Daimler AG Annual Report 2017

← All annual reports

FY2017 Annual Report · Daimler AG

Loading PDF…

Annual Report 2017

Key Figures

Daimler Group

€ amounts in millions

% change

2017

2016

17/16

Revenue

164,330

153,261

Investment in property, plant and equipment

6,744

Research and development expenditure

Free cash ﬂow of the industrial business

EBIT

Net proﬁt

Earnings per share (in €)

Dividend per share (in €)

8,711

2,005

14,682

10,864

9.84

3.65

5,889

7,572

3,874

12,902

8,784

7.97

3.25

Employees (December 31)

289,321

282,488

1 Adjusted for the eﬀects of currency translation, revenue increased by 8%.

+7 1

+15

-48

+14

+24

+23

+12

Cover photo
The Concept EQA is the ﬁrst fully electric
EQ concept car from Mercedes-Benz in the
compact segment. Excellent driving dynamics
are ensured by permanent all-wheel drive and
two electric motors, whose system output can
be increased to over 200 kW thanks to scalable
battery components. In combination with the
intelligent Mercedes-Benz operating strategy, the
Concept EQA oﬀers a range of up to 400 kilometers,
depending on the battery capacity installed. The
highly eﬃcient lithium-ion battery with pouch cells
is supplied by the Daimler subsidiary Deutsche
ACCUMOTIVE. The Concept EQA can be charged
via induction or wallbox and is also prepared for
rapid charging.

Daimler’s Divisions >

The Divisions and Brands

€ amounts in millions

Mercedes-Benz Cars

Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure
thereof capitalized
Unit sales

Employees (December 31)

Daimler Trucks

Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure
thereof capitalized
Unit sales

Employees (December 31)

Mercedes-Benz Vans

Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure
thereof capitalized
Unit sales

Employees (December 31)

Daimler Buses

Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure
thereof capitalized
Unit sales

Employees (December 31)

Daimler Financial Services

Revenue

EBIT

New business

Contract volume

Investment in property, plant and equipment

Employees (December 31)

2017

2016

2015

17/16
% change

94,695

9,207

9.7

4,843
6,642
2,388

89,284

8,112

9.1

4,147
5,671
2,008

83,809

7,926

9.5

3,629
4,711
1,612

2,373,527

142,666

2,197,956

139,947

2,001,438

136,941

35,707

2,380

6.7

1,028
1,322
45

470,705

79,483

13,164

1,181

9.0

710
565
310

401,025

25,255

33,187

1,948

5.9

1,243
1,265
57

415,108

78,642

12,835

1,170

9.1

373
442
238

359,096

24,029

37,578

2,576

6.9

1,110
1,293
26

502,478

86,391

11,473

880

7.7

202
384
153

321,017

22,639

4,351

4,176

4,113

243

5.6

94
194
30

28,676

18,292

23,775

1,970

70,721

139,907

13,012

249

6.0

97
202
11

26,226

17,899

20,660

1,739

61,810

132,565

12,062

214

5.2

104
184
13

28,081

18,147

18,962

1,619

57,891

116,727

9,975

+13

+17
+17
+19

+22

-17
+5
-21

+13

+90
+28
+30

+12

-2

-3
-4
+173

+15

+13

+14

+16

Daimler AG is one of the world‘s most successful automobile companies. With its
divisions Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses
and Daimler Financial Services, the vehicle manufacturer is one of the biggest
suppliers of premium cars and is the largest producer of commercial vehicles with a
global reach. Daimler Financial Services provides ﬁnancing, leasing, ﬂeet management,
insurance, investment products and brokerage of credit cards, as well as innovative
mobility services. For more information: w daimler.com

Contents

CORE
CASE
CULTURE
COMPANY

SHAPING THE FUTURE

Chairman’s Letter

A | To Our Shareholders

The Board of Management
Report of the Supervisory Board
The Supervisory Board
Highlights of 2017
Daimler and the Capital Market
Objectives and Strategy

4
24
44
50

62
64
70
72
78
82

B | Combined Management Report

95
101
107
115

Corporate Profile
Economic Conditions and Business
Development
Profitability
Liquidity and Capital Resources
Financial Position
Daimler AG
118
(condensed version according to HGB)
Sustainability and Integrity
121
Overall Assessment of the Economic Situation 134
135
Events after the Reporting Period
Remuneration Report
136
Takeover-Relevant Information
and Explanation
Risk and Opportunity Report
Outlook

152
155
170

Information guidance system

Refers to an illustration or a table in the Annual Report

w Refers to additional information on the Internet
E Cross-reference within the Annual Report
K Refers to a Daimler publication

C | The Divisions

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

D | Corporate Governance

Report of the Audit Committee
Declaration on Corporate Governance,
Corporate Governance Report

E | Non-Financial Report

Sustainability at Daimler
Environmental issues
Employee issues
Social issues
Compliance
Statement on the review of the
Non-Financial Report

F | Consolidated Financial
Statements

176

178
184
189
192
195

198

200

203

214

216
218
222
227
229

234

236

238

Consolidated Statement of Income
Consolidated Statement of Comprehensive
Income/Loss
239
Consolidated Statement of Financial Position 240
Consolidated Statement of Cash Flows
241
Consolidated Statement of Changes in Equity 242
Notes to the Consolidated Financial
Statements

244

G | Further Information

Responsibility Statement
Independent Auditor’s Report
Ten Year Summary
Glossary
Index
Daimler Worldwide

324

326
327
334
336
337
338

CORE
Strengthening
the base

CASE
Driving
transformation

CULTURE
Innovative, ﬂexible
corporate culture

COMPANY
Future-oriented
structure

01. GB2017_Imageteil_EN_060218-rz.indd 1

12.02.2018 14:48:47

2 DAIMLER ANNUAL REPORT 2017 | #1 | CORE CASE CULTURE COMPANY

AS A LEADING
VEHICLE
MANUFACTURER …

Daimler is writing the next chapter of its success story. As a leading automo-

bile manufacturer, we continue to set the pace and shape the future. That’s

because the mobility of tomorrow will be fundamentally diﬀerent — because

our customers’ expectations are becoming more diverse and more challeng-

ing in increasingly dynamic markets. To make sure Daimler stays in the lead,

we are focusing our activities in four strategic areas. That’s how we aim to

strengthen our economic base through proﬁtable growth in our global core

business: CORE. We are using our earning power to shape the radical trans-

formation of the automobile industry. To this end, we’re investing in the

future-oriented CASE ﬁelds — Connected, Autonomous, Shared & Services

and Electric — in order to strengthen our core business over the long term. To

support this transformation eﬀectively, we are renewing our corporate culture

in cooperation with our employees: CULTURE. Through the new structure

that we envisage, we aim to make even better use of our opportunities in the

market: COMPANY. As a result of our activities in these four strategic areas,

we are becoming more eﬀective, faster and more successful — on course for

a leading role at the next level of mobility.

... WE WANT TO
SHAPE THE FUTURE
OF MOBILITY.

4 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

The updated Mercedes-Benz S-Class deﬁnes milestones
on the road to autonomous driving thanks to its innovative
assistance systems, and thrills customers with its luxurious
driving comfort.

DAIMLER ANNUAL REPORT 2017 | #1 | CORE 5

6 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

CORE

Strengthening the base

Sustainable earning power in our automotive

core business is our economic foundation —

and the basis for the investments we need to

make in the future. That’s why Daimler plans

to systematically expand its global strategy for

success in all of its divisions. Our fascinating

premium cars and our successful trucks, vans

and buses are all shaping our course of prof-

itable growth. The customized financing and

leasing products of Daimler Financial Services

support our successful core business all over

the world. In addition to our traditional markets,

the Asia region and China in particular will

continue to play a key role. Thanks to our glob-

ally organized, flexible production network and

our optimal customer orientation, we continue

along our successful path.

MERCEDES-BENZ:
NO. 1 AMONG
PREMIUM VEHICLES

Premium vehicles from Mercedes-Benz thrill our customers worldwide — unstoppably. Premium
automobiles form the basis of our core business. That’s why Mercedes-Benz now has a larger and more
diverse model portfolio than ever before. With their pioneering design and innovative technologies,
Mercedes-Benz vehicles fascinate customers all over the world. The cars with the star are setting sales
records and leading the worldwide premium segment. The new E-Class and the upgraded S-Class from
Mercedes-Benz are playing a key role in this success. Daimler is operating from a position of strength
and is stepping up its pace. Until the end of this decade, it will launch numerous new car models on the
market. Many of them have no predecessor in the Group’s current product range. We are expanding our
international production network and our ﬂexible modular strategy in order to achieve our long-term goal
of eﬃcient manufacturing for sustainable growth.
w daimler.com/products

8 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

The new edition of the Mercedes-Benz G-Class
represents the biggest transformation in the
success story of this oﬀ-road legend — and yet
it remains true to itself.

CONFIDENT
ON EVERY
TERRAIN

The special qualities of Mercedes-Benz SUVs impress
customers, both on and oﬀ the road. With seven models
in all classes, Mercedes-Benz is extremely well positioned
all over the world in the growing market for oﬀ-road vehicles.
Our model oﬀensive is paying oﬀ: Customers are thrilled
by these vehicles’ superb SUV aesthetics and outstanding
technology. We’re delivering more GLA, GLC, GLC Coupe,
GLE, GLE Coupe, GLS and G-Class vehicles than ever before.
The SUVs with the star are posting double-digit sales
growth that puts them in a top spot in this global growth
segment. These are good reasons to continue closely
watching our oﬀ-road vehicles — because they’re setting
the pace for Daimler.

The dynamic GLC Coupe, which delights
buyers all over the world, is an especially
popular product.

The GLA became an overnight success
in the compact SUV segment, which it
shaped and redeﬁned.

10 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

The minimalistic styling of the sporty
and elegant E-Class coupe typiﬁes the
sophistication of Mercedes-Benz design.

DREAM CAR
WITH A STAR

Roadsters, convertibles and coupes from Mercedes-Benz make customers’ hearts
beat faster. Dream cars such as the legendary gullwing model are part of the myth of the
Mercedes-Benz brand. Today, we offer dream cars that meet a wide range of expectations
and are available in all classes. Now more than ever before, the Mercedes-Benz star stands
for state-of-the-art luxury and outstanding diversity. It symbolizes success: Mercedes-Benz
roadsters, convertibles and coupes are coveted all over the world. The dream car family
includes the SL, the SLC and the C-Class convertible as an entry-level model from the world
of Mercedes-Benz convertibles, as well as the luxurious S-Class four-seat open convertible.
The special highlights of our portfolio also include the Mercedes-Maybach convertible and
the E-Class coupe.

The breathtaking coupes and roadsters from the
Mercedes-AMG GT model series are manufactured
in the hand-ﬁnishing section of the Mercedes-Benz
plant in Sindelﬁngen.

Through its sensual and emotional design and
technical innovations, the Vision Mercedes-Maybach 6
convertible deﬁnes the luxury of the future.

12 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

HIGH SPEED
IN CHINA’S
GROWTH MARKET

Mercedes-Benz is breaking sales records in the booming markets of Asia. The brand
with the star is the most frequently registered premium brand in many countries all over
the globe. Especially in the Asia-Paciﬁc region, Mercedes-Benz vehicles are bestsellers. The
Group delivered more cars in this region last year than ever before. As the world’s biggest
market and a source of considerable growth, China has played a key role in this outstanding
result. Our coveted premium vehicles are also very popular in South Korea and India and
are setting new sales records there. We are already producing many vehicles locally in this
region. For example, we’ve produced more than one million vehicles to date at our plant in
Beijing. We’ve more than tripled our sales in China in just four years. Many new models are
now celebrating their premieres in Asia. That’s yet another way Daimler recognizes the major
role played by its successful markets in Asia, where it remains on course in the passing lane.

