistant PLUS, another milestone

in active safety from Mercedes-Benz. The further developed

driver assistance in the S-Class makes night into day. Already

since 2009, Active Night Vision Assistant PLUS has been able to

recognize pedestrians on the road in the dark and show them on

a dashboard display to warn the driver. Now, Mercedes-Benz has

taken a decisive step forward and has launched the latest stage

of development with a spotlight function as a world first. In the

driver’s immediate field of vision, warnings of potential danger

are displayed by flashing the headlights at people on the road.

A positive side-effect is that the pedestrians are also warned.

This means that a Mercedes-Benz S-Class equipped with the

spotlight function not only protects the occupants, but also

makes a significant contribution to enhancing the safety of other

road users – for a completely new level of safety at night.

In focus: state-of-the-art
safety equipment in the
Mercedes-Benz S-Class.

Drive through the night safely in the epitome of

luxurious transport. The Mercedes-Benz S-Class

offers even more safety for all road users with

the new Active Night Vision Assistant PLUS.

Innovation Close Up | 53

A sign of excellent
customer relations.

With a future-oriented download application for mobile users,
Mercedes-Benz was the world’s first auto financer to provide
important service functions in this way. The mobile strategy
is now going a step further with the Apple iPadTM in the show-
rooms of US Mercedes-Benz dealerships.

The electronic signature function is

part of the mobile service strategy.

Innovation Close Up | 55

New devices make
customer service mobile.

The advantages are obvious.
The iPadTM allows quick and direct
access to the MB Advantage

dealer system with customers

in the showroom.

M ercedes-Benz Financial has been keeping up with the

market since 1982. As a partner to Mercedes-Benz dealers

At vehicle points of sale and in dialogue with customers, the

finance teams can access the MB Advantage dealer system

and customers, Mercedes-Benz Financial is now also setting

quickly and easily with the tablet computer. Already during the

trends in the United States: with services that can be used with

pilot project in mid-2010, it soon became clear how everyone

iPhonesTM and other smartphones, and now also with the Apple

involved would benefit. From new financing to leasing contracts

iPadTM. This allows the intelligent acceleration of a comprehen-

to the return of leased vehicles, orders can now be processed

sive range of financing products for Mercedes-Benz vehicles.

with greater customer focus and more efficiency. Another pio-

The 355 North American Mercedes-Benz dealerships are the

neering aspect is the electronic signature function, which allows

first in the world to use the new mobile application in a business

customers to sign documents directly on the screen.

environment for innovative customer care.

“With MB Advantage on iPadTM, we can access real-time information

on the showroom floor. For even better and more flexible service.

That’s a genuine competitive advantage.”

Bernie Moreno, President of Mercedes-Benz of North Olmsted, Cleveland, Ohio

Innovation Close Up | 57

We invented the automobile.
And we are constantly reinventing it.
With enthusiasm and passion.

Daimler will safeguard mobility for
future generations with innovative and
sustainable vehicle concepts, a unique
product mix, environmentally friendly
drive systems and groundbreaking
safety technologies.

The year 2010 developed more favorably than expected for Daimler. Unit
sales by all divisions increased by strong double-digit rates. Revenue grew
by 24% to €97.8 billion and operating result (EBIT) reached €7.3 billion
(2009: EBIT of minus €1.5 billion). We anticipate a generally positive devel-
opment of business in the year 2011.

Management Report

62 - 73

Business and General Conditions

98 - 101 Daimler AG (condensed version according to HGB)

62
63
63
65
68
68

69
71

The Group
Corporate governance
Information and explanation relevant to acquisitions
Strategy
Settlement with US authorities
New Board of Management position for
Integrity and Legal Affairs
Economy and the industry
Business development

99
100
101
101

Profitability
Financial position, liquidity and capital resources
Risks and opportunities
Outlook

102

Overall Assessment of the Economic Situation

103

Events after the End of the 2010 Financial Year

74 - 88

Profitability

104 - 113 Risk Report

74
77
78
80
82
83

86
87
88

EBIT
Financial performance measures
Value added
Statement of income/loss
Dividend
Research and development, environmental
protection
Employment
Procurement
Information technology

89 - 95

Liquidity and Capital Resources

89
90
92
93
94

Principles and objectives of financial management
Cash flows
Capital expenditure
Refinancing
Other financial commitments and
off-balance-sheet transactions
Credit ratings

96 - 97

Financial Position

104
104
106
108
112
113
113

Risks and opportunities
Risk management systems
Economic risks
Industry and business risks
Financial risks
Legal risks
Overall risk

114 - 119 Outlook

114
114
115
117
117
118
119
119

World economy
Automotive markets
Unit sales
Revenue and earnings
Opportunities and risks
Capital expenditure
Research and development
Workforce

152 - 157 Remuneration Report

The Remuneration Report in the Corporate Governance section
on pages 152 ff is also a part of the Management Report.

Management Report | Contents | 61

Business and General Conditions

The Group

Daimler AG is the parent company of the Daimler Group and
is domiciled in Stuttgart. The main business of the Company is
the development, production and distribution of cars, trucks
and vans in Germany and the management of the Daimler Group.
In addition to Daimler AG, the Daimler Group includes all the
subsidiaries throughout the world in which Daimler AG has a direct
or indirect controlling interest. Through those companies, we
conduct for example our business with buses and financial services.
The management reports for Daimler AG and for the Daimler
Group are combined in this Management Report.

Daimler can look back on a tradition now covering 125 years,
a tradition that extends back to Gottlieb Daimler and Carl Benz,
the inventors of the automobile, and features pioneering achieve-
ments in automotive engineering. Today, the Daimler Group is a
globally leading vehicle manufacturer with an unparalleled range
of premium automobiles, trucks, vans and buses. The product
portfolio is completed by a range of tailored automotive services.

With its strong brands, Daimler is active in nearly all the countries
of the world. The Group has production facilities in a total of
18 countries and approximately 8,000 sales centers worldwide.
The global networking of research and development activities
and of production and sales locations gives Daimler considerable
potential to enhance efficiency and gain advantages in interna-
tional competition. For example, we can apply our green drive
technologies in a broad portfolio of vehicles while utilizing
experience and expertise from all parts of the Group. In the year
2010, Daimler generated revenue of €97.8 billion. The individual
divisions contributed to this total as follows: Mercedes-Benz Cars
53%, Daimler Trucks 22%, Mercedes-Benz Vans 8%, Daimler
Buses 5% and Daimler Financial Services 12%. At the end of 2010,
Daimler employed a total workforce of more than 260,000
people worldwide.

The products supplied by the Mercedes-Benz Cars division
range from the high-quality small cars of the smart brand to
the premium automobiles of the Mercedes-Benz brand and to
the Maybach luxury sedans. The main country of manufacture
is Germany, but the division also has production facilities in the
United States, China, France, South Africa, India, Vietnam and
Indonesia. Worldwide, Mercedes-Benz Cars has 17 production
sites at present. In order to extend our product range in the
compact-car segment, we are currently constructing a new plant
in Hungary, which is scheduled to go into operation in 2012.
The most important markets for Mercedes-Benz Cars in 2010
were Germany with 23% of unit sales, the other markets of Western
Europe (27%), the United States (17%) and China (13%).

As the biggest globally active manufacturer of trucks above 6 tons
gross vehicle weight, Daimler Trucks develops and produces
vehicles in a global network under the brands Mercedes-Benz,
Freightliner, Western Star and Fuso. The division’s 28 production
facilities are in the NAFTA region (14, thereof 11 in the United
States and 3 in Mexico), Asia (5), Europe (7), South America (1)
and Africa (1). In Brazil, Daimler Trucks will expand its production
network in 2012 with the addition of the plant in Juiz de Fora,
where heavy-duty Mercedes-Benz Actros trucks as well as
medium-duty Mercedes-Benz Accelo trucks will be produced for
Latin American markets. Daimler Trucks’ product range includes
light-, medium- and heavy-duty trucks for local and long-distance
deliveries and construction sites, as well as special vehicles for
municipal applications. Due to close links in terms of production
technology, the division’s product range also includes the buses
of the Thomas Built Buses and Fuso brands. Daimler Trucks’ most
important sales markets in 2010 were Asia with 34% of unit
sales, the NAFTA region (22%), Latin America excluding Mexico
(16%) and Western Eu rope (16%).

Mercedes-Benz Vans has production facilities at a total of seven
locations in Germany, Spain, the United States, Argentina
and Vietnam, and since April 2010 also in China in the context
of a 50:50 joint venture, Fujian Daimler Automotive. The division’s
product range comprises the Sprinter, Vito/Viano and Vario
series in weight classes from 1.9 to 7.5 tons. The most important
markets for vans are in Euro pe, which accounts for 77% of unit
sales. The Sprinter is sold in the United States under the Freight-
liner brand and since the beginning of 2010 also under the
Mercedes-Benz brand.

Consolidated revenue by division

Corporate governance

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

53%

22%

12%

The Daimler Buses division with its brands Mercedes-Benz,
Setra and Orion is the world’s leading manufacturer of buses and
coaches above 8 tons. The product range supplied by Daimler
Buses comprises city and intercity buses, coaches and bus chassis.
The most important of the 15 production sites are in Germany,
Turkey, Latin America, France, Spain and the NAFTA region. In 2010,
45% of Daimler Buses’ revenue was generated in Western Europe,
12% in the NAFTA markets and 27% in Latin America (excluding
Mexico). While we mainly sell complete buses in Europe and
the NAFTA region, our business in Latin America, Africa and Asia
is focused on the production and distribution of bus chassis.

The Daimler Financial Services division supports the sales of
the Daimler Group’s automotive brands in nearly 40 countries.
Its product portfolio primarily comprises tailored financing and
leasing packages for customers and dealers, but it also provides
services such as insurance, fleet management, investment prod-
ucts and credit cards. The main areas of the division’s activities
are in Western Europe and North America. In 2010, more than
40% of the vehicles sold by the Daimler Group were financed by
Daimler Financial Services. Its contract volume of €63.7 billion
covers 2.5 million vehicles. Daimler Financial Services also holds
a 45% interest in the Toll Collect consortium, which operates an
electronic road-charging system for trucks over 12 tons on high-
ways in Germany.

Through a subsidiary, Daimler holds a 22.5% equity interest in
the European Aeronautic Defence and Space Company (EADS),
a leading company in the aerospace and defense industries.
In economic terms, Daimler owns a 15% stake in EADS, because
a consortium of national and international investors owns a
one-third interest in the subsidiary that holds the EADS shares.
Daimler also holds a 28.4% equity interest in Tognum AG, one
of the world’s leading producers of off-highway engines. Through
a broad network of holdings, joint ventures and cooperations,
Daimler is active in the global automotive industry and related
sectors. A list of shareholdings in accordance with Section 313
of the German Commercial Code (HGB) can be found on the
Internet at http://www.daimler.com/ir/results2010.

Full information on the subject of corporate governance at
Daimler is provided in the Corporate Governance section of this
Annual Report on pages 148 ff.

Corporate Governance Statement. The Corporate Governance
Statement to be issued pursuant to Section 289a of the German
Commercial Code (HGB) is a constituent part of this combined
Management Report and can be seen on the Internet at
www.daimler.com/corpgov/de. Pursuant to Section 317 Sub-
section 2 Sentence 3 of the HGB, the contents of the statement
pursuant to Section 289a of the HGB are not included in the
audit carried out by the external auditors.

Remuneration Report. A description of the system of remuner-
ation and the individualized details of the remuneration of the
members of the Board of Management and of the Supervisory
Board are provided in the Remuneration Report on pages 152 ff.
That report is also a constituent part of the Management Report.

Information and explanation relevant to acquisitions
(Report pursuant to Section 315 Subsection 4 and Section 289
Subsection 4 of the German Commercial Code (HGB))

Management; appointment and dismissal of members of
the Board of Management. Daimler AG is a stock corporation
domiciled in Germany. It is managed by a Board of Management,
whose members are authorized to represent it vis-à-vis third parties.
The Board of Management must have at least two members,
who, in accordance with Section 84 of the German Stock Corpo-
ration Act (AktG), are appointed by the Supervisory Board for
a maximum period of office of five years. Reappointment or the
extension of a period of office is permissible, in each case for
a maximum of five years. Appointments and reappointments can
only be made by a resolution of the Supervisory Board; reap-
pointments may generally not be made more than one year before
the end of a Board of Management member’s current period
of office. The Supervisory Board appoints one of the members
of the Board of Management as the Chairman of the Board
of Management. In exceptional cases, a member of the Board
of Management can be appointed by the court in accordance
with Section 85 of the German Stock Corporation Act (AktG). The
Supervisory Board can revoke the appointment of a member
of the Board of Management and of the Chairman of the Board
of Management if there is an important reason to do so.

Management Report | Business and General Conditions | 63

to a takeover offer from a third party on the shares of any other
party, or the case of a change of control of the issuer of the
shares in question.

Authorization to buy back shares, approved and conditional
capital. On April 14, 2010, the Annual Shareholders’ Meeting
revoked the authorization to acquire own shares that had been
granted in the prior year to the extent that it had not yet been
utilized. At the same time, the Company was again authorized
during the period until April 13, 2015 to acquire own shares
for certain defined purposes up to a maximum of 10% of the share
capital at the time of the resolution by the Annual Shareholders’
Meeting. The purchase of the Company’s own shares is allowed,
inter alia, for the following purposes: for the purpose of canceling
them, offering them to third parties in connection with a corporate
merger or acquisition, disposing of them in another way than
offering them to all shareholders, and serving the stock option
plan. Own shares in a volume of up to 5% of the share capital
existing at the time of the resolution of the Annual Shareholders’
Meeting can also be acquired with the use of derivative financial
instruments, whereby the period of the individual option may not
exceed 18 months.

By resolution of the Annual Shareholders’ Meeting held on April 8,
2009, the Board of Management was authorized with the
consent of the Supervisory Board to increase the share capital of
Daimler AG during the period until April 7, 2014 by issuing new
registered shares of no par value in exchange for cash or non-cash
contributions, wholly or in partial amounts, on one or several
occasions, by up to €1,000 million (Approved Capital 2009).
The Board of Management was also authorized, inter alia, under
certain circumstances and with the consent of the Supervisory
Board to exclude shareholders’ subscription rights.

Furthermore, the Board of Management was authorized by reso-
lution of the Annual Shareholders’ Meeting of April 14, 2010
with the consent of the Supervisory Board during the period until
April 13, 2015 to issue convertible bonds and/or bonds with
warrants or a combination of these instruments, once or several
times, in a total nominal amount of up to €10 billion with a maxi-
mum term of ten years, and to grant the owners/lenders of those
bonds conversion or option rights to new, registered shares
of no par value in Daimler AG with a corresponding amount of the
share capital of up to €500 million, in accordance with the terms
and conditions of those convertible bonds or bonds with warrants.
The bonds can also be issued by direct or indirect majority-
owned subsidiaries of Daimler AG. Accordingly, the share capital
was conditionally increased by up to €500 million (Conditional
Capital 2010). No use has yet been made of the authorization to
issue convertible bonds and/or bonds with warrants.

Purpose of the Company; amendments to the Articles of
Incorporation. The general purpose for which the Company is
organized is defined in Article 2 of the Articles of Incorporation.
Pursuant to Section 179 of the German Stock Corporation Act
(AktG), the Articles of Incorporation can only be amended
by a resolution of a Shareholders’ Meeting. In accordance with
Section 133 of the German Stock Corporation Act (AktG) and
Article 16 Paragraph 1 of the Articles of Incorporation, resolutions
of a Shareholders’ Meeting are passed with a simple majority
of the votes cast, unless otherwise required by binding provisions
of applicable law, and with a simple majority of the share capital
represented at the Shareholders’ Meeting if this be required, and
with a relative majority of the yes votes in the case of voting in
accordance with Article 16 Paragraph 2 of the Articles of Incor-
poration. Pursuant to Section 179 Subsection 2 of the German
Stock Corporation Act (AktG), any amendment to the purpose of
the Company requires a 75% majority of the share capital repre-
sented at the Shareholders’ Meeting. Amendments to the Articles
of Incorporation that only affect the wording can be decided
upon by the Supervisory Board in accordance with Article 7 Para-
graph 2 of the Articles of Incorporation. Pursuant to Section 181
Subsection 3 of the German Stock Corporation Act (AktG), amend-
ments to the Articles of Incorporation take effect upon being
entered in the Commercial Register.

Subscribed capital. The subscribed capital of Daimler AG amounts
to €3,058 million at December 31, 2010. It is divided into
1,065,641,907 registered shares of no par value. All shares confer
equal rights to their holders. Each share confers the right to one
vote and, with the possible exception of any new shares that are
not yet entitled to a dividend, to an equal share of the profits.
The rights and obligations arising from the shares are derived
from the provisions of applicable law. There were 221,418 treasury
shares at December 31, 2010.

Restrictions on voting rights and on the transfer of shares.
The Company does not have any rights from treasury shares.
In the cases described in Section 136 of the German Stock Corpo-
ration Act (AktG), the voting rights of treasury shares are nullified
by law. Shares acquired by employees within the context of the
employee share program may not be disposed of until the end
of the following year.

On April 7, 2010, Daimler AG and the Renault-Nissan Alliance
signed a master cooperation agreement on wide-ranging strate-
gic cooperation and a cross-shareholding. Renault S.A. and
Nissan Motors Co. Ltd each received an equity interest of 1.55%
in Daimler AG and Daimler AG received equity interests of 3.1%
in each of Renault S. A. and Nissan Motors Co. Ltd. For the duration
of the master cooperation agreement, but at least for five years,
i) Daimler AG may not transfer its shares in Renaul S.A. and Nissan
Motors Co. Ltd and ii) Renault S.A. and Nissan Motors Co. Ltd
may not transfer their shares in Daimler AG, to a third party with-
out prior written consent. Transfers to third parties that are not
competitors of one of the issuers of the shares in question are
exempted from this prohibition under certain circumstances,
including the case of internal corporate transfers, transfers related

Change-of-control clause. Daimler AG has concluded various
material agreements, as listed below, that include clauses regu-
lating the possible occurrence of a change of control, as can
occur as a result of a takeover bid:
– A non-utilized syndicated credit line in a total amount of €7 billion,
which the lenders are entitled to terminate if Daimler AG
becomes a subsidiary of another company or comes under the
control of one person or several persons acting jointly.

– Credit agreements with lenders for a total amount of €800 million,
which the lenders are entitled to terminate if Daimler AG
becomes a subsidiary of another company or comes under the
control of one person or several persons acting jointly.

– Guarantees and securities for credit agreements of consolidated
subsidiaries for a total amount of €505 million, which the lenders
are entitled to terminate if Daimler AG becomes a subsidiary
of another company or comes under the control of one person
or several persons acting jointly.

– An agreement concerning the acquisition of a majority (50.1%)
of AFCC Automotive Fuel Cell Cooperation Corp., which has
the purpose of further developing fuel cells for automotive appli-
cations and making them marketable. In the case of a change
of control of Daimler AG, the agreement provides for the right
of termination by the other main shareholder, Ford Motor Com-
pany, as well as for a put option for the minority shareholder,
Ballard Power Systems. Control as defined by this agreement
is the beneficial ownership of the majority of the voting rights
and the resulting right to appoint the majority of the members
of the Board of Management.

– A master cooperation agreement on wide-ranging strategic

cooperation with Renault S.A., Renault-Nissan B. V. and Nissan
Motors Co. Ltd. in connection with cross-shareholdings. The
Renault-Nissan Alliance received an equity interest of 3.1% in
Daimler AG and Daimler AG received equity interests of 3.1%
in each of Renault S. A. and Nissan Motors Co. Ltd. In the case
of a change of control of one of the parties to the agreement,
each of the other parties has the right to terminate the agree-
ment. A change of control as defined by the master cooperation
agreement occurs if a third party or several third parties acting
jointly acquires, legally or economically, directly or indirectly,
at least 50% of the voting rights in the company in question
or is authorized to appoint a majority of the members of the
managing board. Under the master cooperation agreement,
several cooperation agreements were concluded between
Daimler AG on the one side and Renault and/or Nissan on the
other concerning a new architecture for small cars and the
shared use of fuel-efficient diesel and gasoline engines and
transmissions, as well as the development and supply of a
small van, which provide for the right of termination for a party
to the agreement in the case of a change of control of another
party. A change of control is deemed to occur at a threshold
of 50% of the voting rights or upon authorization to appoint
a majority of the members of the managing board. In the case
of termination of cooperation in the area of the development
of small cars due to a change of control in the early phase of
the cooperation, the party affected by the change of control
would be obliged to bear its share of the costs of the development
of shared components even if the development were terminated
for that party.

– An agreement regulating the exercise of voting rights in EADS
N.V. In the case of a change of control, this agreement stipu-
lates that Daimler AG is obliged, if so requested by the French
party to the agreement, to make all efforts to dispose of its
shares in EADS under appropriate conditions to a third party
that is not a competitor of EADS or of the French contracting
partner of Daimler AG. In this case, the French party has the right
of preemption under the same conditions as offered by a third
party. A change of control can also lead to the dissolution
of the voting-rights consortium. According to the EADS agree-
ment, a change of control has taken place if a competitor of
EADS N.V. or of the French contracting party either appoints
so many members of the Supervisory Board of Daimler AG that
it can appoint the majority of the members of the Board of
Management or holds an investment that enables it to control
the day-to-day business of Daimler AG.

Strategy

We fundamentally transformed mobility with the invention of
the automobile 125 years ago. And we aim to continue playing
a groundbreaking role with the further development of mobility
in the future. As pioneers of automotive engineering, we intend
to make future mobility safe and sustainable. Our activities are
focused on our customers’ needs. We want to inspire them with
– exciting premium automobiles that set standards in the areas
of design, safety, comfort, perceived value, reliability and
environmental compatibility;

– commercial vehicles that are the best in their respective com-

petitive environment;

– outstanding service packages related to those products; and
– new mobility solutions, oriented towards the needs of our

customers.

This is our mission, and it represents what we stand for at Daimler.
We have formulated this mission in the Daimler target system,
which includes the targets for Daimler as a whole and for each
of our businesses.

Management Report | Business and General Conditions | 65

Innovation and technology leadership. We want to be the
innovation leader for green technologies and safety: With “Green
Technology Leadership” at Mercedes-Benz Cars and “Shaping
Future Transportation” at Daimler Trucks, Mercedes-Benz Vans
and Daimler Buses, we will live up to our ambitions today and in
the future. Differing mobility demands require different drive-
system solutions. Our portfolio of solutions ranges from the opti-
mization of internal-combustion engines to hybridization to
vehicles that are free of local emissions. We also intend to further
strengthen our pioneering role in the fields of active and passive
safety for cars and commercial vehicles.

With new business ideas such as car2go and Bus Rapid Transit
(BRT), we are pursuing innovative mobility concepts and business
models to fulfill customers’ needs and to utilize additional growth
potential (see pages142 f).

Global presence and networking. Our goal as a company
is to continue our profitable growth and to be among the best in
the industry: in our core business, in traditional and new markets.
In particular in the rapidly growing markets of China, India, Russia
and Brazil, we are intensifying our local activities by establishing
and developing local production and sales operations, to some
extent together with local partners.

Operational excellence and sustainability. We achieve opera-
tional excellence by means of efficiency targets and related pro-
grams in the areas of production, development, sales and admin-
istration. This is based on a culture of excellence. By means of
standardization and modularization, we can significantly enhance
efficiency with new products, new technologies and new pro-
cesses. We are improving our cost position with support from
cooperations, for example with Renault-Nissan. At the same time,
we are expanding our product portfolio in the small-car segment
and with small vans. Due to our flexibility, for example in produc-
tion at Daimler Trucks, we can cope better with market cycles.
Programs such as Truck Operating System (TOS) at Daimler
Trucks create a culture of learning and continuous improvement.
Through this holistic management approach, all of the direct
and indirect areas of the worldwide sites of Daimler Trucks are
gradually improving their efficiency.

Target system. Our overriding corporate goal is to achieve sus-
tainable profitable growth and thus to increase the value of the
Group. We intend to be among the world’s leading automotive
companies. As shown in the diagram on page 67, the Daimler target
system consists of six strategic dimensions. It provides a stra-
tegic framework and defines in which dimensions we want to play
a leading role. We aim to inspire our customers with our brands,
products and services. And we strive to occupy the leading posi-
tion in each market segment. With pioneering technologies,
we want to be the world leader for sustainable drive systems and
safety. To us, having a global presence means that we want to
secure our position in traditional markets while expanding in new
markets. Operational excellence and efficiency along with inspired
and high-performing people are the key to our future corporate
success. At the same time, our entrepreneurial activities are
guided by the principle of sustainability: in the areas of econom-
ics and corporate governance, environmental protection and
safety, as well as in our relations with employees, customers and
society in general. Since we want to anchor sustainability more
firmly not only in our operations but also formally, we have included
it as an additional target in the Daimler target system. Our
employees direct their actions towards the corporate values of
passion, respect, integrity and discipline, and they aim to set
an example with ethical behavior in conformance with applicable law.

Excellent products offering superior customer experience
form the basis for our success. Through the constant search
for the best solution and in line with the lifecycles of our prod-
ucts, we are launching 16 new models at Mercedes-Benz Cars in
the years 2010 and 2011 alone. We are expanding our product
portfolio in all divisions to address increasing differentiation within
customer segments as well as varying regional requirements.
Some examples are the CLS Shooting Brake and the long version
of the E-Class for China. At Daimler Trucks, we renewed a large
part of our product range with five new models in the year 2010.
As ever, our main goal is to be Number 1 in terms of customer
satisfaction. We place high priority on our activities directed at
improving product and service quality as well as on providing
a range of services appropriate to our customers’ needs.

Leading brands contribute towards the Daimler Group’s long-
term success. Leading brands also provide customers with orien-
tation, create trust and arouse the emotions. The Mercedes-Benz
brand is one of the most successful and well-known brands in the
world. We intend to maintain and extend this position also in the
future. Our divisions’ brand strategies, such as “The best or noth-
ing” at Mercedes-Benz, help us to further sharpen our brands’
profiles compared with the competition and to organize our activi-
ties accordingly.

Superior

Products

and
Customer

Experience

Innovation
and
Technology
Leadership

and

Operational Excellence and Sustainability

We have a clear claim to leadership also in the field of sustain-
ability. We place a particular focus on environmental protection
with production and products, long-term job protection, respon-
sible suppliers, intact relations with society, and transparent com-
munication. One of the key goals in this context is the ongoing
reduction of the CO2 emissions of our cars and commercial vehicles.
We intend to reduce the average CO2 emissions of our fleet of
new cars in the European Union from 158 g/km in 2010 to less
than 140 g/km in 2012. A key contribution will be made by
our BlueDirect V6 and V8 gasoline engines with third-generation
direct fuel injection, which we launched in late 2010. And within
the framework of a voluntary commitment signed by various truck
manufacturers, we are pursuing the goal of reducing the CO2
emissions of the heavy trucks (above 12 tons) we sell in Europe
compared with base year 2005 by an average of 20% per ton-
kilometer by 2020 (see pages 140 ff).

We aim to have high-performing, inspired employees who
direct their actions towards our corporate values and maintain
the highest ethical standards. The new Board of Management
position for Integrity and Legal Affairs has the task of ensuring
that rules and regulations are observed and that the highest
ethical standards are met. As we regard diversity within our work-
force as an advantage, we are making efforts to achieve for
example 20% of executive positions occupied by women by the
year 2020 and to increase our internationality.

Ultimately, we will grow profitably by consistently implementing
the strategies derived from our target system. For all our activities,
the focus is on
– strengthening the core business,
– growing further in new markets,
– maintaining a leading position with “green” technologies, and
– playing a leading part in the development of new mobility

concepts and services.

Ambitious return targets. We have set ourselves clear return
targets. As of 2013, we aim to earn an average return on sales
of 9% in our automotive business across all market and product
cycles. This is based on return targets for the individual divisions
of 10% for Mercedes-Benz Cars, 8% for Daimler Trucks, 9% for
Mercedes-Benz Vans and 6% for Daimler Buses. Our target for
the Daimler Financial Services division is a return on equity of 17%.

Portfolio changes. With the goal of strengthening our core busi-
ness and utilizing new growth potential, we further developed
the Daimler Group’s business portfolio in 2010:

In March 2010, Daimler AG sold its entire 5.34% shareholding
in Tata Motors, an Indian automotive group, to various groups of
investors. We achieved a cash inflow of €303 million from the sale.
Daimler has an excellent starting position to utilize the growth
potential for cars and commercial vehicles in India and is strength-
ening its own activities in that market. It was therefore no longer
necessary for Daimler to continue holding an equity interest in Tata.

Management Report | Business and General Conditions | 67

Settlement with US authorities

On April 1, 2010, Daimler AG reached a settlement with the
United States Securities and Exchange Commission (SEC) and the
US Department of Justice (DOJ) concluding investigations of
possible violations of the US Foreign Corrupt Practices Act (FCPA).
As part of the settlement, Daimler paid fines and penalties
of US$93.6 million (approximately €70 million) and agreed to
disgorge profits of US$91.4 million (approximately €68 million).
Daimler had recognized provisions in a sufficient volume for this
in previous years.

Daimler cooperated with the SEC and the DOJ on the investiga-
tions, which started in the fall of 2004. In parallel, Daimler has
developed a wide-ranging compliance organization to ensure that
its business practices conform to the Group’s Integrity Code and
the provisions of applicable law in the future (see pages 158 f).

The investigations of Daimler AG and Daimler North East Asia
Ltd. carried out by the DOJ were deferred on the premise that
Daimler will not violate the provisions of the FCPA during the two-
year term of the agreements and will maintain a comprehensive
compli ance program. This program is designed to ensure, inter
alia, compliance with anti-bribery laws such as the FCPA. Upon
successful satisfaction of the terms set forth, the proceedings
will be dismissed without further action. In addition, former
US federal judge Louis Freeh will serve for three years as an
independent compliance monitor; his role will include monitoring
and documenting the Company’s compli ance program. Further
information on this matter is provided in Note 28 to the Consoli-
dated Financial Statements.

New Board of Management position for Integrity
and Legal Affairs

Daimler pursues the goal of creating a corporate culture that
not only adheres to the provisions of applicable law, but also meets
the highest ethical standards and is regarded as exemplary
throughout the industry.

In order to achieve this goal, the Supervisory Board decided on
September 28, 2010 to create a new Board of Management
position for the area of Integrity and Legal Affairs. The responsi-
bilities of the new member of the Board of Management include
the management of the global legal and compliance organization
and related processes, as well as business ethics and the sustained
anchoring of compliance and integrity throughout the Group.

On April 7, 2010, Daimler AG and the Renault-Nissan Alliance
reached an agreement on wide-ranging strategic cooperation
that will bring both sides advantages from a series of specific
projects and the shared use of best practices. In particular,
this relates to a new, shared architecture for small cars, the shared
use of fuel-efficient three- and four-cylinder engines and coopera-
tion in the field of light commercial vehicles. In addition, a cross-
shareholding was agreed upon: The Renault-Nissan Alliance
received a 3.1% equity interest in Daimler, served with treasury
shares, and in return Daimler received equity interests of 3.1%
in each of Renault and Nissan.

BYD Company Limited and Daimler AG signed an agreement
on May 27, 2010 on the establishment of a 50:50 joint venture,
Shenzhen BYD Daimler New Technology Co. Ltd., for the devel-
opment of an electric vehicle for the Chinese market. BYD and
Daimler will invest a volume of RMB 600 million (approximately
€71 million) in the joint venture. The new company is to develop
a new generation of electric vehicles combining Daimler’s exper -
tise in automotive architecture and safety with BYD’s know-how
in the fields of battery technology and electric vehicle systems.
The vehicle will be sold under a new brand to be jointly created
by Daimler and BYD. The brand rights will be owned by the joint
venture.

On June 17, 2010, Daimler AG and the European Bank for Recon-
struction and Development (EBRD) successfully increased their
strategic shareholding in Russian truck manufacturer Kamaz.
Already on February 11, 2010, Daimler AG had signed a memo-
randum of understanding on the acquisition of the 5% of Kamaz
shares held by Troika Dialog Limited. As a result, Daimler increased
its equity interest in Kamaz by one percentage point to 11%
while the remaining 4% of Kamaz shares are legally owned by the
EBRD. Due to the contractual terms and conditions, beneficial
ownership of the shares held by the EBRD is assigned to Daimler
under IFRS.

Daimler and Foton have made a large step forward in their
negotiations on the establishment of a 50:50 joint venture.
After the Chinese National Development and Reform Commission
approved the plans, the joint-venture agreement was signed
on July 16. Daimler will contribute its technological expertise, in
particular with diesel engines and emission technology. Both
partners will use Foton’s Auman truck brand as a platform in China
and as a basis for joint exports. The joint venture is another
important milestone in the implementation of Daimler’s China
strategy.

On January 11, 2011, Daimler’s subsidiary Mitsubishi Fuso Truck
and Bus Corporation (MFTBC) carried out a capital increase
of 30 billion Japanese yen (€274 million). In this context, Daimler
increased its equity interest in MFTBC from 85% to 89%; the
stake held by Mitsubishi Group companies decreased to 11%.

One negative factor in spring was the high budget deficit in
Greece and the debt problems of other European countries. The
financial markets reacted with sharp fluctuations and investor
and consumer uncertainty increased again. The governments of
the European Union together with the International Monetary
Fund were finally forced to set up a comprehensive safety net,
which Ireland was then the first country to make use of in
November. Already in the summer months, concerns about the
stability of the upswing and fears of a renewed slip into recession
increased significantly. There was a particular focus on the US
economy due to its relatively low overall growth and ongoing
high unemployment rates. In autumn, the US Federal Reserve
therefore announced the loosening of its already very ex -
pansive monetary policy and in December, the government and
the opposition agreed on new financial-policy supporting actions.
Over the year 2010 as a whole, the US economy achieved growth
of 2.9% due to a revival in the fourth quarter. As in the previous
year, the emerging economies and above all China and India were
significant growth drivers in this rather uncertain environment.
It was also important for global developments that the Chinese
economy looked less likely to overheat, with its growth rate
decreasing moderately to a more sustainable level. However, the
intensifying debate about exchange rates not reflecting market
realities was a very critical factor. This discussion centered mainly
on the Chinese yuan, but also on the US dollar. Although the G20
summit meeting in Seoul in mid-November at first prevented any
further escalation, no sustainable solution was reached to
resolve the global imbalance.

In this environment, exchange rates were very volatile again.
The US dollar at first strengthened from $1.44 to a euro at the
beginning of the year to $1.20 in mid-2010, but then weakened
again by autumn to a parity of $1.40. At the end of the year, the
value of the euro measured in US dollars was 7% lower than
a year earlier at $1.34. With fluctuations, the euro also fell against
the Japanese yen by 18% in 2010. Compared with the British
pound, the euro fell by 3% over the year, also with sharp
fluctuations in value.

Economic growth
Gross domestic product, growth rates in %

2009
2010

8
6

-2

-4

-6

-8

Total

NAFTA
region

Western
Europe

Japan

Asia excl.
Japan

Other
markets

Source: Global Insight

The new Board of Management function is a logical step in the
further development of the corporate structure and culture.
In this context, Daimler’s Board of Management has decided to
push forward with its compliance activities – including its rela-
tions with business partners. The Daimler Group is currently rep-
resented in 200 countries either with its own companies or
through its business partners. Maintaining correct business prac-
tices in conformance with applicable laws and regulations requires
an appropriately trained compli ance organization with a world -
wide reach as well as effective processes and controls. At the
same time, it is and it will remain the task of the entire Board of
Management and of all executives to permanently anchor through-
out the Group a keen awareness of adherence to the law and
regulations, as well as for business ethics (see pages 158 f).

Economy and the industry

The world economy. With growth of 4.0%, the world economy
displayed astounding dynamism in overcoming the recent reces-
sion during 2010, with growth in economic output exceeding
the prior-year level already in the summer. The main drivers of this
positive development were the rapidly growing emerging econo-
mies, whose gross domestic product expanded by almost 7%.
Although the industrialized countries posted solid growth rates
with an aggregate increase in economic output of about 2.5%,
with few exceptions they were still significantly lower than the
rates of expansion attained in 2007 and 2008. Among the indus-
trialized countries, economies with a strong dependence on
exports and investment goods such as Germany (3.6%) and Japan
(4.2%) profited the most from the global recovery and the result -
ing significant revival of world trade. Growth in the more mature
economies was generally boosted by the continuation of very
expansive monetary policies and the effects of the massive stim-
ulus programs of the previous year. Other factors were special
and one-time effects such as restocking inventories that had been
depleted during the recession. But the world economy’s overall
growth dynamism slowed down again significantly as the year
progressed.

Management Report | Business and General Conditions | 69

Global demand for commercial vehicles also increased again
significantly in 2010. But this growth was primarily driven by regions
outside the triad markets of Western Europe, the United States
and Japan. In the segment of medium and heavy-duty trucks, world-
wide unit sales increased by approximately 35% while growth
in the triad of approximately 10% was far less dynamic. The US
market has recovered only hesitantly so far with growth of almost
15% in 2010 following a market collapse of nearly two thirds in
the years 2006 through 2009. In Western Europe, the truck
market bottomed out early in 2010 followed by a distinct upward
tendency. In the full year, however, unit sales were only slightly
higher than in 2009. But the German market, which is particularly
important for Daimler, expanded by more than 20%. In Japan,
demand increased in the segment of medium- and heavy-duty
trucks by more than 25% over the full year. After the expiry of the
state incentive program in September, the market weakened tempo-
rarily, but it had returned to a path of moderate recovery by the
end of the year. In the large emerging markets, demand for commer-
cial vehicles increased substantially. The Brazilian truck market,
which is important for Daimler, expanded strongly to surpass the
prior-year level by 50%. The recovery of the Russian market
accelerated during the year with the result that unit sales of trucks
increased by a significant double-digit rate over the full year.
The Indian market grew by 50% and more than 1.2 million medium-
and heavy-duty trucks were sold in China (2009: 834,000),
equivalent to about half the entire world market in 2010.

With regard to the van markets important to Daimler, demand
in Western Europe recovered moderately and unit sales were
10% higher than in 2009. The US market grew substantially
(+19%), although the rate of recovery declined distinctly during
the course of the year.

Bus markets developed very disparately in 2010: Strong growth
of 27% in Latin America (excluding Mexico) was offset by declining
demand in the NAFTA region (-7%). Demand remained below
prior-year levels in most of the countries of Western Europe; the
region’s total market volume decreased by 9%.

Global automotive markets
Unit sales growth rates 2010/2009 in %

Passenger cars
Commercial vehicles

-15

Total

Western
Europe

1 Cars segment includes light-trucks
2 Medium- and heavy-duty trucks

Japan

USA1, 2

South
America 2

China

Source: German Association of the
Automotive Industry (VDA), various institutions

Automotive markets. After some dramatic drops in demand
during the year 2009, global automotive markets expanded again
significantly in 2010.

At the beginning of 2010, many countries’ state incentive programs
were still having an effect, so the global car market achieved double-
digit growth rates in the first half of the year. Rates of expansion
slowed down for a while in the second half, but demand increased
again towards the end of the year and surpassed the prior-year
volume by about 12% in the full year. As a result, worldwide unit
sales surpassed the record level of 2007. But in regional terms,
demand developed very differently. Strong growth in the Asian
emerging economies, especially China and India with rates of
30% and more, was the main factor behind the expansion of the
world market. Although the US market expanded overall by
approximately 11%, its recovery was slightly less dynamic than
had been expected at the beginning of the year. In Western
Europe, state scrappage schemes gradually expired as the year
progressed, so demand as of the second quarter was significantly
lower than in the prior year and decreased by 5% over the full
year. Of the volume markets, only the United Kingdom and Spain
surpassed the prior-year level, while demand was distinctly lower
in Germany (-23%), France (-2%) and Italy (-9%). In Japan, the market
profited until September from state incentives and expanded
by a good 7% over the full year. But after the incentive program
expired, demand for cars slumped by a significant double-digit
rate in the fourth quarter year on year. The development of markets
in Eastern Europe and South America was generally positive.
Thanks to state scrappage incentives, the Russian market recovered
somewhat with growth of more than 30%, following the collapse
of nearly 50% in 2009. Demand in Brazil was robust and unit sales
surpassed the prior-year level by 10%, although the state support
program already expired in March. As a result, Brazil attained
a market volume of more than three million vehicles, making it
bigger than Germany’s and the fourth-largest car market in the world.