Strong demand: Between 2013 and 2017,
sales of Mercedes-Benz cars in China more
than doubled.

More and more satisﬁed customers:
Half of all the new vehicles we sell today
are either ﬁnanced or leased through
Daimler Financial Services.

WORLD-
CLASS
FINANCIAL
SERVICES

Customized ﬁnancing and leasing products accelerate
our automotive business. One of the most important factors
behind our success is our attractive and innovative range
of services around vehicle ﬁnancing and insurance. Daimler
Financial Services has posted record ﬁgures for many years.
We aim to systematically pursue our strategy of proﬁtable
growth at high speed in the future. Daimler Financial Services
ﬁnances or leases half of all the new vehicles sold worldwide
by the Daimler Group — and our international portfolio contin-
ues to grow. In 2017 DFS increased the number of its new
leasing and ﬁnancing contracts by 14 percent, once again
setting a new record. It’s clear that in the future, Daimler’s
automotive core business will stay in the fast lane.
w daimler-ﬁnancialservices.com/en

DAIMLER TRUCKS:
GLOBAL LEADERS

With the new generation of the FUSO ﬂagship
truck, the Super Great, Daimler Trucks aims to
further expand its market position in Japan.

Ever since the truck was invented 120 years ago,
Daimler Trucks has been the pioneer in the sector —
and it continues to gain ground. As the world’s
number one company in the truck business, we focus
our strengths for our customers’ benefit — with the
optimal experience, know-how and positioning for
providing attractive products and services. Our success
is based on six strong vehicle brands under the roof of
Daimler Trucks. We aim to continue shaping the logistics
business with these brands in the future. We offer
customized applications and pioneering truck technolo-
gies all over the world. For example, since early 2017,
we have been offering the new Freightliner Cascadia in
the North American market and the new FUSO Super
Great to customers in Japan. At the beginning of 2017, we
launched production of the new Freightliner Cascadia,
which is equipped with our integrated powertrain.
Components of the global Daimler Trucks platform
strategy are installed in all of our new heavy-duty
trucks from Mercedes-Benz, Freightliner and FUSO.
Our standardized architecture for electric and electronic
systems is yet another success factor that makes us
the leader in the global truck market.
w daimler.com/products/trucks

DAIMLER ANNUAL REPORT 2017 | #1 | CORE 15

Thanks to the ongoing optimization of its
powertrain and aerodynamics, the Actros is
posting ever better fuel economy.

The 75th anniversary of Freightliner and the 50th
of Western Star: Two signiﬁcant birthdays that
underline Daimler Trucks’ strong market position
in North America.

VEHICLES FOR
EVERY MARKET

DAIMLER ANNUAL REPORT 2017 | #1 | CORE 17

In another milestone, Daimler Trucks has put more than 60,000 BharatBenz
trucks on the road in India in the ﬁve years since the brand’s market launch.

In 2017, Daimler and its partner Beiqi
Foton Motor produced more than
112,000 Auman brand mid-size and
heavy-duty trucks in China.

As a world market leader with a global pres-
ence, Daimler Trucks is close to its customers.
We identify customer needs quickly and respond
to them with tailor-made solutions. That’s why
we aim to expand our strong position in our core
markets and enter new markets as well. For exam-
ple, in 2012 Daimler Trucks launched BharatBenz,
its first brand specially tailored to the needs of
a specific market. Modern BharatBenz trucks
in weight classes between nine and 49 tons are
manufactured locally for the Indian market. At
our production plant in Wanaherang, Indonesia,
Mercedes-Benz trucks have been rolling off the
assembly line since 2017. In addition to FUSO
vehicles, Daimler Trucks will produce heavy-duty
trucks with the star for the Indonesian market
at this plant in the future. Daimler Trucks’ FUSO
brand has occupied a very strong position in
Indonesia for more than 40 years. In China, the
world’s biggest truck market, Daimler is also
stepping on the gas through Beijing Foton Daimler
Automotive (BFDA), its joint venture with Beiqi
Foton Motor. All in all, these are the ideal precondi-
tions for keeping Daimler Trucks in the forefront of
the international truck markets in the future.
w daimler.com/company/business-units/

daimler-trucks

18 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

A STRONG
VAN PORTFOLIO

A comprehensive product range is the engine of our
“Mercedes-Benz Vans goes global” strategy. Thanks to its
complete range of vans for private and commercial use,
Daimler is ideally positioned in the growing global van market.
The mid-size pickups, commercial vehicles, full-size MPVs and
travel and recreational vehicles from Mercedes-Benz stand
for reliability, quality and value retention all over the world. The
portfolio ranges from the X-Class to the Citan urban delivery van,
the mid-size Vito (“Metris” in the United States) and V-Class vans
including the Marco Polo models, and the large Sprinter van.

Mercedes-Benz is the world’s first premium automaker in
the promising segment of mid-size pickups, represented
by the X-Class. The mid-size pickup segment is global in scope,
high-volume and set for further growth. Thanks to its typical
pickup strengths and Mercedes-Benz standards of design, com-
fort, safety and connectivity, the X-Class forms a bridge between
commercial and private use and between rural and urban appli-
cations. That makes it not only a commercial vehicle but also a
lifestyle and family vehicle. So the X-Class is adding a fourth
category to the Mercedes-Benz Vans portfolio — at the interface
between cars and commercial vehicles, where we’re already

enjoying success with the Vito and the V-Class. The X-Class
appeals to pickup owners who would like their vehicles to have
more of the qualities typical of cars. It also attracts customers
who have previously driven a car, a van or an SUV.
w daimler.com/products/vans

Mid-size vans with the star are a major pillar of Mercedes-Benz
Vans’ success. The V-Class full-size MPV is a standout vehicle
for family, sports and recreational activities. It combines the func-
tionalities of traditional vans with the strengths of Mercedes-Benz
sedans. The new V-Class RISE was added to the line in 2017.
The Marco Polo travel and camper vans, which are based on the
V-Class and the Vito, have been especially successful. For the first
time, they are now also offered with right-hand drive in Australia
and the United Kingdom. Following the Marco Polo and the Marco
Polo ACTIVITY, the product family has been supplemented by the
compact Marco Polo HORIZON camper van since 2017.
w daimler.com/products/camper-vans

The new Marco Polo HORIZON combines
functionality with high quality design —
and it’s thrilling new customer groups.

Stylish and robust: Mercedes-Benz has
created the X-Class for a wide range of
customer groups all over the world.

SUCCESS
STORY

The Mercedes-Benz Sprinter established the market for large vans — and has broken records
ever since. More than 3.4 million units have been delivered to customers in over 130 countries to date.
That makes the Sprinter one of the most successful commercial vehicles of all time and a bestseller
in the Daimler product portfolio. In addition to its commercial applications, the Sprinter is playing an
increasingly important role in the growing market for camper vans. With the introduction of the fully
connected new Sprinter, Mercedes-Benz Vans is ushering in the age of the digital van and once again
reinventing the worldwide van segment. Through numerous innovations and even greater versatility, our
new large van offers customized solutions to a wide range of customers and sectors. In addition, the
new model generation equipped with new drive variations offers tailor-made solutions for the diverse
requirements of the growing camper van market.
w daimler.com/company/business-units/mercedes-benz-vans

The launch of the new Sprinter will begin in
the ﬁrst half of 2018 in Europe, followed
by other markets. It will once again redeﬁne
the van segment.

DAIMLER ANNUAL REPORT 2017 | #1 | CORE 21

The Vito is a reliable partner for tradesmen,
a delivery van, a high-capacity taxi and an
emergency vehicle — a real all-rounder on
course for success in many sectors all over
the world.

RECORD
BREAKERS

The Vito and the V-Class full-size MPV are also
pacesetters for the global growth strategy
of Mercedes-Benz Vans. The mid-size vans with
the star are exciting and impressing our customers
all over the world. The Mercedes-Benz Vito and the
V-Class are proving to be strong sales drivers with
sustained high growth rates. Their attractive design
and diverse variants are setting the benchmarks in
their respective segments. The versatile Vito mid-size
van combines spaciousness with high quality and
stands out through its great adaptability. For its part,
the V-Class combines the high-quality design of a
Mercedes-Benz car with the strengths of a mid-size
van. Mercedes-Benz Vans has been delivering Vito
and V-Class models in China, the world’s largest auto-
mobile market, since 2016. Both vehicles are “Made
in China for China” and manufactured by our local
joint venture Fujian Benz Automotive Co., Ltd. (FBAC)
in Fuzhou.

22 DAIMLER ANNUAL REPORT 2017 | #1 | CORE

WORLDWIDE
SUCCESS
ON THE ROAD

The Mercedes-Benz Citaro, our best-selling
city bus, is now also on the market in
a future-oriented hybrid variant.

Daimler Buses is still on the upswing, thanks to its pioneering
city buses and coaches with over eight tons gross vehicle
weight, its global positioning and its innovative mobility solu-
tions. Our full line of vehicles from the Mercedes-Benz, Setra
and BharatBenz brands covers a wide range of requirements. In
addition, our products impress customers through their safety,
eﬃ ciency and environmental friendliness. Our portfolio is rounded
out by the OMNIplus and BusStore service brands, our worldwide
workshop network and our comprehensive range of services —
everything that keeps Daimler’s bus segment on the move.
w daimler.com/company/business-units/daimler-buses

Our city buses are also scoring points with their innovations.
For example, the hybrid drive of the Mercedes-Benz Citaro,
combined with its new electrohydraulic steering system, is further
reducing its fuel consumption. And our sales oﬀ ensive in the
emerging markets is in full swing. Daimler Buses has launched two
new bus models on the market in Kenya, Cameroon and the Ivory
Coast. This is how Daimler Buses is responding in eastern and
central Africa to the growing demand for comfortable and safe
buses for passenger transportation. Our global production net-
work is also part of this campaign: The chassis for local assembly
come from our bus production plants in India and Brazil.

The new Setra S 531 DT double-decker bus
and the Setra TopClass 500 are now rounding
out our successful portfolio.

Two coaches celebrate world premieres in the booming intercity
bus market. The year 2017 was a special one for Daimler Buses.
The new Setra S 531 DT double-decker bus and the Setra TopClass 500
impress with their eﬃ ciency, versatility, comfort and safety. The
Mercedes-Benz Tourismo RHD high-decker coach also celebrated its
premiere in 2017. It’s impressing transportation companies, passengers
and drivers alike through its cost-eﬀ ectiveness, safety, functionality
and high level of comfort.
w daimler.com/products/buses/setra
w daimler.com/products/buses/mercedes-benz

24 DAIMLER ANNUAL REPORT 2017 | #1 | CASE

DAIMLER ANNUAL REPORT 2017 | #1 | CASE 25

DAIMLER ANNUAL REPORT 2017 | #1 | CASE 27

CASE

Driving transformation

Connected, Autonomous, Shared & Services, Electric —

by connecting all the future-oriented CASE fields,

Daimler is transforming itself from an automaker to

a provider of mobility services. It’s shaping “intuitive

mobility” with comfortable, user-friendly products

and services that are making our customers’ mobility

and daily lives easier. For one thing, we are electri-

fying our cars, trucks, vans and buses. In the car

division alone, we intend to launch at least ten fully

electric models, ranging from the smart to the SUV,

by 2022. Connected vehicles and digital services are

already sales clinchers today. Through Mercedes me,

Mercedes PRO and Uptime, we offer our customers

comprehensive access to a wide range of brands and

services. Mobility services such as car2go, moovel,

mytaxi and the piloted on-demand ride-sharing service

ViaVan are becoming increasingly important. We’re

also developing additional impetus through innova-

tion platforms such as the STARTUP AUTOBAHN

and Lab1886. The smart vision EQ fortwo is fully-

automated, customizable, communicative and

electric. In this concept vehicle, we have combined

all the CASE areas for the first time and exploited

the tremendous potential of this intelligent mix.
w daimler.com/case/en

28 DAIMLER ANNUAL REPORT 2017 | #1 | CASE

Connected

Connected automobiles
support drivers and
communicate with their
surroundings.