Unit sales structure of Mercedes-Benz Cars

Unit sales structure of Daimler Trucks

Trucks Europe/Latin America

Trucks NAFTA

Trucks Asia

38%

22%

40%

Following the sharp decline in the prior year, the Daimler Trucks
division increased its unit sales by 37% in 2010. In total, we
shipped 355,300 heavy-, medium- and light-duty trucks as well
as buses of the Thomas Built Buses and Fuso brands last year,
meaning we continue to be the biggest globally active manufac-
turer of trucks above 6 tons gross vehicle weight. All of our
main markets contributed to this significant growth in unit sales
– Europe and the United States as well as Latin America and
Japan. The Trucks Europe/Latin America unit profited from the
global economic recovery and increased its unit sales by 41%
to 135,200 vehicles. Growth in unit sales was particularly strong
in Brazil (+45%), Eastern Europe (+139%) and Turkey (+122%).
In Western Europe, we expanded our unit sales by 23% to 50,200
vehicles, defending our leading position in the segment of
medium- and heavy-duty trucks with a market share of 24.3%.
With sales of 79,400 units, Trucks NAFTA sold 25% more vehicles
than in 2009. This was primarily due to the successful new engines
as well as our increased involvement in the areas of construction
applications and disposal services, especially in the Class 8 segment.
We increased our market share in the medium- and heavy-duty
segment (Classes 6-8) in the NAFTA region to 31.6% (2009: 29.6%)
and thus gained market leadership. Sales of 140,700 units by
Trucks Asia in 2010 were significantly higher than in the prior year
(+41%). Growth in unit sales was particularly strong in Indonesia
(+82%), but a small increase was recorded also in the Japanese
domestic market (+7%). Fuso is already the market leader in some
Asian emerging markets. We are in first place in the segment
of light-duty trucks in Taiwan and Indonesia (see pages 126 ff).

A-/B-Class

C-/SLK-Class

E-/CLS-Class

S-/CL-/SL-Class/SLR/SLS/Maybach

M-/R-/GL-/GLK-/G-Class

smart

18%

27%

26%

16%

Business development

Unit sales. Daimler sold a total of 1.9 million vehicles in 2010.
The level of the prior year, which had been very low due to the
global economic and financial crisis, was thus surpassed by 22%.
The market revival was significantly more dynamic than expected
at the beginning of the year, especially for cars.

The Mercedes-Benz Cars division increased its unit sales by 17%
to 1,276,800 vehicles. The Mercedes-Benz brand recorded growth
of 21% to 1,178,300 units. We therefore further strengthened our
position in the market for premium automobiles. Our S-, E- and
C-Class sedans and the E-Class station wagon are world leaders
in their respective market segments. The new E-Class range, which
was completed in March 2010 with the addition of the new
convertible, was particularly successful. Total shipments of E-Class
cars increased from 212,100 to 330,800 units in 2010. Due to
the market success of the S-Class, we were able to increase
unit sales by Mercedes-Benz Cars also in the luxury segment
(S-, CL-, SL-Class, SLR, SLS and Maybach) by 41% to 80,400 auto-
mobiles. Once again, the S-Class was the world’s best-selling
luxury sedan. In the C-Class segment (C- and SLK-Class), sales
increased by 6% to 341,900 units, and in the SUV segment
(M-, R-, GL-, GLK- and G-Class), Mercedes-Benz actually increased
its unit sales by 21% to 202,800 vehicles. Towards the end of
their lifecycles, the A- and B-Class models still achieved slight
growth to sales of 222,400 units (2009: 215,500).

Mercedes-Benz increased its unit sales in all regions. In the
United States, sales rose by 15% to 216,400 units. In Germany,
we sold 265,000 vehicles (2009: 265,500) and defended our
leading market position in the premium segment; 290,500 vehi-
cles were shipped in the other countries of Western Europe
(2009: 267,200). Business in the emerging markets developed very
positively. In China, Mercedes-Benz continues to be the fastest-
growing premium brand: Sales more than doubled in that market
in 2010 to 156,400 units (+140%), and China was the most
important market for our S-Class for the second consecutive year.
All the other BRIC markets also recorded double-digit growth:
Brazil (+40%), Russia (+68%) and India (+79%). Sales of the smart
fortwo decreased in 2010 to 94,300 units (2009: 113,900).
The new generation of the innovative two-seater has been available
from dealerships since October 2010 (see pages 122 ff).

Management Report | Business and General Conditions | 71

Unit sales by the Mercedes-Benz Vans division increased by
35% to 224,200 vehicles of the Sprinter, Vito/Viano and Vario
models in 2010. We sold 156,800 units in Western Europe,
surpassing the prior-year figure by 22%, aided by contributions
from all of the region’s major markets. This enabled Mercedes-
Benz Vans to maintain its market leadership in the European Union
in the segment of medium-sized and large vans. Our business
in the NAFTA region also developed very well: Unit sales there
increased to 13,300 vans (2009: 2,600). In the promising Chinese
market for high-quality vans and premium multi-purpose vehicles,
Mercedes-Benz Vans sold 12,200 units. Of that total, 10,700 units
were from local production, which we started in April 2010.
Mercedes-Benz Vans was also very successful in Latin America
and Eastern Europe in 2010. Total sales of the Sprinter increased
by 37% to 143,700 units last year. We sold 77,600 of the Vito and
Viano models (+34%), although the new generation of those vans
was not launched until the fourth quarter (see page 130 f).

With unit sales of 39,100 complete buses and bus chassis
(2009: 32,500), Daimler Buses was the world’s biggest manufac-
turer in the segment of buses over 8 tons gross vehicle weight
in 2010. The 20% growth in unit sales was primarily the result of
the positive business development for bus chassis in Latin America.
In Western Europe, unit sales decreased by 1% to 7,200 buses.
We felt the effect of investment cuts in the public sector in particular
for city buses. Nonetheless, Daimler Buses succeeded in main-
taining its leading position in Western Europe with a market share
of approximately 30% (2009: 30%). In Latin America, Daimler Buses
increased its unit sales of bus chassis of the Mercedes-Benz brand
following a significant market recovery by 43% to 23,200 units.
As a result, Daimler Buses was able to expand its market share in
Latin America to 47.1% (2009: 44.7%). While the Mexican market
recovered slightly, unit sales declined in the USA/Canada region
(see pages 132 f).

Market share

In %

Mercedes-Benz Cars
Western Europe

thereof Germany

United States

Japan

Daimler Trucks
Medium- and heavy-duty
trucks Western Europe

thereof Germany

Heavy-duty trucks NAFTA region
(Class 8)

Medium-duty trucks NAFTA
region (Classes 6 and 7)

Medium- and heavy-duty trucks
Brazil

Trucks Japan

Mercedes-Benz Vans
Medium-sized and large
vans Western Europe

thereof Germany

Daimler Buses
Buses over 8 tons Western
Europe

thereof Germany

Buses over 8 tons Latin America

2010

2009

10/09

Change in
%-points

4.8

10.6

1.9

0.8

24.3
40.5

32.4

29.9

27.4
19.8

17.8
26.1

29.6

55.5

47.1

4.7

8.3

2.0

0.8

23.0

41.6

30.9

27.2

28.5

20.2

18.1

27.6

29.6

59.6

44.7

+0.1

+2.3

-0.1

0.0

+1.3

- 1.1

+ 1.5

+ 2.7

- 1.1

- 0.4

- 0.3

- 1.5

0.0

- 4.1

+ 2.4

The business of the Daimler Financial Services division devel-
oped very positively in the period under review. Its worldwide
contract volume of €63.7 billion at the end of 2010 was 9% above
the level of a year earlier. Adjusted for exchange-rate effects,
there was an increase of 3%. New business grew compared with
the prior year by 17% to €29.3 billion; adjusted for exchange-rate
effects, the increase amounted to 11%. Growth was primarily driven
by the regions of North and South America and Asia, while
contract volume in Euro pe stabilized at the prior-year level. The
Insurance Services unit brokered more than 839,000 insurance
policies around the world in 2010, representing growth of 22%
compared with the 2009. One of the main reasons why we were
so successful with insurance is that we sell tailored packages
of insurance cover, leasing and financing products, service
contracts and additional safety equipment in the insured vehicles.
We also continued to expand our business with commercial
customers and fleet customers. In close cooperation with the
automotive division’s sales departments, Daimler Financial Services
thus made an important contribution to promoting their unit
sales (see pages 134 f).

Consolidated revenue by region
In billions of euros

2006
2007

2008
2009

2010

Germany

Western Europe
(excl. Germany)

NAFTA region

Asia

Other markets

Order situation. The Mercedes-Benz Cars, Daimler Trucks,
Mercedes-Benz Vans and Daimler Buses divisions produce vehicles
to order in accordance with customers’ specifications. While
doing so, we endeavor to flexibly adjust the production numbers
of individual models to changing levels of demand. As a result
of the worldwide economic revival and due in particular to rising
demand in the emerging markets, volumes of orders received
in 2010 increased significantly at all divisions following a distinct
slump in 2009. At Mercedes-Benz Cars, orders returned to the
high levels of the years before the economic and financial crisis.
This upturn was partially caused by the market success of the
new E-Class models and strong demand in China and other emerg-
ing markets. At Daimler Trucks, the recovery of important markets
and the great acceptance of our products resulted in a very substan-
tial increase in orders received. Due to the strong improvement
in demand, we ramped up the production of cars, trucks, vans and
buses once again. For long periods of the year, the car plants were
operating at full capacity in order to meet the market’s increased
demand. The total order backlog at the end of 2010 was again
significantly higher than the weak level of a year earlier.

Revenue. The Daimler Group’s revenue increased in 2010 by 24%
to €97.8 billion; adjusted for exchange-rate effects, there was
an increase of 19%. This means that our business recovered from
the worldwide sales crisis faster than we had expected at the
beginning of the year, but the Group’s total revenue only reached
the magnitude of 2008 and was still below the record level
of the year 2007. All divisions profited from the recovery of major
markets: Revenue rose at Mercedes-Benz Cars by 29% to €53.4
billion, at Daimler Trucks by 31% to €24.0 billion, at Mercedes-
Benz Vans by 26% to €7.8 billion and at Daimler Buses by 8% to
€4.6 billion. The Daimler Financial Services division also achieved
revenue growth of 7% to €12.8 billion.

In regional terms, Daimler increased its revenue primarily in Asia
(+58% to €19.7 billion). The main positive impact in that region
was from the favorable development of business in China (+109%
to €9.1 billion). In the NAFTA region, revenue rose by 22% to
€23.6 billion. The development of business in Latin America was
also very dynamic, especially in Brazil (+54% to €4.2 billion).
In Western Europe, however, there was only a small increase
of 6% to €38.5 billion; slight growth of 3% in Germany was boosted
by stronger growth of 9% in the other markets of the region.
In general, the regional distribution of Daimler’s revenue has altered
significantly in the past two years in favor of new markets.
We now generate 35% of our business in markets outside the triad
of the United States, Western Europe and Japan. In the year 2008,
that proportion was still just 28%.

Revenue

In millions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

2010

2009

10/09

% change

97,761

53,426

24,024

7,812

4,558

12,788

78,924

41,318

18,360

6,215

4,238

11,996

+24

+29

+31

+26

Management Report | Business and General Conditions | 73

Profitability

EBIT

Daimler achieved EBIT of €7.3 billion in 2010 and thus con-
cluded the financial year very successfully (2009: minus €1.5 bil-
lion).

EBIT by segment

In millions of euros

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Reconciliation

Daimler Group

2010

2009

10/09

% change

4,656

1,323

451

215

831

-202

7,274

-500

-1,001

183

-230

-1,513

+17

-12

After the prior year had been severely impacted by the financial
and economic crisis, earnings in all divisions developed much
more positively than had been anticipated at the beginning of 2010.
This was due not only to the general market recovery, but in par-
ticular to our attractive product range and the efficiency gains we
realized. There was an opposing effect on EBIT from increased
research and development costs.

EBIT was positively affected also by lower expenses for the com-
pounding of non-current provisions (2010: €240 million; 2009:
€1,003 million) and by a significantly lower annual contribution
to the German Pension Protection Association (2010: expense
of €23 million; 2009: expense of €164 million).

The adjustment of health-care and pension benefit plans at our
US subsidiary, Daimler Trucks North America, resulted in non-
recurring income of €160 million in 2010. The sale of our 5.3%
equity interest in Tata Motors and the positive outcome of a legal
dispute involving Daimler AG in October 2010 led to additional
non-recurring income in a total amount of €483 million.

On the other hand, the programs for the repositioning of Daimler
Trucks North America and Mitsubishi Fuso Truck and Bus Corpo-
ration resulted in expenses of €40 million in 2010 (2009: €340
million). The decision to restructure the business operations
of Daimler Financial Services AG and Mercedes-Benz Bank AG
in Germany by the end of 2012 led to expenses of €82 million
in 2010, primarily related to personnel adjustments. In connec-
tion with the now-completed sale of non-automotive assets,
Daimler Financial Services also incurred expenses of €9 million
in 2010 (2009: €100 million).

Group EBIT was also reduced by €261 million representing our
share of the loss incurred by EADS; our investment in that com-
pany is accounted for using the equity method. Our proportionate
share of the loss of EADS was primarily affected by expenses
relating to the A400M military transport aircraft (€237 million).

Due to the very good development of earnings in 2010 and in
view of the 125th anniversary of the invention of the automobile
in 2011, the Board of Management decided in December to pay
out a special bonus in a volume of approximately €125 million
to all persons employed by the Group, the individual amounts
depend ing on each employee’s period of service. It was also
decided to increase the capital of the Daimler and Benz Founda -
tion from €37 million to €125 million. These expenses as well
as additional expenses in connection with legal proceedings in
2010 are not allocated to the divisions, but are shown in the
reconciliation of the divisions’ EBIT to Group EBIT under corpo-
rate items.

Group EBIT in the prior year included Chrysler-related charges
of €294 million.

Development of earnings
In billions of euros

-2

-4

2006

2007

2008

2009

2010

The special items affecting earnings in the years 2010 and 2009
are listed in the following table.

EBIT
Net profit (loss)

The Mercedes-Benz-Cars division posted EBIT for 2010 of
€4,656 million, an improvement of €5.2 billion compared with
the prior-year result. The division’s return on sales was 8.7%
(2009: minus 1.2%).

This excellent result is mainly a reflection of the high volume
of unit sales (+17%), especially in the premium and luxury seg-
ments, following the decline in demand for cars in the previous
year. Above all in the United States and China, the Mercedes-
Benz Cars division was able to increase its unit sales significantly
because of its attractive product range. Other factors with
a positive impact on earnings were a favorable product mix,
improved pricing and increased efficiency. An additional positive
effect came from lower expenses from the compounding of non-
current provisions (2010: €140 million; 2009: €657 million).
Research and development costs were higher than in the prior
year.

Special factors affecting EBIT

In millions of euros

Daimler Trucks
Adjustment of health-care and pension benefit
plans

Repositioning of Mitsubishi Fuso Truck and
Bus Corporation

Repositioning of Daimler Trucks North America

Daimler Financial Services
Repositioning of business activities in
Germany

Sale of non-automotive assets

Reconciliation
Gain on the sale of shares in Tata Motors

Income connected with the settlement of a
legal dispute

Anniversary bonus and allocation to Foundation

Losses relating to Chrysler

2010

2009

The EBIT of €1,323 million reported by the Daimler Trucks
division was also a substantial improvement on the prior year
result of minus €1,001 million. The return on sales was 5.5%
(2009: minus 5.5%).

160

-3

-37

-82

-9

265

218

-213

-245

-95

-100

-294

This earnings improvement is primarily due to the good develop-
ment of unit sales, after sales of commercial vehicles had been
depressed in the prior year by the sharp fall in demand for trans-
port services. With its attractive product range, the division was
able to increase its unit sales by 37% in 2010, with contributions
from all major markets. Earnings were positively affected in 2010
also by cost-reducing actions, in particular from the repositioning
of Daimler Trucks North America and Mitsubishi Fuso Truck and
Bus Corporation, although the implementation of those programs
still had a negative impact on earnings of €40 million in 2010
(2009: negative impact of €340 million). In addition, EBIT for 2010
includes expenses relating to the reassessment of long-term
warranty and service obligations as well as higher costs for research
and development. There was an opposing, positive effect from
income of €160 million recognized at Daimler Trucks North America
in connection with the adjustment of health-care and pension
benefit plans. Lower expenses from the compounding of non-cur-
rent provisions also had a positive impact (2010: €58 million;
2009: €241 million).

Management Report | Profitability | 75

Return on sales
In %

2007
2008

2009
2010

Return on equity
In %

2007
2008

2009
2010

-3

-6

Mercedes-Benz
Cars

Daimler Trucks

Mercedes-Benz
Vans

Daimler Buses

Daimler Financial Services

In the year 2010, Mercedes-Benz Vans also achieved significant
earnings growth with EBIT of €451 million (2009: €26 million).
The division’s return on sales developed accordingly, improving
from 0.4% to 5.8%.

The reconciliation of the divisions’ EBIT to Group EBIT reflects
our proportionate share of the results of our equity-method
investment in EADS, other corporate gains and losses, and the
effects on earnings of eliminating intra-group transactions
between the divisions.

The positive earnings trend resulted primarily from the increase
in unit sales (+35%), especially in Western Europe, the United
States and China, and also from better pricing. Charges from
exchange-rate effects were more than offset by sustained
efficiency improvements.

The Daimler Buses division increased its EBIT to €215 million
(2009: €183 million) and achieved a return on sales of 4.7%
(2009: 4.3%).

This earnings development mainly reflects the substantial
increase in deliveries of bus chassis in Latin America. There were
opposing effects from lower unit sales of complete buses in
Western Europe and North America.

Daimler Financial Services also improved its earnings
significantly in 2010 with EBIT of €831 million (2009: €9 million).
The division’s return on equity was 16.1% (2009: 0.2%).

The increase in earnings after crisis year 2009 was mainly
caused by lower expenses for risk provisions and higher interest
margins. There were opposing, negative effects in 2010 from
expenses of €82 million related to the repositioning of business
operations in Germany. An additional factor was that the division
disposed of non-automotive assets that were subject to leasing
agreements, resulting in an expense of €9 million (2009: expense
of €100 million).

Daimler’s proportionate share of the net loss of EADS amounted
to an expense of €261 million (2009: income of €88 million).
The sharp deterioration is mainly due to the additional provisions
recognized at EADS in its 2009 consolidated financial statements
in connection with the A400M military transport aircraft (minus
€237 million). Negative exchange-rate effects were also a factor.

The income of €30 million recognized at corporate level in 2010
(2009: expense of €486 million) primarily reflects a gain of
€265 million on the sale of Daimler’s 5.3% equity interest in Tata
Motors and pre-tax income of €218 million related to the positive
outcome of a legal dispute involving Daimler AG in October 2010.
It also includes expenses totaling €213 million for an anniversary
bonus and an increase in the capital of the Daimler and Benz Foun-
dation as well as additional expenses in connection with legal
proceedings in 2010. In the prior year, the items reported at corpo-
rate level included Chrysler-related expenses totaling €294 million,
partially resulting from the full disposal of Daimler’s remaining
19.9% equity interest in Chrysler.

The elimination of intra-group transactions resulted in income
of €29 million in 2010 (2009: income of €168 million).

Financial performance measures

The financial performance measures used at Daimler are oriented
towards our investors’ interests and expectations, and provide
the foundation for our value-based management.

Value added. For purposes of performance measurement,
Daimler differentiates between the Group level and the divisional
level. Value added is one element of the performance measure-
ment system at both levels and is calculated as the difference
between the operational result and the cost of capital of the
average net assets in that period.

Value Added

Profit Measure

–

Net Assets

Cost of
Capital (%)

Cost of Capital

Alternatively, the value added of the industrial divisions can be
determined by using the main value drivers, return on sales
(ROS; quotient of EBIT and revenue) and net assets productivity
(quotient of revenue and net assets).

Value Added

Return on
Sales

Net Assets
Productivity

–

Cost of
Capital (%)

Net Assets

The use of ROS and net assets productivity within the context
of a revenue growth strategy provides the basis for a positive
development of value added. Value added shows to which extent
the Group and its divisions achieve or exceed the minimum
return requirements of the shareholders and creditors, thus
creating additional value.

Profit measure. The operational profit measure at divisional
level is EBIT (earnings before interest and taxes). EBIT is calculated
before interest, income taxes and results from discontinued
operations, and hence reflects the divisions’ profit and loss respon-
sibility. The operational profit measure used at Group level
is net operating profit. It comprises the EBIT of the divisions and
profit and loss effects that the divisions are not held responsible
for, including results from discontinued operations, income taxes
and other reconciliation items.

Net assets. Net assets represent the basis for the investors’
required return. The industrial divisions are accountable for the
operational net assets; all assets, liabilities and provisions which
they are responsible for in day-to-day operations are therefore
allocated to them. Performance measurement at Daimler Finan-
cial Services is on an equity basis, in line with the usual practice
in the banking business. Net assets at Group level include
the net assets of the industrial divisions and the equity of Daimler
Financial Services as well as the net assets from discontinued
operations, income taxes and other reconciliation items for which
the divisions are not held accountable. The average annual
net assets are calculated from the average quarterly net assets,
which are calculated as the average of net assets at the begin-
ning and end of each quarter.

Cost of capital. The required rate of return on net assets and
hence the cost of capital is derived from the minimum rates
of return that investors expect on their invested capital. The cost
of capital of the Group and the industrial divisions comprises
the cost of equity as well as the costs of debt and pension obliga-
tions of the industrial business; the expected returns on liquidity
and plan assets of the pension funds of the industrial business
are considered with the opposite sign.

Management Report | Profitability | 77

The cost of equity is calculated according to the capital asset
pricing model (CAPM), using the interest rate for long-term risk-
free securities (such as government bonds) plus a risk premium
reflecting the specific risks of an investment in Daimler shares.
The cost of debt is derived from the required rate of return for
obligations entered into by the Group with external lenders. The
cost of capital for pension obligations is calculated on the basis
of discount rates used in accordance with IFRS. The expected
return on liquidity is based on money market interest rates.
The expected return on plan assets of the pension funds is derived
from the expected return generated by the plan assets, which
are invested to cover the pension obligations. The Group’s cost
of capital is the weighted average of the individually required
or expected rates of return; in the reporting period, the cost of
capital amounted to 8% after taxes. For the industrial divisions,
the cost of capital amounted to 12% before taxes; for Daimler
Financial Services, a cost of equity of 13% before taxes was applied.

Cost of capital

In percent

2010

2009

Group, after taxes

Industrial divisions, before taxes

Daimler Financial Services, before taxes

Return on sales. As one of the main drivers of value added,
the return on sales (ROS) is of particular importance for the
assessment of the industrial divisions’ profitability. The profit-
ability measure of Daimler Financial Services is not ROS, but
return on equity (ROE), in line with the usual practice in the bank-
ing business.

Value added

The Group’s value added increased by €7.4 billion to €2.8 billion,
representing a return on net assets of 17.5% (2009: minus 6.6%).
This was considerably higher than the minimum required rate
of return of 8%. In addition to the decrease in average net assets,
the improvement in value added was primarily due to the sig-
nificant increase in the divisions’ operating profit. There was an
opposing, negative effect in particular from the higher income-
tax expense.

Mercedes-Benz Cars achieved positive value added of €3.4 billion
(2009: minus €1.9 billion). The division’s excellent earnings,
primarily resulting from the higher volume of unit sales and an
advantageous product mix as well as the decrease in average
net assets caused by rising liabilities, contributed to the increase
in value added.

The value added of Daimler Trucks increased by €2.3 billion to
€0.5 billion. The main reasons for this increase were the signifi-
cant earnings improvement due to the good development of unit
sales and the positive effects from the cost-reducing actions.
Average net assets were almost unchanged.

The Mercedes-Benz Vans division posted an increase in value
added of €0.5 billion to €0.3 billion, primarily due to the significant
earnings improvement resulting from higher unit sales. An addi-
tional factor was that the decrease in average net assets caused
by lower working capital led to a further increase in value added.

Value added at Daimler Buses increased from €36 million to
€71 million. In addition to a slight decrease in average net assets,
this was caused by the positive earnings development.

Value added also increased significantly at Daimler Financial
Services (by €0.8 billion to €0.2 billion). The division’s return
on equity was 16.1% (2009: 0.2%). The positive development was
mainly the result of the increase in earnings caused by lower
expenses for risk provisions and higher interest margins, partially
offset by an increase in equity.

Value added

Reconciliation to net operating profit/loss

In millions of euros

% change

In millions of euros

2010

2009

10/09

2010

2009

10/09

% change

Daimler Group

2,773

-4,644

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

3,438

499

303

160

-1,865

-1,808

-181

-599

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

EBIT of the divisions

+97

4,656

1,323

451

215

831

-500

-1,001

183

7,476

-1,283

Income taxes 1
Other reconciliation

-2,154

-202

Net operating profit (loss)
1 Adjusted for tax effects of interest income

5,120

-589

-230

-2,102

2010

2009

10/09

% change

+17

Net assets (average amounts)

In millions of euros

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses
Daimler Financial Services 1

Net assets of the divisions
Investments accounted for using
the equity method 2

Assets and liabilities from income
taxes 3
Other reconciliation 3

Daimler Group
1 Total equity
2 To the extent not allocated to the segments
3 Industrial business

29,338

10,146

11,373

6,863

1,228

1,200

5,156

6,720

1,728

1,221

4,671

24,593

25,713

3,119

3,591

1,278

348

2,944

-470

31,778

-11

-29

-2

+10

-4

-13

-57

-8

Management Report | Profitability | 79

Net assets at year end can be derived from the consolidated
balance sheet as follows:

Statement of income/loss

Net assets of the Daimler Group at year-end

Consolidated statement of income/loss

In millions of euros

% change

In millions of euros

2010

2009

10/09

2010

2009

10/09

% change

+24

+14

+71

+17

+20

+40

+31

-27

-23

Net assets of the industrial
business

Intangible assets

Property, plant and equipment

Leased assets

Inventories

Trade receivables

Less provisions for other risks

Less trade payables

Less other assets and liabilities

Assets and liabilities from
income taxes

Total equity of
Daimler Financial Services

7,444

17,544

9,611

14,056

6,964

-12,078

-7,429

-12,031

6,690

15,911

8,651

12,337

5,073

-10,655

-5,422

-9,651

718

1,586

4,865

4,670

Net assets

29,664

29,191

+11

+10

+11

+14

+37

+13

+37

+25

-55

Revenue

Cost of sales

Gross profit
Selling expenses

General administrative expenses

Research and non-capitalized
development costs

Other operating income

Other operating expense

Share of profit/loss from invest-
ments accounted for using the
equity method, net

Other financial income/expense, net

Earnings before interest and
taxes (EBIT) 1
Interest income

Interest expense

Profit/loss before income taxes
Income taxes

Net profit/loss
Minority interest

97,761

-74,988

22,773

-8,861

-3,474

-3,476

971

-660

-148

149

7,274

825

-1,471

6,628

-1,954

4,674

-176

78,924

-65,567

13,357

-7,608

-3,287

-2,896

693

-503

-1,341

-1,513

1,136

-1,921

-2,298

-346

-2,644

Profit/loss attributable to
shareholders of Daimler AG
1 EBIT includes expenses from the compounding of provisions and effects
from the change in the discount rates (2010: minus €240 million; 2009:
minus €1,003 million).

-2,640

4,498

The Daimler Group’s total revenue increased by 23.9% to €97.8
billion in 2010 (2009: €78.9 billion); adjusted for positive currency
effects, the increase was 19.1%. The revenue growth was primar-
ily due to increase vehicle shipments compared with the crisis-hit
weak prior year. Further information on the development of reve-
nue is provided in the “Business development” section of this
Management Report.

Cost of sales amounted to €75.0 billion in the year under review,
increasing by 14.4% compared with 2009 (€65.6 billion). The
increase in cost of sales was caused by higher business volumes
and the resulting increase in material and personnel expenses.
There were opposing effects from further cost reductions, due
in part to the efficiency-enhancing programs, and from lower
expenses for risk provisions and refinancing at Daimler Financial
Services. Overall, cost of sales rose at a lower rate than revenue,
so gross profit accounted for a significantly higher proportion
of revenue than in the prior year (23.3% compared with 16.9%).
Further information on cost of sales is provided in Note 5 of the
Notes to the Consolidated Financial Statements.

Due to the growth in unit sales, selling expenses increased
by €1.3 billion to €8.9 billion (2009: €7.6 billion). The increase
is a reflection among other things of higher expenses for person-
nel, IT and marketing. Partially due to efficiency-enhancing pro-
grams within the sales organisation, as a percentage of revenue,
selling expenses fell from 9.6% in 2009 to 9.1% in 2010.

General administrative expenses increased by 5.7% to €3.5
billion in 2010 (2009: €3.3 billion). This increase was mainly
the result of expenses relating to the repositioning of Daimler
Financial Services in Germany and for the repositioning of Daimler
Trucks North America and Mitsubishi Fuso Truck and Bus Corpo-
ration. Higher other personnel expenses were also a factor.
As a percentage of revenue, general administrative expenses
were 3.6% (2009: 4.2%).

Research and non-capitalized development costs amounted
to €3.5 billion in 2010 (2009: €2.9 billion). The increase was mainly
caused by higher personnel expenses and increased expenses
of purchased of goods and services. The focus of research and
development work was on the development of successor models
as well as new generations of engines and alternative drive systems.
As research and non-capitalized development expenses increased
at a lower rate than revenue, their proportion of revenue fell
slightly from 3.7% to 3.6%. Further information on the Group’s
research and development costs is provided in the “Research
and development, environmental protection” section of this
Management Report.

Other operating income increased to €1.0 billion (2009: €0.7
billion). This was primarily due to income recognized following
the positive outcome of a legal dispute involving Daimler AG
(€218 million) and gains on the sale of real estate.

Other operating expense amounted to €0.7 billion (2009: €0.5
billion).

Further information on the composition of other operating
income and expense is provided in Note 6 of the Notes to the
Consolidated Financial Statements.

In 2010, our share of loss from investments accounted for
using the equity method amounted to €0.1 billion and was thus
lower than the prior-year result (profit of €0.1 billion). There was
a negative impact primarily from Daimler’s share of the loss
reported by EADS (2010: expense of €0.3 billion; 2009: income
of €0.1 billion), which was mainly the result of expenses relating
to the A400M program.

Other financial income, net developed from an expense of €1.3
billion in 2009 to income of €0.1 billion in 2010. The improve-
ment is due to lower expenses from the compounding of non-cur-
rent other provisions following the decline in interest rate levels
(2010: expense of €0.2 billion; 2009: expense of €1.0 billion).
In addition, the Group realized a gain of €0.3 billion on the sale
of its shares in Tata Motors. In the prior year, other financial
expense included expenses of €0.3 billion relating to the agree-
ments concluded with Chrysler.

Management Report | Profitability | 81

The Group recorded net interest expense for the year 2010
of €0.6 billion (2009: net interest expense of €0.8 billion).
The improvement was primarily due to lower interest expenses
caused by a lower level of debt in the industrial business.
This more than offset the higher expenses relating to pension
and health-care obligations. Further information on interest
income and expense is provided in Note 8 of the Notes to the
Consolidated Financial Statements.

The income-tax expense of €2.0 billion recorded in 2010
(2009: €0.3 billion) is mainly a reflection of the Group’s profit
before income taxes, with opposing effects from the reversal
of impairments recognized on deferred tax assets. The effective
tax rate for 2010 is 29.5% (2009: minus 15.1%). The effective
tax rate in 2009 reflects the fact that impairments had to be recog-
nized on deferred tax assets at non-German subsidiaries and
that tax expenses had to be recognized in connection with the
tax assessment of previous years. Further information on income
taxes is provided in Note 9 of the Notes to the Consolidated
Financial Statements.

The positive development of EBIT led to a significant improve-
ment in net profit to €4.7 billion in 2010 (2009: net loss of €2.6
billion). Earnings per share improved accordingly to €4.28
(2009: loss per share of €2.63).

Dividend per share
In euros

2.50

2.00

1.50

1.00

0.50

2.00

1.85

1.50

0.60

2006

2007

2008

0.00

2009

2010

Dividend

After deciding not to pay a dividend last year in view of the net
loss in 2009, we now want our shareholders to participate again
appropriately in our financial success. In setting the dividend,
we aim to distribute approximately 40% of the Group’s net profit
attributable to the Daimler shareholders. On this basis, the Board
of Management and the Supervisory Board have decided to recom-
mend to the shareholders for their approval at the Annual
Meeting to be held on April 13, 2011 that a dividend of €1.85
per share be paid out. The total dividend payout will then amount
to €1,971 million.

Road to Emission-free Mobility

Optimizing our vehicles
with modern conventional
powertrains

Hybridization for further
increase in efficiency

Locally emission-free driving
with electric vehicles powered by
fuel cells or batteries

Clean fuels for internal combustion engines

Energy sources for locally emission-free driving

Energy for the future

Research and development, environmental protection

Research and development as a key success factor.
Research and development play a key role at Daimler. Following
the tradition of Gottlieb Daimler and Carl Benz, who invented
the automobile 125 years ago, we see ourselves as pioneers and
drivers of innovation in the automotive industry. In view of the
fundamental technological transformation facing the entire auto-
motive industry, successful research and development work is
a key factor for the Daimler Group’s future success. Our research
activities help us to anticipate trends as well as customers’
desires and the requirements they place on future mobility, which
are then consistently integrated into series products by our
development engineers. Our goal is to provide our customers with
exciting products and tailored solutions for needs-oriented, safe
and sustainable mobility. We organize our technology portfolio and
our core competencies to ensure that we achieve this goal
(see pages 140 ff.).

22,100 employees in research and development departments.
Key factors for the market success of our vehicles are the exper-
tise, creativity and motivation of our employees in research and
development. At the end of the year 2010, 22,100 persons were
employed in Daimler’s research and development departments
around the world. Of that total, 14,700 persons were employed
at Group Research and Mercedes-Benz Cars Development, 5,400
at the Daimler Trucks division, 900 at the Mercedes-Benz Vans
division and 1,100 at Daimler Buses. More than 4,000 research
and development personnel were employed outside Germany.

The most important sites in our research and development network
are Sindelfingen and Stuttgart-Untertürkheim in Germany. Our
research and development locations in North America and Asia
include Palo Alto, California and Portland, Oregon, as well as
the research center for information and communication technology
in Bangalore, India, and the Global Hybrid Center in Kawasaki,
Japan. Furthermore, we collaborate with various renowned research
institutes worldwide and participate in international exchange
programs for young scientists.

Effective involvement of the supplier industry. In order to
achieve our ambitious research and development goals, we also
make use of services provided by supplier companies. Particu-
larly in view of the technological challenges facing the automotive
industry and the need to bring new technologies to market
maturity as quickly as possible, it is essential to coordinate our
activities with supplier companies. Within the framework of
joint research and development work, we ensure that the core
competencies for technologies important for the future of the
automobile and for the uniqueness of our brands remain at the
Group.

More than 2,100 patents filed. Daimler newly registered
a total of 2,105 patents in the year 2010 (2009: 2,072), most
of which were in the areas of drive systems and safety. More
than 1,000 patent applications related to the issue of emission-
free mobility, in particular electric drive systems using power
from batteries or fuel cells. In the coming years, we will further
extend our technology and innovation leadership across all
products and brands with the help of industrial property rights.

High level of research and development expenditure. We
effectively continued the research and development projects
important for our vehicles’ competitiveness in 2010, while
further improving the efficiency and quality of our research and
development work. We intend to play an active part in shaping
the technological transformation facing the automotive industry
with pioneering innovations also in the future. We therefore
increased our research and development expenditure to €4.8 billion
in 2010 (2009: €4.2 billion). In accordance with IFRS accounting
regulations, we capitalized development costs in a total amount
of €1.4 billion (2009: €1.3 billion). The main areas of our work
were new, extremely fuel-efficient and environmentally friendly drive
technologies, in line with our “Road to Emission-free Mobility”
initiative. We work on optimizing conventional drive technologies
and enhancing their efficiency through hybridization, as well
as on electric vehicles with fuel-cell drive and battery power.
Another focus is on new safety technologies: In the context of
our “Vision of Accident-free Driving,” we are pursuing the goal
of avoiding accidents as far as possible and of alleviating the
consequences of any accidents that might still occur.

Management Report | Profitability | 83

Commercial vehicles with low consumption and emissions.
We have also continuously reduced the emissions of CO2 and
other harmful substances by our commercial vehicles in recent
years. BLUETEC technology increases the efficiency and
reduces the polluting emissions of our trucks significantly: Fuel
consumption falls by 2 to 5%, representing 2,000 liters less
diesel per truck each year. The Mercedes-Benz Actros 1844 LS
is the world’s most fuel-efficient series-produced truck, with
consumption of 19.44 liters per 100 kilometers. Hybrid drive is
becoming increasingly important for commercial vehicles and
can reduce diesel consumption in delivery applications by up to
15%. Daimler is the world’s leading manufacturer of commercial
vehicles with hybrid drive: By December 2010, we had supplied
customers with about 3,000 Orion hybrid buses, approximately
1,000 Freightliner trucks and vans with hybrid drive, and more than
1,100 Fuso trucks and buses with hybrid technology. Worldwide,
a total of more than 5,200 commercial vehicles from Daimler are
on the road with hybrid drive.

Research and development expenditure

In millions of euros

Daimler Group

thereof capitalized

Mercedes-Benz Cars
thereof capitalized

Daimler Trucks

thereof capitalized

Mercedes-Benz Vans
thereof capitalized

Daimler Buses

thereof capitalized

2010

2009

10/09

% change

4,849
1,373

3,130
940

1,282
373

267
29

223
31

4,181
1,285

2,696
913

1,116
368

193
0

212
5

+16
+7

+16
+3

+15
+1

+38
.

+5
+520

Research and development expenditure
In billions of euros

total
thereof capitalized

2006

2007

2008

2009

2010

The most important projects at Mercedes-Benz Cars were the
successor models for the A/B-Class and the M-Class and the
model upgrade for the C-Class, as well as new-generation engines
and alternative drive systems. Total research and development
expenditure at Mercedes-Benz Cars amounted to €3.1 billion last
year (2009: €2.7 billion). Daimler Trucks spent €1.3 billion on
research and development (2009: €1.1 billion). The main areas
there were alternative drive systems, new engines for medium
and heavy-duty trucks and successor generations of existing prod-
ucts. The focus of expenditure at Mercedes-Benz Vans was on
the further development of engines to fulfill future emission regu-
lations. The Daimler Buses division concentrated its development
activities on new products, the fulfillment of new emission standards
and alternative drive systems such as diesel hybrid and fuel cells.

Further reduction in our cars’ CO2 emissions. Thanks to our
new economical engines and our additional BlueEFFICIENCY
models, we were able to reduce the average CO2 emissions of
the passenger cars we sold in the European Union in the year
under review to 158 grams per kilometer. What’s more, we achieved
this feat despite a greater share of exceptionally high-quality
and powerful vehicles in our model mix. The first of these fuel-
efficient automobiles, with which we achieve additional fuel
savings compared with the standard models of more than 20%,
was launched in 2008. By the end of the year 2010, 85 Blue-
EFFICIENCY models had become available. Meanwhile, nearly one
third of our cars sold in Europe have CO2 emissions of less
than 140 grams per kilometer. We will reduce fuel consumption
and CO2 emissions even more in the future with innovative
technologies for locally emission-free mobility. Our goal is to reduce
the CO2 emissions of our new car fleet in the European Union
to less than 140 grams per kilometer by 2012. In recent years, we
have continuously reduced the emission of pollutants by our
cars: by more than 75% since 1995 and by more than 30% in the
past five years. The emission reductions achieved by our cars
with our BlueTEC diesel engines are particularly impressive: by more
than 90% compared with 1995 and by more than 75% compared
with 2005. We are global leaders for clean diesel engines with our
BLUETEC technology. Our BLUETEC automobiles fulfill the
strictest emission standards and are the cleanest diesel cars
in the world.

In the area of waste management, our guiding principle is that
avoidance and recycling are better than disposal. Innovative
techniques and environmentally compatible production allow us
to steadily reduce our volumes of waste materials. Between
2005 and 2010, the total of production-related waste material
fell by 13% to 1.0 million tons. Also in this area, we recorded
an increase over the prior year – along with the substantial growth
in production volumes – of 27%. But in the more relevant com-
parison with 2008, there was a reduction of 10%. The figures stated
for the year 2010 are based on an extrapolation of the environ-
mental data currently available for 2010. The exact figures will be
released with the publication of the new Sustainability Report
in April 2011.

We make use of comprehensive environmental management
systems in our efforts to make further progress in the field
of environmental protection. More than 98% of our employees
worldwide work in plants whose environmental management
systems have been certified according to ISO 14001 or EMAS
environmental standards.

€2.3 billion for environmental protection. Once again in
the year 2010, we pursued the goal of preserving resources and
reducing all relevant emissions. We consider the effects of all
our processes – from vehicle development to production and to
recycling and environmentally friendly disposal. Last year, we
increased our spending on environmental protection by 8% to
€2.3 billion.

Extensive activities for environmental protection in
production. With the help of environmentally friendly production
methods, we have succeeded in recent years – with comparable
production volumes – in continually reducing our plants’ energy
consumption, CO2 emissions, production-related solvent
emissions and noise pollution. As a result, energy consumption
fell between 2005 and 2010 by 5.7% to 10.3 million megawatt
hours. During the same period, CO2 emissions decreased by 3.0%
to 3.7 million tons. Compared with the year 2009, both energy
consumption and CO2 emissions increased last year: by 16% and
18% respectively. However, this is solely a reflection of the
unusually low production volumes in the prior year caused by
the worldwide sales crisis. A more relevant comparison is with
the year 2008, which shows reductions in energy consumption
of 5.9% and in CO2 emissions of 4.6%, despite the new inclusion
of production-related fuel consumption. Without this change, the
reductions would have been 6.6% for energy consumption and
4.7% for CO2 emissions. Utilization of techniques that preserve
resources such as closed-cycle systems enabled us to reduce
water consumption by 10.5% between 2005 and 2010. Water con-
sumption was 18% higher in 2010 than in 2009, but was 10.1%
lower than in 2008.