Autonomous

Smoothly flowing traffic,
flexible logistics processes
and stress-free travel in
self-driving vehicles.

Shared & Services

Reaching destinations
quickly and flexibly using
your own car and other
transportation options.

Electric

Electric vehicles plus
a service infrastructure
will shape the future.

CASE — these four letters are radically changing

mobility. Our new interactive website shows how

Daimler is reshaping the mobility of the future by

combining these four future fields.
w daimler.com/case/en

30 DAIMLER ANNUAL REPORT 2017 | #1 | CASE

EQ: ELECTRIC
INTELLIGENCE

Our electric offensive is taking off with the Concept EQA. The modular basic
architecture of our EQ technology and product brand can be individually varied to
suit SUVs, sedans and other lines. With its Concept EQA, Mercedes-Benz is now show-
ing what a compact EQ could look like. This concept vehicle has two electric motors
with a system performance of up to 200 kilowatts. Permanent all-wheel drive ensures
great handling. The battery-electric Concept EQA study achieves a range of about
400 kilometers thanks to its intelligent operating-mode strategy, and offers a techno-
logical vision of the electrified future. Its lithium-ion battery comes from the Daimler
subsidiary Accumotive. The Concept EQA can be charged by means of induction or a
wall box. It can also be used with fast-charging systems. As a result, the Concept EQA
from Daimler, the inventor of the automobile, embodies all the essentials of state-of-
the-art electric mobility.
w mercedes-benz.com/EQ/en

The EQ ecosystem is a trailblazer for comprehensive customer-oriented
electric mobility. EQ stands for “electric intelligence” and is derived from the
Mercedes-Benz brand values of emotion and intelligence. In 2019, we will launch
the ﬁrst series-produced EQ model, the EQC. And in addition to electric vehicles,
we will also be oﬀering much more: charging services and products ranging
from wall boxes to home energy-storage units. Seamless Charging is one vision
of how to recharge electric vehicles at public charging stations in the future. This
Mercedes me-based service would enable drivers to recharge their vehicles and
pay for this service anywhere. Through strategic partnerships with companies such
as the leading global charging solution provider ChargePoint, we are forging ahead
with the expansion of our intelligent EQ ecosystem. A further important step is
the founding of the IONITY joint venture for creating a public high-power charging
station infrastructure along the main traﬃc arteries of Europe.

The Concept EQA combines electrifying
aesthetic appeal, driving pleasure, suitability
for daily use and safety.

The intuitive and adaptive multimedia system
“MBUX Mercedes-Benz User Experience”, which
will be standard equipment in the new A-Class,
is ushering in a new era of infotainment.

IN DIALOGUE
WITH YOUR CAR

Mercedes me transforms vehicles into mobile assistants.
Our personalized digital services in the areas of connectivity,
service, ﬁnancing and mobility have been expanded further.
The “Digital Anticipation” service, which has been honored with
the German Award for Online Communication, supports our
customers from the time they buy a car until their new vehicle
is delivered. In Germany, customers can track the production
status of their new car in real time. It’s an exclusive interactive
service that provides a completely new kind of brand experi-
ence. To make sure customers stay mobile even without their
Mercedes-Benz vehicle, the Mercedes me app is integrated
with moovel, mytaxi and car2go to provide mobility services
across the board. The Mercedes me connect service “In-Car
Oﬃce” enables customers to use certain oﬃce functions as
well as their own telephone and calendar data while they’re on
the road. The “In Score” feature oﬀers discounts of up to 20
percent on insurance premiums, depending on the customer’s
personal driving style. And coming soon is the “Ask Mercedes”
app, a digital users’ manual with an augmented reality function
and additional online services that will make our customers’
daily lives noticeably easier.
w mercedes-benz.com/en/mercedes-me

The digital service portal Mercedes me is now actively
used and appreciated by well over 1.5 million Mercedes me
customers in 36 countries.

Women in focus. Through the community and inspiration platforms of “She’s Mercedes”, we are emphasizing
our claim to be totally responsive to the wishes and needs of women customers — in areas ranging from sales
to communication and aftersales services. Through these platforms, Mercedes-Benz is engaging in a more
intensive dialogue with women and offering an even more impressive premium brand experience.
w mercedes-benz.com/en/mercedes-me/inspiration/she

DAIMLER ANNUAL REPORT 2017 | #1 | CASE 33

URBAN MOBILITY?
OUR CONCEPT
OF THE FUTURE!

The smart vision EQ fortwo is ﬂipping the switch to bring more ﬂexibility and individuality to
local public transportation. Thanks to swarm intelligence and demand prediction, the fully automated
driving electric smart vision EQ fortwo picks up its customers wherever they wish. This concept car is
operated entirely via smartphone. Through the black panel grill at the front and the projection surfaces
along the sides, the smart vision EQ fortwo oﬀers previously undreamed-of options for individualized car
sharing. Relieved of driving obligations, people inside the car can relax or chat with their fellow passen-
gers. The smart vision EQ fortwo is the ﬁrst concept vehicle from Daimler to dispense with the steering
wheel and the gas and brake pedals. It’s also the ﬁrst vehicle in which we have installed all the future-
oriented features of CASE. This approach oﬀers huge advantages to our customers: urban mobility with
the highest level of comfort, more individuality and a whole new form of communication.

No steering wheel, pedals or driving tasks: The
smart vision EQ fortwo oﬀers customers innovative
options for urban mobility in the future.

34 DAIMLER ANNUAL REPORT 2017 | #1 | CASE

The fully electric E-FUSO Vision One is a
future-oriented solution for the transportation
of heavy cargo in inner-city traﬃc.

ELECTRIFYING
IDEAS

The new E-FUSO brand from Daimler is electrifying the entire FUSO product range.
People are increasingly calling for clean and quiet urban delivery traﬃc. In response, our
commercial vehicle subsidiary Mitsubishi Fuso Truck and Bus Corporation (MFTBC) is
putting the FUSO eCanter on the road. This light-duty eCanter is environmentally friendly
and cost-eﬃcient, with an impressive range of up to 100 kilometers. The drive system
is powered by six high-voltage lithium-ion batteries. FUSO is taking advantage of many
Daimler partnerships to establish the eCanter in the market, including Mercedes-Benz
Energy as a supplier of local energy storage and the charging station provider ChargePoint.
MFTBC aims to fully electrify all of FUSO’s truck series. The concept vehicle of the fully
electric E-FUSO Vision One heavy-duty truck with a range of up to 350 kilometers exempli-
ﬁes our claim to be a pioneer in the segment of electric commercial vehicles.

TOTALLY CONNECTED

Daimler Trucks is setting the pace for our customers with the Truck Data Center and digital services.
Connectivity and digitization make it possible to use trucks more eﬃciently. In a pioneering move,
Mercedes-Benz Trucks is oﬀering a smart network consisting of vehicles, Mercedes-Benz services and freight
companies — through Mercedes-Benz Uptime. When Uptime is in use, it monitors the vehicle systems in real
time and promptly warns of critical situations. The aim is to avoid breakdowns and unplanned repairs and
optimize scheduled trips to the workshop. Thanks to the new FleetBoard Manager app, Mercedes-Benz oﬀers
quick entry into connectivity free of charge. This smartphone app enables users to call up information
about a vehicle ﬂeet, such as capacity utilization, mileage, vehicle positions, fuel consumption and cost-saving
potential. The key element for both of these services as well as previously introduced solutions is the new
Truck Data Center — the “brain” of connected trucks. This connectivity module is based on internationally
standardized electric/electronic architecture. We are installing it across all brands at Daimler Trucks and
adapting it to regional customer needs.

PERFORMANCE BOOST

Daimler is the ﬁrst truck manufacturer to put a truck platoon on public highways in the United States.
Public interest in digitally connected trucks for road freight transport is growing. Trucks driving independently
behind one another can be linked together to form a partially automated truck platoon. This helps to enhance
safety, relieves strain on the drivers and improves fuel eﬃciency, thanks to shorter distances between the
vehicles. Following successful trials on test tracks, the regional regulatory authorities in the United States have
authorized Daimler Trucks North America (DTNA) to continue its platooning tests on public highways. To being
with, two Freightliner New Cascadia tractor-trailers are being paired. Digitally connected commercial vehicles
also perform well in oﬀ-road applications. In a trial near Frankfurt Airport, four connected Mercedes-Benz Arocs
semitrailer trucks showed how cost-eﬃcient it is to clear an airﬁeld with driverless vehicles — and how the
cutting-edge “Remote Truck Interface” technology from Daimler Trucks is opening up the road to the future.

36 DAIMLER ANNUAL REPORT 2017 | #1 | CASE

SUPPLIER
OF COMPLETE
SOLUTIONS

Mercedes-Benz Vans is oﬀering customized sector solutions through adVANce.
Through the strategic initiative adVANce, Mercedes-Benz Vans is transforming itself
from an automobile manufacturer to a provider of holistic transport and mobility
solutions. adVANce comprises all of the CASE future ﬁelds. In ﬁve areas of innovation,
it will oﬀer responses to the megatrends and central challenges in the transport sector.
At DIGITAL@VANS, the main focus is on connectivity and the digital networking of
vehicles. At SOLUTIONS@VANS, we develop hardware solutions that can make our
customers’ daily business operations more eﬃcient. Meanwhile, RENTAL@VANS is all
about innovative rental models, SHARING@VANS presents new concepts for local public
transport, and eDRIVE@VANS presents a comprehensive approach to electric mobility.
Mercedes-Benz Vans is developing innovative products and services — and once again
deﬁning the route to the future of transportation.

Delivers revolutionary concepts: With its fully automatic
cargo area, delivery drones and other innovations,
the intelligent Vision Van deﬁnes the requirements for the
networked delivery chains and vans of the future.

Fleet managers are connected with all the vehicles
and drivers in their ﬂeets via the web-based service
Mercedes PRO connect.

PIONEERING
CONCEPTS

Mercedes PRO takes service for the transport sector
to a new level. This online services platform provides
centralized access to existing professional services as well
as newly developed applications for daily operations. Here,
commercial customers can receive customizable holistic
solutions and services from Mercedes-Benz Vans. Plans
call for the step-by-step expansion of the range of oﬀers to
include concepts that go far beyond traditional van features,
ranging from connectivity, mobility and transport solutions
to ﬂeet and overall system solutions.
w pro.mercedes-benz.com/uk/en

Mercedes-Benz Vans is electrifying all of its commercial
van model series. It has already begun with the mid-size
eVito van, which has been available for ordering since
November 2017. Deliveries are scheduled to start in the
second half of 2018. The battery-electric Vito will be
followed by the eSprinter in 2019. The holistic electric drive
strategy eDRIVE@VANS focuses not only on the electric
van itself, but also on an ecosystem geared to provide eco-
nomic beneﬁts to electriﬁed ﬂeets. The customized system
solutions, which will cover the entire value chain, include
a powerful and intelligent charging infrastructure, rental
vehicles, a driver training program for eﬃcient vehicle use,
and connectivity solutions that will ensure optimal vehicle
capacity in relation to an individual vehicle’s state of charge
and battery range, as well as route planning in real time.

Connected delivery processes for more eﬃciency in the
last mile. As part of the future-oriented adVANce initiative,
Mercedes-Benz Vans is combining vans with delivery drones
and delivery robots. In a pilot project, a Mercedes-Benz
Sprinter became a mobile loading and transport hub for
eight autonomously operating robots. The overall concept is
now being extensively tested in cooperation with logistics
companies. In the Vans & Drones pilot project in Zurich —
a world ﬁrst — products that have been ordered online
are being delivered to customers by two drones and two
Mercedes-Benz Vito vans with integrated landing platforms.