Management Report | Profitability | 85

Due to the discontinuation of reduced working hours and
short-time work, personnel and related expenses increased
to €16.5 billion in 2010 from €13.9 billion in the prior year.

Profit sharing. As a result of the unsatisfactory business
development in 2009, no profit-sharing bonus could be granted
for that year. Nonetheless, the employees of Daimler AG paid
according to wage-tariff agreements received a special one-time
bonus of 500 euros in April 2010. This was intended to show
the Board of Management’s recognition of the workforce’s efforts
in a difficult environment. In addition, employee shares were
offered once again in May 2010, after the employee-share program
had to be suspended in 2009.

In view of the Group’s positive economic development in the year
2010, Daimler’s Board of Management and General Employee
Council have agreed that the special efforts made by the workforce
in 2010 will be rewarded with a high performance participation
bonus: In Germany, each entitled employee of Daimler AG will be
paid 3,150 euros at the end of April 2011.

Average age. The average age of our employees worldwide
in 2010 was 41.9 (2009: 41.4). In Germany, the average age
of the employees of Daimler AG was 43. Along with general
demographic developments, the average will increase over the
coming years.

This demographic change is leading to various challenges and
opportunities. The objective of the measures we have initiated
is to develop our employees’ productivity and to make use of
their growing experience. As part of our resource management
activities, we examine for example how demographic change
will affect our future needs for skilled workers. This will allow us
to take preventative action in order to maintain the long-term
competitiveness of our workforce.

Employees by division

Daimler Group

260,100

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Sales Organization

Daimler Financial Services

Other

96,281

71,706

14,557

17,134

48,299

6,742

5,381

Employment

260,100 employees worldwide. Due to the revival of demand,
the size of our workforce increased slightly in 2010. As of
December 31, we employed a total of 260,100 people worldwide,
compared with 256,407 at the end of 2009. In Germany, the
number of employees increased to 164,026 (2009: 162,565);
18,295 people were employed in the United States (2009:
17,697), 13,484 in Brazil (2009: 13,088) and 12,836 in Japan
(2009: 14,152). At our consolidated subsidiaries in China,
the headcount at the end of 2010 was 1,552 (2009: 1,166);
in addition, our Chinese joint venture companies employed
approximately 7,500 people. The number of apprentices and
trainees was 8,841 (2009: 9,151). The parent company,
Daimler AG, employed 145,796 people as of December 31,
2010 (2009: 147,052).

Employment increased at the divisions Mercedes-Benz Cars
(+3%) and Daimler Trucks (+1%). While the number of persons
employed in the sales and marketing organization also rose
(+1%), headcounts decreased at the divisions Mercedes-Benz
Vans (-4%) and Daimler Financial Services (-1%). At Daimler
Buses, employment was nearly unchanged.

Cost savings due to package of measures taken. In 2010, it
was possible to suspend the measures agreed upon by the Board
of Management and the Group Employee Council in Germany
in 2009 to reduce labor costs and secure employment. Due to the
improving economic situation, we reduced short-time work as
of January at first at the car plants and then gradually also at the
truck and van plants, so by the end of the third quarter it was
completely phased out. For the entire workforce, the termination
of reduced working hours was agreed upon for the end of May
2010 – one month earlier than planned. In total, this package of
measures, which also included savings on supplementary com-
pany benefits, made an important contribution to the reduction
of personnel expenses. By means of the measures taken to
enhance personnel flexibility, we were able to overcome the diffi-
cult economic situation without actively reducing the headcount
in Germany.

Risk management continues to prove its worth. Also in the
year 2010, we continually monitored the financial development
of our suppliers in the context of our risk management. We focus
in particular on security of supply, the development of working
capital and the continuation of productivity-enhancing projects
from the year 2009. Although some of our suppliers had to file
for bankruptcy in 2010, we were able to avoid any major production
losses. Due to the great importance of suppliers for our pro-
duction processes, Daimler has established a Supplier Risk Board,
which holds regular meetings. This board has members from
various departments and if required develops action plans enabling
us to react quickly to the danger of supplier insolvency. We sup-
port distressed suppliers for example by making advance payments
for subsequent deliveries.

Sustainability in procurement. Our goal is to ensure that our
business practices are sustainable along the entire value chain.
Our expectations in terms of ecological and social aspects are
formulated in Daimler’s sustainability guidelines for suppliers.
Since the end of 2010, they have been a binding component of
our terms and conditions for purchasing in Germany, which are
valid for a large proportion of our suppliers. Other contracts and
agreement are gradually being adapted worldwide. In addition,
we apply various instruments to check and support the implemen-
tation of our requirements, including supplier training courses
as well as dialogues and other communication activities.

Increase in employees’ average period at the Group and in
the proportion of women in management positions. The
average period for which Daimler employees have been at the
Group increased in 2010 from 15.4 to 16.0 years. At the end
of the year, Daimler Group employees in Germany had been with
us for an average of 18.7 years (2009: 18.1); the average for
employees of Daimler AG was 18.9 years (2009: 18.4). The aver-
age period for our employees outside Germany was 11.3 years
(2009: 11.0). Women accounted for 13.5% of the total workforce
of Daimler AG at the end of 2010 (2009: 13.1%). In management
positions of levels 1 to 4, the proportion of women increased from
last year’s 10.9% to 11.6%.

Procurement

Goal: the world’s most effective supplier network. The
Daimler Group’s procurement organization consists of three
departments – Procurement Mercedes-Benz Cars and Vans,
Procurement Daimler Trucks and Buses, and International Procure-
ment Services for non-production materials – and is present
at more than 50 locations all over the world. The goal of the pro-
curement organization is to create the world’s most effective
supplier network and thus to contribute to Daimler’s overall suc-
cess.

Performance-oriented cooperation with our suppliers. Under
the motto “Commitment to Excellence,” the Daimler Supplier
Network (DSN) defines the business philosophy of Daimler’s
procurement organization. Its principles are performance
and partnership: With the help of the external balanced scorecard,
suppliers’ performance is measured in the categories quality,
technology, costs and reliability. To us, partnership means fairness,
dependability and credibility. The best suppliers are rewarded
each year with the Daimler Supplier Award for outstanding perfor-
mance.

Increasing raw-material prices. After historical lows in the prior
year, the prices of many raw materials increased again significantly
in 2010. This development was the result above all of expansive
monetary policies worldwide, rising industrial demand in emerging
economies, and the interests of financial investors. Daimler pro-
tects itself against price fluctuations with a number of measures,
including long-term agreements and hedging transactions.

Management Report | Profitability | 87

Integrated system solution for commercial-vehicle sales.
Following a successful start in the Daimler TruckStores, we further
developed the internet-based software solution for the used
commercial-vehicle business and introduced it at Daimler Buses.
All accounting-relevant transactions are processed automatically
worldwide. Details of vehicles in stock, including pictures, are trans-
ferred daily and automatically from the system to the TruckStore
Internet portal for the sales function.

Green IT makes visible contribution to sustainability. One
focus of our IT work at Daimler is on sustainability issues such
as green IT. We have achieved substantial savings of resources
in the context of this initiative: In the IT organization, 55 million
kilowatt-hours of electricity and 33,000 tons of CO2 emissions
were saved within one year. This benefited not only our ecological
performance, but also our profitability.

The consistent focus of IT on aspects of sustainability has been
emphasized by the inclusion of key figures for green IT in the
IT organization’s balanced scorecard. This makes it possible to
continually measure the environmental and resource-saving
application of information technology. It also allows us to recognize
innovative environmental potential faster and to integrate it into
the processes of our business operations. Outside Daimler, the
IT organization is active in the EU’s Code of Conduct for Data
Centers – an environmental initiative by the European Union encour-
aging companies to commit voluntarily to the use of efficient
data centers.

In November 2010, Daimler AG received the Gartner Data Center
Excellence Award for the concept and measurable success of
the Group-wide green IT initiative entitled “Think economically, act
ecologically.” This prize is awarded for pioneering and strategic
concepts related to the design and ecological operation of data
centers. It is the most prestigious award in the international IT
industry.

Information technology

IT as key factor for efficiency and innovation. In view of
technological advances and the increasing penetration of
information technology (IT) in business processes, the importance
of a secure, high-performance IT system is increasing all the
time. Nearly all business processes – from product development
to vehicle production to sales and finance processes – are
becoming ever more digitalized. Efficient and innovative IT systems
therefore make a significant contribution to our business success.
Approximately 4,800 employees at more than 500 locations pro-
vide effective support for Daimler’s business processes with
various IT applications. This includes ensuring that the system
landscape is constantly functional and permanently optimized.
In order to simultaneously improve efficiency, we continuously
consolidate the IT system landscape and intend to reduce the
number of existing systems by up to 40% by the year 2015. In 2010,
we already reduced the number of applications by approxi-
mately 8%.

Worldwide, Daimler’s IT organization supports more than 260,000
employees as well as external business partners with an integrated
network infrastructure. One of the key IT tasks is therefore to
protect the flow of information against unauthorized access. Due
to increasing risks and dangers for information security, we have
set up a dedicated department at corporate level to work on this
issue. This department defines and monitors the technical
protective facilities and also takes organizational precautions such
as worldwide employee training courses or the management
of local IT-security executives.

IT solutions support the further development of individual
mobility. Both for our operating business units and for the
sales organization, we have developed tailored IT solutions to
support Daimler’s mobility strategy. After supporting car2go
with its IT systems, Daimler’s IT specialists provided advice to the
web-based car-sharing service, car2gether, and assisted with
the design and implementation of its web portal. We also accom-
panied the launch of the car2gether pilot project in Ulm.

IT mobility services were further developed also in the sales
function. Following the launch of the Apple iPhone app for the
personalized contract management of financial services at
Mercedes-Benz Financial, the entire Mercedes-Benz dealer network
in the United States was equipped for mobile work with Apple’s
3G iPadTM. All 355 dealerships can now access Advantage®, the
Mercedes-Benz dealer system, at each point of sale and at any
place or time. We have also developed a function that allows cus-
tomers to electronically sign documents directly on the iPad
display. Since the beginning of 2010, Mercedes-Benz Financial’s
IT services also include a website created solely for smartphone
users.

Liquidity and Capital Resources

Principles and objectives of financial management

Financial management at Daimler consists of capital structure
management, cash and liquidity management, pension asset
management, market price risk management (foreign exchange
rates, interest rates, commodity prices) and credit and financial
country risk management. Worldwide financial management is
performed within the scope of legal requirements for all Group
entities by Treasury. Financial management operates within a frame-
work of guidelines, limits and benchmarks, and is organizationally
separate from other financial functions such as settlement, finan-
cial controlling, reporting and accounting.

Capital structure management designs the capital structure
for the Group and its subsidiaries. Decisions regarding the capi-
talization of financial services companies, as well as production,
sales and financing companies, are based on the principles of cost-
optimized and risk-optimized liquidity and capital resources.
In addition, it is necessary to adhere to various restrictions on
capital transactions and on the transfer of capital and currencies.

Cash management determines the Group’s cash requirements
and surpluses. The number of external bank transactions is mini-
mized by the Group’s internal netting of cash requirements and
surpluses. Netting is done by means of cash-concentration or cash-
pooling procedures. Daimler has established standardized pro-
cesses and systems to manage its bank accounts, internal cash-
clearing accounts and the execution of automated payment
transactions.

Management of market price risks aims to minimize the
impact of fluctuations in foreign exchange rates, interest rates
and commodity prices on the results of the divisions and the
Group. The Group’s overall exposure to these market price risks
is determined to provide a basis for hedging decisions, which
include the definition of hedging volumes and corresponding
periods as well as the selection of hedging instruments. Decisions
regarding the management of risks resulting from fluctuations
in foreign exchange rates and commodity prices, as well as deci-
sions on asset/liability management (interest rates), are regu-
larly made by the relevant committees.

Liquidity management secures the Group’s ability to meet its
payment obligations at any time. For this purpose, liquidity plan-
ning provides information about all cash flows from operating
and financial activities in a rolling plan. The resulting financial
requirements are covered by the use of appropriate instruments
for liquidity management (e.g. bank credit, commercial paper, notes);
liquidity surpluses are invested in the money market or the capital
market to optimize risk and return. The goal is to ensure the level
of liquidity regarded as necessary at optimal costs. Besides
operational liquidity, Daimler keeps additional liquidity reserves
which are available in the short term. These additional financial
resources include a pool of receivables from the financial services
business which are available for securitization in the credit
market, as well as a contractually confirmed syndicated credit
line in a volume of €7 billion.

Management of pension assets includes the investment of
pension assets to cover the corresponding pension obligations.
Pension assets are held in separate pension funds and are thus
not available for general business purposes. The funds are allocated
to different asset classes such as equities, fixed-interest securi-
ties, alternative investments and real estate, depending on the
expected development of pension obligations and based on
a process for risk-return optimization. The performance of asset
management is measured by comparing with defined reference
indices. Local custodians of the pension funds are responsible for
the risk management of the individual pension funds. The Global
Pension Committee limits these risks by means of a Group-wide
binding guideline with due consideration of applicable laws.
Additional information on pension benefit plans and similar obliga-
tions is provided in Note 22 of the Notes to the Consolidated
Financial Statements.

Management Report | Liquidity and Capital Resources | 89

The risk volume that is subject to credit risk management
includes all of Daimler’s worldwide creditor positions with financial
institutions, issuers of securities, and customers in the financial
services and automotive businesses. Credit risks with financial
institutions and issuers of securities arise primarily from invest-
ments executed as part of our liquidity management and from
using derivative financial instruments. The management of
these credit risks is mainly based on an internal limit system that
reflects the creditworthiness of the respective financial institu -
tion or issuer. The credit risk with customers of our automotive
businesses results from granting them a payment period and
includes the risk of default by contracted dealerships and general
distributors, other corporate customers and retail customers.
In connection with the export business, general distributors that
according to our creditworthiness analysis are not sufficiently
creditworthy are generally required to provide collateral such
as first-class bank guarantees. The credit risk with end custom-
ers in the financial services business is managed by Daimler
Financial Services on the basis of a standardized risk manage-
ment process. In this process, minimum requirements are defined
for the sales financing and leasing business and standards are
set for credit processes as well as for the identification, measure-
ment and management of risks. Key elements for the manage-
ment of credit risks are appropriate creditworthiness assessments,
supported by statistical analyses and evaluation methods, as well
as structured portfolio analysis and monitoring.

Financial country risk management includes various aspects:
the risk from investments in subsidiaries and joint ventures,
the risk from the cross-border financing of Group companies in
risk countries, and the risk from direct sales to customers in
those countries. Daimler has an internal rating system that divides
all countries in which it operates into risk categories. Equity
capital transactions in risk countries are hedged against political
risks with the use of investment-protection insurance such
as the German government’s investment guarantees. Some cross-
border receivables due from customers are protected with the
use of export-credit insurance, first-class bank guarantees and
letters of credit. In addition, a committee sets and restricts the
level of hard-currency credits granted to financial services com-
panies in risk countries.

Additional information on the management of market price risks,
credit defaults and liquidity risks is provided in Note 31 of the
Notes to the Consolidated Financial Statements.

Cash flows

Condensed consolidated statement of cash flows

In millions of euros

Cash and cash equivalents
at the beginning of the year
Cash provided by
operating activities

Cash provided by / used for
investing activities

Cash provided by / used for
financing activities

Effect of exchange-rate changes
on cash and cash equivalents

Cash and cash equivalents
at the end of the year

2010

2009

10/09
Change

9,800

6,912

2,888

8,544

10,961

-2,417

-313

-8,950

8,637

-7,551

1,057

-8,608

423

-180

603

10,903

9,800

1,103

Cash provided by operating activities amounted to €8.5 billion
in 2010 (2009: €11.0 billion). The positive effect from the signifi-
cant improvement in net profit was partially offset by the devel-
opment of inventories, which increased in 2010 due to the higher
production volumes but decreased substantially in the prior year.
Compared with 2009, additional factors reducing cash provided
by operating activities were the increased new leasing and sales
financing business and the reduction in proceeds from the sale
of parts of the non-automotive portfolio in the financial services
business. In addition, the negative effects from increased trade
receivables resulting from higher unit sales were only partially
offset by an increase in trade payables. Furthermore, income-
tax payments of €1.2 billion were higher than in the prior year
(2009: €0.4 billion), but due to the utilization of tax-loss carry-
forwards, they increased at a lower rate than operating result.

Cash flows from investing activities resulted in a net cash out-
flow of €0.3 billion (2009: €9.0 billion). The reduced cash outflow
compared with the prior year was primarily the result of acquisi-
tions and sales of securities carried out in the context of liquidity
management, which led to a net cash inflow of €4.3 billion last
year compared with a net cash outflow of €5.4 billion in the prior
year. The reporting period was also affected by proceeds from
the sale of shares in Tata Motors (€0.3 billion). There were higher
cash outflows for substantially increased investments in property,
plant and equipment and intangible assets, as well as for the pay-
ment made in connection with the cross-shareholding with the
Renault-Nissan Alliance (€0.1 billion).

Cash flows from financing activities resulted in a net cash out-
flow of €7.6 billion, which almost solely reflects the repayment
of financing liabilities. To a lower extent, there were opposing cash
inflows from the issue of new shares in connection with the
exercise of stock options (€0.2 billion). The net cash inflow of
€1.1 billion in the prior year mainly reflects the capital increase
from the issue of new shares (€1.95 billion), reduced by the pay-
ment of the dividend for the year 2008 (€0.6 billion).

Cash and cash equivalents increased compared with December
31, 2009 by €1.1 billion, after taking currency translation into
account. Total liquidity, which also includes deposits and market-
able debt securities, was reduced by €3.1 billion to €13.0 billion.

The free cash flow of the industrial business, which is the
parameter used by Daimler to measure the Group’s financing
capability, increased by a significant €2.7 billion to €5.4 billion.

The main reason for the increase in the free cash flow was the
substantial improvement in the divisions’ profit contributions,
which more than offset the negative effects of inventory develop-
ments and higher investments in property, plant and equipment
and intangible assets. The sale of the shares in Tata Motors also
had a positive impact on the free cash flow.

Free cash flow of the industrial business

2010

2009

10/09

Change

10,066

-741

6,544

-7,716

3,522

6,975

In millions of euros

Cash provided by
operating activities

Cash used for investing activities

Change in cash (> 3 months)
and marketable debt securities
included in liquidity

Free cash flow of the industrial
business

Net liquidity of the industrial business

In millions of euros

Cash

Marketable debt securities
and term deposits

Liquidity
Financing liabilities

Market valuation and currency
hedges for financing liabilities

Financing liabilities (nominal)

Net liquidity

Dec. 31,
2010

Dec. 31,
2009

10/09

Change

9,535

6,735

2,800

1,258

10,793

1,358

-213

1,145

11,938

5,073

11,808

-5,516

993

-4,523

7,285

-3,815

-1,015

6,874

-1,206

5,668

4,653

The net liquidity of the industrial business is calculated as the
amount of cash, cash equivalents, marketable debt securities and
other financial investments included in liquidity management,
less the currency-hedged nominal amount of the financing liabilities.

To the extent that the Group’s internal refinancing of the financial
services business is provided by the companies of the industrial
business, it is deducted for the calculation of the debt of the indus-
trial business. At December 31, 2010, due to the application
of the funds of the industrial business, the Group’s internal refi-
nancing was larger than the financing liabilities originally entered
into by the industrial business. This resulted in a positive value
for the financing liabilities of the industrial business, and there-
fore a positive component of net liquidity.

Compared with a year earlier, the net liquidity of the industrial
business increased by €4.7 billion to €11.9 billion.

-3,893

3,878

-7,771

The increase was primarily due to the positive free cash flow.

5,432

2,706

2,726

Management Report | Liquidity and Capital Resources | 91

Net debt at Group level, which primarily results from the refinancing
of the leasing and sales financing business, decreased
compared with December 31, 2009 by €0.3 billion.

Capital expenditure
In billions of euros

2006

2007

2008

2009

2010

At the Mercedes-Benz Vans division, the focus of investment
was for the model upgrade of the Vito/Viano, the development of
new products, and our plants and sales organization. At Daimler
Buses, our main investment in 2010 was in new products and our
production plants.

Investment in property, plant and equipment

In millions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

2010

2009

10/09
% change

3,653

2,457

1,003

2,423

1,618

597

113

+51

+52

+68

-19

+22

-14

Net debt of the Daimler Group

In millions of euros

Cash

Marketable securities
and term deposits

Liquidity
Financing liabilities

Market valuation and currency
hedges for financing liabilities

Financing liabilities (nominal)

Net debt

Capital expenditure

Dec. 31,
2010

Dec. 31,
2009

10/09
Change

10,903

9,800

1,103

2,096

12,999

-53,682

-213

-53,895

-40,896

6,342

16,142

-58,294

993

-57,301

-41,159

-4,246

-3,143

4,612

-1,206

3,406

263

Following significant reductions in the year 2009 as a result of
strict liquidity management, in line with the more favorable busi-
ness development, we increased our investment in property,
plant and equipment to €3.7 billion in 2010 (2009: €2.4 billion).
The focus was on investments in new vehicle models and new
drive systems. €2.1 billion of the total volume of capital expendi-
ture was in Germany.

At Mercedes-Benz Cars, investments in property, plant and equip-
ment increased by 52% to €2.5 billion in 2010. One focus was on
the expansion of production capacities for the successor to the
A/B-Class at the new plant in Kecskemét, Hungary, and at the
Rastatt plant in Germany. In addition, we invested in the ramp-up
of the new M-Class in Tuscaloosa, USA, and prepared for the start
of C-Class production there in 2014. The main investment at the
Bremen plant was for the new generation of the SLK roadster.
We also invested in engine projects such as the production
of the new V6 and V8 gasoline engines at the plant in Stuttgart-
Bad Cannstatt, as well as in expanding our car production capaci-
ties in the growth markets of China and India. Daimler Trucks
invested primarily in projects for the global harmonization and
standardization of engines and other main components and
to enable it to fulfill stricter emission regulations. We also invested
in the successor generations of existing truck models. Other
areas of investment were for additional production capacities for
the Actros heavy-duty truck, which has also been produced in
Aksaray, Turkey, since late 2010 and will be assembled in Juiz de
Fora, Brazil, as of 2012, and for the expansion of production
capacities at the plant in São Bernardo do Campo, Brazil. Total
investment in property, plant and equipment at Daimler Trucks
amounted to €1.0 billion (2009: €0.6 billion).

Refinancing

To cover its refinancing requirements, Daimler makes use of
a broad spectrum of various financing instruments in the interna-
tional money and capital markets. Daimler needs capital primarily
for the financing of vehicles in the leasing and sales financing busi-
ness. In addition to issuing short-term commercial paper in the
money market, Daimler issues bonds in the capital market in various
currencies with medium and long maturities. They include so-called
benchmark issuances (large bonds with large trading volumes)
as well as low-volume emissions. In addition, bank credit lines
and securitized receivables are also used to cover financing
requirements.

In 2010, the Group covered its liquidity requirements mainly
through the issuance of bonds and with bank loans. Due to the
positive development of cash provided by operating activities, the
funding requirement was significantly lower than in 2009.
To a very small extent, funds were also raised by issuing commer-
cial paper. Furthermore, the still high level of customer deposits
at Mercedes-Benz Bank was used as an additional source of
finance.

For raising longer-term capital in the capital market, various
programs are available such as the €35 billion multi-currency
multi-issuer euro medium-term note program, under which the
following euro benchmark bonds were successfully placed on the
market in 2010:

Amount in
billions of euros

Term in
years

Maturity

1.0

3.5

7.0

July 2013

January 2017

In order to diversify our refinancing, we made smaller private
placements in the euro market and issued bonds in the local mar-
kets of South Africa, Mexico, Argentina and Thailand. And in
April 2010, the Group successfully placed an ABS transaction in
an amount of US$1.0 billion with investors in the United States;
in this context, Daimler made use of its US platform, Mercedes-
Benz Auto Receivables Trust.

At the end of 2010, Daimler had short-term and long-term credit
lines totaling €24.0 billion (2009: €21.1 billion), of which €9.4
billion (2009: €0.8 billion) was not utilized. These included a new
syndicated credit facility arranged with a consortium of
international banks in volume of €7 billion with a maturity of five
years. That credit facility was significantly over-subscribed. After
signing the new credit line, Daimler prematurely terminated the
two existing syndicated credit lines of US$5 billion and €3 billion.

The carrying values of the main refinancing instruments and the
weighted average interest rates are shown in the table below.

Average interest rates
Dec. 31,
2009

Dec. 31,
2010

Book value
Dec. 31,
2009

Dec. 31,
2010

In %

In millions of euros

Bonds/notes

Commercial paper

Liabilities to banks

4.58

4.82

4.42

4.66

6.48

5.04

26,123

14,328

30,095

176

13,000

The financial instruments shown in the table above at December
31, 2010 are mainly denominated in the following currencies:
30% in US dollars, 29% in euros, 7% in Japanese yen, 7% in Brazil-
ian real and 5% in British pounds.

At December 31, 2009, the financial liabilities shown in the
consolidated balance sheet, which include customer deposits in
the direct banking business, amounted to €53,682 million
(2009: €58,294 million).

Detailed information on the amounts and terms of financing
liabilities is provided in Notes 24 and 31 of the Notes to the Consol-
idated Financial Statements. Note 31 also provides information
on the maturities of the other financial liabilities.

Management Report | Liquidity and Capital Resources | 93

Other financial commitments and off-balance-sheet
transactions

In the context of its normal business operations, the Group has
entered into other financial commitments in addition to the liabili-
ties shown in the consolidated balance sheet at December 31,
2010. These other financial commitments primarily relate to pur-
chasing commitments and commitments to invest in replacement
and expansion of property, plant and equipment. The Group has
also committed to make payments in connection with rental and
leasing agreements for the use of production facilities and other
property, plant and equipment. In addition, particularly Daimler
Financial Services has made irrevocable loan commitments within
the framework of its business operations.

The table below provides an overview of these other financial
commitments and their maturities:

In millions of euros

Purchasing commitments, investments in property, plant and equipment

Future lease payments under rental and leasing agreements

Irrevocable loan commitments

The Group’s off-balance-sheet transactions relate to transactions
in the context of which Daimler has provided guarantees and
thus continues to be subject to risk. However, this does not include
warranties the Group provides on its products in the context
of its vehicle sales.

The guarantees reported by the Group (excluding product war-
ranties) principally represent financial guarantees that require
us to make certain payments if a guarantee holder fails to meet
its financial obligations. The maximum potential obligation result-
ing from these guarantees amounts to €1.1 billion at December
31, 2010 (end of 2009: €1.5 billion); the corresponding provi-
sions amount to €0.2 billion at the end of the year (end of 2009:
€0.2 billion).

Most of the financial guarantees relate to the situations described
as follows: In connection with the transfer of a majority interest
in Chrysler, Daimler guaranteed payments of up to US$200 million
into the Chrysler pension plans. The term of this guarantee
is limited until August 2012. The Group also provided guarantees
for other Chrysler obligations; at December 31, 2010, these
guarantees amounted to €0.3 billion, whereby Chrysler provided
€0.2 billion on an escrow account as collateral for the guaran-
teed obligations. Another financial guarantee of €0.1 billion relates
to bank loans of Toll Collect GmbH, the operator company of
the toll-collection system for trucks in Germany.

within
1 year

in
1-3 years

Payments falling due:
after
5 years

in
4-5 years

6,017

297

1,624

1,086

504

262

168

396

149

953

Total

7,420
2,150

1,910

Other risks arise from an additional guarantee that the Group
provided for obligations of Toll Collect GmbH towards the Federal
Republic of Germany. This guarantee is related to the completion
and operation of the toll-collection system. A claim on this guaran-
tee could primarily arise if for technical reasons toll revenue
is lost or if certain contractually defined parameters are not fulfilled,
if the Federal Republic of Germany makes additional claims or
the final operating permit is not granted. Furthermore, arbitration
proceedings have been initiated against the Group. The maximum
obligation that could result from this guarantee is substantial, but
cannot be reasonably estimated.

Furthermore, the Group has issued a number of smaller guaran-
tees, some of which specify that Daimler guarantees the financial
obligations of companies which supply us with parts, vehicle
components or services or which lease production facilities to us.

On August 26, 2010, Standard & Poor’s affirmed its long-term
credit rating for Daimler AG at BBB+ and changed its outlook
from negative to stable. It justified this step with the substantial
improvement in our financial risk profile during the first half
of 2010. In this context, Standard & Poor’s referred to the signifi-
cant increase in the Group’s profitability.

The rating agency Moody’s Investors Service (Moody’s) did not
alter its ratings for Daimler during the year 2010. On December 7,
2010, Moody’s affirmed its long-term rating at A3 and praised
the material improvements in Daimler’s operating performance.
At the same time, Moody’s made it clear that the improvements
in profitability and cash-flow generation achieved in the first nine
months would have to be maintained beyond the year 2010 to
secure the existing level of rating.

On July 19, 2010, Fitch upgraded our rating outlook from nega-
tive to positive in the context of revising its ratings for European
automobile manufacturers. Our long-term rating was confirmed
at BBB+. As justification, Fitch referred to the continuous improve-
ment in the financial profiles of European carmakers since the
year 2009, the faster-than-expected recovery in global auto sales,
and Fitch’s revised expectations for those companies’ key credit
metrics in the coming years.

On November 29, 2010, the Canadian agency DBRS confirmed
the long-term rating for Daimler AG and its related companies at
A (low) with a stable outlook. It stated that although our financial
profile had deteriorated in the previous year due to the global
economic downswing, our profitability had improved sharply
year-over-year in the first three quarters of 2010.

The short-term ratings of all four rating agencies remained
unchanged during 2010.

Buyback obligations arise for the Daimler Group from agree-
ments under which we guarantee to customers certain trade-in
or resale values for sold vehicles. Most of these guarantees
provide the holder with the right to return purchased vehicles to
the Group if the customer acquires another vehicle from Daimler.
At December 31, 2010, the maximum potential obligation from
these guarantees amounted to €0.7 billion (December 31, 2009:
€0.7 billion); the corresponding provisions amounted to €0.1
billion at the end of 2010 (end of 2009: €0.1 billion).

Further information on other financial commitments and contin-
gent liabilities from guarantees granted as well as on the elec-
tronic toll-collection system and related risks is provided in Note
29 (Guarantees and other financial commitments) and Note 28
(Legal proceedings) of the Notes to the Consolidated Financial
Statements.

Credit ratings

No significant changes were made to the ratings of Daimler AG
and its subsidiaries during the year under review. Only Standard
& Poor’s Ratings Services (Standard & Poor’s) and Fitch Ratings
(Fitch) upgraded the outlook for our long-term credit rating,
whereby the upgrade issued by Fitch of an improvement from
negative to positive was more significant than the change from
negative to stable at Standard & Poor’s.

In their publications during the year 2010, most of the rating
agencies pointed out the significant improvement in Daimler’s
profitability, in particular at Mercedes-Benz Cars. Another factor
is that the recovery of worldwide demand for motor vehicles last
year was stronger than most of the rating agencies had expected.
But in view of uncertainty about the ongoing development of the
automotive industry and additional costs caused by legislation
on emission reductions, there have not yet been any further
adjustments of our ratings.

Long-term credit ratings

Standard & Poor’s

Moody’s

Fitch

DBRS

Short-term credit ratings

Standard & Poor’s

Moody’s

Fitch

DBRS

End of 2010 End of 2009

BBB+

A (low)

A-2

P-2

BBB+

A (low)

A-2

P-2

R-1 (low)

Management Report | Liquidity and Capital Resources | 95

Financial Position

Intangible assets increased to €7.5 billion (December 31, 2009:
€6.8 billion). The increase of €0.6 billion after adjusting for the
effects of currency translation was mainly caused by capitalized
development costs, which accounted for 28.3% of total develop-
ment expenditure (2009: 30.7%).

Capital expenditure that was significantly higher than depreciation
and exchange-rate effects caused property, plant and equip-
ment to increase to €17.6 billion (December 31, 2009: €16.0
billion). The investments were made at the car plants in Kecskemét,
Rastatt, Tuscaloosa and Kölleda and at the truck plants in
Germany, Brazil and India.

Equipment on operating leases and receivables from financial
services increased primarily due to exchange-rate effects by
€3.9 billion to a total of €61.0 billion. The increase adjusted for
exchange-rate effects was due to the higher volume of new
business resulting from growth in unit sales in the automotive
divisions, and mainly related to the business with end-customers.
The proportion of the balance sheet total was 45% (December
31, 2009: 44%).

Investments accounted for using the equity method of
€4.0 billion primarily comprise the carrying amounts of our equity
interests in EADS, Tognum and Kamaz. The decrease of €0.3
billion mainly relates to our investment in EADS and reflects
impairments of derivative financial instruments recognized
directly in equity at EADS as well as the company’s net loss for
the period.

Inventories increased by €1.7 billion to €14.5 billion, equi-
valent to 11% of total assets. Higher production volumes
and exchange-rate effects were the reasons for the increase,
which primarily reflects increased stocks of finished vehicles.

Due to higher unit sales and exchange-rate effects, trade
receivables increased by €1.9 billion to €7.2 billion.

Cash and cash equivalents increased compared with
December 31, 2009 by €1.1 billion to €10.9 billion.

Condensed consolidated statement of financial position

Dec. 31,
2010

Dec. 31,
2009

% change
10/09

In millions of euros

Assets
Intangible assets

Property, plant and equipment

Equipment on operating leases
and receivables from financial
services

Investments accounted for using
the equity method

Inventories

Trade receivables

Cash and cash equivalents

Interest-bearing securities

Other financial assets

Other assets

Total assets

Equity and liabilities
Equity

Provisions

Financing liabilities

Trade payables

Other financial liabilities

Other liabilities

7,504

17,593

6,753

15,965

60,955

57,010

3,960

14,544

7,192

10,903

2,096

5,441

5,642

4,295

12,845

5,285

9,800

6,342

5,135

5,391

135,830

128,821

37,953

20,637

53,682

7,657

10,509

5,392

31,827

18,372

58,294

5,622

9,737

4,969

Total equity and liabilities

135,830

128,821

-8

-67

-8

The Group’s balance sheet total increased compared with
December 31, 2009 by €7.0 billion to €135.8 billion. Adjusted
for the effects of currency translation, the balance sheet total
grew by €0.7 billion. The financial services business accounted
for €67.9 billion of the balance sheet total (December 31, 2009:
€65.1 billion), equivalent to 50% of the Daimler Group’s total
assets (December 31, 2009: 51%).

Current assets accounted for 42% of the balance sheet total,
the same as a year earlier. The increases in receivables, inventories
and cash and cash equivalents were offset by the reduction in
marketable debt securities. Current liabilities increased to 39%
of the balance sheet total (December 31, 2009: 37%), primarily
due to higher trade payables and higher provisions.

Balance sheet structure Daimler Group
In billions of euros

Balance sheet structure industrial business
In billions of euros

2009
2010

Assets

Equity and liabilities

Assets

2009
2010

Equity and liabilities

Non-current assets

Equity

Non-current assets

Equity

Current assets

of which: Liquidity

13
136

16
129

129

136

Non-current liabilities

Current assets

Current liabilities

of which: Liquidity

Non-current liabilities

Current liabilities

Marketable debt securities decreased compared with
December 31, 2009 from €6.3 billion to €2.1 billion. These items
primarily comprise debt instruments quoted in an active market
and are allocated to liquidity.

Financing liabilities decreased by €4.6 billion to €53.7 billion.
The decrease adjusted for currency effects of €6.9 billion is
mainly related to bonds and liabilities arising from customers’
deposits in Mercedes-Benz Bank’s direct banking business.

Other financial assets increased from €5.1 billion to €5.4 billion.
They mainly comprise investments and derivative financial
instruments, as well as loans and other receivables due from third
parties. The increase in investments reflects the cross-share-
holding arising from the strategic cooperation with the Renault-
Nissan Alliance, and was partially offset by the sale of our
interest in Tata Motors. The fair values of derivative financial
instruments decreased partially as a result of the weaker euro.

Other assets of €5.6 billion mainly comprise deferred tax assets
and reimbursements due to tax refunds (December 31, 2009:
€5.4 billion).

The Group’s equity increased compared with December 31, 2009
by €6.1 billion to €38.0 billion. The increase primarily reflects
the net profit of €4.7 billion, boosted by exchange-rate effects
and the issue of shares in connection with the acquisition of
shares in Renault and Nissan. The shares in Renault and Nissan
were mainly acquired with the use of treasury shares. The
equity ratio was 26.5% for the Group (December 1, 2009: 24.7%)
and 45.8% for the industrial business (December 31, 2009:
42.6%). The 2010 equity ratios are adjusted for the proposed
dividend payment for the year 2010.

Provisions account for 15% of the balance sheet total. Most of
them relate to provisions for warranty claims and personnel and
pension obligations, and at €20.6 billion were above the level of
December 31, 2009 (€18.4 billion). The increase was mainly due
to higher provisions for personnel obligations.

Trade payables increased by €2.0 billion to €7.7 billion, partially
due to the higher production volumes.

Other financial liabilities increased to €10.5 billion
(December 31, 2009: €9.7 billion). They primarily relate to
residual-value guarantees, wages and salaries, derivative
financial instruments and accrued interest on financing liabilities.
The increase mainly resulted from the revaluation of hedging
instruments due to the weakness of the euro.

Other liabilities of €5.4 billion mainly comprise deferred tax
liabilities, tax liabilities and accrued expenses as well as deferred
income (December 31, 2009: €5.0 billion).

The funded status of the Group’s pension benefit obligations,
defined as the difference between the present value of the
pension obligations and the fair value of pension plan assets,
decreased in 2010 by €0.6 billion to minus €6.5 billion.

At December 31, 2010, the present value of the Group’s pension
obligations amounted to €17.7 billion, compared with €16.5
billion at the end of the prior year. The increase resulted primarily
from a reduction in the discount rate for German pension
benefit plans of 0.3 of a percentage point to 5.0%. The plan assets
available to finance the pension obligations increased from
€10.6 billion to €11.2 billion, due to the positive development
of capital markets as well as contributions.

Further information on pension benefit and similar obligations
is provided in Note 22 of the Notes to the Consolidated Financial
Statements.

Management Report | Financial Position | 97

Daimler AG

Condensed version according to the German Commercial Code (HGB)

In addition to reporting on the Daimler Group, in this section, we
also describe the development of Daimler AG.

Reconciliation of the 2009 financial statements to transitional amounts
according to BilMoG at January 1, 2010

Daimler AG is the parent company of the Daimler Group and is
domiciled in Stuttgart. Its principal business activities comprise
the development, production and distribution of cars, vans and
trucks in Germany and the management of the Daimler Group.

The vehicles are produced at the domestic plants of Daimler AG,
under contract-manufacturing agreements by domestic and foreign
subsidiaries, and by producers of special vehicles. Daimler AG
distributes its products through its own sales network of 34 German
sales-and-service centers, through foreign sales subsidiaries
and through third parties.

Unlike Daimler’s consolidated financial statements, which are
prepared in accordance with the International Financial Reporting
Standards (IFRS), the annual financial statements of Daimler AG
are prepared according to the German Commercial Code (HGB).
This results in some differences with regard to recognition and
measurement, mainly relating to intangible assets, provisions,
financial instruments and deferred taxes.

The financial statements for the year 2010 were for the first
time prepared with application of the provisions of Germany’s
Accounting Law Modernization Act (BilMoG).

The main effects of changing over to the new accounting regula-
tions were the netting of pension plan assets with provisions
for pensions, changes in the area of measuring provisions, inven-
tories and amounts in foreign currencies, and a change in the
presentation of treasury shares.

The result of operations reported by Daimler AG improved
by €254 million as a result of changing over to the new account-
ing regulations according to BilMoG. The balance sheet total
decreased by €7,936 million.

In millions of euros

Assets

Non-current assets
Inventories

Receivables, securities
and other assets

Cash and cash equivalents

Current assets

Deferred expenses
and accrued income

Equity and liabilities
Share capital

(conditional capital €415 million)

Capital reserve

Retained earnings

Unappropriated profit

Equity
Provisions for pensions
and similar obligations

Other provisions

Total provisions
Trade payables

Other liabilities

Total liabilities

Deferred income
and accrued expenses

Effects of the application of BilMoG at January 1, 2010 on the
statement of income/loss for 2010

The following overview shows the reconciliation of the balance
sheet amounts shown in the 2009 financial statements to the
“transitional amounts” according to HGB as amended by the
Accounting Law Modernization Act (HGB n.F.) at the time of first
application (January 1, 2010).

In millions of euros

Measurement of inventories

Fair valuation of pension plan assets

Allocation to other provisions

Measurement of assets and liabilities denominated in
foreign currencies

Extraordinary income

The equity ratio increased due to the changeover to HGB n.F. to
33.0% at January 1, 2010 (December 31, 2009: 27.1%).

Jan. 1,
2010

Reconcil-
iation

Dec. 31,
2009

37,637

5,006

20,582

2,251

27,839

65,529

-7,811

134

-259

-125

45,448

4,872

20,841

2,251

27,964

-7,936

73,465

2,938

-107

3,045

11,123

7,279

254

21,594

3,961

10,624

14,585

3,111

24,427

27,538

1,812

65,529

1,558

254

1,705

-9,020

-580

-9,600

-7

-34

-41

-7,936

11,123

5,721

19,889

12,981

11,204

24,185

3,118

24,461

27,579

1,812

73,465

134

-12

254

Profitability

Condensed statement of income of Daimler AG

The development of business in the year 2010 was primarily
driven by the recovery of the world economy. The main automo-
tive markets developed positively with a generally high level
of demand. Unit sales were higher than the prior-year levels for
all types of vehicle. After the prior year was severely impacted
by the financial and economic crisis, Daimler AG posted a profit
on ordinary activities of €5.6 billion in 2010 (2009: loss of
€4.4 billion).

The improved result is primarily due to the increased unit sales
of vehicles, a favorable sales structure and the improvement
in financial income/expense.

Revenue increased by €15.8 billion to €63.0 billion. The revenue
generated by sales of passanger cars increased by €11.7 billion
to €46.1 billion due to higher unit sales and structural effects.
As a result of the worldwide recovery of demand, Daimler AG
also recorded a substantial increase in revenue generated by
sales of trucks and vans of €4.1 billion to €16.9 billion.

The result of operations in the car business was a significant
profit in 2010. This was mainly due to high volumes of unit sales
and an advantageous product mix. Better pricing also had a posi-
tive impact on earnings. There was an opposing, negative effect
on earnings from increased research and development expenses.
Sales of new cars increased by 21% to 1,256,000 units* in 2010
(2009: 1,038,000 units). Car sales increased significantly, partic-
ularly in the United States and China and in the premium and luxury
segments. Sales rose of the S-Class by 78% to 84,000 units and
of the E-Class by 47% to 320,000 units.

The result of operations for trucks and vans was also significantly
better than in the prior year due to higher unit sales. Unit sales
of vans increased due to the positive market development by 39%
to 208,000 vehicles. Unit sales of trucks reached 77,000 vehi-
cles (2009: 53,000)*. The growth in unit sales of trucks and vans
was mainly based on the Actros (62%), Axor (33%) and Sprinter
(50%) model series.

* The unit sales of Daimler AG include vehicles invoiced to companies of
the Group which have not yet been sold on to external customers by those
companies. Vehicle sales by production companies of the Daimler Group
are not counted in the unit sales of Daimler AG.

In millions of euros

Revenue

Cost of sales (including R&D expenses)

Selling expenses

Administrative expenses

Other operating income/expense

Financial income/expense

Profit/loss on ordinary activities
Extraordinary income

Income tax expense

Profit/loss for the year

Dec. 31,
2010

Dec. 31,
2009

63,002

-54,241

-4,907

-2,194

923

3,024

5,607

254

-462

5,399

47,177

-44,503

-4,389

-2,178

-68

-403

-4,364

–

-401

-4,765

Transfer from the capital reserve

4,765

Transfer to retained earnings

Balance sheet profit/loss

-2,699

2,700

–

Financial income/expense improved by €3.4 billion to €3.0
billion, primarily due to improved income from equity invest-
ments. The increase in investment income is mainly the result
of higher profit contributions from the domestic and foreign
subsidiaries of Daimler AG.

Cost of sales (excluding R&D expenses) increased at a lower
rate than revenue by 22.8% to €50.0 billion (2009: €40.7 billion).
The increase in cost of sales was primarily due to the increase
in material expenses caused by the higher unit sales. It was espe-
cially apparent in direct materials and the expense of purchased
services.

Research and development expenses, which are included
in cost of sales, increased from €3.8 billion to €4.2 billion, but
decreased as a proportion of revenue from 8.0% to 6.7%. The
increase in research and development expenditure was mainly
the result of higher expenses for purchased goods and services.
One focus of R&D expenditure was on activities for the reduction
of fuel consumption and CO2 emissions, as well as the develop-
ment of alternative drive systems. Other important projects were
for the revision and extension of the product portfolio, in partic-
ular the S-/SL-Class, the C-Class, the A-/B-Class and the smart.
Cars accounted for €3.0 billion (2009: €2.8 billion) and trucks
and vans accounted for €1.2 billion (2009: €1.0 billion). At the
end of the year, approximately 16,000 people were employed
in the area of research and development.

Management Report | Daimler AG | 99

Selling expenses increased to €4.9 billion in 2010 (2009: €4.4
billion). The increase was caused by the higher volume of busi-
ness and the related higher charges from impairments of receiv-
ables and cost of shipping. Expenses of information technology
also increased.

Administrative expenses of €2.2 billion were at the level of the
prior year (2009: €2.2 billion).

Other operating income improved by €1.0 billion to €0.9 billion.
The prior year comprised expenses in connection with Chrysler
and from the amendment requirements for former AEG share
holders.

Extraordinary income reflects the income and expenses relat-
ing to the changeover to the new accounting regulations accord-
ing to BilMoG at January 1, 2010.

The income tax expense amounts to €0.5 billion and primarily
comprises the tax expense for the year 2010.

Financial position, liquidity and capital resources

Statements on changes in individual items relate to the recon-
ciled balance sheet amounts at January 1, 2010.

Compared to January 1, 2010, the balance sheet total increased
by 17.0% to €76.7 billion.

Non-current assets increased by €1.5 billion to €39.2 billion
during 2010. This was primarily the result of increased equity
interests in subsidiaries and associated companies and was
mainly related to the strategic cooperation with Renault-Nissan.
As part of the cross-shareholding, Daimler AG received a 3.1%
equity interest in each of Renault and Nissan. Daimler AG placed
those equity interests with a Spanish subsidiary. Capital expen-
diture on property, plant and equipment (excluding leased assets
of approximately €2.1 billion) mainly constituted investment for
the production of the new SLK, CLS and C-Class coupe, as well
as investment in engine and transmission projects for both cars
and commercial vehicles.

Balance sheet structure of Daimler AG

Dec. 31,
2010

Jan. 1,
2010

Dec. 31,
2009

In millions of euros

Assets

Non-current assets
Inventories

Receivables, securities
and other assets

Cash and cash equivalents

Current assets

Deferred expenses
and accrued income

Equity and liabilities
Share capital

(conditional capital €602 million)

Capital reserve

Retained earnings

Unappropriated profit

Equity
Provisions for pensions
and similar obligations

Other provisions

Total provisions
Trade payables

Other liabilities

Total liabilities

Deferred income
and accrued expenses

39,151

5,574

26,123

5,753

37,450

76,700

37,637

5,006

20,582

2,251

27,839

45,448

4,872

20,841

2,251

27,964

65,529

73,465

3,057

2,938

3,045

11,321

11,193

2,700

28,271

4,027

11,463

15,490

4,334

27,598

31,932

1,007

76,700

11,123

7,279

254

21,594

3,961

10,624

14,585

3,111

24,427

27,538

1,812

65,529

11,123

5,721

19,889

12,981

11,204

24,185

3,118

24,461

27,579

1,812

73,465

Inventories increased compared with January 1, 2010 by €0.6
billion to €5.6 billion, mainly relating to finished goods and our
higher production volumes.

Receivables, securities and other assets increased compared
with January 1, 2010 by €5.5 billion to €26.1 billion. This was
primarily caused by an increase in receivables due from subsid-
iaries related to the financing function of the parent company
of €7.8 billion. There was an opposing effect from the decrease
of €3.2 billion in securities held as current assets.

Cash and cash equivalents increased by €3.5 billion to €5.8
billion.

100

Risks and opportunities

The business development of Daimler AG is fundamentally sub-
ject to the same risks and opportunities as the Daimler Group.
Daimler AG generally participates in the risks of its equity inter-
ests and subsidiaries in line with the percentage of each holding.
Charges may additionally arise from equity interests and subsid-
iaries in connection with statutory or contractual obligations
(in particular with regard to financing). The risks are described
in the Risk Report.

Outlook

Due to the interrelations between Daimler AG and its subsidiaries
and the relative size of Daimler AG within the Group, we refer
to the statements in the Outlook chapter, which also largely reflect
our expectations for the parent company. Daimler AG expects
to post a significant profit in the year 2011 but lower than in 2010.
Further increases in annual earnings are anticipated in the
medium term.

Gross liquidity – defined as cash and cash equivalents plus
other marketable securities – of €7.0 billion was €0.3 billion
above the prior-year level. Cash provided by operating activi-
ties amounted to €6.7 billion in 2010 (2009: €3.3 billion).
The positive effects from the significantly improved result
of operations and from equity investments were partially offset
by higher receivables from the supply of goods and services
within the Group. Cash provided by operating activities increased
also due to the increase in trade payables caused by the higher
levels of production and unit sales. The cash flow from investing
activities resulted in a net cash inflow of €0.4 billion in 2010
(2009: net outflow of €5.1 billion). This mainly reflects the sale
of securities held as current assets. There was an opposing effect
from capital expenditure for property, plant and equipment. The
cash flow from financing activities resulted in a net cash
outflow of €3.6 billion (2009: net inflow of €3.3 billion). This was
mainly caused by the increase in financial receivables due from
companies of the Group. On the other hand, borrowing increased
the cash inflow from financing activities.

Equity increased compared with January 1, 2010 by €6.7 billion.
This change primarily resulted from the net profit, of which,
pursuant to Section 58 Subsection 2 of the German Stock Corpo-
ration Act (AktG), €2.7 billion was transferred to retained earn-
ings, and from the strategic cooperation with Renault-Nissan.
Retained earnings increased by €1.1 billion due to the transfer
of treasury shares to Renault S.A. and Nissan Motor Co. Ltd.
The equity ratio at December 31, 2010 was 36.9% (January 1, 2010:
33.0%).

Provisions increased compared with January 1, 2010 by
€0.9 billion to €15.5 billion. This was mainly related to pensions
and similar obligations and provisions for derivative financial
instruments.

Liabilities rose by €4.4 billion to €31.9 billion. This rise mainly
reflects the increases in bonds and commercial paper (plus €2.1
billion), trade payables (plus €1.2 billion) and financial liabilities
to subsidiaries (plus €0.9 billion).

Management Report | Daimler AG | 101

Overall Assessment of the Economic Situation

On the whole, Daimler’s business developed substantially better in
2010 than we expected at the beginning of the year. Daimler has
emerged strengthened and with great dynamism from the global
financial and economic crisis. We made use of the years 2009
and 2010 to significantly increase our efficiency and to achieve
a sustained improvement in our cost basis. We are now profiting
from the fact that we steadily continued with our projects for secur-
ing our future also through the financial and economic crisis.
As a result, we now have a large number of new and attractive prod-
ucts and pioneering technologies to offer our customers. In addi-
tion, our long-term and wide-ranging involvement in markets such
as China, India, Brazil and Russia started to pay off significantly
in the year under review. This is due not least to the fact that the
recovery of worldwide automotive demand has been driven not
by our established markets, but by the growth markets of Asia and
Latin America.

Against this backdrop, all of Daimler’s automotive divisions
significantly increased their unit sales in the year 2010. In fact,
Mercedes-Benz Cars and Daimler Buses approached the levels
they achieved in 2008. Daimler Trucks and Mercedes-Benz Vans
posted double-digit growth rates despite the hesitant upswing
of markets for commercial vehicles, but their unit sales were still
below the record levels of the years before the crisis. The Daimler
Group’s revenue increased at an even higher rate than its unit sales
– by 24% to €97.8 billion. One reason for this development
is that the structure of unit sales at Mercedes-Benz Cars shifted
towards higher-value vehicles with the market success of the
new E-Class models and the S-Class.

The earnings turnaround was particularly impressive: After posting
a loss in 2009, we achieved EBIT of €7.3 billion and net profit
of €4.7 billion last year. The main contribution to this result came
from Mercedes-Benz Cars. Both the Daimler Trucks division and
the Mercedes-Benz Vans division significantly improved their EBIT.
But Daimler Buses’ earnings were also above the prior-year level
and Daimler Financial Services’ EBIT reached the very high level of
€831 million (2009: €9 million).

Because of this positive earnings trend, our key figures improved
significantly in 2010. The Group’s overall equity ratio increased
from 24.7% to 26.5% and the equity ratio of the industrial business
rose from 42.6% to 45.8%. The free cash flow of the industrial
business – the parameter we use to measure our financial strength
– increased by €2.7 billion to €5.4 billion in 2010. This means that
the net liquidity of our industrial business also improved during the
course of the year: from €7.3 billion to €11.9 billion.

After deciding not to pay a dividend last year in view of the net
loss in 2009, we now want our shareholders to participate again
appropriately in our financial success. In setting the dividend,
we aim to distribute approximately 40% of the Group’s net profit
attributable to the Daimler shareholders. On this basis, the Board
of Management and the Supervisory Board have decided to
recommend to the shareholders for their approval at the Annual
Meeting to be held on April 13, 2011 that a dividend of €1.85
per share be paid out. The total dividend payout will then amount
to €1,971 million.

We are well prepared for the challenges of the coming years.

From the starting point of a sound financial basis, we are continuing
and intensifying our research and development work. During the
planning period of 2011 through 2012, Daimler will invest a total
of €10.3 billion in research and development activities. Our objec-
tive is to strengthen Daimler’s competitive position against the
backdrop of the upcoming technological challenges. We intend
to convince the markets with innovative solutions for low-emission
and safe mobility.

With a volume of more than €10 billion, we will also significantly
increase our capital expenditure in the years 2011 and 2012.
The focus will be on preparing for numerous product launches as
well as expanding and modernizing our production facilities. In
order to penetrate markets in the developing economies, we are
increasingly investing in local production capacities, especially
in China, India and Russia. We can only ensure that we profit from
the future growth of those markets by having an effective local
presence.

Daimler is a financially healthy, strong and above all innovative
company. We therefore enter the year 2011 with great confidence.

102

Events after the End of the 2010
Financial Year

Since the end of the 2010 financial year, there have been no
occurrences other than those taken into account in the consolidated
financial statements or otherwise reported on that are of major
significance for Daimler. The course of business in the first two
months of 2011 confirms the statements made in the Outlook
section of this Annual Report.

Management Report | Overall Assessment of the Economic Situation | Events after the End of the 2010 Financial Year | 103

Risk Report

Risks and opportunities

Daimler’s divisions are exposed to a large number of risks which
are inextricably linked with their entrepreneurial activities.
In order to identify, evaluate and deal consistently with those
risks, we make use of effective management and control sys-
tems; we have combined these systems in a uniform risk man-
agement system, which is described below.

Entrepreneurial activity primarily consists of creating and utilizing
opportunities in order to secure and strengthen the company’s
competitiveness. Entrepreneurial opportunities are not reported
within our risk management system, but are included in the
annual operational planning and followed up during the year in
the context of periodical corporate reporting. The divisions are
directly responsible for the early identification of opportunities
and their utilization. Within the framework of the strategy pro-
cess, longer-term opportunities for further profitable growth are
identified and brought into the decision-making process. Further
information on this subject is provided on page 117 of the
Management Report.

Risk management systems
(Report and explanation provided pursuant to Section 315
Subsection 2 Number 5 and Section 289 Subsection 5 of
the German Commercial Code (HGB))

The risk management system with regard to material risks
and risks threatening the existence of the Group is inte -
grated into the value-based management and planning system of
Daimler AG and the Group. It is an integral part of the overall
planning, management and reporting process in all relevant legal
entities, divisions and central functions. It aims to systematically
identify, assess, monitor and document material risks and risks
threatening Daimler’s existence. Risk assessment principally
takes place for a two-year planning period, although in the discus-
sions for the derivation of medium-term and strategic goals,
Daimler also identifies and monitors longer-term risks. In the
context of the two-year operational planning, with the use of
defined risk categories, risks are identified for the divisions and
operating units, the major joint ventures and associated com-
panies and the central departments, and are assessed regarding
their probability of occurrence and possible extent of damage.

104

Assessment of the possible extent of damage usually takes
place in terms of the risks’ impact on EBIT. In addition, risks for
example with an impact on the Group’s reputation are assessed
according to qualitative criteria. The reporting of relevant risks
is based on fixed value limits. The responsible persons also
have the task of developing, and initiating as required, measures
to avoid, reduce and hedge risks. Material risks and the counter-
measures taken are monitored within the framework of a regular
process. As well as the regular reporting, there is also an internal
reporting obligation within the Group for risks arising unexpect-
edly. The Group’s central risk management department regularly
reports on the identified risks to the Board of Management and
the Supervisory Board.

The internal control and risk management system with
regard to the accounting process has the goal of ensuring
the correctness and effectiveness of accounting and financial
reporting. It is continually further developed and is an integral
part of the accounting and financial reporting process in all
relevant legal entities and central functions. The system includes
principles and procedures as well as preventive and detective
controls. Among other things, we regularly check that:
– the Group’s uniform financial reporting, valuation and account-
ing guidelines are continually updated and regularly trained
and adhered to;

– transactions within the Group are fully accounted for and prop-

erly eliminated;

– issues relevant for financial reporting and disclosure from
agreements entered into are recognized and appropriately
presented;

– processes exist to guarantee the completeness of financial

reporting;

– processes exist for the segregation of duties and for the “four-

eyes principle” in the context of preparing financial statements,
as well as for authorization and access rules for relevant IT
accounting systems.

We systematically assess the effectiveness of the internal control
and risk management system with regard to the corporate
accounting process. At first, there is a risk analysis and a defini-
tion of control. Significant risks are identified relating to the pro-
cess of corporate accounting and financial reporting in the main
legal entities and central functions. The controls required for
the identification of risks are then defined and documented in
accordance with Group-wide guidelines. Regular random tests
are carried out to assess the effectiveness of the controls. Those
tests constitute the basis for self-assessment of the appropriate
extent and effectiveness of the controls. The results of this self-
assessment are documented and reported in a global IT system.
Any weaknesses recognized are eliminated with consideration
of their potential effects. At the end of the annual cycle, the
selected legal entities and central functions confirm the effec-
tiveness of the internal control and risk management system
with regard to the corporate accounting process. The Board of
Management and the Audit Committee of the Supervisory Board
are regularly informed about the main control weaknesses and
about the effectiveness of the control mechanisms installed.
However, the internal control and risk management system with
regard to the accounting process cannot ensure with absolute
certainty that material false statements are avoided in accounting.

In order to ensure the complete presentation and assessment
not only of material risks and risks threatening the existence of
the Group, but also of the control and risk process with regard to
the corporate accounting process, Daimler has established the
Group Risk Management Committee (GRMC). It is composed of
representatives of the areas of Finance & Controlling, Account-
ing, Legal Affairs and Compliance, and is chaired by the Board of
Management Member for Finance (CFO). The Internal Auditing
department contributes material statements on the internal con-
trol and risk management system. In addition to fundamental
issues, the committee has the following tasks:
– The GRMC creates and shapes the framework conditions with
regard to the organization, methods, processes and systems
we need to ensure a functioning, Group-wide and thorough
control and risk management system.

– The GRMC regularly reviews the effectiveness and functionality

of the installed control and risk management processes.
Minimum requirements can be laid down in terms of the design
of the control processes and of risk management, and correc-
tive measures can be commissioned as necessary or appropri-
ate to eliminate any system failings or weaknesses exposed.
But responsibility for operational risk management for risks
threatening the existence of the Group and for the control
and risk management processes with regard to the corporate
accounting process remains directly with the corporate areas,
companies and central functions. The provisions taken by GRMC
ensure that relevant risks and any existing process weaknesses
in the corporate accounting process are identified and elimi-
nated as early as possible.

In the Board of Management and the Audit Committee of the
Supervisory Board of Daimler AG, regular reports are given
regarding the current risk situation and the effectiveness, func-
tionality and appropriateness of the internal control and risk
management system. Furthermore, the responsible managers
regularly discuss the risks of business operations with the
Board of Management.

The Audit Committee of the Supervisory Board is responsible
for monitoring the internal control and risk management
system. The Internal Auditing department monitors whether the
statutory conditions and the Group’s internal guidelines are
adhered to for the Group’s entire monitoring and risk management
system, and if required develops appropriate measures which
are initiated by the management. The external auditors audit
the system for the early identification of risks that is integrated
in the risk management system for its fundamental suitability
for identifying risks threatening the existence of the Group;
in addition, they report to the Supervisory Board on any signifi-
cant weaknesses that have been discovered in the internal
control and risk management system.

Management Report | Risk Report | 105

Economic risks

In the first year after the worst recession of the postwar period,
the world economy enjoyed a relatively strong recovery, although
global economic dynamism weakened somewhat towards the
middle of 2010. At the same time, there was increased concern
about a renewed slump (double dip). The world economy there-
fore remains very fragile and sensitive to external disturbances.
We see the biggest individual risks for the year 2011 in renewed
financial turbulence (including currency risks), the further exacer-
bation of public authorities’ debt problems, a growth slump in
China, high price volatility in raw-material markets, nascent protec-
tionism and the possible destabilizing effects of a too-expansive
monetary policy. The development of the world economy in 2011
that is expected by the majority of economic research institu-
tions, and also by Daimler, is highly dependent on the development
of those risk factors. But it would only be possible for the world
economy to return to a phase of recession if several of those fac-
tors actually occurred. This means that there are still consider-
able economic risks for Daimler’s financial position, cash flows
and profitability.

One important topic in the year 2010 was levels of public debt
in the triad, which increased sharply as a result of the recession
and the economic stimulus programs – some of them quite sub-
stantial – that had been initiated. This problem will not only dampen
the economic outlook for 2011, but could also have a consider-
able impact on the financial markets. This applies in particular
to the risk of a sovereign default; from the perspective of the
financial markets, this risk has not been eliminated for several
European countries, despite the rescue fund set up by the Euro-
pean Union and the International Monetary Fund (IMF). There
is a serious risk that after Greece and Ireland, other countries
might get into refinancing difficulties. This would result in even
higher volatilities on the financial markets, significant downward
pressure on the euro and drastic spending cuts to reduce public
deficits. These austerity efforts could become so strict that
demand would fall quite severely in the countries affected, lead-
ing to another recessive phase. Another risk could be that after
the countries of the euro zone, the financial markets might focus
on other highly indebted countries.

In their attempts to resolve the crisis, central banks have applied
expansive monetary policies, in some cases to a substantial
extent. This applies especially to the United States and the
United Kingdom. In view of the rather hesitant economic recovery,
the further expansion of quantitative easing was announced in
the United States in the autumn of 2010. But the further the pro-
cess of economic recovery advances, the greater the potential
risk that this will result in excess liquidity, in particular with regard
to possible new market bubbles or higher inflation. The impact
of expansive monetary policy on global exchange rates is also
connected with significant risks.

The US economy was still on course for a relatively moderate
recovery at the end of 2010. The upswing was still generally too
weak to have a positive effect on the labor market, so the unem-
ployment rate has remained unusually high by American stan-
dards. If the unemployment situation does not improve a little or
actually gets worse, private consumption will decrease enor-
mously. Another factor is the risk from the real-estate sector;
if it continues its weak development, the asset positions
of private households and banks could come under additional
pressure. A further risk for the US economy is to be seen in
insufficient lending, which is not unlikely despite the sharp increase
in the money supply. This would be the case above all if banks
severely limited their lending in order to reduce their own risk
exposure or to improve their balance sheet ratios. In such a sce-
nario, there would be a reduction in investment activity, which
needs to recover before there is a sustained improvement in
the labor market. The consequence would be even weaker growth
in gross domestic product and possibly even stronger monetary
expansion. Due to the importance of the US economy, such an
unfavorable development would have a corresponding negative
impact on the world economy. Furthermore, the United States
still has a relatively high current account deficit and is thus
dependent on capital inflows from abroad. A possible – and in
the medium term inevitable – correction of the current account
deficit could depress domestic demand and trigger depreciation
of the US dollar. That depreciation could be additionally acceler-
ated by massive movements of global currency reserves. In total,
such occurrences would have negative impacts on demand for
cars and commercial vehicles.

106

With few exceptions, such as Germany or Sweden, economic
recovery in Western Europe has been rather moderate so far.
The biggest risks for the ongoing development are to be seen in
the financial markets and the consolidation of budget deficits.
The countries of the euro zone in particular could come under
pressure due to the continuing discussion about refinancing
problems, sovereign default and banks’ problems. As the basic
scenario already contains a substantial growth differential within
Western Europe, this could become more extreme and increase
the existing tension. Demand for and supply of credit have
been rather disappointing in the economic cycle so far. If credit
volumes decreased significantly, the resulting burden would
be primarily on small and medium-sized enterprises. The contin-
uation of the economic recovery process could be jeopardized
and lead to another spate of insolvencies, possibly affecting vehi-
cle dealers and automotive suppliers. There is also a risk that
both private consumption and companies’ investments will be
substantially weaker than assumed, which would have a corre-
sponding negative impact on demand for motor vehicles. This
has considerable risk potential for the Daimler Group given
the importance of Germany and the other countries of Western
Europe as major sales markets.

The basic economic pattern for Japan is similar. Although the
country’s economic growth rate was relatively strong in 2010,
it was already significantly less dynamic in the second half
of the year. The appreciation of the yen was a particularly nega-
tive factor. If the yen stays at this high level or continues to
climb, the Japanese economy will come under even more pres-
sure. The enormous increase in the national debt and the high level
of unemployment by Japanese standards are sources of addi-
tional risk potential that should not be underestimated. A less
favorable economic outlook in Japan would not only reduce
the Group’s exports to that market, but would also worsen the
earnings of our subsidiaries there.

A sustained reduction in economic growth in China would also
be financially and strategically relevant for Daimler. Concern
about an investment and real-estate bubble were often apparent
in China last year. In the second half of 2010, increased food
prices put pressure on the inflation rate, which in the long term
could jeopardize social stability. Significantly lower growth
rates in China would result in distinct growth losses for the world
economy and would therefore affect Daimler’s business opera-
tions. Risks for the development of demand could also result from
measures taken to avoid economic overheating (e.g. regional
approval restrictions), especially if such measures are wide-rang-
ing or stringent. An additional factor is that possible economic
crises in the emerging markets where the Group has important
production facilities could be highly relevant. On the other hand,
crises in emerging economies where Daimler is active solely in
a sales function would result in a more limited risk potential.

We see an additional major risk in the development of raw-mate-
rial prices. If prices were to rise sharply once again and depart
even further from fundamentally justified levels, the assumed
global economic outlook would be jeopardized. Raw-material
markets have so far absorbed some of the excess liquidity, and
with a continuation of expansive monetary policy, there is a danger
of speculative bubbles. This would result in a negative impact
on growth, especially in those countries that import large volumes
of raw materials. However, falling raw-material prices entail
substantial risks for the economic growth of raw-material export-
ing emerging markets.

Management Report | Risk Report | 107

Due to the competitive pressure on the automotive markets,
it is essential for us to continually and successfully adapt our
production and cost structures to changing conditions. If we
fail to do so, this would affect the Group’s competitiveness and
could once again require cost-intensive restructuring actions.

The recent crisis years have also led to a worsening of the
financial situation of some suppliers, dealers and vehicle
importers. For this reason, it is still not possible to rule out
individual or joint supporting actions by the vehicle manufactur-
ers, which would have a negative impact on Daimler’s financial
position, cash flows and profitability.

Risks relating to the leasing and sales-financing business.
Daimler’s financial services business primarily comprises
the provision of financing and leasing for the Group’s products.
In particular, this business involves the risk that the prices
realizable for used vehicles at the end of leasing contracts are
below their book values (residual-value risk). Another inherent
risk is that some of the receivables due in the financial services
business might not be recoverable due to customer default
(credit risk). Other risks connected with the leasing and sales-
financing business are the possibilities of increased refinancing
costs and of potential changes in interest rates. An adjustment
of credit conditions for customers in the leasing and sales-
financ ing business due to higher refinancing costs could reduce
the new business and contract volume of Daimler Financial
Services, thus also reducing the unit sales of the automotive
divisions. Daimler counteracts residual-value and credit risks
by means of appropriate market analyses and creditworthiness
checks. Derivative financial instruments are used to hedge
against the risk of changes in interest rates. Further information
on credit risks and the Group’s risk-minimizing actions is pro-
vided in Note 31 of the Notes to the Consolidated Financial
Statements.

Risks for market access and the global networking of the Group’s
facilities could arise as a result of a weakening of international
free trade in favor of regional trade blocks or the emergence
of protectionist tendencies. The latter could occur in particular
due to competitive devaluation resulting from insufficient adjust-
ment of exchange rates and an increase in speculative capital
movements. A rise in bilateral free-trade agreements outside
the European Union could also affect Daimler’s position in key
foreign markets.

Finally, the world economy could be negatively affected by a last-
ing deterioration in consumer and investor confidence and
by sustained deflationary tendencies, but also by inflationary
tendencies. Such developments could be triggered not only
by financial market problems, but also by geopolitical and military
instability. That also includes the recent events in northern
Africa, which certainly have the potential to have implications
far beyond the region. In addition to possible effects on raw-
material prices, the transfer of political instability to other coun-
tries respectively regions would depress not only the regional
outlook, but also the outlook for the global economy.

Industry and business risks

General market risks. Although the world economy enjoyed
a strong recovery in 2010, there are still considerable economic
risks for the development of the automotive markets. And com-
petitive pressure in the automotive markets is as high
as ever. Customers have meanwhile become used to a certain
level of sales-supporting actions. If competitive pressure
in the automotive markets becomes even tougher, possibly due
to a renewed worsening of global economic developments,
this could lead to the increased application of sales-promoting
financing offers and other incentives once again. This would
not only reduce revenues in the new-vehicle business, but would
also lead to lower price levels in used-vehicle markets and thus
to falling residual values. In many markets, a shift in demand
towards smaller, more fuel efficient vehicles is apparent; this
is the result of customers’ significantly increased sensitivity
to vehicles’ environmental friendliness and the development of
fuel prices. In order to enhance the attractiveness of less fuel-
efficient vehicles, additional actions might become necessary
with a negative impact on earnings. This, together with the shift
in the model mix towards smaller vehicles with lower margins,
would place an additional burden on the Group’s financial posi-
tion, cash flows and profitability.

108

Production and technology risks. In order to achieve the tar-
geted levels of prices, factors such as brand image, design and
product quality play an important role, as well as additional
technical features resulting from our innovative research and devel-
opment. Convincing solutions, for example supporting accident-
free driving or further improving our vehicles’ fuel consumption
and emissions as with as the electrification of the drive train,
are of key importance for safe and sustainable mobility. Because
those solutions generally require higher advance expenditure
and greater technical complexity, there is an increasing challenge
to realize efficiency improvements while simultaneously fulfilling
Daimler’s own quality standards. If we fail to perform this task
optimally or cannot implement statutory requirements in good
time, that could negatively affect the Group’s future profitability.
The possible loss of acceptance for our products could have
a negative impact on pricing and capacity utilization.

Product quality has a major influence on a customer’s decision
to buy a passenger car or commercial vehicle. At the same time,
technical complexity continues to grow as a result of additional
features, for example for the fulfillment of various emission and
fuel-economy regulations, increasing the danger of vehicle mal-
functions. Technical problems could lead to recall and repair
campaigns, or could even necessitate new development work.
Furthermore, deteriorating product quality can lead to higher
warranty and goodwill costs.

Risks related to the legal and political framework. The legal
and political framework has a considerable impact on Daimler’s
future business success. Regulations concerning vehicles’ emis-
sions, fuel consumption and safety play a particularly impor-
tant role. Complying with these varied and often diverging regula-
tions all over the world requires strenuous efforts on the part
of the automotive industry. We expect that we have to significantly
increase our research and development spending in order to fulfill
those requirements in the future. Many countries have already
implemented stricter regulations to reduce vehicles’ emissions
and fuel consumption, or are about to do so, one example being
European regulations on exhaust emissions and fuel consump-
tion. For example, the key elements of the European Union’s reg-
ulation on carbon dioxide, which was passed by the EU parlia-
ment at the end of 2008, call for a significant reduction in new
cars’ CO2 emissions already as of 2012, and for phased improve-
ments whereby the average emissions of manufacturers’ entire
fleets of new cars have to meet new limits by 2015. Non-compli-
ance with those limits will lead to penalty payments for manufac-
turers. Similar legislation exists or has been proposed for cars in
the United States, China, South Korea, Japan and Switzerland.
In 2010, most of the new CO2 legislation for light-duty commer-
cial vehicles was passed in the European Union. The resulting tar-
gets constitute a long-term challenge in particular for Mercedes-
Benz Vans. Efforts are also being made worldwide to regulate the
CO2 emissions of heavy commercial vehicles. We assume that
we will meet those targets. As a result of customers’ future pur-
chase decisions, monetary sanctions cannot be completely ruled
out in the United States. In addition to emission, consumption and
safety regulations, traffic-policy restrictions for the reduction
of traffic jams and pollution are becoming increasingly important
in the cities and urban areas of the European Union and other
regions of the world. Drastic provisions such as general vehicle-
registration restrictions, for example in Beijing or Shanghai, can
have a dampening effect on the development of unit sales, espe-
cially in the growth markets. Daimler monitors these develop-
ments and attempts to anticipate foreseeable requirements and
long-term targets during the phase of product development.

Management Report | Risk Report | 109

Procurement market risks. Procurement market risks arise
for the Group from fluctuations in prices of raw materials.
After falls in those prices at the end of 2008 and their subse-
quent recovery in 2009, they have now reached a very high level
once again. This recovery of prices is highly dependent on eco-
nomic recovery in the various economic regions of the world.
But the outlook for future price developments remains uncertain
not least due to the increasing influence of institutional investors.
This influence is apparent in the increased demand for raw-mate-
rial investments and thus explains the high level of price volatility
in the raw-material markets. In general, our scope to pass on
the increased cost of raw materials and purchased components
in the form of price increases for our vehicles is very limited
because of intense pressure of competition in the international
automobile markets. Daimler counteracts procurement risks
by means of targeted commodity and supplier risk management.
We attempt to reduce our dependency on individual materials
in the context of commodity management, by making appropriate
technological progress for example. Daimler protects itself
against the volatility of raw-material prices by entering into long-
term supply agreements, which make short-term risks for mate-
rial supplies and the effects of price fluctuations more calculable.
Furthermore, in connection with some metals, we make use
of derivative price hedging instruments. Supplier risk management
aims to identify suppliers’ potential financial difficulties at an
early stage and to initiate suitable countermeasures. As a result
of the financial market crisis, some of our suppliers’ refinancing
possibilities have worsened significantly. This has necessitated
individual or joint support actions by vehicle manufacturers
to safeguard their own production and sales. In the context of
supplier risk management, regular reporting dates are set for
suppliers depending on our assessment of them, in which key per-
formance indicators are reported to Daimler and any required
support actions are decided upon.

Information technology risks and unforeseeable events.
Production and business processes could also be disturbed by
unforeseeable events, such as natural disasters or terrorist
attacks. Consumer confidence would be significantly affected
and production could be interrupted by supply problems and
intensified security measures at territorial borders. Information
technology plays an important role in our business processes.
Storing and exchanging data in a timely, complete and correct
manner and being able to utilize fully functioning IT applications
are highly important for a global company such as Daimler. Possi-
ble risks, the occurrence of which could result in the interruption
of our business processes due to the failure of IT systems or the
loss or corruption of data, are therefore identified and evaluated
over the entire life cycles of applications and IT systems. Daimler
has defined suitable actions for risk avoidance and limitation
of damage, continually adapts these actions to changing circum-
stances, and monitors their implementation. These activities
are embedded in a multi-stage IT risk management process. For
example, the Group minimizes potential interruptions of operat -
ing routines in the data centers by means of mirrored data sets,
decentralized data storage, outsourced archiving, high-availability
computers and appropriate emergency plans. In order to coun-
teract the growing threat for the operation of central IT systems
and the security of confidential data, we have our own risk
management system for information security. Due to the wide-
ranging security measures we take, most IT risks have a low
probability of occurrence, but can have a significant impact on
business operations if they do occur.

Reputation. The general public is becoming increasingly aware
of companies’ behavior in matters of ethics and sustainability.
Compliance of corporate actions with applicable law and ethical
principles is essential for the Daimler Group. Furthermore, cus-
tomers and capital markets critically observe how the Group
reacts to the technological challenges of the future and the
extent to which we succeed in placing up-to-date and technologi-
cally leading products on the market. Dealing securely with sensi-
tive data is also a precondition for conducting business relations
with customers and suppliers in a trusting and fair environment.
Daimler applies comprehensive packages of measures so that
risks affecting the Group’s reputation are subject to formal inter-
nal controls.

110

The Group is also exposed to a number of risks because it has
issued guarantees for and holds an equity interest in the system
for recording and charging tolls for the use of highways in Ger-
many by commercial vehicles of more than 12 metric tons gross
vehicle weight. The operation of the electronic toll-collection
system is the responsibility of the operator company, Toll Collect
GmbH, in which Daimler holds a 45% stake and which is included
in the consolidated financial statements using the equity method
of accounting. In addition to Daimler’s membership of the Toll
Collect consortium and its equity interest in Toll Collect GmbH,
risks also arise from guarantees that Daimler AG issued support-
ing obligations of Toll Collect GmbH towards the Federal Republic
of Germany concerning the completion and operation of the toll
system. Claims could be made under these guarantees, if toll rev-
enue is lost for technical reasons or if certain contractually
defined parameters are not fulfilled, if additional claims are made
by the Federal Republic of Germany, or if the final operating
permit is not granted. Additional information on contingent obliga-
tions from guarantees granted and on the electronic toll collection
system and the related risks can be found in Note 28 (Legal pro-
ceedings) and Note 29 (Guarantees and other financial commit-
ments) of the Notes to the Consolidated Financial Statements.

Specific risks in the area of human resources. Daimler’s suc-
cess is highly dependent on the expertise and commitment of
its workforce. Competition for highly qualified staff and manage-
ment is still very intense in the industry and the regions in
which we operate. Our future success also depends on the extent
to which we succeed over the long term in recruiting, integrating
and retaining executives, engineers and other specialists.
The application of our human resources instruments takes such
personnel risks into consideration, while contributing towards
the recruitment and retention of staff with high potential and exper-
tise and ensuring transparency with regard to our resources.
One focus of our human resources management is on the targeted
personnel development and further training of our workforce.
Our employees profit for example from the range of courses offered
by the Daimler Corporate Academy and from the transparency
created by LEAD, our uniform worldwide performance and poten-
tial management system.

Because of demographic developments, the Group has to cope
with the changes relating to an aging workforce and has to secure
a sufficient number of qualified young persons with the potential
to become the next generation of highly skilled specialists and
executives.

Risks relating to equity holdings and cooperations as well
as other business risks. Daimler bears in principle a propor-
tionate share of the risks of its associated companies, of EADS
and joint ventures in growth markets for example. In order to
make use of additional growth opportunities, particularly in the
emerging markets, cooperation with partners in joint ventures
and the associated risks are of increasing significance. The Group
includes associated companies and joint ventures in the con-
solidated financial statements using the equity method of account-
ing; any factors with a negative impact on those companies’
earnings have a proportionate negative impact on our net results.
Such factors can also mean that impairment losses have to
be recognized on the carrying values of the equity interests or
the amounts entered on the basis of the equity method. Further-
more, failures or delays in the development of joint ventures
could negatively affect our growth targets in important markets.
The successful implementation of cooperations with other com-
panies is also of key importance to realize cost advantages and
combat the competitive pressure in the automotive industry.

Management Report | Risk Report | 111

Financial risks

Daimler is exposed to market risks from changes in foreign cur-
rency exchange rates, interest rates, commodity prices and share
prices. Market risks may adversely affect Daimler’s financial
position, cash flows and profitability. Daimler seeks to control
and manage these risks primarily through its regular operating
and financing activities and, if appropriate, through the use of deriv-
ative financial instruments. As part of the risk management
process, Daimler regularly assesses these risks by considering
changes in key economic indicators and market information.
Any market-sensitive instruments held in pension funds and other
postretirement pension benefit plans, including equity and inter-
est-bearing securities, are not included in the following analysis.

Exchange rate risks. The Daimler Group’s global reach means
that its business operations and financial transactions are con-
nected with risks arising from fluctuations of foreign exchange
rates, especially of the US dollar and other important currencies
against the euro. An exchange rate risk arises in the operating
business primarily when revenue is generated in a different currency
than the related costs (transaction risk). This applies in particular
to the Mercedes-Benz Cars division, as a major portion of its rev-
enue is generated in foreign currencies while most of its produc-
tion costs are incurred in euros. The Daimler Trucks division is also
exposed to such transaction risks, but only to a minor degree
because of its worldwide production network. Currency exposures
are gradually hedged with suitable financial instruments (predomi-
nantly foreign forward exchange contracts and foreign currency
options) in accordance with exchange rate expectations, which
are constantly reviewed. Exchange rate risks also exist in connec-
tion with the translation into euros of the net assets, revenues
and expenses of the subsidiaries of the Group outside the euro
zone (translation risk); these risks are not hedged.

Interest rate risks. Daimler holds a variety of interest rate sensi-
tive financial instruments to manage the cash requirements of
its business operations on a day-to-day basis. Most of these finan-
cial instruments are held in connection with the financial services
business of Daimler Financial Services, whose policy is generally
to match funding in terms of maturities and interest rates.
However, to a limited extent, the funding does not match in terms
of maturities and interest rates, which gives rise to the risk of
changes in interest rates. The funding activities of the industrial
business and the financial services business are coordinated
centrally at Group level. Derivative interest rate instruments such
as interest rate swaps and forward rate agreements are used
to achieve the desired interest rate maturities and asset/liability
structures (asset and liability management).