38 DAIMLER ANNUAL REPORT 2017 | #1 | CASE

EMISSION-FREE

The countdown has started for the fully electric Mercedes-Benz Citaro. All over the
world, the demand for clean and economical local public transport is growing. That is giving an
additional boost to the development of our best-selling city bus, the Citaro. For Daimler Buses,
the logical next step a(cid:5)er the Citaro hybrid will be the fully electric Citaro. The new model will
set milestones with its lithium-ion battery drive system and its modular battery package for
diverse applications in city traﬃc. In addition to a network for powering the vehicles at wall
sockets in the depots, Mercedes-Benz will also provide interim charging systems. A special
feature of the new bus model is thermal management of the climate control and drive systems.
The developers have signiﬁcantly reduced the model’s energy consumption, thus expanding its
range without having to enlarge the batteries. As a result, the new Mercedes-Benz Citaro will
run locally emission-free in cities — and in the local public transportation network of the future.

Daimler Buses is shaping the future of mobility through innovative vehicles and novel
services. In a strategic partnership with the on-demand ride-sharing service CleverShuttle,
Daimler Buses will oﬀer ﬂexible solutions for on-demand mobility. This will enable transport
associations and companies to optimally adapt their services to passenger needs at any time.

Series production of the fully electric
Mercedes-Benz Citaro will begin in
late 2018.

GET IN AND
DRIVE OFF

Innovative mobility services from Daimler are on an upswing. Demand is increasing in the area
of future-oriented shared and services all over the world, especially in China. Our mobility services
provider, Daimler Financial Services, has a wide range of responses to every need — for example,
through the world’s leading company for ﬂexible car sharing, car2go, as well as moovel mobility services
and transport services ranging from Blacklane to our stake in Flixbus. Thanks to mytaxi, Daimler is the
leading app-based taxi broker in Europe. We’ve also become a full-service ﬂeet management provider
for cars and vans in Europe through our acquisition of Athlon Car Lease. We aim to continue expanding
our mobility portfolio in the future. For example, our acquisition of shares in Turo is another step in our
expansion of peer-to-peer car sharing. And our investment in Via has made Mercedes-Benz Vans a
player in the ﬁeld of on-demand ride sharing. In all of these ways, Daimler is using smartphone-based
mobility concepts to support the optimal use of existing transportation infrastructures on the way to
the ﬂexible and environmentally friendly mobility of tomorrow.
w daimler-ﬁnancialservices.com/en

The mytaxi app has revolutionized an entire industry. Taxi rides via mytaxi are simple
and eﬃcient — from ordering the car to cashless payment and ﬁnally an evaluation of the
ride. mytaxi is the biggest service platform of its kind in Europe, with 70 million passen-
gers and 120,000 registered taxi drivers in over 70 cities in eleven European and two South
American countries. It’s the leading app-based taxi broker, and as a result of its merger
with Hailo and Taxibeat, it now operates in Germany, Greece, the United Kingdom, Ireland,
Italy, Austria, Poland, Portugal, Spain and Sweden. Taxibeat also operates today in Peru
and Chile. The network also includes the Clever Taxi subsidiary in Romania.
w mytaxi.com/de/en

FIND. BOOK. PAY.

car2go is an important part of Daimler’s mobility
strategy. car2go makes Daimler a pioneer and market
leader in the ﬁeld of ﬂexible car sharing at 26 locations in
eight countries on three continents: Europe, North America
and Asia. In Europe and North America, car2go vehicles
can be taken across national borders. Today, almost three
million customers have access to the car2go ﬂeet of more
than 14,000 smart and Mercedes-Benz vehicles. Customers
ﬁnd, book and pay for car2go vehicles via their smartphones.
There are fully electric ﬂeets with a total of 1,400 vehicles in
Stuttgart, Amsterdam and Madrid. That makes car2go one
of the biggest providers of electric car sharing. In April 2016,
car2go opened its ﬁrst operation in the growth market of
China in the city of Chongqing. Demand for the 600 smart
fortwo vehicles at this car2go location developed rapidly
within just one year: 234,000 customers were using car2go
in Chongqing at the end of 2017. This makes Chongqing the
metropolis with the most car2go customers, ahead of cities
such as Berlin and Madrid.
w car2go.com/de/en

Daimler’s moovel is an operating system for urban
mobility. The smart connection of diverse means of
transportation is a trend of our time. Our moovel mobility
app oﬀers access to a wide range of mobility services
and shows the duration and cost of trips made via local
public transport, car sharing, mytaxi, rental bicycle and the
Deutsche Bahn rail network. Most of these services can be
directly booked and paid for via the app. Over 3.7 million
customers in Germany and the United States use the moovel
app and moovel transit, a worldwide service from the
moovel Group which oﬀers solutions that transit associa-
tions and companies can make available to their customers
under their own brand names. In the USA, moovel transit
is the market leader for mobile ticketing systems. More
than 22.3 million transactions were conducted via moovel
products in 2017.
w moovel.com/de/en

DAIMLER ANNUAL REPORT 2017 | #1 | CASE 41

DAIMLER ANNUAL REPORT 2017 | #1 | CASE 43

IDEAS FOR
TOMORROW

Even more drive for Daimler innovations — thanks to the entrepreneurial spirit of the startup
community. We are forging ahead with new ideas for mobility, in many cases through our dialog
with young companies. Our points of entry include initiatives such as CASE Invest, Lab1886, Startup
Intelligence Center, DigitalLife@Daimler and STARTUP AUTOBAHN. As one of the leading European
startup accelerators in the ﬁelds of mobility and Production 4.0, STARTUP AUTOBAHN works with
established companies to support selected startups. Projects are rapidly advanced with space, a
hardware lab and a network of investors and mentors. Daimler and the other founding partners have
been joined by additional partners since 2016. A total of 41 startups conducting a large number of
pilot projects have completed the ﬁrst two STARTUP AUTOBAHN programs in Stuttgart. One of the
ﬁrst products to have been realized is the innovative address system “what3words,” which makes
every location on earth unmistakably identiﬁable by means of three words. Mercedes-Benz is the
ﬁrst auto manufacturer to use the system. In the third program at STARTUP AUTOBAHN, 34 young
tech companies are developing their projects to market maturity. STARTUP AUTOBAHN is also widely
established internationally: Alongside Stuttgart, startups are also being sought, sponsored and
supported in Beijing, Singapore and South Africa.
w daimler.com/innovation/venture/en

44 DAIMLER ANNUAL REPORT 2017 | #1 | CULTURE

DAIMLER ANNUAL REPORT 2017 | #1 | CULTURE 45

46 DAIMLER ANNUAL REPORT 2017 | #1 | CULTURE

CULTURE

Innovative, ﬂexible corporate culture

At Daimler, the expansion of our attractive core busi-

ness operations is inseparable from our systematic

development of the CASE fields. We want to safeguard

and enhance our corporate success through optimal

customer orientation and innovative business models.

To this end, we are establishing a corporate culture

that effectively supports transformation and keeps

Daimler on its successful path. Integrity, one of our

four corporate values, is its foundation. Together with

our employees, we have developed future-oriented

management principles and work methods within the

framework of the Leadership 2020 program. This is

how we can shape the mobility of the future from a

position of leadership, flexibly address ever-changing

customer requirements, and quickly establish our-

selves in new markets. State-of-the-art office environ-

ments support agile Group-wide cooperation through

the options offered by connectivity, communication

and collaboration.

LEADERSHIP 2020

New forms of cooperation will make us even faster, more agile, and closer to our customers.
Daimler has shaped the automotive sector for more than 130 years. But the markets are becoming
increasingly fast-paced and focusing on customers even more than before. Daimler is adapting itself
to this fundamental transformation. That’s because the more precisely we know our customers, the
faster we can react to their ever-changing requirements. The sooner we launch the right products on
the market, the more we distinguish ourselves from our competitors. And the more ﬂexibly we react
to changes, the more eﬀectively we can use trends to our advantage. We are shaping our future success
by means of a new kind of cooperation: one that is faster and more ﬂexible and involves more sharing
and more innovation. An international Leadership 2020 team across hierarchies, locations and functions
is shaping the new culture at Daimler. In eight focus areas — the “game changers” — we are creating
completely new systems, processes and tools. Supported by a mandate from the Board of Management,
this process is also deliberately altering previous structures and work methods — in order to prepare
the way for a new era of mobility.
w daimler.com/career/thats-us/leadership2020

48 DAIMLER ANNUAL REPORT 2017 | #1 | CULTURE

FREE SPACE FOR
INNOVATIONS!

Today’s modern work environments already oﬀer us scope for future operations. To sup-
plement Leadership 2020 and our new work culture, we are developing our business premises
into future-oriented oﬃce environments. Traditional single-occupancy oﬃces are giving way to
ﬂexible, activity-oriented work settings. As a result of this reorganization, Daimler employees
can work ﬂexibly in terms of their work space and work organization. They can take advantage
of all the potential oﬀered by agile, project-related teamwork. We have transformed traditional
oﬃces into state-of-the-art work environments in pilot projects at various locations such as
Mercedes-Benz in Sindelﬁngen and Daimler Financial Services at Pragsattel in Stuttgart. In the
future, we will launch pilot projects at the new Daimler Trucks campus in Leinfelden-Echterdingen
and the campus in Stuttgart-Vaihingen. Through these experiences and in line with the needs
of the dynamically changing world of work, we are continuously developing our “me@work”
concept. This is where we can implement the dynamic culture and values that we, the inventors
of the automobile, have embodied for over 130 years and will continue to embody in the future.
w daimler.com/career/thats-us/daimler-as-an-employer

This is where Daimler is enabling new forms
of cooperation and direct communication across
hierarchies and functions.

THE BASIS OF
OUR CONDUCT

Integrity is our motivation — for balanced economic, environmental and social results. Together with
passion, discipline and respect, integrity is one of our four corporate values at Daimler. In our understanding,
integrity includes compliance with laws and regulations, as well as fairness, responsibility, mutual respect,
openness and tolerance. Daimler’s management culture is based on this understanding. Integrity is also the
basis of our respectful dealings with one another. It gives our employees orientation, even in diﬃcult situa-
tions. That’s especially important in times of change and transformation. Integrity and Leadership 2020 are
part of Daimler’s DNA, and they are essential if we are to remain on our successful course in the future.
w daimler.com/sustainability/integrity

50 DAIMLER ANNUAL REPORT 2017 | #1 | COMPANY

DAIMLER ANNUAL REPORT 2017 | #1 | COMPANY 51
51

52 DAIMLER ANNUAL REPORT 2017 | #1 | COMPANY

PROJECT
FUTURE

This is the right moment to prepare Daimler optimally for the future and to safeguard
our employees. New competitors, breakneck technological change and increasingly diverse
customer requirements — never before has the automotive sector changed so hard and fast.
To stay competitive, we want to continuously develop — technologically, culturally and struc-
turally. In the highly dynamic ﬁ elds where we operate, we need an organization that enables
us to act fast and ﬂ exibly, with the power of a globally operating company. In “Project Future”,
we will strive to further focus and strengthen our structure. We are considering the forma-
tion of three legally independent business entities under the management of Daimler AG:
Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and Daimler Financial Services AG,
which is already a successful legally independent company. This is how we want to create
the preconditions for optimally utilizing market potential — with new cooperation partners as
well — and to safeguard our employees at the Group. E pages 93 f
w daimler.com/company/strategy

The planned new structure
We continue to be a family under the roof of Daimler AG

Daimler AG

Mercedes-Benz Cars & Vans

Daimler Trucks & Buses

Daimler Financial Services

Mercedes-Benz
Cars

Mercedes-Benz
Vans

Daimler
Trucks

Daimler
Buses

Daimler
Financial
Services

Daimler
Mobility
Services

Through our future-oriented strategy, we aim to
boost our eﬀectiveness and also set benchmarks in
the global mobility sector as a corporate family.