Equity price risks. Daimler holds investments; in accordance
with international banking standards, Daimler does not include
equity investments that the Group classifies as long-term, such
as in EADS, Tognum, Kamaz, Renault and Nissan, in the assess-
ment of equity price risks.

Commodity price risks. Associated with Daimler’s business
operations, the Group is exposed to changes in the prices
of commodities. We address these procurement risks by means
of concerted commodity and supplier risk management.
To a minor extent, derivative commodity instruments are used
to reduce some of the Group’s commodity risks, primarily the
risks associated with the purchase of metals.

Liquidity risks. In the normal course of business, we make use
of bonds, commercial paper and securitized transactions as
well as bank credit in various currencies, primarily to refinance
the leasing and sales-financing business. A negative develop-
ment of the capital markets could increase the Group’s financing
costs. More expensive refinancing would also have an impact
on the competitiveness and profitability of our financial services
business; a limitation of the financial services business would
have a negative effect on the automotive business.

Risks from changes in credit ratings. Daimler’s creditworthi-
ness is assessed by the rating agencies Standard & Poor’s,
Moody’s Investors Service, Fitch Ratings and DBRS. Upgrades
of the credit ratings issued by the rating agencies could reduce
the Group’s cost of borrowing. Downgrades are connected with
possible risks, which could have a negative impact on the
Group’s financing.

112

Risks connected with pension benefit plans. Daimler has
pension benefit obligations, and to a smaller extent obligations
relating to healthcare benefits, which are not completely covered
by plan assets. The balance of obligations less plan assets consti-
tutes the funded status for these employee-benefit plans. Even
small changes in the assumptions used for the valuation of the
benefit plans such as a reduction in the discount rate could lead
to an increase in those obligations. On the other hand, the market
value of the plan assets is determined to a large degree by
developments in the capital markets. Unfavorable developments,
in particular relating to equity prices and fixed-interest securi-
ties, could reduce the market value. Higher obligations as well as
reduced plan assets or a combination of both would have a nega-
tive impact on the funded status of our benefit plans. Higher obli-
gations and lower yields from the plan assets could also increase
the net expenses relating to the benefit plans in the coming years.

Further information on financial market risks, risk-minimizing
actions and the management of those risks is provided in Note
31 of the Notes to the Consolidated Financial Instruments.
Information on financial instruments and on the Group’s pension
benefit plans can be found in Notes 30 and 22.

Legal risks

Various legal proceedings and administrative proceedings are
pending against Daimler or could develop in the future. In our
view, most of those proceedings constitute ordinary, routine litiga-
tion that is incidental to Group’s business, some of which
could also affect the Group’s reputation. We recognize provisions
for litigation risks if the resulting obligations are probable and
can be reasonably estimated. It is possible, however, that due to
the final resolution of some of those pending lawsuits, our pro-
visions could prove to be insufficient and therefore substantial
additional expenditures could arise. This also applies to legal
disputes for which the Group has seen no requirement to recog-
nize a provision. Although the final result of any such lawsuit
could have a material effect on the Group’s earnings in any par-
ticular period, Daimler believes that any resulting obligations
are unlikely to have a sustained effect on the Group’s cash flows,
financial position or profitability. Further information on legal
proceedings can be found in Note 28 of the Notes to the Consoli-
dated Financial Statements.

Overall risk

The Group’s overall risk situation is the sum of all the individual
risks of all risk categories for the divisions and the corporate
functions. There are no discernible risks that, either alone or in
combination with other risks, could jeopardize the continued
existence of the Group. In total, risks have decreased significantly
compared with crisis year 2009. But since considerable eco-
nomic and industry risks still exist, setbacks on the way to regu-
larly achieving our targeted growth and profitability targets
cannot be completely ruled out.

Management Report | Risk Report | 113

Outlook

The statements made in the Outlook section are generally based
on the operational planning of Daimler AG as approved by the
Board of Management and Supervisory Board in December 2010
for the years 2011 and 2012. This planning is based on premises
regarding the economic situation, which are derived from assess-
ments made by renowned economic institutions, and on the
targets set by our divisions. The prospects for our future business
development presented here reflect the opportunities and risks
offered by anticipated market conditions and the competitive
situation. We are constantly adjusting our expectations, taking
into account the latest forecasts on the development of the world
economy and of automotive markets as well as our recent busi-
ness development. The statements made below are based on the
knowledge available to us in February 2011.

World economy

At the beginning of the year 2011, most leading indicators suggest
that the global economic upswing will continue. However, there
are also signs that the rate of economic expansion is likely to be
somewhat weaker than in 2010. The ongoing uncertainty in
financial markets is evidence of continued concern about the
sustainability of the upswing. Particularly in the industrialized
countries, the economic outlook is rather modest. The spending
cuts initiated due to high state deficits will be a great challenge
for many countries. And as financial consolidation is an important
issue also in the private sector, the overall negative impact on
total economic demand is significant. Higher levels of unemploy-
ment in many countries, tight real-estate markets and under-
utilized production capacities are restricting the growth of private
consumption as well as investment. As world trade has also lost
some of its impetus and is no longer growing as fast as last year,
foreign trade cannot fully compensate for the weakness of other
components of economic growth. This is especially relevant for
export-oriented economies such as Germany and Japan, both
of which gained a substantial contribution to overall growth from
foreign trade in 2010. In the United States, employment should
continue increasing in the private sector, but the gains will proba-
bly be too small to reduce unemployment to a significant extent.
But private consumption, a key economic driver, should be stimu-
lated by the recently approved tax changes, which has now signi-
ficantly improved the prospects for growth in 2011. The effects
of the substantial expansion of the money supply and the ongo-
ing increase in government debt on the US economy remain to
be seen, however.

114

In Western Europe, the debt crisis and the resulting spending
cuts are having a negative impact on total growth potential.
Some economies, such as Greece, will therefore remain in the
recessive phase. On the other hand, according to the more
positive economic indicators at the end of the year, the outlook
for the German economy has brightened considerably so that
the country’s growth is expected to be significantly higher than
the European average. Against this backdrop, the aggregate
growth rate for the industrialized countries is likely to fall slightly
to approximately 2 to 2.5% in 2011, whereby indi vidual countries’
rates will differ. Once again, substantially more impetus to the
world economy will come from the emerging markets, which
should expand at about two and a half times that rate. However,
there have been signs in recent months of a slight growth
slowdown also for those economies, especially in Asia and South
America. In the case of China, a somewhat lower growth rate is
actually desirable in view of the significant expansion of credit
volumes and regional real-estate bubbles. In total therefore,
global economic output could expand in the year 2011 by approxi-
mately 3.5%. But due to ongoing consumer and investor
uncertainty in many countries, the world economy remains
rather fragile and thus also sensitive to external disturbances.

Automotive markets

According to current estimates, worldwide demand for motor
vehicles will continue to grow this year, but no longer as dynami-
cally as in 2010. The global car market could expand by 5 to 7%,
thus reaching a new record volume. The Asian emerging markets
and in particular the Chinese market will continue to play a major
role. China’s importance also for the German premium manufac-
turers will continue increasing this year. But the outlook remains
mixed for the triad markets of Western Europe, the United States
and Japan. The US market should continue its recovery, while
the best that can be expected for car sales in Western Europe
is that they remain at the prior-year level.

The after-effects of state incentive programs are still dampening
demand in some volume markets, above all in the lower market
segments. In Germany, however, significant growth is now to be
expected following the double-digit market decline in 2010.
On the other hand, the Japanese car market is unlikely to equal
its artificially high level of 2010, which was boosted by state
incentives for car buyers. In addition to the Asian emerging markets,
demand will continue to grow also in Latin America and Eastern
Europe. In Brazil, slightly less market growth than in the prior year
is anticipated, while demand in Russia should also expand at
a lower rate this year.

Worldwide demand for commercial vehicles this year will probably
feature sharply differing market developments in the triad
markets and the other regions. Market recovery is expected to
accelerate in the triad of Western Europe, the United States
and Japan, especially in the segment of medium-duty and heavy-
duty trucks. For the NAFTA region, market growth of 20 to 25%
is anticipated. Demand for trucks in Europe should increase
by 15 to 20%. Following the expiry of state incentive schemes in
autumn 2010, moderate volume growth is expected for the
Japanese market for medium and heavy-duty trucks. Demand for
trucks outside the triad will be primarily determined by the
Chinese market. Since the state incentive program expired in
China at the end of 2010, demand is expected to decline this
year. But the Indian market should continue growing, although
rather moderately. The Brazilian market, which is important for
Daimler, will probably remain roughly at the high level of last year.
The end of state incentives after the first quarter should be
offset by ongoing strong demand from infrastructure projects.
The possibility of purchases being brought forward before stricter
emission limits come into force in 2012 could have an additional
positive impact on the market this year. The Russian market is
expected to continue its recovery, supported by a state scrappage
bonus. From a global perspective, however, a slight reduction
in total market volume is likely, due to anticipated lower demand
in China.

Growth in demand in Daimler’s currently most important van
market, Europe, is expected to be moderate at between 4 and 6%
this year. Demand for vans in the United States is likely to grow
by a double-digit percentage.

With regard to buses, we anticipate ongoing strong demand in
Latin America at a similar level to the year 2010. In Western
Europe, we expect no significant change in the market situation.

Independently of economic developments in our markets, the
regional distribution of demand has shifted significantly in recent
years. The importance of the emerging markets has increased
enormously not only for the industry as a whole, but especially
for manufacturers of premium vehicles, and the trend is likely
to continue in the coming years. This creates great challenges for
the industry regarding production sites and flexibility, as well
as the requirements of differing customers in a global market.
Another factor is the continuing and increasing need to invest
in fuel-efficient and future-oriented technologies and to develop
and supply innovative and sustainable mobility and transport
solutions. The companies that meet these challenges and make
active use of these fundamental changes will have excellent
growth prospects also in the future. But ultimately, the ability
to stand out from the competition with innovations, exciting
products and strong brands will be an increasingly important
factor for success.

Unit sales

In view of the continuation of generally good market prospects
as well as numerous model changes and new products,
Mercedes-Benz Cars anticipates further growth in unit sales
by the Mercedes-Benz brand. Thanks to our up-to-date and
competitive model range, we will profit also in the year 2011
from the strong demand for our E-Class models and from the
market success of the S-Class. Furthermore, the new version of
the CLS coupe has been delivered to customers since late Janu -
ary 2011. As of March, the new generation of the C-Class sedan
and station wagon and the new SLK roadster will provide addi-
tional sales impetus. The C-Class coupe will follow in June, the
new version of the M-Class will be launched in September, and
the roadster version of the Mercedes-Benz SLS AMG will follow
in the fourth quarter. In November, the new B-Class will be
launched – the first model of four new vehicles in the compact-
car segment. On the engine side, we will introduce our highly
efficient four, six and eight-cylinder engines and the eco-start-
stop technology in additional models. This will give us a wide
range of vehicles that will impress our customers – especially
our fleet customers – with high performance and outstanding
drivability combined with low fuel consumption. On this basis,
we are putting particularly economical and environmentally
friendly model versions on the road, thus further reducing the
CO2 emissions of our fleet. With the new generation of the
C-Class, for example, the C 220 CDI will soon be available with
fuel consumption of just 4.4 liters per 100 kilometers and CO2
emissions of 117 g/km.

Management Report | Outlook | 115

In addition, we want to utilize additional growth potential with
our involvement in the emerging markets – especially in Russia,
India and China. We are also expanding our production capacities
in Brazil and Turkey. This will improve the availability of our trucks
there and help us to defend or strengthen our position in those
markets.

At Mercedes-Benz Vans, the positive sales trend of the year
2010 should continue in 2011 and 2012. On the product side,
demand will be boosted by new generations of the Vito and
Viano and additional BlueEFFICIENCY models. Production in Argen-
tina will change over by the end of the year 2011 to the current
Sprinter model generation, thus significantly upgrading our pro duct
range in South American markets. Furthermore, the Sprinter will
be launched in China this year. By means of local production, we
intend to significantly increase our unit sales in that market with
great potential for the future. In this context, the 50:50 joint venture
Fujian Daimler Automotive will produce a bus version of the
Sprinter in addition to the Vito and Viano starting in 2011.

Daimler Buses assumes it will maintain its globally leading posi-
tion for buses above 8 tons with innovative and high-quality new
products. We expect to achieve unit sales in the years 2011 and
2012 similar to the high levels of 2010. But due to the probable
development of our key markets of Western Europe and Latin
America, scope for growth is rather limited.

Daimler Financial Services anticipates further growth in 2011
and 2012 in the financing and leasing business as well as with
insurance and fleet management. We are continually expanding
our product offering and combine individual financial services
elements into attractive mobility solutions.

On the basis of our assumptions concerning the development
of automotive markets and the divisions’ planning, we expect the
Daimler Group’s total unit sales to continue increasing in the
years 2011 and 2012.

In regional terms, we see good growth opportunities in the
coming years above all in North America, the BRIC countries
(China, India, Russ ia and Brazil) and South Korea. On the other
hand, growth prospects in Western Europe and Japan are rather
limited. But on the basis of our attractive range of automobiles,
we assume that we will be able to defend our position also in these
extremely competitive markets. Our overall goal is to increase
the unit sales of Mercedes-Benz in each of the years 2011 and
2012. For the smart brand, due to the full availability of the new-
generation smart fortwo, we anticipate unit sales in the magni-
tude of the year 2010.

Daimler Trucks assumes that it will increase its unit sales sub-
stantially again in 2011 and 2012. Aided by the general eco-
nomic recovery and the expected related growth in demand for
transport services and vehicles, most of our markets will grow
at double-digit rates. In Western Europe, we anticipate significant
growth in unit sales following a moderate recovery in 2010,
although they are likely to be below the pre-crisis level. Our unit
sales should be around the level of the previous year in Eastern
Europe this year. We anticipate an ongoing high level of unit sales
in Latin America due to strong infrastructure demand. We also
expect purchases to be brought forward there in connection with
the upcoming introduction of Euro 5 regulations. Although the
economic situation in the NAFTA region is improving only slowly,
a significantly positive trend is apparent. We see clearly positive
signals for our business also in Asia. And we expect a positive
business development in Japan, despite the end of state incen-
tives.

Our expectations for unit sales are based on our numerous new
products, including the new Atego and the Atego BlueTec Hybrid,
both of which were voted Truck of the Year 2011. The new ver-
sion of the Axor is the first truck of its class in the upper perfor-
mance range in Germany to be fitted with Mercedes PowerShift
transmission as standard equipment. PowerShift optimizes fuel
consumption and enhances driving comfort. BLUETEC technol-
ogy, which has already proven its worth for several years in Europe,
was successfully introduced in new engines in the United States
and Canada in 2010. We assume that with these new engines,
we will profit even more from the replacement of aging vehicles
that is expected in North America. In Japan, we presented the
new long-distance truck Super Great in spring 2010. In November,
the all-new Canter was launched, a light-duty truck that sets
new standards in terms of economy, environmental compatibility,
safety and design. The Fuso Canter Eco Hybrid is Number 1 for
fuel efficiency among trucks up to five tons in Japan, and is now
available also in Australia, Ireland and Hong Kong. Our wide
range of safety technology was expanded for Mercedes-Benz
trucks with the second generation of Active Brake Assist, which
can initiate an emergency braking procedure also before station-
ary obstacles if required.

116

Revenue and earnings

Following the substantial increase in 2010, we assume that
Daimler’s revenue will continue growing at more moderate rates
in 2011 and 2012. This growth will probably be driven by all the
automotive divisions.

The following factors are particularly important for the earnings
situation of the Daimler Group in the years 2011 and 2012:
– We made use of crisis year 2009 and also of the year 2010 to
achieve a sustainable improvement in our cost basis. We inten-
sified the efficiency-enhancing programs running in all divisions,
supplementing some of them with structural components.
We will consistently continue our efforts to improve efficiency
on the basis of the existing programs.

– At the same time, we are now profiting from the fact that we

continued with the projects designed to safeguard our future
also during the financial and economic crisis. This is the reason
why we can now convince our customers with a large number
of highly attractive products and new technologies. Within the
framework of our initiative “The Road to Emission-free Mobility,”
we intend to further improve the environmental friendliness
and fuel efficiency of our vehicles with the application of new
technologies, while attracting and retaining customers with
our typical product features.

– In the BRIC countries, we have developed production facilities
and distribution structures and can therefore participate in the
above-average growth of those markets.

– In order to secure and strengthen our competitive position,

we will significantly increase our advance expenditure to safe-
guard our future in the years 2011 and 2012.

– The increases in raw-material prices - some of them quite sub-
stantial – that we have to anticipate also for the year 2011 are
likely to have a negative impact on our earnings.

On the basis of current assessments, we expect Daimler to post
EBIT from the ongoing business in 2011 significantly in excess
of the level of the year 2010.

In the coming years, we want to improve the earnings of the indi-
vidual divisions and thus of the entire Group, and to achieve
our return targets on a sustainable basis. We intend to profit to
an above-average extent from the anticipated growth of auto-
motive markets.

As of the year 2013, we aim to achieve on a sustained basis an
annual average return on sales for our automotive business of 9%
over market and product cycles. This is based on target returns
on sales for the individual divisions of 10% for Mercedes-Benz Cars,
8% for Daimler Trucks, 9% for Mercedes-Benz Vans and 6%
for Daimler Buses. For the Daimler Financial Services division,
we have set a target return on equity of 17%.

The years 2011 and 2012 will feature high expenditure for new
products and technologies and to penetrate new markets. Further-
more, the numerous model changes scheduled for Mercedes-
Benz Cars during the planning period will only have a positive
impact on our earnings after a certain delay. Another factor
to be considered is that despite their strong growth rates, the
major commercial-vehicle markets will only reach their volumes
of the record years before the financial and economic crisis in
the medium term.

After deciding not to pay a dividend last year in view of the
net loss in 2009, we want our shareholders to participate again
appropriately in our financial success in the coming years.
In setting the dividend, we aim to distribute approximately 40%
of the Group’s net profit attributable to the Daimler share-
holders. On this basis, the Board of Management and the Super-
visory Board have decided to recommend to the shareholders
for their appro val at the Annual Meeting to be held on April 13,
2011 that a dividend of €1.85 per share be paid out.

Opportunities and risks

Our forecasts for the years 2011 and 2012 are based on the
assumptions that political conditions will remain generally stable
and that there will be no serious setback in the development
of the global economy and that the upward trend of worldwide
demand for motor vehicle will continue in 2011 and 2012.
Additional opportunities and risks may result from the develop-
ment of currency exchange rates and raw-material prices,
as well as from our assessments of the future market success
of our products.

In our view, the biggest individual risks for the world economy
are renewed financial-market turbulence including currency risks,
the exacerbation of public authorities’ debt problems, a growth
slump in China, high price volatilities in raw-material markets,
production interruptions due to bottlenecks at supplier compa-
nies, nascent protectionism, and the possible destabilizing effects
of excessively expansive monetary policy. There would be reason
to fear that the world economy could enter another recessive phase
only if several of those factors occurred simultaneously.

We have already hedged most of the risks arising for our business
in the year 2011 from severe exchange-rate fluctuations. The
hedging rate for the US dollar and the British pound is approxi-
mately 75%.

Management Report | Outlook | 117

Fundamentally, there are also good chances of a generally more
positive development of the world economy. If inves tors and
consumers very quickly regain confidence in the firmness of the
upswing and this is also reflected in the form of increased demand
and investment, growth rates could be significantly higher, partic-
ularly in the industrialized countries. This applies above all if the
banks support the upswing with appropriately increased lending
and if the dampening effects of state financial consolidation
are less significant than assumed. A rapid return to stability in
the financial markets is another factor that could support the
global upswing.

Such a scenario would result in the possibility of a significantly
more favorable business development at Daimler in the years
2011 and 2012. We see opportunities for additional unit sales
and earnings in particular if the mature automotive markets of
the triad markets of North America, Western Europe and Japan
return faster than generally expected to their volumes of the
record years 2007 and 2008.

In the medium term, additional growth potential will be presented
above all by the expansion of our presence in Asia and Eastern
Europe. Our local activities there will enable us to utilize those
opportunities. Together with our local partners, we are increasing
the production of cars and vans in China and are now preparing
to establish a truck joint venture which will include the produc-
tion of heavy-duty truck engines. We are also expanding our pro-
duction facilities for cars and setting up a new truck plant in
India. In Russia, we are intensifying our partnership with truck
manufacturer Kamaz, and have signed a memorandum of under-
standing on production of the Sprinter with GAZ. In addition, we
have started construction of a new car plant in Hungary. We see
good prospects for additional growth also in Latin America and
emerging markets such as Indonesia, Vietnam and Thailand.

Furthermore, there will be considerable opportunities in the
medium term also from the upcoming fundamental changes
in automotive technology. If we succeed in our aim of playing
a pioneering role for motor vehicles and concepts for sustainable
mobility with innovative technologies, this should give us additional
growth potential in terms of both unit sales and earnings.

Investment in property, plant and equipment 2011–2012
In %

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

60%

32%

0.2%

Capital expenditure

In the coming years, we will continue to concentrate our invest-
ment budget on projects of particular importance for the market
success of our products. Nonetheless, we will significantly
increase our investment in property, plant and equipment in the
years 2011 and 2012. This reflects on the one hand the far-
reaching technological transformation of the automotive industry,
in which we intend to play a leading role; but on the other hand,
also the need to penetrate future growth markets with appropriate
products and local production facilities. At both Mercedes-Benz
Cars and Daimler Trucks, the planned investment in property,
plant and equipment will be significantly higher than in the prior
years. At the Mercedes-Benz Cars division, the focus will be on
advance expenditure for new vehicles such as the successor
models to the A- and B-Class and the new M-Class. The biggest
current project is the expansion of our model range in the A/B-
Class segment: Solely for that purpose, we will invest a total
of approximately €1.4 billion at our sites in Rastatt and Keçskemèt,
Hungary. But substantial investments are also planned for the
expansion of our production capacities in the United States, China
and India. Daimler Trucks will mainly invest in successor genera-
tions for existing models in the coming years. Another area
of investment will be to establish and expand production capacities,
in order to penetrate the Indian market for example. At Mercedes-
Benz Vans, the focus will be on investing in cooperation projects
with Renault, in local production of the Sprinter in Russia, and
in existing production plants. The key projects at Daimler Buses
are advance expenditure for new models, future emission tech-
nologies and alternative drive systems.

Investment in property, plant and equipment

2009

2010

2011-2012

In billions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

2.4

1.6

0.6

0.1

3.7

2.5

1.0

0.1

Daimler Financial Services

0.01

10.1

6.1

3.2

0.5

0.3

0.02

118

Research and development expenditure 2011–2012
In %

Workforce

Against the backdrop of rising production volumes and the tar-
geted productivity advances, Daimler assumes that the total
number of persons employed by the Group will increase slightly
in the years 2011 and 2012.

Forward-looking statements in this annual report:
This document contains forward-looking statements that reflect our current
views about future events. The words “anticipate,” “assume,” “believe,” “esti-
mate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expres-
sions are used to identify forward-looking statements. These statements are
subject to many risks and uncertainties, including an adverse development of
global economic conditions, in particular a decline of demand in our most impor-
tant markets; a deterioration of our funding possibilities on the credit and finan-
cial markets; changes in currency exchange rates; a shift in consumer prefer-
ence towards smaller, lower margin vehicles; or a possible lack of acceptance of
our products or services, which may limit our ability to implement prices as well
as to adequately utilize our production capacities; price increases in fuel, raw
materials; disruption of production due to shortages of materials, labor strikes,
or supplier insolvencies; a decline in resale prices of used vehicles; the effective
implementation of cost-reduction and efficiency-optimization measures; the
business outlook of companies in which we hold a significant equity interest,
most notably EADS; the successful implementation of strategic cooperations
and joint ventures; changes in laws, regulations and government policies, partic-
ularly those relating to vehicle emissions, fuel economy and safety; the resolu-
tion of pending governmental investigations and the conclusion of pending or
threatened future legal proceedings; and other risks and uncertainties, some of
which we describe under the heading “Risk Report” in Daimler’s Annual Report.
If any of these risks and uncertainties materialize, or if the assumptions under-
lying any of our forward-looking statements prove incorrect, then our actual
results may be materially different from those we express or imply by such
statements. We do 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.

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

62%

26%

Research and development

With our research and development activities, our goal is to further
improve Daimler’s competitive position against the backdrop of
upcoming technological challenges. We want to create competitive
advantages by means of innovative solutions for low emissions
and safe mobility. In the years 2011 and 2012, Daimler plans to
spend a total of €10.3 billion on research and development activi-
ties. This is approximately €1.3 billion more than in the years 2009
and 2010. We intend to increase our research and development
spending at Mercedes-Benz Cars once again. The main projects
are the successor models for the A- and B-Class, the M-Class
and the S-Class, as well as new engines and alternative drive sys-
tems. Research and development expenditure at Daimler Trucks
will remain at a high level. The focus will be on developing and
adapting new engine generations in order to fulfill increasingly
strict emission regulations, as well as on successor generations
for existing products. The further development of engines
for future emission standards is an important area of research
and development at Mercedes-Benz Vans and Daimler Buses.
Alternative drive systems also play an important role, in
particular at Daimler Buses.

In addition to the aforementioned projects, Daimler has set aside
substantial amounts in its research budget for new technologies
with which we intend to achieve a sustained improvement in the
safety, environmental compatibility and economy of road traffic.

Research and development expenditure

In billions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

2009

2010

2011-2012

4.2

2.7

1.1

0.2

4.8

3.1

1.3

0.3

0.2

10.3

6.4

2.7

0.8

0.4

Management Report | Outlook | 119

All of Daimler’s divisions profited from the global economic upswing and
from their attractive product ranges. In terms of unit sales and revenue,
mainly double-digit growth rates were achieved. We were able to further
improve our market position in many product areas.

The Divisions

122 - 125 Mercedes-Benz Cars

132 - 133 Daimler Buses

– Generally positive unit-sales trend driven by Latin America
– Positive development of market share in key markets
– Attractive product portfolio with pioneering drive technologies
– EBIT of €215 million

134 - 135 Daimler Financial Services

– High growth rates in Asia
– Reorganization of business in Germany
– Top marks for customer and dealer satisfaction
– Very high level of EBIT at €831 million

– Unit sales up by 17%
– Improved market position and model mix
– New E-Class models well received by the market
– Lower fuel consumption due to new engines
– Substantially improved profitability:
EBIT of €4.7 billion and return on sales of 8.7%

126 - 129 Daimler Trucks

– Strong growth in unit sales in all major markets
– Global product offensive with new engines and models
– Entry into new markets and growth areas
– Significant increase in EBIT to €1.3 billion

130 - 131 Mercedes-Benz Vans

– Unit sales up significantly to 224,200 units
– Leading market position in European Union maintained
– Start of production in China
– EBIT of €451 million

The Divisions | Contents | 121

Mercedes-Benz Cars

Mercedes-Benz Cars improved its market position and achieved stronger, sustainable profitability in 2010.
This positive development largely resulted from new models in the E-Class series and the market success
of the S-Class. The E-Class convertible, the new CLS four-door coupe and the Mercedes-Benz SLS AMG
super sports car were the fascinating new product highlights in the year under review. In addition, our
new engines are now demonstrating that efficiency and performance are no longer mutually exclusive.

Mercedes-Benz Cars

Amounts in millions of euros

2010

2009

10/09

% change

EBIT

Revenue

Return on sales

Investment in property,
plant and equipment

Research and development
expenditure
thereof capitalized

Production
Unit sales 1
Employees (December 31)

4,656

53,426

8.7%

-500

41,318

-1.2%

2,457

1,618

3,130
940

1,312,456

1,276,827

96,281

2,696
913

1,031,562

1,093,905

93,572

+29

+52

+16
+3

+27

+17

Unit sales

In thousands

Mercedes-Benz
thereof A/B-Class

C/CLK/SLK-Class

E/CLS-Class

S/CL/SL-Class/
SLR/SLS/Maybach

M/R/GL/GLK/
G-Class

smart
Mercedes-Benz Cars 1
thereof Western Europe

thereof Germany

NAFTA

thereof United States

China

Japan

2010

2009

10/09

% change

1,178

222

342

331

203

1,277

636

293

256

220

160

975

215

323

212

167

114

1,094

623

298

236

203

+21

+56

+41

+21

-17

+17

-2

+137

+17

1 Includes Mitsubishi vehicles manufactured and/or sold in South Africa.

122

Significant increase in unit sales, revenue and earnings.
Mercedes-Benz Cars, comprising the brands Mercedes-Benz,
Maybach, and smart, sold 1,276,800 vehicles in the year under
review (2009: 1,093,900). With this increase of 17%, the division
returned to the sales volumes of 2008 following weak market
conditions in 2009. At the same time, a shift in the division’s
sales structure toward higher-value models significantly increased
revenue by 29% to €53.4 billion. EBIT rose to €4.7 billion
(2009: minus €0.5 billion) and return on sales reached 8.7%.
The overall market recovery, highly dynamic markets in Asia and
the sales success of our models all contributed to this develop-
ment, as did the extensive measures we took to reduce costs
and improve efficiency.

Mercedes-Benz gains market share in many countries. The
Mercedes-Benz brand shipped 1,178,300 vehicles in 2010
(2009: 974,700), thus improving its position in many markets.
Our S-, E-, and C-Class sedans are market leaders worldwide
in their respective segments, as is the E-Class station wagon.

Thanks to the success of our new models, we were able to boost
unit sales in the E-Class segment by 56% to 330,800 vehicles in
2010. Following the introduction of the E-Class sedan, coupe, and
station wagon in 2009, we launched the E-Class convertible in
the spring of 2010. Worldwide unit sales for Mercedes-Benz in the
luxury segment (S-, CL-, SL-Class; SLR, SLS, and Maybach) rose
from 57,100 vehicles in 2009 to 80,400 during the year under
review, whereby the S-Class defended its lead as the world’s
best-selling luxury sedan, despite new competitors in its segment.
This development was due in part to heightened demand in
the Chinese market. Unit sales in the C-Class segment (C- and SLK-
Class) increased by 6% to 341,900 vehicles, while unit sales in
the all-terrain/SUV segment (M-, R-, GL-, GLK-, and G-Class) rose
by 21% to 202,800 vehicles. As they approached the end of
their life cycles, the A- and B-Class models posted a 3% increase in
unit sales. As a result, sales of those cars rose to 222,400 units
(2009: 215,500).

The new generation of the Mercedes-Benz C-Class has been comprehensively modernized for spring 2011.

Mercedes-Benz succeeded in boosting unit sales in all regions dur-
ing the year under review. Despite a weak market development,
we sold 265,000 vehicles in Germany, thereby reaching the sales
level recorded in the prior year (2009: 265,500), allowing us to
increase our market share and maintain our leading position in the
premium segment. Mercedes-Benz sales in other Western European
countries rose by 9% to 290,500 units (2009: 267,200). In the
United States, we increased unit sales by 15% to 216,400 vehicles.
Business also developed very positively in the emerging markets.
In China, for example, where Mercedes-Benz remains the fastest-
growing premium brand, unit sales more than doubled to 156,400
vehicles (+140%). China has now been the world’s most important
market for the S-Class for two years in a row. Additional demand
was generated in China in 2010 by a long-wheelbase version of the
E-Class – a model that we started producing locally and exclusively
for the Chinese market in May 2010. Double-digit sales increases
were also recorded in the other BRIC nations Brazil (+40%), Russia
(+68%) and India (+79%), as well as in the growth markets of Taiwan
(+109%), South Korea (+80%) and the Middle East (+63%).

The new E-Class convertible: Open-air driving pleasure for four.
The E-Class convertible celebrated its world premiere at the North
American International Auto Show in Detroit in January 2010. The
four-seat, year-round convertible completes the successful E-Class
family and features a world first in the form of the AIRCAP wind
deflector, which significantly reduces air turbulence in the vehicle’s
interior during open-top driving. Like all E-Class models, the convert-
ible also offers outstanding levels of safety. Its safety equipment
includes the ATTENTION ASSIST drowsiness detection system, the
anticipatory PRE-SAFE® occupant protection system, the Intelligent
Light System, and the DISTRONIC PLUS proximity control unit.
Readers of Germany’s “auto motor und sport” magazine voted the
vehicle “2010’s most beautiful convertible.” The first E-Class convert-
ibles were delivered to customers in March 2010 and 24,500 units
had been sold by the end of the year.

Fascination and efficiency – the new CLS. The new four-door
CLS coupe, which was presented for the first time during the Paris
Motor Show at the end of September, has assumed the pioneering
role that characterized its predecessor. However, the newcomer
also stands out as a new and unique product. The CLS combines
a powerful and confident design with the highest levels of efficiency.
All CLS engines are new and offer fuel savings of up to 25% com-
pared with the predecessor models. The CLS, which has been
available for delivery to our customers since January 2011, was
awarded the coveted Golden Steering Wheel 2010 shortly after
it was unveiled at the Paris Motor Show.

Additional new models in 2010. The most prominent external
feature of the new R-Class generation is the model’s completely
redesigned front end. On the inside, the new R-Class offers the
space economy one would expect from a modern minivan. At the
same time, it also boasts the comfort, high value and prestige
typical of a classic Mercedes-Benz sedan. With the new-generation
CL-Class, Mercedes-Benz is shifting the focus to achieving better
fuel economy and lower exhaust gas emissions in the exclusive upper
range segment as well. An impressive 22% reduction in fuel con-
sumption has been achieved with the CL 500 BlueEFFICIENCY with
the help of our all-new BlueDIRECT technology, which features
spray-guided direct injection, and our customized BlueEFFICIENCY
package.

Economical and powerful engines. Our new engines prove that
efficiency and performance are no longer mutually exclusive. We
had already updated our range of four-cylinder engines in 2009, and
we followed that up in 2010 with the launch of our new six and
eight-cylinder units. We now offer a broad range of high-performance,
low-consumption engines that can also be used flexibly in a variety
of models. With a total of four new diesel and gasoline engines, the
Mercedes-Benz S-Class leads the way in its segment. The new
S 250 CDI BlueEFFICIENCY, for example, has been named the
“world’s most fuel-efficient luxury sedan.” Despite its high output of
150 kW (204 hp), this S-Class consumes only 5.7 liters of diesel
per 100 km (combined NEDC consumption), which corresponds to
CO2 emissions of 149 g/km. The new V6 diesel engine in the S 350
BlueTEC delivers 190 kW (258 hp) with a combined consumption
of 6.8 liters per 100 km (177 g CO2/km).

The Divisions | Mercedes-Benz Cars | 123

The Mercedes-Benz SLS AMG E-CELL super sports car with pure electric drive.

Thanks to its AdBlue® exhaust gas treatment system, this unit
is one of the cleanest diesel engines in the world. Our newly
developed six-cylinder gasoline engine is now used in the CLS 350
BlueEFFICIENCY model, for example. The vehicle’s standard ECO
start/stop feature gives the model combined consumption of 6.8
liters per 100 km (159 g CO2/km).

CO2 emissions further reduced. Thanks to our new economical
engines and our additional BlueEFFICIENCY models, we were able to
reduce the average CO2 emissions of the passenger cars we sold in
the European Union in the year under review to 158 g/km. What’s
more, we achieved this feat despite a greater share of exceptionally
high-quality and powerful vehicles in our model mix. Our goal is to
reduce the CO2 emissions of our new vehicle fleet in the EU to less
than 140 g/km by 2012 (see pages 83 f and 140 ff).

Locally emission-free electric vehicles in series production. At
the end of 2009, the Mercedes-Benz B-Class F-CELL and the smart
fortwo electric drive became the first locally emission-free vehicles
manufactured under series-production conditions at Daimler. A total
of 1,500 smart fortwo electric drive cars will have been leased to
selected customers in Berlin and major European and US cities by
the end of 2011. Half of those vehicles had already been delivered
by the end of 2010. We are now manufacturing 200 Mercedes-Benz
B-Class F-CELL cars with fuel-cell drive in small-batch production;
these vehicles will be delivered to selected customers in Germany
and the United States for use under everyday conditions between
now and 2012. The third electric car from Mercedes-Benz, the A-
Class E-CELL, went into production at the plant in Rastatt, Germany,
in September 2010. This five-seater, which can comfortably meet
everyday requirements and is ideal for families, features a battery-
electric drive system. The car is based on the most recent A-Class
model and offers a spacious and versatile interior and cargo area.
Thanks to its two highly efficient lithium-ion batteries, which are
mounted in a space-saving manner in the vehicle floor, it achieves
a range of 255 km (NEDC). The approximately 500 units that have
been produced are being delivered to selected customers in several
European countries (including Germany, France and the Nether-
lands) for use as full-service rental cars (see page 141).

New-generation smart fortwo. The new model generation of the
innovative two-seater has been available at dealerships since Octo-
ber 2010. The smart fortwo has been made even more attractive
through a new interior look, an upgraded exterior design, and even
greener engines. The vehicle’s communication and entertainment
systems are equipped with state-of-the-art technology, and ultra-
modern propulsion is ensured by gasoline engines that have been
further refined and emit less than 100 g CO2/km in the 45 kW and
52 kW versions – a new record. Unit sales of the smart brand
totaled 94,300 vehicles in the year under review (2009: 113,900).

Continued success for car2go. The response to the innovative
car2go mobility concept, which we began offering in Ulm, Germany,
in March 2009 and in Austin, Texas, in November 2009, has been
very encouraging. The number of customers in Ulm increased to more
than 20,500 during the year under review, while Austin currently
has around 15,000 registered users. In view of the great success
enjoyed by car2go in Ulm and Austin, we have decided to offer the
system in other cities as well (see page 142).

Maybach sedans even more glamorous. Maybach presented its
high-end luxury sedans with significantly expanded high-class equip-
ment and customization options at the Auto China show in Beijing
in April 2010. A large new chrome radiator grille emphasizes the leg-
endary brand’s exceptional status and self-confidence, while the
output of the 12-cylinder engines in the Maybach 57 S and 62 S was
increased to 463 kW (630 hp), despite a reduction in the pollutant
emissions of all models. Unit sales of 200 Maybach models were at
roughly the same level as in the prior year.

Automotive fascination: the Mercedes-Benz SLS AMG. The
Mercedes-Benz SLS AMG was the most important new-product high-
light from our AMG performance brand in 2010. The super sports
car stands for automotive fascination and high technology of the
highest order, boasting purist design, systematic lightweight engi-
neering and superior handling. The Mercedes-Benz SLS AMG has
already won many awards, such as the Design Award of the Federal
Republic of Germany in Gold, the Golden Steering Wheel from Auto
Bild and the award for “Most Beautiful Sports Car” in a survey of
readers of “auto motor und sport” magazine. In 2010, AMG also
presented a new and highly efficient powertrain with a gasoline
direct-injection biturbo V8 engine for the S- and CL-Class.

124

The ultimate luxury coupe: the new generation of the Mercedes-Benz CL-Class.

Investment in the global production network. The targeted
expansion of the international production network is helping us
increase our competitiveness, reduce our susceptibility to exchange-
rate fluctuations, and optimally benefit from growth opportunities.
At the same time, substantial capital investment in our German
plants underscores the fact that our German locations remain the
heart of our production network.

In October 2010, we celebrated the topping-out ceremony for our
new car plant in Kecskemét, Hungary, after just one year of con-
struction. Plans call for the Kecskemét facility to begin manufactur-
ing two models of the A-Class and B-Class successor generations
in 2012 in a production network with the Rastatt plant. To this end,
Daimler is investing €800 million in the construction of the plant
in Hungary and €600 million in the implementation of upgrades at
the primary facility in Rastatt. We have also taken the initial step
of expanding the production capacity of Beijing Benz Automotive Co.,
Ltd. (BBAC) in Beijing to 100,000 units per year to meet the rising
demand for our products in China. In addition to the C-Class sedan,
BBAC now also manufactures a long-wheelbase version of the
E-Class exclusively for the Chinese market. Production of the latter
vehicle began in May 2010. Key projects in Germany in the year
under review included preparations for production of the new SLK
in Bremen, the establishment of manufacturing facilities for new
six and eight-cylinder gasoline engines in Bad Cannstatt, and expan-
sion of engine assembly operations at MDC Power GmbH in Kölleda.

Mercedes-Benz was also honored by several organizations for out-
standing achievements in the areas of safety, design, value retention
and service in 2010. Mercedes-Benz workshops, for example,
received the highest possible marks in a test conducted by Germany’s
ADAC automobile association and the Stiftung Warentest consumer
advocacy group, as well as in tests conducted by other organizations.

The best or nothing. The Mercedes-Benz brand is one of Daimler’s
most valuable assets. It is therefore not surprising that the prestigious
Interbrand rankings for 2010 once again named Mercedes-Benz
the most valuable premium car brand in the world and the most valu-
able German brand. We will do everything we can to improve this
position even further. Accomplishing that goal will require not only
fascinating products but also a self-confident brand. That is why
we introduced a carefully refined brand image in 2010 – one that is
based on our exceptional history. We invented the automobile and
we have been shaping the industry with our ground breaking innova-
tions for the past 125 years. Many technologies that are now stan-
dard in the automotive industry can be traced back to our company.
They include the safety cell, ABS, airbags, ESP®, the latest techno-
logical highlights such as PRE-SAFE® and state-of-the-art driver assis-
tance systems such as ATTENTION ASSIST drowsiness detection.
This heritage by itself is enough to make customers expect more from
Mercedes-Benz. For us, that means delivering the best product to
our customers, no matter what the segment or system – today and
in the future.

Many awards for Mercedes-Benz automobiles. The measures
taken to further enhance quality proved very successful in the year
under review – a fact that was confirmed by external studies as well.
In the most recent J. D. Power and Associates Initial Quality Study,
82,000 purchasers of model-year 2010 vehicles were surveyed 90
days after receiving their vehicles. We achieved our best results in
this US survey since 1990: The C-Class finished first in its segment,
while the E-Class sedan, E-Class coupe, and S-Class all finished sec-
ond in their respective vehicle segments.

Own factory team for the Formula 1 series; DTM winners. In its
first year as a Formula 1 factory team, MERCEDES GP PETRONAS
finished fourth in the Constructors’ Championship, while drivers
Nico Rosberg and Michael Schumacher finished seventh and
ninth respectively in the Drivers’ Championship. McLaren race cars
equipped with Mercedes-Benz engines captured four Grand Prix
victories during the season. Our Formula 1 team is working hard to
develop a competitive vehicle that will allow it to battle for success
in both the Constructors’ and Drivers’ Championships in 2011. The
2010 German Touring Car Masters (DTM) season was one of the
most successful for Mercedes-Benz in the history of the series. The
C-Class came out on top in nine out of 11 races. After the ninth
race, it was already clear that only one of our three Mercedes driv-
ers would be able to capture the title. Eventually Paul Di Resta won
the championship with a total of three race victories.

The Divisions | Mercedes-Benz Cars | 125

Daimler Trucks

Business development at Daimler Trucks was clearly positive in 2010. Active management of market
cycles, one of the four pillars of the Global Excellence strategy, ensured we were well prepared to
utilize the global upturn for commercial vehicles following crisis year 2009. Continuation of the strategy
program will safeguard our long-term competitiveness.

Daimler Trucks

Amounts in millions of euros

EBIT

Revenue

Return on sales

Investment in property, plant
and equipment

Research and development
expenditure

thereof capitalized

Production

Unit sales

Employees (December 31)

Unit sales

In thousands

Total

Western Europe

thereof: Germany

United Kingdom

France

NAFTA

thereof: United States

Latin America
(excluding Mexico)

thereof: Brazil

Asia

thereof: Japan

126

2010

2009

10/09

% change

1,323

24,024

5.5%

-1,001

18,360

-5.5%

1,003

597

1,282
373

360,896

355,263

71,706

1,116
368

235,474

259,328

70,699

+31

+68

+15
+1

+53

+37

2010

2009

10/09

% change

355

259

120

+37

+25

+21

+53

+26

+24

+20

+57

+45

+39

Significant increase in unit sales, revenue and EBIT. The
global economy recovered in 2010, although the rate of recovery
varied greatly from region to region. The economic upturn led to
a substantial increase in demand for commercial vehicles and
transportation services. Daimler Trucks was able to post substan-
tial increases in unit sales and earnings in this favorable environ-
ment. Unit sales rose by 37% to 355,300 vehicles with all of our
core markets (Europe, the United States, Latin America, and
Japan) contributing to this development. Revenue increased by
31% to €24.0 billion and EBIT reached €1.3 billion (2009: minus
€1.0 billion).

Positive sales development at Trucks Europe/Latin America.
The Mercedes-Benz Trucks brand stands for “Trucks you can
trust.” This means always doing everything possible for our cus-
tomers and being a reliable partner. With its Actros, Axor and
Atego models, Mercedes-Benz offers individual solutions in the
medium and heavy-duty truck segment for long-haulage trans-
port, construction and local distribution applications. The port-
folio is completed with the Econic, Zetros and Unimog models
offered by the Mercedes-Benz Special Trucks unit.

One year after experiencing a sharp decline in unit sales, Trucks
Europe/Latin America profited from the global economic recov-
ery during 2010 and unit sales increased by 41% to 135,200
vehicles. With a market share of 24.3%, we expanded our leader-
ship in the segment for medium and heavy-duty trucks in
Western Europe (2009: 23%). Our position is particularly strong
in Germany, where Mercedes-Benz Trucks was once again
number one with a market share of 40.5% (2009: 41.6%).

After undergoing a disproportionate decline in the prior year,
unit sales in Eastern Europe more than doubled in 2010 (+11,000
to 19,000 units). We achieved a 122% increase in unit sales to
11,500 vehicles in Turkey, where we are the market leader with
a share of 38% of the Turkish market (2009: 33.5%). Extremely
positive economic developments in Brazil and government subsi-
dies that stimulated demand led to a sales increase of 45%
to 44,300 units in that country. Due to intense competition, our
market share in the medium and heavy-duty truck segment in
Brazil decreased slightly to 27.4% (2009: 28.5%).

Trucks Europe/Latin America – the focus was on the market launch of the new Mercedes-Benz Atego and the new Mercedes-Benz Axor.

Continuous investment in the further development of the product
range and the expansion of our plants contributes towards safe-
guarding our long-term competitiveness. Some of the results could
be seen at the 2010 IAA Commercial Vehicles trade fair, where
we presented a number of new products. In response to the tremen-
dous increase in demand for heavy-duty long-haulage trucks in
our core markets, we began assembling the Actros in Aksaray,
Turkey, in late 2010 and will start production of that model in
Juiz de Fora, Brazil, in 2012. Mercedes-Benz do Brasil also invested
in expanding the production capacity of its São Bernardo do
Campo plant by 15% to 75,000 units each year.

The demands placed on commercial vehicles are continually rising,
and individual solutions and conversions are becoming more and
more important in the truck segment. For this reason, Mercedes-
Benz Special Trucks expanded its Mercedes-Benz Custom Tailored
Trucks (CTT) unit in the past two years and established a develop-
ment center for special trucks in Molsheim, France. CTT, which
focuses on special customer requirements related to conversions
and special equipment for Mercedes-Benz trucks, celebrated its
tenth anniversary in 2010.

Sales growth in the NAFTA region. Trucks NAFTA is the leading
truck manufacturer in North America in Classes 6 to 8. Under
the Freightliner brand name, we offer customers heavy-duty trucks
for long-haulage transport and medium-duty trucks mainly for
local distribution applications. Heavy-duty trucks from the Western
Star premium brand serve the markets for special-purpose,
construction and long-haulage trucks. Since 1916, Thomas Built
Buses has been the embodiment of innovative design, safety
and top quality. The yellow school buses manufactured by the
market leader are a common sight across the United States.

With sales of 79,400 units, Trucks NAFTA sold 25% more vehicles
in 2010 than in the prior year. The region is currently experi-
encing a mild recovery. Our positive sales development is being
achieved through our successful new EPA10-compliant engines
and stepped-up activities in the sectors for construction and
disposal services, particularly in the Class 8 segment. This
allowed us to increase our market share in Classes 6 to 8 to
31.6%, making us the market leader in the entire NAFTA region
(2009: 29.6%). Also in the United States, Trucks NAFTA is the
most successful supplier in this segment with a market share of
32.6% (2009: 30.0%). In Class 8, we further increased our
market share in both the NAFTA region with a share of 32.4%
(2009: 30.9%) and the United States with a share of 33.9%
(2009: 31.2%). This is clear evidence of customers’ strong accep-
tance of our products.

Daimler Trucks North America launched a repositioning program
in 2008 that has since been successfully completed. In order to
further consolidate our long-term competitiveness, we will continue
to optimize our processes and improve our efficiency in the
future. The successful implementation of the program was made
possible in large part by an agreement with the United Auto
Workers union (UAW) covering the four sites of Mt. Holly, Cleveland,
Gastonia and Portland. Thanks to positive market developments
in the NAFTA region, we increased production capacity in good
time in 2010 and rehired nearly 1,100 workers. In addition,
approximately 700 employees were newly recruited at our new
plant in Saltillo. The Detroit Diesel engine plant in Redford, Michi-
gan, also benefited from solid orders and the BlueTec engines
newly introduced in the United States. We are currently investing
approximately US$200 million in expanding the Detroit Diesel
facility. Our commitment to developing environmentally friendly
and efficient drive-system technologies was honored by the
US Department of Energy at the beginning of 2010: Daimler Trucks
North America will receive some US$40 million in funding over
the next five years as part of the “21st Century Truck Technology
Partnership.” The funds will be used for commercial-vehicle and
engine development. The high level of acceptance enjoyed by our
engines is confirmed by the success of the Captive Engine strat-
egy at Trucks NAFTA. Today, more than 95% of our trucks in the
heavy-duty segment are powered by engines we build ourselves.

The Divisions | Daimler Trucks | 127

Daimler Trucks North America – market leader for heavy-duty trucks in the United States and the NAFTA region.

Significant unit-sales increase by Trucks Asia. With its Canter,
Fighter, and Super Great truck models and its Rosa and Aero
buses, the Fuso brand has gained a reputation around the world
as a quality-focused manufacturer of commercial vehicles. In
addition to producing a successful range of models in the light to
heavy-duty segments, Mitsubishi Fuso Truck and Bus Corporation
(MFTBC) is also the competence center for light-duty trucks and
state-of-the-art hybrid technology from Daimler Trucks.

At 140,700 vehicles, unit sales by Trucks Asia were significantly
higher in 2010 than in the prior year (+41%). Trucks Asia’s sharp
increase in unit sales in Indonesia by 82% to 55,700 vehicles was
accompanied by a strong 30% rise in Taiwan to 8,200 vehicles.
As a result, MFTBC was able to fully participate in the upturn there.
The Japanese home market displayed a slight recovery and unit
sales in Japan rose by 7% to 24,800 units.

Fuso is already the leader in several emerging Asian markets.
We are number one, for example, in the segment for light-duty
trucks in Taiwan and Indonesia.

During the year under review, we consistently and very success-
fully continued our program to realign MFTBC activities. The pro-
gram was launched in 2009 in response to structural changes in
the Japanese commercial-vehicle market. To ensure we remain
well positioned and competitive in the future, we are placing great
emphasis on maintaining the level of efficiency we have now
achieved. In 2010, Daimler AG increased its interest in MFTBC
from 85% to 89% through a capital increase of JPY30 billion
(€271 million).

Fuso has great expertise in developing alternative drive systems
for commercial vehicles and designing and developing light-duty
trucks. Building on the success of the Fuso Canter Eco Hybrid,
MFTBC has expanded its hybrid development activities. In Decem-
ber 2010, a new test rig was added to the Kitsuregawa test
center in Japan, where hybrid drives are to be tested under various
realistic conditions in the future.

Widespread acceptance of new products. Innovation and cus-
tomer utility in relation to future product generations are two
important elements of Daimler Trucks’ Global Excellence strategy.
We presented numerous new products at the 63rd IAA Commer-
cial Vehicles trade fair in Hanover, Germany, all of which take
their cue from successful past vehicles. The new Atego and Atego
BlueTec Hybrid were both named “Truck of the Year 2011,”
and the hybrid version was also honored with the German Environ-
mental Technology Award and the German Sustainability Award.
The new Axor is winning over customers with its standard-fitted
Mercedes-Benz PowerShift automated gearshift and a new
design. With the second generation of our Active Brake Assist
system, which can initiate an emergency braking maneuver in
critical situations, we are once again underscoring our leading
role in the field of safety. The system even responds to stationary
objects. At Daimler Trucks North America, we focused on the
development and market launch of new environmentally friendly
technologies in 2010: Our presentation at the Mid-American
Trucking Show (MATS) in March 2010 highlighted our three new
DD13, DD15 and DD16 engines from Detroit Diesel (DDC).
These engines are equipped with selective catalytic reduction
tech nology (SCR) for exhaust gas treatment and comply with
the EPA10 emissions standard that came into effect in the United
States in early 2010. Nearly 20,000 trucks and buses from
Trucks NAFTA have been put on the road in North America with
this advanced technology since the introduction of the new
engine generation. Fuso started its product offensive with the
launch of the new Super Great long-haulage truck on the Japa -
nese market in the spring of 2010. With its 6R10 engine from
Daimler Trucks’ new heavy-duty engine generation (equipped with
BLUETEC technology), Fuso’s flagship model fulfills the stringent
JP09 emission limits. It is also equipped with various innovative
safety systems. And since June, new versions of the mediumduty
truck Fuso Fighter have been available in Japan. Trucks Asia pre-
sented the new Canter in Japan in November 2010. With its
low fuel consumption, it sets new standards in the light-duty truck
segment for efficiency, environmental friendliness, safety, and
design. The Canter will also be launched in Fuso’s worldwide
export markets beginning in 2011. Fuso’s introduction of the
Duonic transmission marks the first time a dual-clutch transmis-
sion has been made available as standard equipment in a truck.

128

Trucks Asia – the new Super Great long-haulage truck and the new Canter delivery truck form the core of the Fuso product offensive.

The Fuso Canter is Daimler Trucks’ best-selling vehicle the world
over and since February 2010, its standard diesel variant has
complied with the Enhanced Environmentally Friendly Vehicle
Standard. The Fuso Canter Eco Hybrid is number one in terms
of fuel efficiency among trucks up to five tons gross vehicle weight
in Japan. Altogether, more than 1,000 units have been sold world-
wide to date. The vehicle is also now available outside Japan in
Australia, Ireland, and Hong Kong. The world premiere of the
Fuso Canter E-CELL concept truck also met with a very positive
response. This model’s battery-electric drive system performs
so well that a combustion engine is unnecessary. Fuso continued
to move ahead consistently with its product offensive in the year
under review with the introduction of its new Super Great long-
haulage truck on the Japanese market in the spring of 2010.

Shaping Future Transportation. Our new products and technol-
ogies offer evidence of the success of the CleanDrive, SafeDrive,
and ValueDrive programs from our Shaping Future Transportation
initiative, which was launched in 2007. CleanDrive stands for
environmentally friendly and economical commercial vehicles
built by Daimler for all different types of applications. Within
the framework of SafeDrive, we are pursuing the vision of accident-
free driving and continually developing new safety technologies.
We constantly focus also on customer utility, because operating
and maintenance costs account for approximately 90% of the
total cost of ownership (TCO) of a commercial vehicle. This is
where the various customized services from Daimler Trucks
come into play such as Charterway and the FleetBoard telemat-
ics services, all of which are consolidated into the “ValueDrive”
program.

For ten years, Daimler FleetBoard has been developing and mar-
keting telematics solutions to boost the profitability of commer-
cial vehicle fleets. Key benefits here include average fuel savings
of seven percent within the first three months after the system
is introduced, training programs for new customers, significant
savings on maintenance and repair work for longtime customers,
optimal order management thanks to the FleetBoard transport
management system, close to real-time transmission of vehicle
locations and routes using satellite images and FleetBoard Map-
ping, and a time management system that enables operators
to better monitor drivers’ working and resting times and thus opti-
mize order management.

Outstanding global position with the Global Excellence Pro-
gram. The penetration and extensive management of new mar-
kets and growth sectors – another pillar of the Global Excellence
strategy – was successfully continued during the year under
review. In Russia, our joint ventures Fuso Kamaz Trucks Russia
and Mercedes-Benz Trucks Vostok manufactured the first Fuso
and Mercedes-Benz trucks to be produced in the country and
launched the vehicles on the domestic market. At the end of 2010,
we also signed a memorandum of understanding with Kamaz
relating to cooperation on the production of axles in Russia. In
addition, Kamaz is currently introducing the Truck Operating
System (TOS) that Daimler Trucks uses around the world. This
system forms the basis for the Operational Excellence initiative,
which is part of the Global Excellence strategy. The initiative con-
centrates on the rigorous reduction of material expenses and
fixed costs, as well as the optimization and standardization of
global processes and the increased flexibility of production
plants. In India, we consolidated all the country’s truck sales
activities at Daimler India Commercial Vehicles (DICV) in Chen-
nai. DICV is thus also responsible for sales and marketing of
Mercedes-Benz trucks in India. We also put our proving grounds
into operation in the spring of 2010. In China, we received
approval from the Chinese National Development and Reform
Commission (NDRC) as the first major step toward establishing
a 50:50 joint venture with the Chinese truck manufacturer Foton
Motor, with whom we signed a joint venture agreement.

In December, we signed an agreement covering the delivery of
Mercedes-Benz truck components to Finnish truck manufacturer
Oy Sisu Auto Ab. With this contract, Mercedes-Benz is opening
up a new area of business and generating additional sales poten-
tial for vehicle components. The contract involves the delivery
of Mercedes-Benz Actros cabs, engines, and transmissions for
200 to 400 vehicles each year. Heavy-duty Polar Truck models
will be assembled by Sisu and sold in Finland under the Sisu brand
name. Plans call for the first trucks to be delivered to customers
in March 2011.

The Divisions | Daimler Trucks | 129

Mercedes-Benz Vans

Mercedes-Benz Vans performed well in the year 2010 and maintained its position as market leader
in the European Union. Start of production at the new plant in Fuzhou enables us to supply the Chinese
market with locally manufactured vans. We are continuing our product offensive with new generations
of the Vito and the Viano.

Mercedes-Benz Vans

Amounts in millions of euros

2010

2009

10/09

% change

EBIT

Revenue

Return on sales

Investment in property,
plant and equipment

Research and development
expenditure

thereof capitalized

Production

Unit sales

Employees (December 31)

451

7,812

5.8%

267
29

6,215

0.4%

113

193
0

227,975

224,224

14,557

156,667

165,576

15,226

+26

-19

+38
.

+46

+35

-4

2010

2009

10/09

% change

224,224

156,775

62,193

16,404

10,482

12,528

12,151

15,884

165,576

128,134

58,185

10,980

1,604

9,453

1,302

14,103

+35

+22

+49

+553

+33

+833

+13

Unit sales

Total

Western Europe

thereof: Germany

Eastern Europe

United States

Latin America
(excluding Mexico)

China

Other markets

130

Significant increases in unit sales, revenue and EBIT following
market recovery. Mercedes-Benz Vans sold 224,200 vehicles
during the year under review. Thanks to recovering markets and
increasing demand, unit sales of the Sprinter, Vario, Vito and
Viano models were 35% higher than in 2009. At €7.8 billion
(2009: €6.2 billion), revenue was also significantly higher than
in the prior year. EBIT substantially increased from the prior
year to €451 million (2009: €26 million).

Mercedes-Benz Vans records strong increase in unit sales.
Mercedes-Benz Vans recorded major sales increases in Western
Europe, our key sales market. At 156,800 vehicles, unit sales sur-
passed the prior year’s figure by 22%. The sales situation was partic-
ularly encouraging in key Western European markets such as the
United Kingdom and France, which experienced an early and sus-
tained recovery. As a result, unit sales there grew by 43% and 45%
respectively. In Germany, unit sales increased by 7% to 62,200 vans.
In Eastern Europe, the increase in unit sales by Mercedes-Benz Vans
grew by a significant double-digit rate (+49%) in 2010.

Mercedes-Benz Vans’ new sales organization in the United States
and Canada was very successful. Since the beginning of 2010,
we have been selling the Sprinter under the Mercedes-Benz and
Freightliner brands through our retail network in North America,
which currently numbers around 180 dealers. We are benefiting
from the market success of the Sprinter, whose outstanding tech-
nology, safety, efficiency and driving performance continually set
new standards in its vehicle segment. During the year under
review, unit sales in the NAFTA region rose to 13,300 vehicles
(2009: 2,600).

Mercedes-Benz Vans sold 12,200 units in 2010 in the rapidly
expanding Chinese market for high-quality vans and premium
multi-purpose vehicles. A total of 10,700 of those vehicles
were manufactured in China, where local production commenced
in spring 2010. By starting local production, we have created
the right conditions to quickly and successfully participate in one
of the world’s largest and fastest-growing automotive markets.

The new Mercedes-Benz Viano: first class for comfort and environmental compatibility.

In 2010, Mercedes-Benz Vans was also very successful in Latin
America, where it increased its unit sales by 33% to 12,500 vehicles.
Compared with the prior year, worldwide sales of the Sprinter
rose by 37% to 143,700 units. The Vito and Viano models also
posted increases, with unit sales rising by 34% to 77,600 vehicles
during the start-up phase for the new vehicle generations.

Moreover, Mercedes-Benz Vans was able to maintain its market
leadership in the European Union’s medium-sized and large van seg-
ments. The Sprinter did particularly well, achieving a market share
of more than 18% of the large-van segment. This was the vehicle’s
biggest market share since the expansion of the European Union
to its present size.

Product offensive launched at IAA Commercial Vehicles.
In order to generate additional growth in existing markets,
Mercedes-Benz Vans also invested in the modernization and
expansion of its current product range during the year under
review. As a result, we celebrated the world premieres of four
new vans at the IAA Commercial Vehicles trade fair in Hanover,
Germany. The new Vito for commercial use features a higher
payload and is very robust, while the new Viano sets standards
for safety, comfort and driving pleasure in a large van. The two
models are also equipped with efficient, environmentally friendly
and economical engines using BlueEFFICIENCY technology.
As a result, they produce up to 15% less CO2 and consume up
to 15% less fuel than the predecessor models.

First customer vehicle rolls off the assembly line in China.
In 2010, Mercedes-Benz Vans steadily pursued its strategy, which
entails growing in new markets in addition to expanding in tradi-
tional markets and maintaining its technological leadership. In 2007,
we teamed up with Fujian Motors Group to form the first-ever van
joint venture in China. The goal here is to leverage the growth
potential of this important market. Since the start of manufacturing
operations at the new plant in Fuzhou in April 2010, the 50:50
joint venture company Fujian Daimler Automotive (FDJA) has also
been supplying the Chinese market with locally produced Vito and
Viano vans. Beginning in 2011, we will also produce a bus version
of the Sprinter in China.

Agreement reached on contract production of vans in Russia.
In December 2010, we signed a memorandum of understanding
with GAZ, a Russian manufacturer of commercial vehicles, on pro-
duction of the Mercedes-Benz Sprinter in Russia. Engines, trans-
missions, axles and other components will also be produced locally,
to be used in the Sprinter as well as in GAZ products.

Product lineup expanded. The wide-ranging strategic partner-
ship established with Renault-Nissan in April 2010 also includes
collaboration on light-duty commercial vehicles. This partnership
is an important step for Mercedes-Benz Vans with regard to
future projects and the expansion of its product range. In this
context, we will add a completely new city delivery vehicle
for commercial customers to our product lineup in 2012.

In addition to the penetration of new growth areas, Mercedes-
Benz Vans’ strategic approach focuses on the development of
environmentally friendly technologies and safety systems. At IAA
Commercial Vehicles, we also presented the Mercedes-Benz Vito
E-CELL – the world’s first series-produced all-electric van. Thanks
to its locally emission-free drive system, the Vito E-CELL is ideal
for use in inner cities and areas with very sensitive environments.
A small batch of approximately 70 Vito E-CELLs was produced
during the year under review and handed over to customers in
Berlin and Stuttgart for testing under everyday conditions.
2,000 of these vehicles are scheduled to go on the road by 2012.
Another premiere was celebrated at the IAA by the Mercedes-
Benz Sprinter LGT, which can run on either liquefied gas or gasoline.

Outstanding products impress experts and customers alike.
In 2010, the great popularity enjoyed by Mercedes-Benz vans
among customers and automotive experts alike was reflected
by several awards. Our vehicles took first place in the overall
Vans category of the annual image rankings conducted by the
“VerkehrsRundschau” automotive magazine. And the Sprinter
was ranked first among vehicles up to 3.5 tons gross vehicle
weight in the readers’ choice poll conducted by EuroTransport
Media and DEKRA to determine the best commercial vehicles
of 2010.

The Divisions | Mercedes-Benz Vans | 131

Daimler Buses

In the year 2010, unit sales at Daimler Buses almost matched the record number achieved in 2008.
We thus consolidated our global market leadership as the world’s largest manufacturer of buses
over eight tons – a position that has remained unchallenged for many years. We resolutely continue
to forge ahead with alternative drive technologies.

Daimler Buses

Amounts in millions of euros

2010

2009

10/09

% change

EBIT

Revenue

Return on sales

Investment in property,
plant and equipment

Research and development
expenditure

thereof capitalized

Production

Unit sales

Employees (December 31)

215

4,558

4,7%

223
31

39,405

39,118

17,134

183

4,238

4.3%

212
5

32,666

32,482

17,188

+17

+22

+5
+520

+21

+20

-0

2010

2009

10/09

% change

39,118

7,168

2,635

3,878

23,215

1,462

3,395

32,482

7,219

2,831

3,899

16,286

1,976

3,102

+20

-1

-7

-1

+43

-26

Unit sales

Total

Western Europe

thereof Germany

NAFTA

Latin America
(excluding Mexico)

Asia

Other markets

132

Increased demand in Latin America boosts unit sales,
revenue and earnings. With unit sales of 39,100 (2009: 32,500)
complete buses and bus chassis and revenue of €4.6 billion
(2009: €4.2 billion), Daimler Buses was the world’s leading pro-
ducer of buses and chassis over eight tons gross vehicle weight
also in 2010. The 20% increase in unit sales at Daimler Buses
was mainly the result of the positive business development for
chassis in Latin America. For market-related reasons, unit sales
in Western Europe were slightly lower than in the prior year.
At €215 million, EBIT was higher than in the prior year (2009:
€183 million), with the increase mainly due to the positive sales
development in Latin America.

Positive development of market share in key markets. In
Western Europe, the Daimler Buses brands Mercedes-Benz and
Setra offer the complete range of city buses, intercity buses and
coaches, as well as Mercedes-Benz bus chassis. Unit sales in
this region decreased by 1% to 7,200 units. Thanks primarily to our
attractive product lineup, the coach segment suffered only a moder-
ate drop in sales compared with the prior year. Unit sales of city
buses decreased significantly in 2010 due to the reluctance of pub-
lic transport operators to place new orders. On the other hand, unit
sales of bus chassis developed positively in Europe. Daimler Buses
succeeded in maintaining its leading market position in Western
Europe with a market share of approximately 30% (2009: 30%).

In the sharply contracting North American market, Daimler Buses’
unit sales decreased by 29% to 800 units in 2010. Orion hybrid
buses accounted for 32% of total unit sales in North America.

In Mexico, Daimler Buses produces and sells complete buses and
bus chassis of the Mercedes-Benz brand. This region suffered
more than any other from the economic crisis in 2009 but recovered
slightly in the year under review. Our unit sales in Mexico of 3,100
buses and chassis were 12% higher than in the prior year. With an
increase in market share to 53.6% (2009: 51.8%), Daimler Buses
further consolidated its market leadership in the country.

60 years of Setra – the ongoing success story of the bus with a unibody construction.

Bus Rapid Transit. With highly efficient transport solutions such
as Bus Rapid Transit (BRT), Daimler Buses is helping to meet the
rising demand for mobility in a sustainable way. BRT is an efficient
and affordable transportation system that consists of one or more
separate lanes on which high-capacity buses travel at frequent inter-
vals. They are linked to intelligent computer-controlled traffic man-
agement systems, such as those used for traffic-light prioritization.
In addition to real-time traffic management, this makes it possible
for operators to offer high-speed transportation. It is also possible
to quickly establish bus routes with BRT. These systems have been
introduced at many locations, including South Africa, where they
played a role during the 2010 soccer World Cup. At that event,
Daimler Buses contributed its expertise on intelligent transporta-
tion systems and delivered 460 Mercedes-Benz buses.

Expansion of activities in India’s promising market. Daimler
Buses is consistently expanding its involvement in India. In early
2010, Daimler Buses presented its new three-axle coach for the
luxury segment at Auto Expo in New Delhi. The coach comes with
a Mercedes-Benz chassis and the body is assembled by the Indian
partner company, Sutlej Motors Ltd. We delivered a total of around
100 buses to Indian bus operators in 2010.

In Latin America (excluding Mexico), Daimler Buses was able to
boost sales of Mercedes-Benz bus chassis by 43% to 23,200 units,
after markets there had rebounded significantly. Our unit sales
in the region therefore returned to their pre-crisis level, enabling
Daimler Buses to increase its market share in the region to 47.1%
(2009: 44.7%).

Daimler Buses resolutely continues to forge ahead with
alternative drive technologies. A total of 16 Mercedes-Benz
Citaro G BlueTec hybrid buses have been delivered to customers
since the vehicle was first presented to the public in 2009. These
hybrid buses are being tested successfully in six European cities.
Thanks to their pioneering drive technology, they are the only buses
to date that can travel for up to five kilometers at a stretch solely
on electric power.

In addition, the Clean Hydrogen in European Cities (CHIC) project
was launched in Cologne in 2010. This EU-funded project makes
it possible to integrate 26 fuel-cell buses into regular-service opera-
tions in five European cities. Daimler Buses is one of at least three
manufacturers participating in the project and is supplying fuel-cell
hybrid buses. The project marks an important step on the path
toward the comprehensive introduction and marketing of hydrogen-
powered fuel-cell buses. The aim is to gradually create fleets of
fuel-cell buses and the required infrastructure. In the next step, the
experience gained during the project will be incorporated into the
creation of fuel-cell fleets and infrastructures in 14 European regions.

In this way, Daimler Buses is promoting the spread of locally emis-
sion-free drive technology and responding to the global challenges
we face today. As a result of climate change, global population growth
and urbanization, all modes of transport should supplement one
another in an effective and networked system. Buses play a key role
in this endeavor.

The Divisions | Daimler Buses | 133

Daimler Financial Services

The financial services business recovered distinctly during the year under review. Asia provided signifi-
cant impetus and our operations in North and South America were very profitable again. Daimler Financial
Services continued to be among the top performers in terms of customer and dealer satisfaction.

Daimler Financial Services

Amounts in millions of euros

2010

2009

10/09

% change

In Germany, Mercedes-Benz Bank’s contract volume was at the
prior-year level of €16.1 billion. The deposit volume in the direct
banking business decreased from €12.6 billion to €10.9 billion as
we shifted our focus from liquidity to profitability during the year.

EBIT

Revenue

New business

Contract volume

Investment in property, plant
and equipment

Employees (December 31)

831

12,788

29,267

63,725

6,742

11,996

25,066

58,350

6,800

+17

-14

-1

Strong performance by the financial services division. Daimler
Financial Services’ business developed very favorably during the
year under review. Worldwide contract volume of €63.7 billion
was 9% higher than the prior-year level. Adjusted for exchange-
rate effects, contract volume grew by 3%. New business increased
by 17% to €29.3 billion. Adjusted for exchange-rate effects,
the increase was 11%. EBIT was very high at €831 million
(2009: €9 million).

Successful continuation of “Captive #1.” Daimler Financial
Services continued to implement its “Captive #1” strategic
program during the year under review. The aims of this program
include further improving customer and dealer satisfaction,
boosting efficiency and profitability, and achieving sustainable
growth. Due to the global economic and financial crisis, the
division’s focus was on reducing costs and ensuring sufficient
refinancing in 2009. However, sustainable profitable growth
is now once again playing a greater role at Daimler Financial
Services. This is especially true in the Chinese and Brazilian
markets, and the scheduled launch of operations in India in 2011
promises to generate additional growth.

Business remains stable in Europe. Our financial services
business remained stable in Europe in 2010. At €29.2 billion,
contract volume was 2% higher than a year earlier. Adjusted for
exchange-rate effects, there was a slight increase of 1%. New
business of €14.8 billion was 8% higher than the prior-year level.

Developments were very mixed in European markets during the
year under review. Some Central and Eastern European countries
continued to suffer from the effects of the global financial and
economic crisis. In those countries, the division focused on strength-
ening its collections management and improving remarketing
processes. Contract volume once again grew significantly in other
European markets such as Portugal (+23%), Sweden (+17%) and
the United Kingdom (+16%). Growth was also achieved in Russia
(+25%).

Business reorganized in Germany. Daimler Financial Services
and Mercedes-Benz Bank have decided to reorganize their busi-
ness activities in Germany. In October, we reached an agreement
with the employee council on the basic principles of the realign-
ment. In particular, it stipulates that by the end of 2012, all business
activities will be concentrated at three locations in Germany
instead of the current nine. In the medium term, this reorganization
will generate cost advantages of about €40 million each year.

As a result of the reorganization, the headquarters of Daimler
Financial Services will move in 2012 from Berlin to Stuttgart,
where it will be co-located under one roof with the headquarters
of Mercedes-Benz Bank. Mercedes-Benz Bank will set up a new
service center in Berlin by 2012, where it will concentrate its
functions for the commercial financial services business for
Daimler vehicles, which is currently carried out at eight branches
and at the Mercedes-Benz Bank headquarters in Stuttgart.

Growth in North and South America. Contract volume of
€25.9 billion in North and South America was 13% higher than in
2009. Adjusted for exchange-rate effects, there was an increase
of 4%. New business increased by 22% to €10.9 billion. Daimler
Financial Services grew noticeably in Mexico, Brazil and Argen-
tina, with contract volume rising by a total of 30% to €4.1 billion.

134

Daimler Financial Services attracted many new customers last year; new business increased by a significant 17 percent.

Mercedes-Benz Financial Services expanded its offering for
smart phones and other mobile internet devices in the United
States, allowing flexible and convenient payment of leasing and
financing installments. Beginning in the second quarter of 2010,
all Mercedes-Benz dealerships in the USA were equipped with
Apple iPads®, which enable sales staff to directly access the dealer
system at the point of sale. This step not only increases the
flexibility and effectiveness of sales negotiations, but also makes
it easier for customers to return leased vehicles.

Strong growth in Asia. Contract volume rose by 28% to €8.7
billion in the Africa & Asia/Pacific region. Adjusted for exchange-
rate effects, contract volume increased by 7%. New business
of €3.6 billion was 45% higher than in the prior year.

All of the region’s markets contributed to this expansion. Growth
was particularly strong in China, where contract volume rose
by 101% to €958 million. Contract volume increased by double-
digit rates also in other markets of the region, including South
Korea (+51%), Thailand (+28%), Australia (+25%), South Africa (+24%)
and Japan (+14%). With the rapid growth in the region, risk manage-
ment has continued to be a priority to assure continued portfolio
quality.

Growing business with insurance. The Insurance Services
unit brokered more than 839,000 policies worldwide in 2010,
representing an increase of 22% compared with the prior year.
This growth was achieved by effectively combining insurance
services with leasing and financing products, service contracts
and additional safety features in the vehicles. Other growth
factors included the consistent utilization of business opportu-
nities in growth markets such as China and the increased
brokerage of insurance products to cash buyers.

In 2010, Daimler Financial Services concluded further partner-
ship agreements with international insurance companies. For
example, it signed a framework agreement with Allianz SE regu-
lating the two companies’ collaboration in the global motor
insurance business. The contracts stipulate that damaged vehicles
are to be brought to Mercedes-Benz repair shops. With this
agreement, we ensure that our customers receive top-quality
service while also generating additional business for our spare
parts and repair business.

Growth in the fleet business with commercial customers.
During the year under review, Daimler Financial Services once
again expanded its business with commercial customers and
fleet operators. It played a major role in supporting sales and
increasing the proportion of financed Mercedes-Benz vehicles
in commercial fleets. At 112,000 units, new business in this
segment was 35% higher than in the prior year. Contract volume
rose by 5% to 303,000 units. This shows that Daimler Financial
Services’ high level of reliability during the financial and economic
crisis and the resulting rise in customer trust are now paying off.
The products offered in this segment range from financing, leasing
and full-service leasing to fleet management services for owner-
operators and major international customers.

Top rankings for customer and dealer satisfaction. Daimler
Financial Services achieved top marks in a number of global
customer and dealer satisfaction surveys during the year under
review. Mercedes-Benz Financial Services in the United States
came in first in the overall dealer satisfaction category of the
J. D. Power survey. Mercedes-Benz Bank in Germany was once
again voted the best premium-segment financial services provider
in the Autohaus BankenMonitor 2010 survey. In the United King-
dom, Mercedes-Benz Financial Services once again took first place
in the Sewells survey of dealer satisfaction. Mercedes-Benz
Financial Services was voted number one also in an AC Nielsen
survey of dealer satisfaction in Australia and in industry-wide
dealer satisfaction surveys in Russia, Portugal and the Czech
Republic.

Toll Collect system continues to run smoothly. The system
for collecting truck tolls on German highways continued to run
smoothly and without any disturbances. A total of 665,600
on-board units for automatic toll collection were in use at the end
of the year. Tolls were collected for a total distance of 25.8 billion
kilometers during 2010. Daimler Financial Services holds a 45%
stake in the Toll Collect consortium.

The Divisions | Daimler Financial Services | 135

Daimler is committed to the principle of sustainability and has
a holistic view of this issue. So for us, economic, social and ecological
responsibility are inseparable from each other.

Sustainability

138 - 139 Sustainability at Daimler

– 125 years of sustainability
– The principle of sustainability is a fixed element of our

corporate strategy

– Goal of sustained increase in enterprise value
– Daimler Sustainability Board supplements established

management structures

– Intensive dialogue with stakeholders

140 - 143 Innovation, Safety and the Environment

– €4.8 billion invested in research and development
– Further reductions in fuel consumption and CO2 emissions
– Fuel-efficient and environmentally friendly engines for cars

and commercial vehicles

– Four zero-emission vehicles in series production
– Innovative concepts for urban mobility
– New technologies for more safety

144 - 145 Human Resources

– Slight workforce growth
– Measures taken to ensure future supply of qualified staff
– Employees qualified in new technologies
– Promotion of diversity throughout the Group
– High standard of health care

146 - 147 Social Responsibility

– Social commitment as an element of our corporate activities
– Clear regulations for the award of project funds
– Disaster relief provided in Haiti and Pakistan
– Support for various neighborhood projects at our sites

Detailed reporting on the issue of sustainability.
Detailed information is provided in our separate Sustainability
Report. It describes transparently and factually the sustainability
aspects of the past year.

The web-based Interactive Sustainability Report supplements our
sustainability reporting with additional details and information
(http://sustainability2010.daimler.com).

In 2011, the new Sustainability Report will be available as of the
middle of April in time for the Annual Shareholders’ Meeting.

Further information on the subject of sustainability can be found
on our website at http://www.daimler.com/sustainability

Sustainability | Contents | 137

Sustainability at Daimler

Sustainability is an integral part of our corporate strategy. Efficient management structures support
the implementation of sustainability policies in all of our divisions. We continued the intensive dialogue
with our stakeholders in 2010.

– Environmental sustainability: Environmental protection,

innovation and safety are the biggest challenges our company
faces in its commitment to sustainability. Our passenger cars
and commercial vehicles are among the leaders in their respec-
tive market segments in terms of environmental protection
and safety. As we explore new mobility concepts, we are extend-
ing our focus beyond the vehicle itself and are testing environ-
mentally compatible approaches to urban mobility. Also in the
production of our vehicles, we carefully plan every production
step to be as environmentally compatible as possible.

– A sustainable society: Daimler regards itself as an active

member of our society. That is why we are committed to acting
in the best interests of our employees, our customers and the
people who live and work near our business locations. After all,
we benefit from highly motivated and well-qualified employees,
satisfied customers and good relations with our stakeholders
that are based on mutual trust. We want to create value for
society, and through our donations, sponsorships and founda-
tions, we help people in need, promote intercultural under-
standing, and support the arts, culture, education, science and
sports.

Management structures that promote sustainability. Since
2008, the Daimler Sustainability Board has been complementing
and networking our established sustainability management
structures and supporting the divisions in their implementation of
measures that promote sustainability. In May 2009, Dr. Thomas
Weber, the Daimler Board of Management member responsible
for Group Research and Mercedes-Benz Cars Development,
became the new chairman of this top-level committee.

125 years of the automobile. Carl Benz changed the world on
January 29, 1886. He registered his “vehicle with gas-engine
drive” under patent number 37435 with the Berlin Patent Office.
This date marks the birth of the automobile, and the roots
of today’s Daimler AG reach back to that time. Sustainability is
an essential condition for such a long and successful corporate
history. Only sustainable business practices can secure a company’s
continued existence, growth and financial success over the long
term. Not least for that reason, we feel bound in the tradition of
our founders, Carl Benz and Gottlieb Daimler, to the principle
of sustainability.

Our sustainability strategy. We intend to enhance the value of
our company over the long term. And we can do that only if we
define value creation holistically and measure the success of our
business operations not only in terms of financial figures but also
in terms of their social acceptance. The principle of sustainability
is therefore an essential component of our corporate strategy.
In addition, we are firmly committed to the ten principles of the
Global Compact, the labor standards of the International Labor
Organization (ILO), and the OECD guidelines for multinational
companies.

Effective and coordinated strategies and initiatives ensure that
sustainability principles are firmly established in our business
operations. These strategies are firmly anchored in our Group-wide
sustainability management system by means of concrete actions
and measurable target indicators:

– Economic sustainability: Profitable growth and long-term
business success ensure our commitment to sustainable
development. As the technological pacemaker of the automo-
tive industry, we aim to stand out because of our top perfor-
mance and to shape the future of safe and environmentally
friendly mobility. The foundation of our business operations
is corporate management based on a sense of responsibility,
building on systematic corporate governance and unequivocal
principles of compliance, and demanding irreproachable ethical
behavior from every single employee and manager.