OUR GOAL:
TO PIONEER
A NEW ERA
OF MOBILITY

The next level of mobility will have many dimensions: People all over the
world want to be mobile in highly individual ways. Vehicles will be connected
and electric, drive autonomously and be shared with other individuals. As
one of the world’s leading auto manufacturers, Daimler is already shaping
the mobility of tomorrow. Through the combination of our strategic fields of
action — CORE, CASE, CULTURE and COMPANY — we will systematically
write new chapters in our success story in the future.

DAIMLER ANNUAL REPORT 2017 | #1 | CORE CASE CULTURE COMPANY 55

“With the four strategic areas
for action - CORE, CASE, CULTURE
and COMPANY - we are setting the
course for a successful future.”

CHAIRMAN’S LETTER 57

Stuttgart, February 2018

In 2017, Daimler once again succeeded in breaking its record of the previous
year. I would therefore like to thank everyone at Daimler for their great eﬀorts
last year, as well as for their willingness and enthusiasm to actively push for-
ward with our company’s transformation. I would also like to thank you. You
have placed your trust in our strategy. And you have given us the freedom
to act and the time to implement that strategy. And it has been worthwhile!

In the year 2017, we sold more vehicles than ever before in our company’s
history of more than 130 years, nearly 3.3 million altogether. Revenue reached
164.3 billion euros and was thus 7 percent higher than in the previous year.
EBIT increased by 14 percent to 14.7 billion euros. And at 9 percent, we achieved
our targeted return on sales in the automotive business. The bottom line is a
net proﬁt of 10.9 billion euros. At the Annual Shareholders’ Meeting, the Board
of Management and the Supervisory Board will propose the distribution of a
dividend of 3 euros and 65 cents per share.

Let’s have a look at the development of the individual divisions.

Mercedes-Benz Cars remains on its path of proﬁtable growth. In 2017, we
sold nearly 2.4 million cars – an increase of 8 percent compared with the
prior year. Mercedes-Benz continues to be the leading premium brand and
further extended its lead over its direct competitors. A key reason for that
is our success in China. In 2017, unit sales by Mercedes-Benz in the world’s
largest car market increased by 28 percent. This is the result of our hard
work in recent years. smart was also very popular in China in 2017. The strong
demand for the electric smart models is also very pleasing. Worldwide, the
brand sold 136,000 cars.

58 CHAIRMAN’S LETTER

Daimler Trucks sold 471,000 vehicles in 2017 – signiﬁcantly more than in the
previous year and signiﬁcantly more than we had expected at the beginning
of the year. As overall demand from the markets was only moderate, that is a
strong performance, which was primarily driven by our positive business
development in the NAFTA region. With the eﬃciency activities we have initi-
ated, in particular at Mercedes-Benz Trucks, we have good prospects also of
reaching our targeted level of proﬁtability in the medium term.

At Mercedes-Benz Vans, the year featured further strong growth. All model
series helped to achieve the fourth consecutive record year. Towards the end of
the year, we had the successful launch of the X-Class, the world’s ﬁrst pickup
from a premium manufacturer. In 2017, we also showed how we imagine the
transformation from a van producer into a provider of system solutions. That
ranges from ride-sharing projects to new delivery methods with vans and drones.

The development of Daimler Buses beneﬁted from the improved economic
situation in Latin America. We sold a total of 28,700 buses and bus chassis last
year, which is 9 percent more than in 2016. At the same time, we continued
our product oﬀensive: With a new hybrid city bus, we would like to help make
public transportation even more eﬃcient. And with two new coaches, we aim
to continue proﬁting from the growing long-distance bus market.

Daimler Financial Services has been delivering record results for many years
now, and it was the same in 2017. We lease or ﬁnance half of the vehicles we
sell. And we increasingly also broker suitable insurance policies: 20 percent
more in 2017 than in the previous year. The core business of DFS now also in-
cludes mobility services. Nearly 18 million people in more than 100 cities around
the world already use such services provided by Daimler: from ﬂexible car
sharing to an app-based taxi service and mobile ticketing solutions for trans-
portation companies. And we plan to further strengthen this leading position.

CHAIRMAN’S LETTER 59

The results for 2017 show that our company is in excellent shape and highly
proﬁtable. It stands for sustainable success in volatile times. We are proud of
that. But it’s no reason to stand still. That’s why we are pushing forward with
the transformation in all areas at Daimler.

The focus on our core business (CORE) is the foundation for our success
today. It is the ﬁnancial backbone of Daimler and we will make it even stronger.
Above all, we are investing in new products. In the areas of cars alone, we will
launch a total of more than a dozen new models in 2018.

We are making use of our technological expertise and the proﬁtability of our
core business to vigorously tackle the major future issues of our industry.
We summarize them under the acronym CASE. It stands for a combination of
connectivity, autonomous driving, sharing and electric mobility. So it’s about
nothing less than the reinvention of individual mobility. We showed what that
could look like at the Frankfurt Motor Show in the fall: The smart vision EQ
fortwo concept car that we presented there drives to you autonomously and
emission-free whenever you need it. Along the route, it suggests ride sharers
with similar destinations. It is constantly in contact with the other cars in the
ﬂeet. Thanks to artiﬁcial intelligence, it drives in good time to where it will
be needed next. That might sound like science ﬁction. But in the early 2020s,
we at Mercedes-Benz want to put the ﬁrst self-driving taxis on the roads.

Working on the CASE topics requires of us a culture of openness (CULTURE).
We are working on that with Leadership 2020. We wanted to make the trans-
formation quickly tangible. That’s why we focused right from the start on
changing processes, rules and tools. A new phase is now starting. We are
focusing on the basis of Leadership 2020: the principles according to which
we manage and work together. This is also a matter of the right inner attitude,
on cooperation or agile actions for example.

60 CHAIRMAN’S LETTER

We want to reﬂect the entrepreneurial spirit that we promote with Leadership
2020 also in the structure of the Daimler Group (COMPANY). Because an inner
attitude and the external image should complement each other. We would like
to strengthen individual responsibility in our organization while maintaining the
synergies that we have at Daimler.

CORE, CASE, CULTURE and COMPANY. Those are the four fundamental ele-
ments of our future strategy. But another “C” is still missing: the customers –
our customers. They are at the center of everything. Because what convinces
our customers is also good for our employees, for our business partners and
for you, our shareholders.

Together, we have seen three phases in the development of our company in the
past three years. The ﬁrst phase was the restructuring. We focused on our core
competence, the production of motor vehicles. In the second phase, we wanted
to become the number one. We achieved that goal ahead of time and conﬁrmed
it in 2017. We are now in the phase of shaping the future. Our ambition is un-
changed: Daimler belongs at the top. 132 years a(cid:5)er the invention of the auto-
mobile, Daimler is once again a company on the move. And we will be delighted
if you continue to accompany us on this journey.

Sincerely yours,

Dieter Zetsche

A | TO OUR SHAREHOLDERS | CONTENTS 61

CORE, CASE, CULTURE, COMPANY:
WE HAVE SET THE COURSE
FOR A SUCCESSFUL FUTURE!

As the inventor of the automobile, we intend to shape the fundamental transformation
of the automotive industry from the forefront. With a strong core business (CORE),
we are creating the ﬁnancial basis to invest in the future-oriented areas of connectivity,
autonomous driving, the ﬂexible use of vehicles and services, and electric mobility
(CASE). In parallel, we are developing an innovation-friendly and ﬂexible corporate
culture under the roof of Leadership 2020 (CULTURE). In addition, we started “Project
Future” in the year under review (COMPANY), with which we will strengthen the future
viability of our divisions. We reached some important milestones in the implementa-
tion of our strategy last year, and we were once again very successful in our business
operations. This is also to the beneﬁt of our shareholders: in the form of an attractive
dividend and an attractive share price.

A | To Our Shareholders

The Board of Management
Report of the Supervisory Board
The Supervisory Board
Highlights of 2017
Daimler and the Capital Market
Objectives and Strategy

The Board of Management

Dieter Zetsche | 64
Chairman of the Board of Management, Head of
Mercedes-Benz Cars, Appointed until December 2019

Renata Jungo Brüngger | 56
Integrity and Legal Aﬀairs,
Appointed until December 2023

Martin Daum | 58
Daimler Trucks and Buses,
Appointed until February 2022

Ola Källenius | 48
Group Research & Mercedes-Benz Cars Development,
Appointed until December 2022

A | TO OUR SHAREHOLDERS | THE BOARD OF MANAGEMENT 63

Wilfried Porth | 59
Human Resources and Director of Labor Relations,
Mercedes-Benz Vans, Appointed until April 2022

Britta Seeger | 48
Mercedes-Benz Cars Marketing & Sales,
Appointed until December 2019

Hubertus Troska | 57
Greater China,
Appointed until December 2020

Bodo Uebber | 58
Finance & Controlling, Daimler Financial Services,
Appointed until December 2019

64 A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD

Report of the Supervisory Board

Dear Shareholders, Daimler is a successful and strong company. Despite various challenges,
Daimler AG concluded ﬁnancial year 2017 with excellent results once again and, as in the
previous years, with solid earnings. We can therefore strengthen our core business while
investing in new technologies and businesses. From a position of strength, the company
has initiated a far-reaching process of transformation. Daimler is actively shaping the future
of mobility.

Supervisory and advisory activities of the Supervisory
Board
The Supervisory Board of Daimler AG fully performed its tasks as
deﬁned by the law, the Company’s Articles of Incorporation
and rules of procedure. The Supervisory Board continually advised
and supervised the Board of Management in the management
of the Company and provided support with strategically important
issues relating to the Group’s further development. The
Supervisory Board examined whether the annual company and
consolidated ﬁnancial statements, the combined management
report and the other ﬁnancial reporting were in conformance with
the applicable requirements. In addition, it approved numerous
business matters for which its consent was required following
careful reviews and consultations. As well as approving the
further review and initiating the ﬁrst preparatory measures for
the strengthening of the divisional structure by creating legally
independent entities in the context of further developing the
Daimler Group’s structures, this also included ﬁnance and
investment planning, major equity measures at companies of
the Group, key individual investments and the conclusion of
contracts with particular importance for the Group. The Board
of Management informed the Supervisory Board about a
large number of further measures and business transactions,
and discussed them with it intensively and in detail, including
the comprehensive future plan for diesel engines, which was
approved by the Board of Management in July 2017. Finally, the
Board of Management reported continually to the Supervisory
Board on the current status of the main legal proceedings.

The Board of Management regularly informed the Supervisory
Board about all signiﬁcant economic developments of the Group
and the divisions. It continually provided information to it on all
fundamental questions of corporate planning, including ﬁnance,
investment, sales and personnel planning, current developments
at the companies of the Group, the development of revenue,
the situation of the Company and the divisions, and legal risks.
Furthermore, the Board of Management reported to the
Supervisory Board continually on return on equity and the
Group’s liquidity situation, the development of sales and
procurement markets, the overall economic situation, and
developments in the capital markets and the area of ﬁnancial
services. Additional topics included the further development of
the product portfolio, securing the Group’s long-term com-
petitiveness, and the ongoing implementation of measures for

safeguarding sustainable and future-oriented mobility. The
Supervisory Board also dealt in detail with the development of
the share price and the related background, as well as the
expected impact of strategic projects on the share price.