138

Locally emission-free around the world: Three Mercedes-Benz B-Class F-Cell cars demonstrate Daimler’s claim

to leadership in the field of sustainable mobility.

Another task of the Sustainability Board is to analyze and evaluate
our Group’s performance in the area of sustainability. Whenever
they see room for improvement, the members of this committee
develop decision-making tools. In cooperation with the Sustain-
ability Office, which operates at the working level, the Sustainability
Board supports the Board of Management in its efforts to develop
a consensus concerning issues relevant to sustainability.

Our stakeholders: a corrective force on the road to sustain-
ability. Back in 2008, we intensified the dialogue with our stake-
holders and established the Daimler Sustainability Dialogue.
This annual forum brings scientists, politicians and other public
figures together with representatives of Daimler’s top manage-
ment. The aim is to promote an in-depth dialogue concerning critical
issues and to engage in a joint search for practical solutions.

A total of 130 participants came together at the third Daimler
Sustainability Dialogue, which was held in Stuttgart in November
2010. After an introductory talk by Dr. Dieter Zetsche, the event
focused on workshops dealing with the following issues: electric
mobility, sustainable mobility systems, job security during the
economic crisis, demographic developments, human rights, supplier
management and community relations. The results of the work-
shops will be further developed in the following 12 months, and
they will serve as starting points for the next Sustainability
Dialogue.

In July 2010, we were one of the first German companies to
initiate a dialogue with stakeholders in China on the issue of
sustainability. The conference under the title of Daimler Sustain-
ability Forum – Ethical Standards and Corporate Social Respon-
sibility was held in the United Nations pavilion in the Expo Park
in Shanghai.

Voluntary commitment to responsible actions. In Berlin on
November 25, 2010, top executives and entrepreneurs from 21
German companies signed a “Mission statement for responsible
actions in business.” With the other signatories, Daimler sub-
scribes to the social market economy and fair rules in global com-
petition. Based on six principles, the chief executives and
managing directors committed to a style of management oriented
towards success and values compatible with the social market
economy. According to this mission statement, competition is
essential but profits may not be achieved by illegally harming
third parties. In addition, the companies see it as a duty to con-
tinually search for ways to utilize resources for the benefit of
mankind, and thus to do business more sustainably. The principles
included in this mission statement are to be put into practice
together with employees and social partners, and are to become
a constitutive element of the management process.

Transparent reporting on sustainability. We published our
first sustainability report in 1993, thus laying the foundation for
our ongoing reporting on sustainability issues. The year 2010
saw the publication of our sixth Group-wide sustainability report,
360 DEGREES, which is prepared in accordance with the guide-
lines of the Global Reporting Initiative (GRI). It provides a detailed
and comprehensive sustainability analysis of the previous finan-
cial year and is supplemented by an interactive online sustainability
report that contains more detailed and extensive information
(http://sustainability.daimler.com). We will present the new
sustainability report at the Annual Shareholders’ Meeting in
mid-April 2011.

The electronic Daimler Sustainability Newsletter provides
information at regular intervals about our activities in the area
of sustainability. You can subscribe to the newsletter at
sustainability@daimler.com. Further information is available online
at http://sustainability.daimler.com

Sustainability | Sustainability at Daimler | 139

Innovation, Safety and the Environment

Research and development have always played a key role at Daimler. Our goal is to make mobility safe
and sustainable by means of innovative vehicles and customized transportation concepts. To achieve this
goal, we develop fascinating automobiles, cutting-edge drive concepts and trendsetting safety systems.

in many small steps. What is therefore required is a differentiated
approach, which is reflected by Daimler’s customer-focused
threefold drive-system mix:

– We are optimizing the fuel efficiency of conventional vehicles.
– We are developing hybrid drive systems - particularly for large

cars, buses and light-duty trucks for delivery service.

– And we are working on all-electric drive systems that use batteries

and fuel cells.

Research results and the experience we have gained through our
successful large-scale projects for the testing of alternative
vehicle and drive concepts have allowed us to create the precon-
ditions for driving with zero local emissions. In addition, we
have expanded our company’s business operations into future-
oriented areas such as the development and production of
lithium-ion batteries and fuel-cell drive. What’s more, our strategic
partnerships provide us with direct access to the key technol-
ogies of the future.

Further reductions in fuel consumption and CO2 emissions.
Thanks to combustion engines that have been optimized in
numerous ways, downsizing concepts featuring superchargers,
and new transmission systems, we have significantly reduced
the fuel consumption and CO2 emissions of our cars and commer-
cial vehicles over the past several years. Our range of car
engines was almost completely updated in 2009 and 2010, allow-
ing us to offer a broad spectrum of vehicles that consume little
fuel despite their outstanding driving performance. We were able
to further reduce the CO2 emissions of our fleet of new vehicles
in 2010, even though the proportion of high-performance premium
automobiles has grown. Our extensive range of particularly
economical BlueEFFICIENCY models contributed to this reduction
in fuel consumption. As a result, the CO2 emissions of our entire
fleet of cars in the European Union decreased to 158 grams per
kilometer in 2010, despite various opposing effects such as
a market shift towards larger cars.

Innovation from tradition. In the tradition of our founders Carl
Benz and Gottlieb Daimler, research and development have
always played a key role at our company. This is particularly true
today, when we are faced with the task of reinventing the auto-
mobile because of the accelerated pace of technological develop-
ment and the challenges posed by climate change and environ-
mental protection. We invested a total of €4.8 billion in research
and development in 2010 (2009: €4.2 billion). At the end of
2010, approximately 22,100 men and women were employed at
Corporate Research and in the development departments of
Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans and
Daimler Buses.

Patents provide evidence of innovative strength. The inven -
tion of the automobile was followed at Daimler and its predeces-
sor companies in the past 125 years by more than 80,000
patents registered worldwide, whereby quality has always had
priority over quantity. This is shown for example by the Patent
Asset Index of WHU – Otto Beisheim School of Management:
Daimler is ahead of the competition in terms of competitive
impact per patent, a key indicator for companies’ innovative
strength. Today, Daimler has a wide-ranging patent portfolio
of more than 19,600 industrial property rights and a broad spec-
trum of trademarks and protected designs.

Our goal is emission-free mobility. The automobile is entering
a new era. Oil reserves are finite, and their use is contributing
to climate change. At the same time, the need for mobility is grow-
ing worldwide, and individual transport is steadily increasing,
with associated effects on the climate and the environment in
general. Our aim is therefore to substantially reduce our vehicles’
fuel consumption and emissions here and now, and to completely
eliminate them in the long term. We develop innovative vehicle
concepts that are specifically designed to safeguard the mobility
of future generations. One of the primary technological develop-
ments in this respect is the electrification of the powertrain. Over
the past 30 years, Daimler engineers have applied for patents
on more than 750 inventions for electric vehicles with battery drive
and more than 1,000 inventions for fuel-cell drive, of which more
than 380 were in the area of lithium-ion technology. The path to
electric mobility will not be taken in one great leap but instead

140

E-drive on the move: pre-series electric vehicles from Daimler.

BlueDirect engines set new fuel-efficiency standards. Innova-
tive technologies will enable us to further reduce the fuel con-
sumption and CO2 emissions of our vehicles. The BlueDirect V6
and V8 engines with third-generation gasoline direct injection,
which we introduced in late 2010, will help make this possible, as
they set the fuel efficiency standards in this segment. In combi-
nation with the enhanced seven-speed 7G-TRONIC PLUS automatic
transmission, the standard-fitted ECO start/stop function, and
the new reduced-friction converter technology, these new engines
can cut fuel consumption by more than 20%. We have set our-
selves the goal of reducing the average CO2 emissions of our
new-vehicle fleet in the European Union to less than 140 g/km
by 2012. We are steadily introducing fuel-efficient technologies
in all vehicle segments, as demonstrated by models such as
the S 250 CDI BlueEFFICIENCY, which is the world’s first “five-
liter” vehicle in the luxury segment. It is also the first car in its
class with CO2 emissions of less than 150 grams per kilometer.

Environmentally friendly technologies for trucks and buses.
BLUETEC is not only one of Daimler’s key technologies, but also
a synonym for diesel engines for cars and commercial vehicles
with low pollutant emissions and enhanced fuel economy. Back
in 2005, we introduced the first Mercedes-Benz Actros heavy-duty
truck with BLUETEC technology. As the pioneer of this technology,
Daimler Trucks has consistently improved the system. We now
offer BLUETEC not only in Western Europe but also in North
America and Japan. We had sold more than 380,000 BLUETEC
commercial vehicles by the end of 2010. That indicates how
well this technology is being accepted by our customers, and
it contributes considerably to cutting fuel consumption and
pollutant emissions.

The EEV (Enhanced Environmentally Friendly Vehicle) emissions
standard for engines is even stricter than Euro 5, requiring one-
third lower particulate emissions. To meet this standard, we have
further enhanced our engines and the BLUETEC technology.
As a result, we now can meet the stringent emission limits even
without additional exhaust gas aftertreatment. Daimler Trucks
is now expanding its range of environmentally friendly vehicles
by gradually introducing EEV variants into certain power classes
of trucks and buses. BlueTec EEV has been part of the expanded
range of the Mercedes-Benz Econic since January 2010. In Feb-
ruary 2010, the Fuso Canter became Daimler’s first vehicle to be
delivered as an EEV-compliant truck in all power classes as standard.

In the context of a voluntary commitment signed by various truck
manufacturers, we are pursuing the goal of reducing the CO2
emissions of the heavy-duty trucks (above 12 tons) we sell in
Europe compared with the base year of 2005 by an average
of 20% per ton-kilometer by the year 2020.

Four zero-emission vehicles in series production. At the end
of 2009, the Mercedes-Benz B-Class F-CELL and the smart
fortwo electric drive became the first locally emission-free vehicles
manufactured by Daimler under series-production conditions
(see page 124). They were followed last year by the Vito E-CELL
van and the Mercedes-Benz A-Class E-CELL. The Vito E-CELL,
which has been delivered to customers since September, is a
fully fledged van for everyday use and is the world’s first electric
van to be series produced. With a payload of about 900 kilograms
and a fully usable cargo area, the Vito E-CELL can take on all
of the usual transport tasks for a vehicle of its class. This quiet,
zero-exhaust van was produced in a small batch of 100 vehicles,
of which 50 are being used in Berlin and the others in the greater
Stuttgart area. Another 2,000 units of this innovative van will
be manufactured in early 2011. The A-Class E-CELL has battery-
electric drive. The vehicle is fully suited for everyday use and
as a family car, and its two highly efficient lithium-ion batteries
give it a range of more than 250 km (NEDC). The approximately
500 units of the vehicle are being delivered to selected customers
in several European countries for use as full-service rental cars.

Fuel cells in everyday use. Due to their range and suitability for
everyday use, electric vehicles with fuel cells are a promising
alternative to conventional automobiles as we head toward sustain-
able mobility. With its numerous patents and the world’s most-
tested fleet of fuel-cell vehicles, Daimler leads the development
of fuel-cell technology for automotive use. The latest generation
of our fuel-cell vehicles includes the B-Class F-CELL and the Citaro
FuelCELL Hybrid bus. The B-Class F-CELL boasts superior driving
performance and demonstrates its suitability for everyday use in
many ways, such as offering a range of about 400 km. A total
of approximately 200 B-Class F-CELL vehicles are scheduled to
be produced and tested in everyday use by customers in Germany
and the United States.

Sustainability | Innovation, Safety and the Environment | 141

Citaro G BlueTec Hybrid: milestone for fuel efficiency and low emissions.

The Mercedes-Benz Citaro FuelCELL Hybrid bus features a highly
ecological concept. It generates no pollutant emissions and is
almost noiseless, making it ideal for use in congested downtown
areas. To date, a total of 36 Mercedes-Benz Citaro fuel-cell
buses have proven their worth with 12 public transport operators
on three continents. Mercedes-Benz buses have demonstrated
the suitability of fuel-cell drive for everyday use in more than
140,000 hours of operation, during which they were driven
more than 2.2 million kilometers.

German Sustainability Award for the Mercedes-Benz Atego
BlueTec Hybrid. The prize presented in November 2010 by
the German Sustainability Award Foundation honors companies
that combine business success with social responsibility and
nature conservation. The award jury came to the conclusion that
the Mercedes-Benz Atego BlueTec Hybrid is an environmentally
friendly vehicle with which Daimler is setting benchmarks world-
wide. The Mercedes-Benz Atego’s innovative hybrid drive marks
the first time that Daimler is offering this especially low-emission
technology in Europe ex works. Parallel hybrid drive reduces
fuel consumption and exhaust emissions by up to 15% and also
makes it possible to reduce noise. The first batch of 50 Atego
BlueTec Hybrids was delivered to German customers in the distri-
bution sector in early 2011. The Mercedes-Benz Atego BlueTec
Hybrid underscores our position as the world market leader for
hybrid-drive commercial vehicles.

The Mercedes-Benz Citaro G BlueTec Hybrid in everyday use.
The new Citaro G BlueTec Hybrid buses, which have been put
into service in several European cities since early 2010, cut die-
sel consumption and CO2 emissions by 20 to 30% and operate
without emissions and almost noiselessly for portions of a route.
To date, the Citaro G BlueTec Hybrid is the only hybrid bus that
can cover some of its route almost noiselessly while running
solely on electricity, without using the diesel engine. Propulsion
is provided by four electric wheel-hub motors that obtain their
electricity from one of the world’s largest lithium-ion batteries in
mobile use. If required, electricity can also be provided by a gener-
ator driven by a diesel engine that is relatively small for the Citaro’s
vehicle class. Electricity is also generated when braking during
downhill driving, for example.

142

Innovative concepts for urban mobility. Existing infrastructure
and transportation systems are increasingly reaching their limits,
particularly when it comes to fulfilling the need for fast and com-
fortable transport in metropolitan areas. But these are exactly
the applications that offer great opportunities for new and sus-
tainable mobility concepts such as car2go, car2gether, and Bus
Rapid Transit.

The innovative car2go mobility concept, which we launched in
Ulm, Germany, in March 2009 and in Austin, Texas, in November
2009, is particularly notable for its flexibility. The car2go vehicles
are distributed throughout their respective operating areas,
where they can be rented on the spur of the moment, used as
long as desired, and left in any parking space within the system’s
operating area. The number of customers in Ulm rose to more than
20,500 in 2010, and over 230,000 rental contracts were pro-
cessed completely automatically. In Austin, meanwhile, around
15,000 users rented the vehicles more than 120,000 times. In
response to this success, car2go will now be introduced in addi-
tional cities worldwide. Beginning in spring 2011, for example,
we will offer car2go in Hamburg, Germany, in cooperation with
the car rental company Europcar. The vehicle used will be the
smart car2go edition – the world’s first car-sharing automobile to
be produced for this purpose ex works. Among other things, this
model has a more fuel-efficient gasoline engine, automatic trans-
mission with start/stop function, an all-new generation of telematic
systems and a solar roof.

Following car2go, Daimler developed another innovative urban
mobility concept known as car2gether, which was launched last
autumn with two pilot projects in Ulm and Aachen, Germany.
The concept encompasses an online ride-sharing community and
takes advantage of the many communication possibilities of
mobile Internet applications. This system enables users to organize
ride-sharing opportunities on their smartphones while they are
on the go or on their computers at home, almost in real time.
Daimler is the world’s first automaker to test this kind of mobility
in a pilot project, investigating the potential of a smart and
mod ern ride-sharing service that was designed especially for
metropolitan areas.

Active blind-spot assistant: an innovation for active safety.

Daimler is relying on Bus Rapid Transit (BRT) solutions to meet
the growing transportation needs of large cities and regions that
are undergoing rapid population growth. BRT systems consist
of one or more trunk lines with regular service buses traveling at
frequent intervals and fed by several feeder lines coming from
all parts of a city. Separate bus lanes with their own traffic-light
settings enable the vehicles to make quick progress even
during rush hour. In addition, the system is easily adaptable to
each city’s specific conditions. Daimler Buses has a team of
experts providing support with the planning, implementation, and
enhancement of customized BRT systems. BRT is already being
successfully used in cities such as Nantes, Istanbul, Bogotá, and
Mexico City.

On the “Road to Accident-free Driving.” Vehicle safety is one
of our core areas of expertise and a key component of our prod-
uct strategy. No other manufacturer worldwide invests more in
the development of life-saving safety systems than Daimler. For
more than 60 years, our developments have led the way world-
wide in safety for cars, trucks, vans, and buses. We regard our
commitment to enhancing road safety as an expression of our
sense of responsibility toward society and an approach that is in
the interest of all road users. That is why we are systematically
progressing along the “Road to Accident-free Driving.” This endeavor
is also being honored by third parties. For example, the indepen-
dent European safety association Euro NCAP recognized the
Mercedes-Benz brand with two Euro NCAP Advanced Rewards for
its PRE-SAFE® occupant protection system and PRE-SAFE® brake
assistance system in 2010.

Innovations boost active safety. In order to further boost active
safety, we expanded our range of proven technologies – the anti-
lock braking system (ABS), Electronic Stability Program® (ESP®),
Brake Assist Plus, and PRE-SAFE® braking - by adding two new
safety innovations in 2010: Active Blind Spot Assist and Active
Lane Keeping Assist. In the commercial vehicle sector, the sec-
ond generation of Active Brake Assist marks another milestone in
safety innovation.

Active Blind Spot Assist warns the driver when it detects the
risk of a collision during a lane change. To make this possible,
short-range radar sensors monitor the area immediately adjacent
to and behind the vehicle. In addition to issuing a warning, Active
Blind Spot Assist uses ESP® to brake the wheels on the opposite
side of the vehicle so that the automobile leaves its collision
course. A display in the instrument cluster warns the driver at the
same time. If an accident cannot be avoided despite the adjust-
ment of the vehicle’s direction, Active Blind Spot Assist can still
reduce the severity of the impact.

Active Lane Keeping Assist, which is also connected to ESP®,
kicks in when the vehicle crosses a solid line to the right or left of
the lane without the driver activating the turn-indicator light.
In this case, Active Lane Keeping Assist uses ESP® to brake the
opposing wheels in order to prevent the vehicle from leaving
the lane. A display in the instrument cluster warns the driver at
the same time. If the vehicle crosses a broken lane marking,
the system activates an electric motor in the steering wheel. This
produces a brief vibration – a subtle but effective command to
counter steer immediately.

In commercial vehicles, additional safety is provided by Active
Brake Assist 2. Like its predecessor, this system uses radar to
continuously determine how a vehicle’s speed differs from that
of the vehicle ahead of it. However, the new version also measures
the distance to stationary obstacles. If an accident becomes
unavoidable with unchanged vehicle speed and direction, the driver
initially receives a visual warning in the form of an illuminated
red triangle, after which an alarm also sounds. If the situation
becomes more critical, the system initiates braking. The warning
system is designed in such a way that drivers can get out of criti-
cal situations without requiring the system to automatically
brake the vehicle. For this reason and to avoid endangering any
vehicles coming up from behind, Active Brake Assist responds
to stationary obstacles with only 50% of the maximum braking
force. Mercedes-Benz’ Active Brake Assist 2 has certain major
advantages over systems that are currently under development.
For one thing, the proven radar technology is not affected by
weather or lighting conditions, and it is also active throughout
a truck’s entire speed range.

Sustainability | Innovation, Safety and the Environment | 143

Human Resources

Our employees are provided with high-quality training and support. We aim to ensure that we have
a competitive workforce also in the future. In response to demographic developments, we have
launched a variety of initiatives designed to maintain and strengthen the performance of our workforce
and to attract young employees with high potential.

Human Resources

Employees (December 31)

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Sales & Marketing Organization

Daimler Financial Services

Other

2010

2009

10/09

% change

260,100

256,407

96,281

71,706

14,557

17,134

48,299

6,742

5,381

93,572

70,699

15,226

17,188

47,625

6,800

5,297

-4

-0

-1

Workforce development. As of December 31, 2010, the Daimler
Group employed 260,100 men and women worldwide. This figure
was 3,693 more than in the prior year. The increase was caused on
the one hand by additions to the consolidated Group, which were
mainly companies incorporated into the Mercedes-Benz Cars division
and the sales and marketing organization. On the other hand,
personnel numbers increased due to the upturn in demand as well.
Further information on the development of our workforce – in
particular in the individual regions and divisions – is povided in
the Management Report on page 86 of this Annual Report.

Comprehensive range of training courses. Providing our em-
ployees with high-quality training and support is one of our key
concerns. We regard employee development as a continuing pro-
cess, which is why we begin our activities in daycare centers
and schools. Our Genius initiative, for example, provides children
and teenagers with valuable insights into pioneering technologies
and careers in the automotive industry in order to get them excited
about engineering professions and Daimler at an early age.

144

Training continues to have a very high priority at Daimler, and is
maintained at a recognized high level of quality. Training courses
for technical and commercial professions as well as programs
at the Cooperative State University are key elements of our efforts
to secure young talent so that our company will remain success-
ful over the long term.

We had 8,841 apprentices and trainees worldwide at the end of
2010 (2009: 9,151). A total of 2,034 young people (2009: 2,341)
began their occupational training in Germany during the year
under review. Apprentices who perform well are offered attrac-
tive job opportunities. In 2010, 84% of the apprentices at Daimler
AG were hired after completing their training (2009: 89%). The
number of people we train and subsequently hire is based on our
company’s needs and future development. We have an agree-
ment with the employee council regarding the number of appren-
ticeships we will offer in the medium term. At Daimler AG,
these apprenticeships totaled 1,250 in 2010; there will be 1,150
in 2011 and 1,050 in 2012.

Securing and promoting young talent. In 2010, we once again
provided more than 500 university graduates and young people
with initial work experience worldwide with first-class entry-level
positions in which to begin their careers. Through our CAReer
corporate talent program, we focused our hiring efforts on strate-
gic areas such as green technology. Women currently comprise
35% of CAReer participants, and our trainees come from about
20 different countries. Our Daimler Student Partnership (dsp)
program, which currently has approximately 100 active partici-
pants, also contributes substantially to strategically securing and
promoting young talent at the company. We aim to contact
potential new employees and attract them to our company while
they are still at university.

We are also investing in our existing human resources through
new Daimler Academic programs. They enable outstanding
employees to earn bachelor’s, master’s, or MBA degrees either
by studying full-time or while working. The first batch of employ-
ees to be supported in this manner began their studies in the
winter semester of 2010. In a future step, the program will be
expanded to countries outside Germany.

Employees with many different skills and experience work together at Daimler on shaping the future of the automobile.

In addition to the advancement of women, we are also focusing
on many other aspects of diversity, including topics such as
generation management and internationality.

Healthy employees in a healthy company. Daimler provides
workplace-related preventive support to ensure that its employ-
ees remain healthy over the long term. Highly qualified emer-
gency medical personnel provide accident victims with first aid
at our company locations. Our plant medical services assist
employees who are suffering from health-related problems or
require occupational health examinations. We take preventive
action against increased physical strain and the associated health
risks by incorporating ergonomic measures and assessment
methods, whose suitability has been proven in labor research,
into the entire product-creation process.

Another method that is greatly helping employees to stay healthy
is integration management. One focus of these activities is on
reintegrating employees with disabilities. In 2010, we created
binding regulations and guidelines for dealing with health data
throughout Germany in order to support responsible and success-
ful management behavior.

A “thank you” to our workforce. The Board of Management
would like to take this opportunity to thank all of our employees
for their support during the crisis and for their efforts during
the subsequent phase of recovery. Without the flexibility of our
workforce, this achievement would not have been as great as
it was. We would also like to thank the employee representatives
for their great commitment and constructive cooperation.

Employee qualification. “You never stop learning” is an expres-
sion that has been true for many generations and is becoming
even more relevant today. As a result of our employees’ own moti-
vation and our targeted range of qualification programs and
courses, we ensure that our employees can exercise the full range
of their capabilities, particularly with regard to new technologies.
In the year under review, we invested €202 million in the training
and continuing education of our employees in Germany alone
(2009: €207 million); each of our employees received on average
2.3 days of training in 2010 (2009: 2.4 days).

We apply a range of different qualification measures to maintain
our technological leadership. We are the leading company in
Germany in the training and further training of electrical special-
ists, for example. Since 2006, more than 1,000 employees at
Daimler AG in Germany have been trained in high-voltage tech-
nology. Over the next three years, more than 30,000 executives
and employees throughout the Group are scheduled to take part
in the Green Qualification Program, which offers training courses
in environmentally friendly technologies. The participants will
include specialists along the entire value chain (from development
to sales and service) worldwide.

Diversity management. In its commitment to a varied work-
force and diversity management, Daimler is promoting employee
diversity, creating networks and making the company fit for the
future. This is because diversity management is a success factor
not only from a social point of view but also from an economic
one.

Diversity management has been established at Daimler since
2005. One of its focuses is on promoting women to executive
positions (gender diversity). At the end of 2010, the proportion of
executive positions at the Daimler Group around the world that
were held by women was 9%. We intend to increase this propor-
tion to 20% by the year 2020. This objective takes account of
industry-specific facts and constitutes a realistic target on the
basis of the current workforce situations of 13.5% women at
Daimler AG and 15% at the Daimler Group. Another important
aspect that we have considered in setting an appropriate target
is the proportion of female students of engineering subjects.
This is currently between 5 and 20% in Western Europe.

Sustainability | Human Resources | 145

Social Responsibility

We regard our social commitment as a fundamental element of our business activities. We therefore
support the interests of society as a whole and are involved in the communities where we do business.
In 2010, we continued our activities in the areas of corporate volunteering, foundations and community
relations, and we supported various initiatives with donations and sponsorship.

The reasons for our policy of social commitment. Our
company interacts in many different ways with its social envi-
ronment in all the places where we have business locations.
We regard these relationships as both an opportunity and an
obligation. They affect the roles we play as an employer, client,
service provider and automaker, as well as our overall sense of
being a corporate citizen. We aim to create value for all of our
stakeholders. That is why we are involved in society in general
and at our business locations, and why we help to develop
regulatory frameworks for society.

We regard this as a fundamental component of our business
activities. We provide social support through donations, spon-
sorship, corporate volunteering, foundations and community
relations – with a clear focus on certain themes. We promote
cultural activities, education, science, sports and health, as well
as charitable projects, and we also provide speedy short-term
assistance for the victims of natural catastrophes. In the process,
we take into account the specific requirements of our business
locations as well as the interests of society in general, and we
prioritize close contacts with local communities and social
institutions.

Transparent management. We set high quality standards for
our social involvement and we have created transparent struc-
tures and clear lines of responsibility for our distribution of financial
aid. Our Donations and Sponsorship Committee makes its
decisions on the basis of well-defined support criteria. We regis-
ter all of the Group’s activities in the areas of donations and
sponsorship in a database. In 2009, we also approved sponsor-
ship guidelines as a basis for a transparent awards process.
It is designed to help ensure that our donations are in compli-
ance with current legal requirements and ethical standards.

We decide on specific regional areas of activity in close coordi-
nation with our national subsidiaries and production locations.
In 2010, Daimler provided financial support totaling more than
€51 million for socially oriented projects and charitable institu-
tions. In addition, we increased the capital of the Daimler and
Benz Foundation by €88 million.

We also act in accordance with clear guidelines when making
donations to political parties. According to these rules, dona-
tions to political parties generally require authorization from the
Board of Management and are at present only permitted for
parties in Germany.

Donations. Our donation activities focus on the promotion of
science and education, support for charitable projects, and
disaster relief. Because disaster relief has to be quick and effec-
tive, we established a special process for it in 2009. This enabled
us to react promptly to the earthquake in Haiti in January and
the catastrophic floods in Pakistan in July and August 2010, and
to support the appropriate aid projects.

Since 2009, Daimler has also supported, among other institu-
tions, Deutsche Cleft-Kinder-Hilfe, a charitable organization that
supports the comprehensive treatment of children with cleft
palates all over the world. In India, we funded the construction
of a new aid center in Mumbai aimed at helping local people to
help themselves, and we are supporting its ongoing operation.

Sponsorship in the fields of education, sports and culture.
Through our sponsorship activities, we aim to promote sustain-
able development in key areas of social responsibility. This refers
in particular to education, the environment, the arts and culture
in those places where we have business locations. For example,
we have been a sponsor of the Stuttgart Staatsgalerie art
museum for many years, thus creating cultural and educational
opportunities for Daimler employees and their families and
many others.

146

With Genius, Daimler aims in particular to get girls interested in science and technology.

Since 2007, Mercedes-Benz has cooperated with the German
Soccer Association to award an annual Integration Award in
line with the motto “Soccer: many cultures – one passion.” The
award pays tribute to soccer projects for children and young
people that promote integration. Offering material and financial
support with a total value of €150,000, the Integration Award
is one of the largest financial awards in Germany in the area of
social commitment.

Corporate volunteering and other activities for the common
good. We consider it important to be a good neighbor at our
business locations, and we therefore participate in local social
projects focusing on education and training. In 2010, we estab-
lished “Genius - Daimler’s Young Knowledge Community” in order
to get more children and young people enthusiastic about tech-
nology and the natural sciences.

In addition, many of our employees volunteer to work in neigh-
borhood projects. For example, Daimler Financial Services employ-
ees have been working since 2005 in the “Beyond Basics” pro-
gram at Thirkell Elementary School in Detroit, Michigan, which
promotes the education of pupils from socially disadvantaged
families. A total of 650 children participated in the program in 2010.
During the Day of Caring, which Daimler Financial Services
organized once again at 15 locations all over the world last year,
a total of approximately 2,000 employees donated their time
and skills to help socially disadvantaged people.

Support through foundations. In a number of countries, we
have established foundations that enable us to focus our initia-
tives that address social issues. They include the Daimler and
Benz Foundation, which was founded in Germany in 1986, the
Daimler Fund in the German Donors’ Association for the Promo-
tion of Sciences and Humanities, and the Daimler Foundation in
Japan, which supports charitable projects and cultural programs.
At the end of 2010, on the occasion of the 125th anniversary of
the automobile, the Board of Management decided to increase
the capital of the Daimler and Benz Foundation to €125 million.

The Laureus Sport for Good Foundation, of which Daimler is
a co-founder, uses the power of sports to address the social chal-
lenges of our time. It is now one of the world’s biggest social
initiatives. The foundation has the support of 46 legendary
sportsper sons and is actively involved in 80 socially oriented
sports projects on every continent. It has meanwhile helped
more than one million children and young people.

Community relations. As an employer and customer, we aim to
help enhance the competitiveness of the regions in which we
operate and help them meet their social, environmental and educa-
tional policy challenges. That is why we participate in solving
regulatory issues and shaping political frameworks. The issues
we discuss with political decision-makers include the traffic
infrastructure, new mobility concepts and electric mobility.

More details of projects supported by the Group and activities
related to our social commitment can be found in the Daimler
Sustainability Report and on our website under the heading of
“Sustainability” (www.daimler.com/sustainability).

Sustainability | Social Responsibility | 147

Daimler’s Board of Management and Supervisory Board are committed
to the principles of good corporate governance. All of our activities are
based on the principles of responsible, transparent and sustainable
management and supervision.

Corporate Governance

150 - 151 Report of the Audit Committee

160 - 165 Corporate Governance Report

152 - 157 Remuneration Report

– Principles of Board of Management remuneration
– Board of Management remuneration in 2010
– Commitments upon termination of service
– Remuneration of the Supervisory Board

158 - 159 Compliance

– Compliance principles
– Compliance organization
– Systematic compliance risk management
– Highest expectations also of business partners
– Comprehensive compliance services and worldwide training

– Our understanding and general conditions
– Daimler’s corporate bodies
– Shares held by the Board of Management and

the Supervisory Board

– Directors’ dealings
– Risk management, financial reporting and transparency
– Integrity

166 - 167 Declaration of Compliance with the

German Corporate Governance Code

– Deviations from the recommendations of the Code
– Deviations from the suggestions of the Code

Corporate Governance | Contents | 149

Report of the Audit Committee

Dear Shareholders,

Seven meetings of the Audit Committee were held in 2010.
These meetings were regularly attended by, in addition to the
members of the Audit Committee, the Chairman of the Super-
visory Board, the Chairman of the Board of Management, the
member of the Board of Management responsible for Finance and
Controlling (CFO), and the external auditors. The heads of
specialist departments were also present for the appropriate items
of the agenda. In addition, the Chairman of the Audit Committee
held regular individual discussions, for example with the external
auditors, the CFO, the heads of Corporate Accounting, Internal
Auditing, Corporate Compliance and Legal, and the Group’s inde-
pendent Compliance Monitor. The Chairman of the Audit Com-
mittee first informed the Audit Committee about the results of those
bilateral discussions. The Chairman of the Audit Committee then
reported to the Supervisory Board about the activities of the Com-
mittee and about its meetings and discussions in the following
Supervisory Board meetings.

In a meeting in mid-February 2010 attended by the external audi-
tors, the Audit Committee dealt with the preliminary figures of
the annual company and consolidated financial statements, pos-
sible alternatives for a dividend proposal, and the recommenda-
tion of the Board of Management not to pay a dividend. In view of
the unusual crisis conditions in the year 2009 and the Group’s
net loss for that year, the Audit Committee recommended to the
Supervisory Board that the recommendation of the Board of
Management should be followed and that no dividend proposal
should be made to the shareholders at the Annual Shareholders’
Meeting. The preliminary figures were published at the Annual
Press Conference on February 18, 2010.

In a meeting attended by the external auditors at the beginning
of March 2010, the Audit Committee dealt with the annual
company financial statements, the annual consolidated financial
statements and the combined management report for Daimler
AG and the Daimler Group for the year 2009, each of which had
been issued with an unqualified audit opinion by the external
auditors. In preparation, the members of the Audit Committee and
the other members of the Supervisory Board were provided with
comprehensive documentation, including the Annual Report, the
audit reports of KPMG on the annual financial statements of
Daimler AG and the annual consolidated financial statements
according to IFRS, the combined management report for Daimler AG
and the Daimler Group, drafts of the reports of the Supervisory
Board and of the Audit Committee, and the annual report according
to Form 20-F. Reports by the Internal Auditing department and
the external auditors revealed no indications of any deficiencies of

150

the internal control and risk management system. As a result, the
Audit Committee recommended that the Supervisory Board
should approve the annual financial statements and once again
affirmed its recommendation to the Supervisory Board to adopt
the recommendation of the Board of Management that no dividend
proposal should be made to the shareholders at the Annual Share-
holders’ Meeting. Also in this meeting, the Audit Committee dealt
with the draft agenda of the 2010 Annual Shareholders’ Meeting,
with the annual audit plan of the Internal Auditing department for
the year 2010, and accepted an activity report from the Corpo-
rate Compliance department. Furthermore, the Audit Committee
dealt with the fees paid to the external auditors in the year 2009,
discussed the fees agreed for the year 2010, and approved a list
of permissible non-audit services to be provided by the external
auditors in the 2010 financial year.

The Audit Committee regularly examined the qualifications and
independence of the external auditors and the implementation
of the principles decided upon for the approval of non-audit ser-
vices provided by the external auditors. After receiving the
approval of the Annual Shareholders’ Meeting, the Audit Commit-
tee engaged KPMG AG, Wirtschaftsprüfungsgesellschaft, Berlin,
to conduct the 2010 annual audit, negotiated the audit fee of the
external auditors, determined the important audit issues for the
year 2010, and informed the Supervisory Board accordingly.

In the meetings during the year 2010 relating to the quarterly
results, the Audit Committee dealt with the interim financial
reports including the related risk reports. In those meetings, it
accepted reports on the provision of non-audit services by the
external auditors and activity reports from the Corporate Compli-
ance department, the Internal Auditing department and the
independent Compliance Monitor. In this context, the Chairman
of the Audit Committee is also involved in setting and evaluating
the annual compliance targets for the Board of Management.

The Audit Committee also dealt with notifications that were
received confidentially, and if desired anonymously, through the
Group’s own whistleblower system and processed internally by
the Business Practices Office.

Another key area of the Audit Committee’s work in 2010 was its
own duties of control, which had been made more specific by the
German Accounting Law Modernization Act (BilMoG). In this
context, the Committee held an additional meeting in which it dealt,
supported by statements from the external auditors and the

Bernhard Walter, Chairman of the Audit Committee.

Internal Auditing department, with the effectiveness of the exist-
ing systems of internal control and risk management, of internal
auditing and of compliance management, also going beyond the
area of accounting. For this purpose, the Audit Committee dealt
with the activity reports of the Internal Auditing and Corporate
Compliance departments, as well as with the systematic aspects
of risk management and risk reporting and with the functionality
of the systems in use. For many years, a key element of the
Group’s internal control system has been internal control over
financial reporting in accordance with Section 404 of the Sar-
banes-Oxley Act. In this context, the Audit Committee held a dis-
cussion with the Board of Management about the continuation
under other conditions of external audits according to Section 404
of the Sarbanes-Oxley Act, which are no longer mandatory due
to deregistration with the US SEC and delisting from the New York
Stock Exchange. Concerning this matter, in the meeting of the
Audit Committee in July, Daimler presented a risk-oriented approach
for reviewing the accounting-related internal control systems
that had previously been discussed with the external auditors,
which provides for the external auditors to issue a statement
of opinion containing the results of their (future) audit of this
issue. The Committee also received the annual activity report of
the Group’s Data Protection Officer and received information
on Treasury risk management and investment strategy, on the
extent of the Group’s insurance cover and on the status and
management of the pension funds. Other matters discussed at
the additional meeting were the method of calculating key
financial indicators at Daimler, the ongoing development of account-
ing regulations resulting from the German Accounting Law
Modernization Act (BilMoG), amendments to the International
Financial Reporting Standards, and fundamental legal ques tions
relating to the activities of members of the Supervisory Board
and the Audit Committee.

In a meeting in September 2010, the Audit Committee dealt
with the results and recommendations of the first report of the
Compliance Monitor. The stage of implementation and the
requirements for the further development of internal guidelines
for securing compliance were discussed intensively.

management report for Daimler AG and the Daimler Group and the
proposal made by the Board of Management on the appropria-
tion of profits. In preparation, the members of the Audit Commit-
tee and the other members of the Supervisory Board were pro-
vided with comprehensive documentation, some of which was in
draft form, including the Annual Report, the audit reports of
KPMG on the annual financial statements of Daimler AG and the
annual consolidated financial statements according to IFRS,
the combined management report for Daimler AG and the Daimler
Group, and drafts of the reports of the Supervisory Board and
of the Audit Committee. It was no longer necessary to prepare a
report according to Form 20-F due to the delisting and deregis-
tration in the United States. The audit reports and significant
accounting matters were discussed with the external auditors.
The Audit Committee of Daimler AG also dealt with the monitoring
of the accounting process, the effectiveness of the system of
internal control, of the risk management system and of the internal
auditing system, and questions of compliance including anti-
trust issues. This includes the further development and required
adjustments within the Group-wide compliance structures and
activities that were decided upon by the Board of Management.
Following intensive reviews and discussion of the documentation,
the Audit Committee recommended that the Supervisory Board
should approve the annual financial statements and adopt the
Board of Management’s proposal on the appropriation of profits.
The Audit Committee also approved the report of the Audit
Committee in its current version. Furthermore, in that meeting,
the Audit Committee also dealt with the draft agenda of the
2011 Annual Shareholders’ Meeting and the annual audit plan
of the Internal Auditing department.

As in previous years, the Audit Committee once again conducted
a self-evaluation of its own activities in 2010. This did not result
in any need for action with regard to the Committee’s tasks or with
regard to the content or procedure of its meetings.

Stuttgart, February 2011

The Audit Committee

In two meetings attended by the external auditors at the end of
February 2011, the Audit Committee reviewed the annual com-
pany financial statements for 2010 and the annual consolidated
financial statements for 2010 together with the combined

Dr. h. c. Bernhard Walter
Chairman

Corporate Governance | Report of the Audit Committee | 151

Remuneration Report

On the basis of the approved remuneration system, the Super-
visory Board decides at the beginning of the year on the base and
target remuneration for the individual members of the Board of
Management and decides upon the success parameters relevant
for the variable components of remuneration in the coming year.
Furthermore, once a year, individual goals are agreed for the com-
ing year between the Chairman of the Supervisory Board, the
Chairman of the Board of Management and each member of the
Board of Management for his specific area of responsibility;
these goals are then taken into consideration after the end of the
financial year when the annual bonus is decided upon by the
Supervisory Board.

In this way, the individual base and target remuneration and the
relevant performance parameters are set by the beginning of
each year. These details require the approval of the Supervisory
Board.

On this basis, after the end of each year, target achievement
is measured and the actual remuneration is calculated by the
Presidential Committee and submitted to the Supervisory Board
for its approval.

The system of Board of Management remuneration in 2010.
The remuneration system continues to comprise a fixed base
salary (approximately 20% of the target remuneration), an annual
bonus (approximately 30% of the remuneration), and a variable
component of remuneration with a medium-term and long-term
incentive effect (approximately 50% of the target remuneration).
The latter reflects the recommendations of the German Corporate
Government Code through its link to the share price and to addi-
tional challenging comparative parameters, and takes account of
both positive and negative developments. The details of the
system are as follows:

The base salary is fixed cash remuneration relating to the entire
year, oriented towards the area of responsibility of each Board
of Management member, and paid out in twelve monthly install-
ments. In the first six months of 2010, this was reduced due
to a voluntary waiver in the context of the economic crisis by the
members of the Board of Management of 15% of their base
salaries, effective as of May 1, 2009.