Daimler is a strong and successful company and systematically
pushed forward with the implementation of its strategy also in
ﬁnancial year 2017. The Group’s ﬁnancial strength and sound
balance sheet allow our growth strategy to be continued
while paying out an attractive dividend to our shareholders.
In addition to the core business, we have summarized the
topics “Connected”, “Autonomous”, “Shared & Services”, and
“Electric” under the acronym CASE. From a position of strength,
we have initiated a far-reaching transformation process in order
to be active in shaping the upcoming fundamental changes
facing the automotive industry in the coming years. For that
purpose, high levels of advance expenditure will be made in the
coming years. With the presentation of important products and
concept vehicles in 2017, Daimler demonstrated its strong
expertise in the core business and in the CASE areas. The Super-
visory Board and the Board of Management are convinced
that the new challenges require both a cultural change as well
as a changed structure. The cultural change has been
initiated with the involvement of all employee groups. Work is
now being done at all levels to implement that change in
order to be prepared for the challenges ahead of us. Daimler will
become faster, more ﬂexible and more digital in order to
safeguard its future strength. For this purpose, a start has been
made with the review and initiation of the ﬁrst preparatory
measures to strengthen the divisional structure by creating
legally independent entities. The Supervisory Board ﬁrmly
supports all of these steps.

Working culture and areas of Supervisory Board activity
In the year 2017, the Supervisory Board convened for nine
meetings. Participation in the meetings by the members of the
Supervisory Board was at a high level once again. All members
of the Supervisory Board participated in signiﬁcantly more than
half of the meetings of the Supervisory Board and its com-
mittees of which they are members during the year under review.
The work of the Supervisory Board featured open and intensive
exchanges of information and opinions. The members of the
Supervisory Board regularly prepared for upcoming resolutions
with the use of documentation provided in advance by the Board

A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD 65

Dr. Manfred Bischoff, Chairman of the Supervisory Board

of Management. Furthermore, the members representing the
employees and the members representing the shareholders
regularly prepared the Supervisory Board meetings in separate
discussions, which were attended by members of the Board of
Management. The Supervisory Board was intensively supported
by its committees and the members of the Supervisory Board
intensively discussed the measures and business matters to be
decided upon with the Board of Management. For the meetings,
executive sessions were regularly arranged so that topics could
be discussed also in the absence of the Board of Management.

The members of the Supervisory Board and of the Board of
Management came together for the bilateral exchange of
opinions also outside the regular meetings. The Board of Manage-
ment informed the Supervisory Board with written reports
about the most important indicators of business development
and existing risks, and submitted the interim ﬁnancial reports
to the Supervisory Board. The Supervisory Board was informed of
special occurrences also between the meetings.

The members of the Supervisory Board independently attend
such courses of training and further training regarded as
necessary for the performance of their tasks, relating for exam-
ple to questions of corporate governance, changes in the
legal framework, new products and future-oriented technologies,
in which they are supported by the Company. In a special
onboarding program, new members of the Supervisory Board
have the opportunity to meet the members of the Board of
Management and other senior executives for a bilateral exchange
of opinions and information on the current topics of the various
Board of Management areas, allowing them to gain an overview
of the topics relevant to the Daimler Group.

In its meeting on February 1, 2017, which was attended by
the external auditors, the Supervisory Board discussed, took
note of and approved the preliminary key ﬁgures of the
annual company and consolidated ﬁnancial statements for

2016 and the dividend proposal to be made at the 2017 Annual
Shareholders’ Meeting. The Supervisory Board determined
that no objections were to be raised to their publication. The
preliminary key ﬁgures for the year 2016 and the proposal on
the appropriation of proﬁt were announced at the Annual Press
Conference on February 2, 2017.

In the Supervisory Board meeting held on February 10, 2017,
the Supervisory Board ﬁrst decided on the personnel changes
in the Board of Management described on E page 68.
Subsequently, it dealt with the annual company ﬁnancial state-
ments, the annual consolidated ﬁnancial statements and the
combined management report for Daimler AG and the Daimler
Group for the year 2016, each of which had been issued with
an unqualiﬁed audit opinion by the external auditors, as well as
with the reports of the Audit Committee and the Supervisory
Board, the declaration on corporate governance combined with
the corporate governance report, the remuneration report
and the proposal on the appropriation of proﬁt. In preparation,
the members of the Supervisory Board were provided with
comprehensive documentation.

The Audit Committee and the Supervisory Board dealt with
those documents in detail and discussed them intensively in
the presence of the external auditors, who reported on the
results of their audit and were available to answer questions
and to provide further information. Following the ﬁnal results
of the review by the Audit Committee and its own review, the
Supervisory Board declared its agreement with the results
of the audit carried out by the external auditors. It determined
that no objections were to be raised, approved the ﬁnancial
statements and the combined management report as presented
by the Board of Management, and thus adopted the ﬁnancial
statements for the year 2016. On this basis, the Supervisory
Board consented to the proposal made by the Board of
Management on the appropriation of distributable proﬁt. In
addition, the Supervisory Board approved the report of the

66 A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD

Supervisory Board, the corporate government statement
combined with the corporate governance report, and the
remuneration report, as well as its proposed decisions on
the items of the agenda for the 2017 Annual Shareholders’
Meeting.

In connection with the adjustment of Supervisory Board
remuneration proposed at the Annual Shareholders’ Meeting,
the Supervisory Board called for a self-commitment by the
members of the Supervisory Board to purchase Daimler shares.
In this self-commitment, the members of the Supervisory Board
state to the Supervisory Board that they will purchase shares
of the Company each year for 20% of their adjusted Supervisory
Board remuneration (excluding committee remuneration and
meeting fees and before taxes) and hold them at least until the
end of the year following their departure from the Supervisory
Board of the Company (self-commitment according to the
principle of comply or explain). This does not apply for members
of the Supervisory Board whose Supervisory Board remuneration
is transferred to the Hans-Böckler-Sti(cid:5)ung due to compulsory or
voluntary application of the guidelines of the German Federation
of Trade Unions, or is transferred to the member’s employer due
to a contract of employment, or is credited to the member’s
contractual remuneration entitlement. All members of the Super-
visory Board who are not subject to any of the described trans-
fer or credit arrangements made the self-commitment in 2017.

In its meeting on February 10, 2017, the Supervisory Board dealt
also with questions of corporate governance and discussed the
results of the eﬃciency review carried out in ﬁnancial year 2016,
which once again conﬁrmed the very good and constructive
cooperation within the Supervisory Board and with the Board of
Management. There was no fundamental need for action or
change; however, some suggestions for further optimization were
made, which were implemented during the ﬁnancial year.
Furthermore, the Supervisory Board dealt with matters pertain-
ing to the remuneration of the members of the Board of
Management and approved the memberships in other boards
and further external secondary employments of the members
of the Board of Management that were presented in the meeting.
Finally, the Supervisory Board addressed at this meeting once
again whether, in connection with the antitrust investigations of
the European Commission against truck manufacturers, claims
for compensation were to be made against former or current
members of the Board of Management. On the basis of the
reviews carried out so far and repeatedly updated by an inde-
pendent law ﬁrm, a further review by an independent legal
academic, as well as detailed discussions in the Supervisory
Board taking into account the welfare of the Company, the
Supervisory Board maintained its previous resolution, based
on the information available, that no such claims were to be
made at the present time. The grounds for this resolution did not
change in the further course of the year.

The items on the agenda of the Annual Shareholders’ Meeting
held on March 29, 2017 included the reelection of Dr. Clemens
Börsig and the election of Bader Mohammad Al Saad as members
of the Supervisory Board representing the shareholders. In
the subsequent meeting of the Supervisory Board, Dr. Clemens

Börsig was reelected to the Audit Committee and was
appointed as its Chairman.

In another meeting held in late April 2017, the Supervisory Board
received detailed reports on current legal issues, also relating
to the requests, inquiries, investigations and court proceedings
in connection with the issue of diesel exhaust emissions.
Furthermore, the Supervisory Board was informed about current
business developments in China and Brazil and the respective
economic and political situations, and discussed those matters
in detail with the Board of Management.

In the meeting in late July 2017, the Board of Management
informed the Supervisory Board about the review of the general
feasibility and the advantages and disadvantages of the
possibility of reﬂecting the divisional structure of the Group with
legally independent entities. Also in this meeting, the Super-
visory Board discussed in detail with the Board of Management
about the course of business and the results of the ﬁrst half of
the year, and was informed in detail about current legal issues
and about the antitrust accusations made in the press against
the German automotive industry. Finally, also in this meeting, the
Supervisory Board dealt with and approved the new product
platform for construction vehicles from Western Star.

In a subsequent meeting of the Supervisory Board together with
the Advisory Board for Integrity and Corporate Responsibility,
the participants discussed the role of the Advisory Board as well
as the cultural change, which constitutes an important success
factor for Daimler, with the examples of Leadership 2020 and
integrity.

Strategy meeting of the Supervisory Board
During a two-day strategy workshop held in Sindel ﬁngen in late
September 2017, the Supervisory Board was informed about
the status of the transformation in relation to the individual
divisions. The Supervisory Board discussed with the Board of
Management about how, based on the existing core business
and the new businesses summarized under CASE, the future
challenges were to be mastered and the mobility of tomorrow
was to be shaped. The four areas of CASE - “Connected”,
“Autonomous”, “Shared & Services” and “Electric” - were dis-
cussed and it was explained with the use of examples where
Daimler currently stands in these areas. Information was pro-
vided inter alia with regard to “Connected” on mercedes.me
and the Fleetboard solutions, with regard to “Autonomous” among
other things on the cooperation between Daimler and Bosch,
and with regard to “Shared & Services” also on mobility services.
The discussion with the Board of Management with regard
to “Electric” focused on the EQ brand and brand strategy, as
well as on the transition to electric mobility. The members of
the Supervisory Board and the Board of Management, with
participation by the senior executives responsible for the
topics discussed, held a con structive and open dialog about how
Daimler will adapt to new challenges and which further
developments are imminent. The topic of the changing competi-
tive environment was also discussed. In the context of a vehicle
exhibition, various models were presented to the Supervisory
Board. In this meeting, the Supervisory Board was also informed

A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD 67

in detail about the current legal issues and about the subject of
technical compliance management at Daimler. Furthermore, the
members discussed the key ﬁnancial metrics and the targets
for the Group and the divisions.

Corporate Governance and declaration of compliance
During the year 2017, the Supervisory Board was continually
occupied with standards of good corporate governance.

At an extraordinary meeting held in mid-October 2017, the Super-
visory Board was informed about the current status of the
review of the future business structures at Daimler. In late
October, the Supervisory Board granted its consent to the
ongoing review and to the initiation of the ﬁrst preparatory
measures for strengthening the divisional structure.

Meeting on operational planning 2018/2019
On the day before the meeting in December 2017, the members
of the Supervisory Board had the opportunity to participate
in a product presentation and to be informed about new vehicle
models, design studies and forward-oriented technologies.
In the context of the actual meeting on December 7, 2017, the
Supervisory Board dealt with, among other things, the imple-
mentation of non-ﬁnancial reporting at Daimler resulting from the
EU CSR Directive, and in this context decided that KPMG should
be commissioned to carry out a voluntary review in the form of
a limited assurance. The Supervisory Board then decided on
the election proposals to be made to the Annual Shareholders’
Meeting in 2018 as described on E page 68. During the
further course of the meeting, on the basis of comprehensive
documentation, the Supervisory Board discussed in detail and
approved the operational planning for the years 2018 and 2019.
This included discussion of existing opportunities and risks as
well as the Group’s risk management.