The Remuneration Report summarizes the principles that are
applied to determine the remuneration of the Board of Manage-
ment of Daimler AG and explains both the level and the structure
of its members’ remuneration. It also describes the principles
and level of remuneration of the Supervisory Board. The Remu-
neration Report is part of the Management Report for Daimler AG
and for the Group.

Principles of Board of Management remuneration

Goals. The remuneration system for the Board of Management
aims to remunerate its members commensurately with their
areas of activity and responsibility and in compliance with appli-
cable law, so that Daimler is an attractive employer also for
first-class executives. By means of adequate variability, the
system should also clearly and directly reflect the joint and
individual performance of the Board of Management members
and the long-term sustainable performance of the Group.

Practical implementation. For each upcoming financial year,
the Presidential Committee at first prepares a review by the
Supervisory Board of the system and level of remuneration on
the basis of a comparison with competitors. The main focus is
on checking for appropriateness, based on a horizontal and verti-
cal comparison. In this context, the following aspects are given
particular attention in relation to a group of comparable companies
in Germany:

– the effects of the individual fixed and variable components, that
is, the methods behind them and their reference parameters,
– the relative weighting of the components, i.e. the relationship
between the fixed base salary and the short-term and long-
term variable components,

– the ratio of an average employee’s salary to that of a member
of the Board of Management, and the resulting target remuner-
ation consisting of base salary, annual bonus and long-term
remuneration, also with consideration of entitlement to retire-
ment pension and fringe benefits.

In carrying out this review, the Presidential Committee and the
Supervisory Board consult independent external advisors, above
all to facilitate a comparison with remuneration systems common
in the market. If the review results in a need for changes to the
remuneration system for the Board of Management, the Presiden-
tial Committee submits proposals for such changes to the entire
Supervisory Board for its approval.

152

The annual bonus is variable cash remuneration, the level
of which is primarily linked to the operating profit of the Daimler
Group (EBIT), a set of targets determined by the Supervisory
Board and the actual result for the prior year, and optionally to
other key figures and targets (for 2010: total shareholder
return and compliance) as well as the individual performance of
the Board of Management members in the past financial year.

Reference parameters:
– 50% relates to a comparison of actual EBIT in 2010 with EBIT

targeted for 2010.

– 50% relates to a comparison of actual EBIT in 2010 with actual

EBIT in 2009.

Amount with 100% target achievement:
In the year 2010, 1.5 times the base salary, set with consider-
ation of a market comparison.

Range of target achievement:
0 – 200%, i.e. the annual bonus has an upper limit of three times
the base salary and may also be zero.

On the basis of the resulting degree of target achievement,
depending on predefined key figures, an amount of up to 10% can
be added or deducted. Furthermore, the Supervisory Board has
the possibility, based for example on the aforementioned agreed
targets, to take account of the personal performance of the
individual Board of Management members with an addition or
deduction of up to 25%.

Once again in 2010, additional individual targets were agreed
upon with the Board of Management with regard to the develop-
ment and sustained function of a compliance system. The com-
plete or partial non-achievement of individual compliance targets
can be reflected by a deduction of up to 25% from the individual
target achievement. However, the compliance targets cannot result
in any increase in individual target achievement, even in the case
of full accomplishment.

The Performance Phantom Share Plan is an element of remu-
neration with long-term incentive effects. Its opportunity and
risk potential is primarily linked with the development of Daimler’s
share price through the granting of phantom shares. At the
beginning of the plan, medium-term performance targets are set
for a period of three years whose accomplishment has an effect
on the number of phantom shares that are earned. Payouts under
the 2010 plan occur after four years in cash at the price of Daimler
shares that is then valid. For the granting of phantom shares, the
Supervisory Board specifies an absolute amount in euros in the
context of setting the annual target remuneration. The number of
phantom shares granted is calculated by dividing that amount
by the relevant average share price over a long period. This average
price is definitive not only for granting phantom shares under
the new plan, but also for payment under the plan granted four
years previously. Half of the net amount paid out must be used
to buy ordinary Daimler shares until the guidelines for share
ownership are fulfilled (see below); those shares must then be
held permanently.

Reference parameters for Plan 2010:
– 50% relates to the Group’s return on sales compared with a

group of competitors (BMW, Fiat, Ford, Honda, Paccar, Renault,
Toyota, Volvo and Volkswagen). For the measurement of this
success criterion, the competitors’ average return on sales is
calculated over a period of three years, whereby the best
and worst value is not taken into consideration. The extent that
Daimler’s return on sales deviates by plus or minus two per-
centage points from the average thus calculated is deemed
to be the range of target achievement. This means that target
achievement is 200% if Daimler’s return on sales is two
percentage points or more above the calculated average.
Target achievement is 0% if Daimler’s return on sales is two
percentage points or more below the calculated average.

– 50% relates to the Group’s return on net assets in relation to cost
of capital. This criterion stands for the value created by the
Group. The extent that Daimler’s return on net assets deviates
over a period of three years by plus or minus two percentage
points from a target of 8% is deemed to be the range of target
achievement. This means that target achievement is 200% if
Daimler’s return on net assets is 10% or more. Target achieve-
ment is 0% if Daimler’s return on net assets is 6% or less.

Value upon allocation:
Determined annually in relation to a market comparison; for
2010, approximately 2 to 2.5 times the base salary.

Range of target achievement:
0 to 200%, i.e. the plan has an upper limit and may also be zero.

Value of the phantom shares on payout:
In line with the calculated share price and the number of shares
achieved according to the aforementioned criteria. Payout is in
any case limited to 2.5 times the share price at the beginning of
the plan.

During the four-year period, the phantom shares earn a dividend
equivalent whose amount is related to the dividend paid on real
Daimler shares in the respective year. With regard to share-based
remuneration, any subsequent change in the defined perfor-
mance targets or reference parameters is ruled out.

Guidelines for share ownership. As a supplement to these
three components of remuneration, Stock Ownership Guidelines
have been approved for the Board of Management. These guide-
lines require the members of the Board of Management to invest
a portion of their private assets in Daimler shares over several
years and to hold those shares until the end of their Board of Man-
agement membership. The number of shares to be held has been
set in relation to triple the annual base salary for the Chairman
of the Board of Management and double the annual base salary for
the other members of the Board of Management. In fulfillment
of the guidelines, half of the net payment made out of a Perfor-
mance Phantom Share Plan is generally to be used to acquire
ordinary shares in the Company, but the required shares can also
be acquired in other ways.

Corporate Governance | Remuneration Report | 153

Board of Management remuneration in 2010

Total Board of Management remuneration in 2010. The total
remuneration granted by Group companies to the members of
the Board of Management of Daimler AG is calculated as the total
of the amounts of remuneration paid in cash (base salary and
annual bonus), the value of the share-based remuneration at the
time when granted in February 2010 (Performance Phantom
Share Plan – PPSP), and taxable non-cash benefits. The share
price relevant for the payout amount of the PPSP in four years’
time can deviate significantly from the share price relevant when
granted.

Total remuneration comprises €4.8 million as fixed, i.e. non-per-
formance-related remuneration (2009: €4.8 million) €13.5 million
as short-term variable remuneration, i.e. short-term performance-
related remuneration (2009: €1.8 million), and €7.5 million as
variable performance-related remuneration with a long-term
incentive effect granted in 2010 (2009: €5.2 million). This adds
up to a total of €25.8 million for the year 2010 (2009: €11.8
million).

Implementation of the Act on the Appropriateness of Man
agement Board Remuneration/Adjustment of the remuner
ation system in 2011. Against the backdrop of the German
Act on the Appropriateness of Management Board Remuneration
(VorstAG), the Supervisory Board of Daimler AG commissioned
an expertise on the system of Board of Management remuneration
by external auditors in late 2009. As a result, the remuneration
system described above was confirmed as complying with the
provisions of applicable law. On this basis and due to the diffi-
cult economic situation at the beginning of the year, the Supervi-
sory Board decided not to change the remuneration system
in 2010. This remuneration system was approved by the Annual
Shareholders’ Meeting in April 2010 with a majority of 95.97%
of the votes cast.

The 2010 Annual Shareholders’ Meeting was already informed
about the adjustment of remuneration as of the year 2011. The
total of base salary and annual bonus will be divided equally
between those two components. This change at first has the effect
of a neutral shift within the target remuneration from the annual
bonus to the fixed salary. As a result, the target bonus has been
reduced from 1.5 times the base salary to the same amount
as the base salary, thus reducing the maximum amount of annual
bonus to be paid to 200% of the fixed salary. The range of target
achievement and the reference parameters remain unchanged.
In addition, the annual bonus is no longer paid out after the end
of the year in full, but only 50%. The rest is paid out one year later
in the form of a bonus/malus (reward/penalty) arrangement,
depending on the development of Daimler’s share price compared
with an automotive index (Auto-STOXX, see pages 22 ff.), which
Daimler uses as a criterion for the relative performance of its share
price.

Board of Management remuneration 2010

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard

Wilfried Porth

Andreas Renschler 1

Bodo Uebber 2

Dr. Thomas Weber

Total

Base salary

Waiver

Short-term vari-
able remuneration
(annual bonus)

Long-term variable remuneration (PPSP)
Number Value when granted
(2010: at share price €30.61)
(2009: at share price €18.82)

2010
2009

2010

2010
2009

1,530
1,530

472

535
382

575
575

660
660

545
545

4,317
3,692

115
- 153

39
- 53

43
- 58

50
- 66

41
- 55

318
- 385

4,819
689

1,487

1,679
172

1,771
305

2,079
297

1,679
245

80,269
114,967

29,554

32,108

35,829
51,317

38,383
54,975

34,078
48,809

13,514
1,708

250,221
270,068

2,457
2,164

905

983

1,079
966

997
930

1,043
919

7,464
4,979

Total

8,691
4,230

2,834

3,158
501

3,382
1,788

3,686
1,821

3,226
1,654

24,977
9,994

1 PPSP amount after deduction of remuneration of €17,732 received as a board member of an affiliated company.
2 PPSP amount after deduction of remuneration of €177,321 received as a board member of an affiliated company.

154

Once again, basic salaries were reduced due to the voluntary
waiver by the members of the Board of Management of 15% of
their base salaries, which was in effect from May 1, 2009 until
June 30, 2010. The increase in the total of base salaries compared
with the prior year reflects the increased number of Board of
Management members.

The table on page 154 shows the base salaries and variable
remuneration of the active members of the Board of Management
for the year 2010 compared with 2009. It is necessary to take
into consideration that Dr. Bernhard was newly appointed to the
Board of Management with effect as of February 18, 2010.

The granting of taxable non-cash benefits in kind, i.e. primarily
the provision of company cars and the reimbursement of
expenses for security precautions, resulted in benefits for the
members of the Board of Management worth the following
amounts:

Taxable non-cash benefits and other benefits

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard

Wilfried Porth

Andreas Renschler
Bodo Uebber 1
Dr. Thomas Weber

Total

2010

2009

133

101

148

217

162

813

112

346

251

114

252

1,075

1 2010: Including an anniversary bonus of €55,000.

Commitments upon termination of service

Retirement provision. The pension agreements of some Board
of Management members include a commitment to an annual
retirement pension, calculated as a proportion of the former base
salary and depending on the number of years of service. Those
pension rights were granted until 2005 and remain valid, but have
been frozen at that level.

Retirement pensions start upon request when the term of service
ends at or after the age of 60, or are paid as disability pensions
if the term of service ends before age 60 due to disability. The
agreements provide for a 3.5% annual increase in benefits
(with the exception of that Wilfried Porth’s benefits will be adjusted
in accordance with applicable law). The agreements include a
provision by which a spouse of a deceased Board of Manage-
ment member is entitled to 60% of that member’s pension.
The amount can increase by up to 30 percentage points depend-
ing on the number of dependent children.

Effective as of January 1, 2006, we substituted the pension
agreements of the Board of Management members with a new
arrangement, the so-called pension capital system. Under this
system, each Board of Management member is credited with a
capital component each year. This capital component com-
prises an amount equal to 15% of the sum of the Board of Man-
agement member’s fixed base salary and the annual bonus
that was actually achieved, multiplied by an age factor equivalent
to a certain rate of return, at present 6% (Wolfgang Bernhard
and Wilfried Porth: 5%). The benefit from this pension plan is pay-
able at the age of 60 at the earliest.

Corporate Governance | Remuneration Report | 155

Service costs for pension obligations according to IFRS
amounted to €1.945 million in 2010 (2009: €1.660 million).
The present value of the total defined benefit obligation accord-
ing to IFRS amounted to €49.327 million at December 31, 2010
(December 31, 2009: €41.588 million). Taking age and period
of service into account, the individual entitlements, service costs
and present values are as follows:

Individual entitlements, service costs and present values for Board of Management pension plans in 2009/2010

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard

Wilfried Porth

Andreas Renschler

Bodo Uebber

Dr. Thomas Weber

Total

Annual pension
(as regulated
until 2005)
as of age 60

Service cost
(for pension and
pension capital)

Present value
of obligations
(for pension and
pension capital)

1,050
1,050

156
156

250
250

275
275

300
300

2,031
2,031

712
629

205

118
88

243
215

397
362

270
240

1,945
1,534

26,149
22,706

410

3,715
3,002

6,102
5,078

5,357
4,301

7,594
6,501

49,327
41,588

2010
2009

2010

2010
2009

Commitments upon early termination of service. No sever-
ance payments are foreseen for Board of Management members
in the case of early termination of their service contracts. Solely
in the case of early termination of a service contract by mutual
consent, Board of Management service contracts include a
commitment to payment of the base salary and provision of a
company car until the end of the original service period. Such
persons are only entitled to payment of the performance-related
component of remuneration pro rata for the period until they
leave the Company. Entitlement to payment of the performance-
related component of remuneration with a long-term incentive
effect is defined by the exercise conditions specified in the respec-
tive plans. For the period beginning after the end of the original
service period, departing Board of Management members can
receive payments in the amounts of the pension commitments
granted as described in the previous section, as well as the use
of a company car. In the case of those persons receiving pay-
ments until the age of 60, possibly reduced due to other sources
of income, the aforementioned increased amounts also apply.

Sideline activities of Board of Management members. The
members of the Board of Management should accept manage-
ment board or supervisory board positions and/or any other
administrative or honorary functions outside the Group only to a
limited extent. Furthermore, members of the Board of Manage-
ment require the consent of the Supervisory Board before com-
mencing any sideline activities. This ensures that neither the time
required nor the remuneration paid for such activities leads
to any conflict with the members’ duties to the Group. Insofar as
such sideline activities are memberships of other supervisory
boards or comparable boards, they are disclosed in the Notes to
the Consolidated Financial Statements of Daimler AG and on
our website. No remuneration is paid to Board of Management
members for board positions held at other companies of the
Group.

Loans to members of the Board of Management. In 2010,
no advances or loans were made to members of the Board of
Management of Daimler AG.

Payments made to former members of the Board of Manage-
ment of Daimler AG and their survivors. Payments made in
2010 to former members of the Board of Management of Daimler
AG and their survivors amounted to €17.5 million (2009: €16.1
million). Pension provisions for former members of the Board
of Management and their survivors amounted to €197.1 million
at December 31, 2010 (2009: €192.8 million).

156
156

Remuneration of the Supervisory Board

Supervisory Board remuneration in 2010. The remuneration
of the Supervisory Board is determined by the Shareholders’
Meeting of Daimler AG and is governed by the Company’s Articles
of Incorporation. The new regulations for Supervisory Board
remuneration approved by the Annual Shareholders’ Meeting in
April 2008 specify that the members of the Supervisory Board
receive, in addition to the refund of their expenses and the cost
of any value-added tax incurred by them in performance of
their office, fixed remuneration of €100,000, with three times
that amount for the Chairman of the Supervisory Board, twice
that amount for the Deputy Chairman of the Supervisory Board
and the Chairman of the Audit Committee, 1.5 times that amount
for the chairmen of the other Supervisory Board committees
and members of the Audit Committee, and 1.3 times that amount
for members of the other Supervisory Board committees. Mem-
bers of a Supervisory Board committee are only entitled to remu-
neration for such membership if the committee has actually
convened to fulfill its duties in the respective year. If a member of
the Supervisory Board exercises several of the aforementioned
functions, he or she is to be remunerated solely for the function
with the highest remuneration.

In April 2009, the Supervisory Board decided to make a solidarity
contribution with regard to the measures taken to reduce labor
costs, and to waive 10% of the members’ respective components
of individual remuneration for the period of May 1, 2009 until
June 30, 2010.

The individual remuneration of the members of the Supervisory
Board is shown in the table below.

The members of the Supervisory Board and its committees
receive a meeting fee of €1,100 for each Supervisory Board
meeting and committee meeting that they attend.

Except for the remuneration paid to the members of the Super-
visory Board representing the employees in accordance with their
contracts of employment, no remuneration was paid for services
provided personally beyond the aforementioned board and com-
mittee activities, in particular for advisory or agency services.

The remuneration paid in 2010 to the members of the Supervisory
Board of Daimler AG for their services to the Group therefore
totaled €2.7 million (2009: €2.6 million).

Loans to members of the Supervisory Board. In 2010, no
advances or loans were made to members of the Supervisory
Board of Daimler AG.

Supervisory Board remuneration

Name

In euros

Dr. Manfred Bischoff
Erich Klemm 1
Dr. Paul Achleitner

Sari Baldauf

Dr. Clemens Börsig

Prof. Dr. Heinrich Flegel

Dr. Jürgen Hambrecht
Jörg Hofmann 1
Dr. Thomas Klebe 1, 3
Gerard Kleisterlee

Arnaud Lagardère
Jürgen Langer 1
Ansgar Osseforth 4
Valter Sanches 2
Dr. Manfred Schneider
Stefan Schwaab 1
Jörg Spies 1
Lloyd G. Trotter

Function(s) remunerated

Total in 2010

Chairman of the Supervisory Board, the Presidential Committee and the Nomination Committee

Deputy Chairman of the Supervisory Board, the Presidential Committee and the Audit Committee

Member of the Supervisory Board (since April 14, 2010)

Member of the Supervisory Board

Member of the Supervisory Board and the Audit Committee

Member of the Supervisory Board

Member of the Supervisory Board and the Presidential Committee

Member of the Supervisory Board

Member of the Supervisory Board (until April 14, 2010)

Member of the Supervisory Board

Member of the Supervisory Board, the Presidential Committee and the Nomination Committee

Member of the Supervisory Board and the Audit Committee

Member of the Supervisory Board (since January 5, 2010)

Member of the Supervisory Board

298,543

208,672

73,934

102,301

155,982

102,301

148,583

101,201

25,644

103,291

136,973

158,072

102,305

102,301

Dr. h.c. Bernhard Walter
Uwe Werner 1
Lynton R. Wilson
1 The employee representatives have stated that their board remuneration is to be transferred to the Hans-Böckler Foundation, in accordance with the

Member of the Supervisory Board and Chairman of the Audit Committee

Member of the Supervisory Board and the Nomination Committee

Member of the Supervisory Board

205,592

102,301

133,893

guidelines of the German Trade Union Federation. The Hans-Böckler Foundation is a German not-for-profit organization of the German Trade Union Federation.

2 Mr. Sanches has directed that his board remuneration is to be paid to the Hans-Böckler Foundation.
3 Dr. Klebe also received remuneration and meeting fees of €13,700 for his board services at Daimler Luft- und Raumfahrt Holding AG.

These amounts are also to be transferred to the Hans-Böckler Foundation.

4 Mr. Osseforth has directed that a portion of his board remuneration is to be paid to a German foundation for adult education (“Treuhandstiftung Erwachsenenbildung”).

Corporate Governance | Remuneration Report | 157

Compliance

Our understanding of compliance and our principles. Integ-
rity is one of our four corporate values. It is the foundation of our
actions and of our success as a globally active group of compa-
nies. We are convinced that financial success can only be sustain-
able if it is achieved legally and correctly. What does compliance
mean in this context? We understand it as adherence to all appli-
cable laws, rules and regulations and to our related internal
guidelines. We can only establish a sustained culture of compli-
ance if each individual internalizes the rules and accepts
responsibility. Correct business practice and sustainable growth
are closely interlinked, because in the long term, communities
of values are also communities of value creation. In 2010, we car-
ried out for the first time a survey on our Integrity Code and
our anti-corruption guidelines, in order to gain an overview of our
employees’ attitude and knowledge. The results of the survey
will help us to improve the quality of the guidelines and the related
processes.

Settlement with the US authorities. The investigations in the
United States of Daimler AG and three other companies of the
Group concerning possible violations of the Foreign Corrupt Prac-
tices Act were terminated on April 1, 2010. In the coming years,
Judge Louis Freeh, a former US federal judge and director of the
FBI, will regularly report to the US authorities on the effective-
ness of our compliance program in the role of our Compliance
Monitor. The Group fully supports the Monitor in carrying out
his tasks. On the other hand, the Monitor’s activities will help us
to improve the effectiveness and efficiency of our compliance
program.

Further development of compliance organization. In the third
quarter of 2010, the Supervisory Board decided to create a new
Board of Management position, Integrity and Legal Affairs, thus
further developing our compliance organization. The tasks of the
new Board of Management member include managing the global
legal and compliance organization, business ethics and the
sustained anchoring of integrity and compliance throughout the
Group. The Chief Compliance Officer is the head of the Group
Compliance department. In the future, he will report directly to
the Board of Management member for Integrity and Legal Affairs
and will regularly inform the Audit Committee of the Supervisory
Board of his activities.

158

Systematic compliance risk management. The Corporate
Compliance Operations department (CCO) defines the annual
anti-corruption program and supports its implementation
worldwide. In a systematic risk analysis, all companies and entities
of the Daimler Group are assessed and classified in terms of
their corruption risk. The crucial aspects include business
activities, the business environment, and country-specific evaluation
in a corruption awareness index developed by Transparency
International, an anti-corruption organization. Subsequently, we
implement an individually adapted program for the prevention of
corruption on the basis of risk assessments in the companies
and units.

The local compliance managers deployed worldwide are particu-
larly important as contact persons and as an interface to Corpo-
rate Compliance Operations. Approximately 90 specifically quali-
fied local compliance managers look after more than 180
companies and business units at our worldwide sites. They support
the local management with adherence to the anti-corruption
regulations and regularly report both within their business units
and to the Group’s headquarters.

In 72 sales companies and business units, we have also estab-
lished standardized control systems which help to secure correct
behavior in conformance with applicable regulations. The effec-
tiveness of the controls is assessed by our Internal Auditing
department and by the companies themselves in standardized
annual self-assessments. In order to minimize the risk of corrup-
tion, the existing standard process for reviewing transactions
with public authorities and government clients in countries with
an increased risk of corruption is being further developed.

Expansion of worldwide training. Once again, more than
111,000 employees participated in the web-based training on
Daimler’s Integrity Code in 2010. In addition to the issue of
corruption prevention, we also covered the aspects of environmen-
tal protection, respect for human rights, dealing with conflicts
of interest and appearing in public. In addition, more than 21,000
employees from sales companies and sales departments passed
through the web-based training on the prevention of corruption.
The training includes more than 140 presence courses worldwide
with more than 3,500 participants from functions that are particu-
larly exposed to risk. Furthermore, the Group’s top management
level underwent a specific course of anti-corruption training.

The highest expectations also of business partners. Correct
behavior is a precondition for a trusting partnership and coopera-
tion. We therefore expect our business partners to behave in full
conformance with applicable regulations. Anyone acting on
Daimler’s behalf must fulfill the highest ethical standards. To
minimize the risk of corruption, we therefore carry out a risk-based
integrity test with business partners who support Daimler with
sales transactions, and enter into contractual arrangements with
those partners, making clear our expectations in terms of adherence
to the law.

Standard processes support behavior that conforms to
applicable regulations. Compliance cannot be delegated.
Executives are role models and are the first points of contact for
their staff; they therefore bear special responsibility for correct
behavior. For this reason, the fundamental importance of compli-
ance is firmly anchored in our qualification programs for execu-
tives and junior managers, as well as in our talent-promotion activi-
ties. Only those employees who consistently orient their decisions
and processes towards applicable rules and regulations can be
given additional responsibility. In addition, we set specific compli-
ance targets for chief executives, heads of finance, sales manag-
ers and after-sales managers in units where there is an increased
risk of corruption. In the future, we will link the variable element
of executive remuneration more closely with compliant behavior.

Wide-ranging compliance activities. In addition to line manag-
ers and local contact persons, the Daimler Group also has head-
quarters departments for compliance matters. All of the Group’s
employees can contact the Compliance Consultation Desk with
specific questions on the prevention of corruption. And the most
common questions and answers with regard to compliance
advice are accessible in an online database. In accordance with
the Group’s policy of the “Zero-Tolerance-Principle” and the
corporate guidelines on disciplinary actions, there is no scope
for discretion in connection with behavior that is against the
law or contrary to applicable regulations.

The contact point for accepting, documenting and processing any
suspected misconduct is the whistleblower system, the Business
Practices Office (BPO). Not only our employees but also external
persons can report any indications of suspected misconduct
through various channels – worldwide and at any time on a confi-
dential basis – if desired also anonymously. Employees are
required and executives are obliged to report any concrete suspi-
cion of violations of criminal law or of the Daimler Integrity
Code to the BPO. The protection of whistleblowers is also regu-
lated with binding effect. Processing reported indications of
suspected misconduct was significantly accelerated in 2010 as
a result of process improvements. To enhance transparency,
we pass on all the significant reported indications of suspected
misconduct in anonymous form to the top management once
each quarter. As a result of case analyses, processes can be
altered if required so that future damage is avoided.

Corporate Governance | Compliance | 159

Corporate Governance Report

Our understanding

At Daimler, good corporate governance goes beyond the mere
fulfillment of statutory provisions. The Board of Management and
the Supervisory Board have the goal of aligning the Group’s man-
agement and supervision with national and international bench-
marks, in order to secure the continued success of the Group
and its strong traditions by means of sustained value creation and
to contribute to the safeguarding of mobility as an element of
individual freedom.

General conditions

The legal framework for corporate governance at Daimler AG, as
a German stock corporation, is based on German law, in particular
the Stock Corporation Act (AktG), the Codetermination Act
(MitbestG) and legislation concerning capital markets, as well as
on the Articles of Incorporation of Daimler AG.

Daimler AG is obliged by the German Stock Corporation Act
(AktG) to apply a dual management system featuring strict sepa-
ration between the Board of Management and the Supervisory
Board (two-tier board). With this system, the Company’s Board of
Management is responsible for the executive functions while
the Supervisory Board advises and monitors the Board of Manage-
ment. No person may be a member of the two boards at the same
time.

Daimler’s corporate bodies

Shareholders’ Meeting. The Company’s shareholders exercise
their rights in the Company, in particular their voting rights, at
the Shareholders’ Meeting. Each share in Daimler AG entitles its
owner to one vote. There are no Daimler shares with multiple
voting rights, no preferred stock, and no maximum voting rights.
Documents and information relating to the Shareholders’ Meet-
ing can be found on our website at www.daimler.com/ir/am (see
also page 24).

The Annual Shareholders’ Meeting is generally held within four
months after the end of a financial year. The Company facilitates
the exercise of voting rights for the shareholders by appointing
proxies who are bound by the shareholders’ voting instructions.
The Company’s Articles of Incorporation also authorize the
Board of Management to permit postal voting.

Among other matters, the Annual Shareholders’ Meeting decides
on the appropriation of distributable profits, the ratification of
the actions of the members of the Board of Management and the
Supervisory Board, the election of the external auditors and
the election of the members of the Supervisory Board representing
the shareholders. The Annual Meeting also makes other decisions,
especially on amendments to the Articles of Incorporation, capital
measures, and the approval of certain intercompany agreements.
Shareholders can submit countermotions on resolutions proposed
by the Board of Management and the Supervisory Board and
can challenge resolutions passed by the Shareholders’ Meeting
in a court of law.

The influence of the Shareholders’ Meeting on the management
of the Company is limited by law, however. The Shareholders’
Meeting can only make management decisions if it is requested
to do so by the Board of Management.

Supervisory Board. In accordance with the German Codetermi-
nation Act (MitbestG), the Supervisory Board of Daimler AG com-
prises 20 members. Half of them are elected by the shareholders
at the Annual Meeting. The other half comprises members who
are elected by the Company’s employees who work in Germany.
The members representing the shareholders and the members
representing the employees are equally obliged by law to act in
the Company’s best interests.

The Supervisory Board has given itself a set of rules of procedure,
which regulate not only its duties and responsibilities and the
personal requirements placed upon its members, but above all
the convening, preparation and chairing of its meetings and the
procedure of passing resolutions. The rules of procedure of the
Supervisory Board can be seen on our website at www.daimler.
com/dai/rop.

With regard to its own composition, the Supervisory Board has
stipulated in its rules of procedure that more than half of the
members of the Supervisory Board representing the shareholders
are to be independent in order to allow the Board of Manage-
ment to be advised and monitored independently. The rules of
procedure also stipulate that no person may be a member of
the Supervisory Board who is a member of a board of, or advises,
a significant competitor of Daimler AG or its subsidiaries, or
who is subject to any other conflicts of interest. The Supervisory
Board of Daimler AG fulfills these criteria in its present
composition.

160

Governance Structure

Shareholders (Annual Meeting of shareholders)

Election of shareholder representatives

Supervisory Board (10 shareholder and 10 employee representatives),
Nomination Committee, Audit Committee, Presidential Committee, Mediation Committee

Appointments, monitoring, consulting

Board of Management (7 Board members)

One member representing the shareholders, the Chairman of the
Supervisory Board, is a former member of the Board of Manage-
ment. After stepping down from the Board of Management of
Daimler AG in December 2003, he was elected to the Supervisory
Board following a cooling-off period of more than two years in
April 2006, and was elected as its Chairman following a cooling-
off period of more than three years in April 2007. Three mem-
bers of the Supervisory Board are members of the board of man-
agement of a listed company, but including their positions at
Daimler AG, they do not hold more than three supervisory board
positions outside their own groups at listed companies or in
supervisory boards or committees of companies with compara-
ble requirements.

The rules of procedure of the Supervisory Board specify that can-
didates for election as representatives of the shareholders who
are to hold the position for a full period of office should generally
not be over the age of 68 at the time of the election.

Proposals of candidates for election as members representing
the shareholders of Daimler AG take into consideration, as well as
the requirements of applicable law, the Articles of Incorporation
and the German Corporate Governance Code (HGB), a list of cri-
teria of qualifications and experience. They include market
knowledge in the regions important to Daimler, expertise in the
management of technologies, and experience in certain man-
agement functions. An additional guarantee for productive work in
the Supervisory Board, which should include persons not only
with special competencies but also with an international outlook
and openness for social issues, is the members’ personal individ-
ual diversity with regard to gender, ethnic origin or other personal
characteristics. With proposals of candidates for election as
representatives of the shareholders, the Supervisory Board
therefore considers the overall balance, with regard in particular
to gender but also to other aspects, and sees this as added
value for the Supervisory Board in its entirety. The guideline with
regard to gender balance is the Company’s target of achieving
a proportion of 20% women in executive positions by the year
2020 (of the Supervisory Board members representing the share-
holders at December 31, 2010, 10% are women). With regard
to ensuring sufficient internationality, a proportion of more than
one third of non-German members is deemed to be appropriate
and is currently fulfilled.

The Supervisory Board’s duties include appointing and recalling
the members of the Board of Management, deciding on and
regularly reviewing the system of Board of Management remu-
neration, and determining the individual total remuneration
of the members of the Board of Management.

With due consideration of the Group’s international operations,
the Supervisory Board pays particular attention to the issue of
diversity also in connection with the composition of the Board of
Management, for example with regard to gender, ethnic origin
and other personal characteristics.

The Supervisory Board monitors and advises the Board of Man-
agement in its management of the Company. At regular intervals,
the Supervisory Board receives reports from the Board of Man-
agement on the Group’s strategy, corporate planning, profitability
and business developments. The Supervisory Board has retained
the right of approval for transactions of fundamental importance.

Following discussions with the external auditors and its own
review, the Supervisory Board approves the annual company
financial statements and the annual consolidated financial
statements with due consideration of the external auditors’ audit
reports, as well as the results of the review carried out by the
Audit Committee. The Supervisory Board reports to the Annual
Shareholders’ Meeting on the results of its own review.

The members of the Supervisory Board attend in their own
responsibility such courses of training and further training as
might be necessary for the performance of their tasks and
are supported by the Company in doing so. In addition to courses
already offered, Daimler AG will make appropriate offers to the
members of its Supervisory Board as required also in the future.
The contents of such courses could include the subjects of tech-
nological and economic developments, accounting and financial
reporting, internal control and risk management systems, compli-
ance, new legislation and board of management remuneration.

Corporate Governance | Corporate Governance Report | 161

The Supervisory Board has formed four committees, which per-
form to the extent legally permissible the tasks assigned to them
in the name of and on behalf of the entire Supervisory Board:
the Presidential Committee, the Nomination Committee, the Audit
Committee and the Mediation Committee. The committee
chairpersons report to the entire Supervisory Board on the com-
mittees’ work at the latest in the meeting of the Supervisory
Board following each committee meeting. The Supervisory Board
has issued rules of procedure for each of its committees.
These rules of procedure can also be seen on our website at
www.daimler.com/dai/rop; the current members of the Supervisory
Board are listed at www.daimler.com/supervisoryboard and
of its committees at www.daimler.com/dai/sbc. The members
of the Supervisory Board and its committees are also listed
on pages 20 and 21 of this Annual Report.

The Presidential Committee is composed of the Chairman of
the Supervisory Board, his Deputy and two other members,
who are elected by a majority of the votes cast on the relevant
resolution of the Supervisory Board.

The Presidential Committee makes recommendations to the
Supervisory Board on the appointment of members of the Board
of Management and is responsible for their contractual affairs.
It submits proposals to the Supervisory Board on the design of
the remuneration system for the Board of Management and
on the appropriate individual remuneration of its members, and
decides on the granting of consent to sideline activities of
Board of Management members.

In addition, the Presidential Committee decides on questions of
corporate governance, on which it also makes recommendations
to the Supervisory Board. It supports and advises the Chairman
of the Supervisory Board and his Deputy, and prepares the meet-
ings of the Supervisory Board.

The Nomination Committee is composed of at least three
members, who are elected by a majority of the votes cast by the
members of the Supervisory Board representing the sharehold-
ers, and is the only Supervisory Board Committee comprised
solely of members representing the shareholders. It makes
recommendations to the Supervisory Board concerning persons
to be proposed for election as members of the Supervisory
Board representing the shareholders at the Annual Shareholders’
Meeting. In doing so, it takes into consideration the specific
goals that the Supervisory Board has set for its own composition.
Furthermore, it defines the requirements for each specific
position to be occupied.

The Audit Committee is composed of four members, who are
elected by a majority of the votes cast on the relevant resolution
of the Supervisory Board. The Chairman of the Audit Committee
must have special expertise in the field of accounting and should
also have special expertise and experience in the field of internal
control procedures. All the other members of the Audit Commit-
tee should have special expertise in the field of accounting,
business administration or finance.

The Supervisory Board is convinced of the independence of the
Chairman of the Audit Committee, Dr. h.c. Bernhard Walter,
and the other member of the Audit Committee representing
the shareholders, Dr. Clemens Börsig. Both of them have
special expertise and experience in the application of accounting
principles and internal monitoring systems, which qualify
them as financial experts.

The Audit Committee deals with questions of accounting and risk
management, the internal monitoring system, internal auditing,
compliance and the annual external audit. At least once a year,
it discusses with the Board of Management and the external
auditors the effectiveness, functionality and appropriateness
of the internal monitoring systems and the risk management
system, and discusses with the Board of Management the effective-
ness and appropriateness of the internal auditing system and
compliance management. Furthermore, it regularly receives reports
on the work of the Internal Auditing department and the compli-
ance organization. At least four times a year, the Audit Committee
receives a report from the Business Practices Office, which
has been established to deal with complaints and information
about any breaches of guidelines, criminal offences or dubious
accounting, financial reporting or auditing, and is regularly informed
about how such cases are dealt with.

The Audit Committee discusses the interim reports on the first
quarter, first half and first nine months of the year with the Board
of Management. On the basis of the report of the external audi-
tors, the Audit Committee reviews the annual company financial
statements and the annual consolidated financial statements
and discusses them with the external auditors. It makes a proposal
to the Supervisory Board on the appropriation of profits and
on the adoption of the annual company financial statements of
Daimler AG and on the approval of the annual consolidated finan-
cial statements. The Committee also makes recommendations
for the proposal on the selection of external auditors, assesses
those auditors’ suitability and independence, and, after the
external auditors are elected by the Annual Meeting, it commissions
them to conduct the annual audit of the company and consoli-
dated financial statements and to review the interim reports,
negotiates an audit fee, and determines the focus of the
annual audit.

162

The Audit Committee receives reports from the external auditors
on all accounting matters that might be regarded as critical
and on any material weaknesses of the internal monitoring and
risk management system with regard to accounting. Finally, the
Audit Committee approves services provided by the firm of exter-
nal auditors or its affiliates to Daimler AG or to companies of
the Daimler Group that are not directly related to the annual audit.

The Board of Management requires the consent of the Supervi-
sory Board for certain types of transaction of fundamental impor-
tance. At regular intervals, the Board of Management reports to
the Supervisory Board on corporate strategy, corporate planning,
profitability and business developments, as well as on the inter-
nal control system, the risk management system and compliance
issues. Significant deviations are reported without delay.

When making appointments to executive positions at the Group,
the Board of Management gives due consideration to the issue
of diversity, with regard for example to the criteria of age, gender
and internationality. Diversity-management activities include
diversity workshops, the development of internal networks, exter-
nal cooperation with educational facilities, and membership of
selected initiatives. A key area of action is the targeted promotion
of women. The proportion of women in top executive positions
is to increase from the current 9% to 20% by the year 2020. By
means for example of flexible working-time arrangements, setting
up day-nurseries close to workplaces, and a special mentoring
program for women, Daimler has already succeeded in increasing
the proportion of women in top executive positions continuously
since 2005.

The Board of Management has also given itself a set of rules of
procedure, which can be seen on our website at www.daimler.
com/dai/rop. In addition to specifying the responsibilities of its
members, they also describe the procedure to be observed
when passing resolutions and ways to avoid conflicts of interest.

Information on the remuneration of the Board of Management
including the performance phantom share plan and on the
remuneration of the Supervisory Board is provided on pages
152 ff. of this Annual Report.

The Mediation Committee is composed of the Chairman of the
Supervisory Board and his Deputy, as well as one member of the
Supervisory Board representing the employees and one member
of the Supervisory Board representing the shareholders, each
elected with a majority of the votes cast. It is formed solely to
perform the functions laid down in Section 31 Subsection 3 of
the German Codetermination Act (MitbestG). Accordingly, the
Mediation Committee has the task of making proposals on the
appointment of members of the Board of Management if in
the first vote the majority required for the appointment of a Board
of Management member of two thirds of the members of the
Supervisory Board is not achieved.

Board of Management. As of December 31, 2010, the Board of
Management of Daimler AG comprised six members. Information
on their areas of responsibility and curriculum vitae is posted on
our website at www.daimler.com/dai/bom. The members of the
Board of Management and their areas of responsibility are also
listed on pages 12 and 13 of this Annual Report.

No member of the Board of Management holds more than three
supervisory board positions at other listed companies or in
supervisory boards of companies with comparable requirements.

With the consent of the Supervisory Board, the Board of Manage-
ment sets the Group’s strategic focus. Its members have joint
responsibility for managing the Group’s business.

The Board of Management prepares the consolidated interim
reports, the annual company financial statements of Daimler AG
and the annual consolidated financial statements. It has estab-
lished a risk management system and monitors that system. In
addition, the Board of Management is responsible for adherence
to the provisions of applicable law, official regulations and the
Group’s internal guidelines, and works to secure compliance with
those rules and regulations by the companies of the Group. Fur-
ther information on compliance is summarized in the Compliance
section on pages 158 and 159 of this Annual Report.

Corporate Governance | Corporate Governance Report | 163

Shares held by the Board of Management and the
Supervisory Board, directors’ dealings

At December 31, 2010, the members of the Board of Manage-
ment held a total of 1.2 million shares or share options of
Daimler AG (0.110% of the shares issued). At the same date,
members of the Supervisory Board held a total of 0.1 million
shares or share options of Daimler AG (0.006% of the shares issued).

In 2010, the transactions in shares of Daimler AG or related
financial instruments listed in the table below took place involving
members of the Board of Management and the Supervisory
Board (and, pursuant to the provisions of Section 15a of the
German Securities Trading Act (WpHG), involving persons in a
close relationship with the aforementioned persons). Daimler AG
discloses these transactions without delay after receiving
notification of them. This information is also available on our
website at www.daimler.com/dai/dd/en.

Directors’ dealings (pursuant to Section 15a of the German Securities Trading Act (WpHG)) in the year 2010

Date

Name

Function

Type and place of transaction

Number

Price

Total volume

Nov. 25, 2010 Andreas Renschler