Also in this meeting, the Supervisory Board dealt with various
equity contributions at companies of the Group, including at
Daimler India Commercial Vehicles Pvt. Ltd., and consented to
the plans. Subsequently, the Supervisory Board was informed
in detail on the status of the review and on the initiation of the
ﬁrst preparatory measures to strengthen the divisional structure.
A further focus of the meeting was information on the current
legal issues, also with regard to the requests, inquiries,
investigations and legal proceedings in connection with the issue
of diesel exhaust emissions. In the further course of the
meeting, the Supervisory Board dealt with Leadership 2020
and the Personnel Strategy Digitalization, in particular the
initiatives relating to the recruitment of digital talent, employees’
digital qualiﬁcation and the digitization of HR tools. Further-
more, the Supervisory Board approved the creation of a steering
committee for the CASE future topics composed of members
of the Board of Management. Other topics discussed at the
December meeting were corporate governance, also with regard
to the recommendations of the German Corporate Governance
Code, and Board of Management remuneration. Thereby,
the focus was on the qualiﬁcations proﬁles, including diversity
concepts, for the Board of Management as well as for the
Supervisory Board, which are explained on E pages 210 ﬀ
of the declaration on corporate governance combined with
the corporate governance report. Finally, the Supervisory Board
dealt with the probable main topics of the year 2018 and
with the planning of a meeting of the Supervisory Board abroad
in 2018.

In its meeting in December 2017, the Supervisory Board
approved the 2017 declaration of compliance with the German
Corporate Governance Code pursuant to Section 161 of the
German Stock Corporation Act (AktG). With the exception
explained there, all the recommendations of the Code have
been complied with and continue to be complied with. In the
same meeting, the Supervisory Board updated the rules of
procedure for the Supervisory Board and its committees.

In accordance with good corporate governance, the members of
the Supervisory Board of Daimler AG are obliged to disclose
conﬂicts of interest – especially those that might arise due to an
advisory or board function for a customer, supplier or creditor
of Daimler, or for other third parties – to the entire Supervisory
Board.

There were no indications of any actual conﬂicts of interest in
2017. In order to avoid individual conﬂicts of interest, some
members of the Supervisory Board did not participate in dis-
cussions of certain items of the agendas in the year 2017: Dr.
Bernd Bohr, Dr. Jürgen Hambrecht and Dr. Bernd Pischetsrieder
le(cid:5) the room during the Supervisory Board meetings for dis-
cussion of the legal status report on the issue of diesel exhaust
emissions. As a result, in compliance with the goals of the
Supervisory Board, there were no potential conﬂicts of interest
during the year under review for at least half of the members
representing the shareholders and for at least 15 members of the
entire Supervisory Board.

Law for the equal participation of women and men in
management positions
For supervisory boards of listed companies subject to parity
codetermination, like that of Daimler AG, the German Stock
Corporation Act prescribes a binding gender ratio of at least
30% women. The ratio is to apply to the entire supervisory
board. If the side of the supervisory board representing the
shareholders or the side representing the employees objects
to the chairman of the supervisory board before the election
about the application of the ratio to the entire supervisory
board, the minimum ratio is to apply separately to the share-
holders’ side and to the employees’ side for that election.

As of December 31, 2017, the Supervisory Board of Daimler AG is
composed of 30% women (the members Sari Baldauf, Andrea
Jung and Petraea Heynike) and 70% men. On the employees’
side, the proportions as of that date are 20% women (the
members Elke Tönjes-Werner and Sibylle Wankel) and 80% men.
In its meeting on December 7, 2017, the Supervisory Board
dealt with the speciﬁc proposals for candidates for election to
be made at the Annual Shareholders’ Meeting in 2018 and,
against this backdrop, stated that the shareholders’ side and
the employees’ side should separately achieve the legally
prescribed proportion of women. The members representing the
shareholders and the members representing the employees

68 A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD

stated that they object to the overall fulﬁlment of the statutory
gender quota. Subsequently, based on the recommendation of
the Nomination Committee, the Supervisory Board decided to
nominate Sari Baldauf as well as Dr. Jürgen Hambrecht again and
Marie Wieck for the ﬁrst time for election to the Supervisory
Board at the Annual Shareholders’ Meeting in 2018. Marie Wieck
is a General Manager at IBM Blockchain. If the proposed
persons are elected, the statutory quota will be fulﬁlled on the
shareholders’ side, insofar as no other changes occur. The
next election to the Supervisory Board of members representing
the employees will also take place in 2018.

For the composition of the Board of Management, the Super-
visory Board set the target in December 2016 of at least 12.5%
women, which is applicable until December 31, 2020.

Corporate governance at Daimler is described in detail in the
declaration on corporate governance combined with the
corporate governance report on E pages 203 ﬀ and in the
remuneration report on E pages 136 ﬀ of this Annual Report.

The work of the committees

The Presidential Committee convened eight times last year.
It dealt primarily with corporate governance topics as well as
Board of Management matters concerning remuneration and
personnel. As in previous years, compliance targets constituted
part of the individual target agreements of the members of
the Board of Management. Once again, additional non-ﬁnancial
targets were also included as criteria in the target agreements.
For the past ﬁnancial year, they were the further development
and permanent establishment of the corporate value integrity,
diversity with regard to increasing the proportion of women in
management positions, the maintenance and enhancement of
a high level of employee satisfaction, and high product quality.

The Audit Committee met six times in 2017. Details of those
meetings are provided in a separate report of that committee
on E pages 200 ﬀ.

In two meetings in 2017, the Nomination Committee prepared
recommendations for the Supervisory Board’s proposals to
be made at the Annual Shareholders’ Meeting in 2018 on the
candidates for election to the Supervisory Board. Among other
things, and taking into consideration all circumstances of each
individual case, the proposals are oriented towards the Daimler
Group’s interests and aim to fulﬁll the overall qualiﬁcations
proﬁle, including expertise proﬁle and diversity concept, for
the entire Supervisory Board.

There was no occasion to convene the Mediation Committee
in 2017.

Personnel changes in the Supervisory Board and the
Board of Management
In the meetings in December 2016 and on February 10, 2017,
the members of the Supervisory Board representing the
shareholders decided, on the basis of a recommendation by
the Nomination Committee, to propose the election to the
Supervisory Board of Dr. Clemens Börsig and Bader Mohammad
Al Saad at the Annual Shareholders’ Meeting in 2017. Dr. Bernd
Bohr had previously stated that in the interests of the Daimler
Group, he would step down from the Supervisory Board as of
the end of the Annual Shareholders’ Meeting in 2017. The Super-
visory Board had stated its intention to propose Dr. Bernd
Bohr for reelection to the Supervisory Board within the next
two years.

On March 29, 2017, the Annual Shareholders’ Meeting elected
Bader Mohammad Al Saad and Dr. Clemens Börsig as members
of the Supervisory Board representing the shareholders until the
end of the Annual Shareholders’ Meeting that decides on
ratiﬁcation of board members’ actions for ﬁnancial year 2021.

In the Supervisory Board meeting on February 10, 2017,
Ola Källenius was reappointed as a member of the Board of
Management Member with responsibility for “Group Research
and Mercedes-Benz Cars Development”, eﬀective from Janu-
ary 1, 2018 for a period of another ﬁve years.

In advance of this meeting, Dr. Wolfgang Bernhard, who had been
appointed as a member of the Board of Management with
responsibility for “Daimler Trucks & Buses” until February 2018,
stated that he would not be available for a contract extension.
The appointment of Dr. Wolfgang Bernhard was terminated as of
February 10, 2017. Until the appointment of his successor,
Dr. Dieter Zetsche, the Chairman of the Board of Management,
took charge of those divisions.

In its extraordinary meeting in late February 2017, the Supervi-
sory Board appointed Martin Daum as a member of the Board
of Management with responsibility for “Daimler Trucks & Buses”
eﬀective as of March 1, 2017 for a period of ﬁve years until
February 28, 2022.

A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD 69

The Audit Committee and the Supervisory Board dealt with
those documents in detail and discussed them intensively in
the presence of the responsible external auditors, who reported
on the results of their audit and were available to answer
supplementary questions and to provide additional information.
Following the ﬁnal results of the review by the Audit Committee
and its own review, the Supervisory Board declared its agreement
with the results of the audit by the external auditors; it
determined that no objections were to be raised and approved
the ﬁnancial statements and the combined management report
as presented by the Board of Management. The company
ﬁnancial statements of Daimler AG for the year 2017 were
thereby adopted. On this basis, the Supervisory Board consented
to the proposal made by the Board of Management on the
appropriation of distributable proﬁt. Furthermore, it approved
the report of the Supervisory Board, the declaration on cor-
porate governance combined with corporate governance report,
the remuneration report and the non-ﬁnancial report, as well
as its own proposed resolutions for the items of the agenda of
the 2018 Annual Shareholders’ Meeting.

Appreciation
The Supervisory Board warmly thanks all of the employees
and the management of the Daimler Group for their committed
contributions to the very successful year 2017.

The Supervisory Board also thanks Dr. Bernd Bohr, who closely
supported the Daimler Group through his committed work in
the Supervisory Board and who stepped down as of March 29,
2017.

In addition, the Supervisory Board thanks Dr. Wolfgang Bernhard
for his successful work at the Group.

Stuttgart, February 2018

The Supervisory Board

Dr. Manfred Bischoﬀ
Chairman

In the meeting in December 2017, the members of the Super-
visory Board representing the shareholders decided, on the
basis of a recommendation by the Nomination Committee, to
propose the election to the Supervisory Board of Sari Baldauf,
Dr. Jürgen Hambrecht and Marie Wieck at the Annual Share-
holders’ Meeting in 2018.

In the Supervisory Board meeting on February 9, 2018, Renata
Jungo Brüngger was reappointed to the Board of Management of
Daimler AG as the member responsible for “Integrity and Legal
Aﬀairs” for further ﬁve years eﬀective from January 1, 2019.

Audit of the company and consolidated financial
statements
The ﬁnancial statements of Daimler AG and the combined
management report for the Company and the Group for 2017
were duly audited by KPMG AG, Wirtscha(cid:5)sprüfungsgesellscha(cid:5),
Berlin, and were given an unqualiﬁed audit opinion. The same
applies to the consolidated ﬁnancial statements for 2017 pre-
pared according to IFRS.

In a meeting held on January 31, 2018 attended by the external
auditors, the Supervisory Board discussed, took note of and
approved the preliminary key ﬁgures of the annual company and
consolidated ﬁnancial statements for 2017 and the the proposal
on the appropriation of proﬁt to be made at the 2018 Annual
Shareholders’ Meeting. The Supervisory Board determined that
no objections were to be made to their publication. The pre-
liminary key ﬁgures for the year 2017 as well as the proposal on
the appropriation of proﬁt were announced at the Annual Press
Conference on February 1, 2018.

In the meeting held on February 9, 2018, the Supervisory Board
dealt with the annual company ﬁnancial statements, the annual
consolidated ﬁnancial statements and the combined manage-
ment report for Daimler AG and the Daimler Group, each of
which had been issued with an unqualiﬁed audit opinion by the
external auditors, as well as with the reports of the Audit Com-
mittee and the Supervisory Board, the corporate government
statement combined with the corporate governance report, the
remuneration report, the proposal on the appropriation of proﬁt
and the non-ﬁnancial report, the latter prepared for the ﬁrst time
and reviewed by the external auditors pursuant to ISAE 3000. In
preparation, the members of the Supervisory Board had been
provided with comprehensive documentation including the Annual
Report with the consolidated ﬁnancial statements according to
IFRS, the combined management report for Daimler AG and the
Daimler Group, the declaration on corporate governance com-
bined with the corporate governance report, the remuneration
report, the non-ﬁnancial report, the annual company ﬁnancial
statements of Daimler AG, the proposal of the Board of Manage-
ment on the appropriation of proﬁt, the audit reports of KPMG
on the annual company ﬁnancial statements of Daimler AG and
the consolidated ﬁnancial statements, each including the com-
bined management report, as well as dra(cid:5)s of the reports of the
Supervisory Board and of the Audit Committee.

70 A | TO OUR SHAREHOLDERS | THE SUPERVISORY BOARD

The Supervisory Board

Dr. Manfred Bischoﬀ
Munich
elected until 2021
Chairman of the Supervisory Board of Daimler AG
Other supervisory board memberships/directorships:
SMS Holding GmbH

Michael Bettag*
Nuremberg
appointed until 2018
Chairman of the Works Council of the Nuremberg Dealership,
Daimler AG

Michael Brecht*
Gaggenau
elected until 2018
Deputy Chairman of the Supervisory Board of Daimler AG;
Chairman of the General Works Council Daimler Group;
Chairman of the General Works Council Daimler AG;
Chairman of the Works Council, Gaggenau Plant, Daimler AG

Dr. Paul Achleitner
Munich
elected until 2020
Chairman of the Supervisory Board of Deutsche Bank AG
Other supervisory board memberships/directorships:
Deutsche Bank AG – Chairman
Bayer AG

Bader M. Al Saad
Kuwait
elected until 2022
(since March 29, 2017)
Former Chairman and Managing Director of the Executive
Committee of the Board of Directors of Kuwait Investment
Authority
Other supervisory board memberships/directorships:
Member of the Executive Committee of the Board of Directors
of Kuwait Investment Authority

Sari Baldauf
Helsinki
elected until 2018
Chairwoman of the Supervisory Board of Fortum OYj
Other supervisory board memberships/directorships:
Deutsche Telekom AG
Fortum OYj – Chairwoman
Vexve Holding OY – Chairwoman
AkzoNobel N.V. (until December 1, 2017)

Dr. Clemens Börsig
Frankfurt am Main
elected until 2022
Former Chairman of the Supervisory Board of Deutsche Bank
AG
Other supervisory board memberships/directorships:
Bayer AG (until April 28, 2017)
Linde AG
Emerson Electric Co.

Dr. Jürgen Hambrecht
Ludwigshafen
elected until 2018
Chairman of the Supervisory Board of BASF SE
Other supervisory board memberships/directorships:
BASF SE – Chairman
Fuchs Petrolub SE – Chairman
Trumpf GmbH + Co. KG – Chairman
Nyxoah SA (until December 31, 2017)

Petraea Heynike
Vevey
elected until 2021
Former Executive Vice President of the Executive Board
of Nestlé S.A.

Andrea Jung
New York
elected until 2018
President and Chief Executive Oﬃcer of Grameen America, Inc.
Other supervisory board memberships/directorships:
Apple Inc.
General Electric Company

A | TO OUR SHAREHOLDERS | THE SUPERVISORY BOARD 71

Joe Kaeser
Munich
elected until 2019
Chairman of the Board of Management of Siemens AG
Other supervisory board memberships/directorships:
Allianz Deutschland AG
NXP Semiconductors N.V.

Sibylle Wankel*
Frankfurt am Main
appointed until 2018
General Counsel of the German Metalworkers’ Union
(IG Metall)
Other supervisory board memberships/directorships:
Siemens AG (until January 31, 2018)

Ergun Lümali*
Sindelﬁngen
elected until 2018
Chairman of the Works Council at the Sindelﬁngen Plant;
Deputy Chairman of the General Works Council of Daimler AG

Dr. Frank Weber*
Sindelﬁngen
elected until 2018
Director of the Press Shop, Sindelﬁngen Plant, Daimler AG;
Chairman of the Management Representatives Committee,
Daimler Group

Wolfgang Nieke*
Stuttgart
elected until 2018
Chairman of the Works Council, Untertürkheim Plant,
Daimler AG

Dr. Bernd Pischetsrieder
Munich
elected until 2019
Chairman of the Supervisory Board of the Münchener
Rückversicherungs-Gesellscha(cid:5) Aktiengesellscha(cid:5)
in München
Other supervisory board memberships/directorships:
Münchener Rückversicherungs-Gesellscha(cid:5) Aktiengesellscha(cid:5)
in München – Chairman
Tetra Laval Group

Valter Sanches*
Geneva
elected until 2018
General Secretary IndustriALL Global Union

Jörg Spies*
Stuttgart
elected until 2018
Chairman of the Works Council, Headquarters, Daimler AG

Elke Tönjes-Werner*
Bremen
elected until 2018
Deputy Chairwoman of the Works Council, Bremen Plant,
Daimler AG

* Representative of the employees

Roman Zitzelsberger*
Stuttgart
appointed until 2018
German Metalworkers’ Union (IG Metall), District Manager
Baden-Württemberg
Other supervisory board memberships/directorships:
Heidelberger Druckmaschinen AG

Retired from the Supervisory Board:

Dr. Bernd Bohr
Stuttgart
retired on March 29, 2017
Former Member of the Management Board of
Robert Bosch GmbH
Other supervisory board memberships/directorships:
Formula D GmbH

Committees of the Supervisory Board:

Committee pursuant to Section 27 Subsection 3
of the German Codetermination Act (MitbestG)
Dr. Manfred Bischoﬀ – Chairman
Michael Brecht*
Dr. Jürgen Hambrecht
Roman Zitzelsberger*

Presidential Committee
Dr. Manfred Bischoﬀ – Chairman
Michael Brecht*
Dr. Jürgen Hambrecht
Roman Zitzelsberger*

Audit Committee
Dr. Clemens Börsig – Chairman
Michael Brecht*
Joe Kaeser
Ergun Lümali*

Nomination Committee
Dr. Manfred Bischoﬀ – Chairman
Dr. Paul Achleitner
Sari Baldauf

72 A | AN UNSERE AKTIONÄRE | HIGHLIGHTS 2015

At the Frankfurt Motor Show, Mercedes-Benz presented pioneering solutions
for the mobility of the future. The Mercedes-AMG Project ONE show car with its
Formula 1 hybrid technology stands for the future of driving performance.
And the smart vision EQ fortwo oﬀers an electric and fully automated solution
for highly eﬃcient and ﬂexible local transport.

A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2017 73
A | AN UNSERE AKTIONÄRE | HIGHLIGHTS 2015 73

Highlights of 2017

The year 2017 was very successful for Daimler. We strengthened our core
business with attractive new products and services. Important new products
included the upgraded S-Class and the new X-Class from Mercedes-Benz,
the new FUSO Super Great and the new SETRA double-decker bus. We expanded
our business portfolio with targeted acquisitions and joint operations.
We made very good progress in the future strategic areas of connectivity,
autonomous driving, ﬂexible use and services and above all with electric
mobility. Furthermore, we aim to strengthen Daimler’s future viability with
a new divisional Group structure.

74 A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2017

Daimler Financial Services acquires
PayCash Europe S.A.
With its entry into the e-payment business, Daimler
will launch its own electronic payments service under
the “Mercedes pay” brand name.
Mercedes pay is a key component of
Daimler’s mobility and digitization
strategy. The new payment system
demonstrates the goal of making
Daimler even more attractive as the
leading provider of digital mobility
services.

Startup culture at Daimler
Daimler expands its “Knowledge College” program, a series
of workshops for students, with a seminar on the subject
of startup culture at the Group. The company has the clear
goal of combining the strength of a global corporation with
the flexibility of the startup scene. Daimler is creating new
impetus to strengthen the entrepreneurial spirit at the
Group with numerous initiatives. For this purpose, it has
designed a new seminar at which students can acquire
startup know-how.

Daimler Financial Services invests in smartphone app
for auto financing
Daimler Financial Services is continuing along its growth path
with digital ﬁnance and mobility services. With the ﬁnance
startup AutoGravity, which was founded in Irvine, California

in late 2015, Daimler Financial
Services is now starting the national
rollout in 46 federal states of the
USA. The customer-focused comparison
app for automobile purchase and
ﬁnance provides information on up to
four tailored and binding oﬀers within
just a few minutes.

Launch of Truck Data Center and
new digital services
The Truck Data Center facilitates the market launch of new
digital services from Mercedes-Benz Trucks: the revolutionary
service product Mercedes-Benz Uptime and the new Fleet-
Board Manager app. A precondition for both services is the
installation of the Truck Data Center, which will be the brain
of the connected truck across all brands at Daimler Trucks.
It communicates via Bluetooth, 3G mobile telephony or GPS
with the infrastructure, other vehicles and other parties involved
in the logistics process.

Daimler invests in ChargePoint
ChargePoint is regarded as the world’s leading provider in the
segment of charging stations for electric vehicles, and is the
market leader in the United States. Expansion of the business
to the European market is planned. Strategic involvement in
ChargePoint is another important step in the spread of electric
mobility. The cooperation lays the foundation for a compre-
hensive, customer-oriented charging service.

1,500 Mercedes-Benz Sprinter and Vito vans with
electric drive for Hermes
Hermes and Mercedes-Benz Vans agree on a strategic
partnership to electrify the parcel service’s vehicle fleet.
The focus is on the economy, sus-
tainability and practicality of locally
emission-free delivery vans used
for the last mile. By 2020, Hermes
plans to use 1,500 Mercedes-Benz
electric vans of the Vito and Sprinter
model ranges in urban areas all over
Germany.

The Annual Shareholders’ Meeting approves
a constant dividend of €3.25 per share.

Approximately 6,200 shareholders
(2016: 5,500) come to the CityCube in
Berlin on March 29. The resolutions
proposed by the management are all
approved with large majorities. The
dividend payout amounts to €3,477
million and is the highest of the DAX
companies.

A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2017 75

New battery factory in Kamenz
Daimler takes a further step in its electric oﬀensive by laying the
foundation stone for one of the largest and most modern battery
factories. The Group’s second factory for lithium-ion batteries
is being built at the 100-percent subsidiary ACCUMOTIVE in
Kamenz with an investment of approximately €500 million.

€500m

Foundation stone for new car plant in Russia
Mercedes-Benz starts the construction work for a new, fully
ﬂexible car plant in the Moscow region,
which is due to go into operation in
2019. The production facility is planned
for maximum ﬂexibility so that multiple
architectures can be assembled on one
line. A total of more than €250 million
is to be invested.

World premiere for the Mercedes-Benz Tourismo RHD
With sales of more than 23,000 units, the Mercedes-Benz
Tourismo is the most successful coach from Daimler Buses
and a key driver for the division’s success. The new model
sets standards for economy, comfort and safety. With its four
model versions and a broad spectrum of powertrains and
equipment, it covers diverse customer requirements in the
entire coach segment.

Start of construction for new engine plant in Jawor, Poland
The engine plant in Jawor is designed to combine the latest
standards in the sector with Industry 4.0, and to be a benchmark
for engine production. As well as state-of-the-art machinery
and technology, it is also planned to utilize the potential of
digitization, for example with app-based systems in the areas
of human resources and energy management. Daimler is investing
approximately €500 million in the new production facility
for four-cylinder engines.

Bosch and Daimler cooperate on
highly automated driving in an
urban environment
Bosch and Daimler are cooperating to
advance the development of highly
automated driving and driverless cars.
The joint development aims to put
highly automated driving and driver-
less cars on the road in urban environments by early in the
next decade. The project combines the overall vehicle expertise
of the world’s leading premium carmaker with the system and
hardware expertise of the world’s biggest automotive supplier.

World premiere of the upgraded S-Class in Shanghai
Oﬀering a wide range of improvements, the upgraded S-Class
has its world premiere at Auto Shanghai. The highlights include
an all-new, highly eﬃcient family of engines with various
new technologies for electrifying the drivetrain. Intelligent
drive takes a further step towards autonomous driving. And
in the interior, new standards are set for comfort and wellness
in the premium segment.

50th record month in succession
Mercedes-Benz Cars sets an unprec-
edented series of records: It has now
increased its unit sales every month
for more than four years – without a
break. In April, unit sales grow com-
pared with the prior-year month for
the 50th month in succession.

New FUSO Super Great for
the Japanese market
With the latest generation of the
FUSO ﬂagship, the world’s biggest
truck manufacturer sets new
standards in Japan for eﬃciency,
safety and connectivity. Through
the application of various new tech-
nologies, the new truck’s fuel consumption can be reduced
by up to 15 percent. The FUSO Super Great makes full use of
Daimler Trucks’ global platform strategy. This allows uniform
quality standards, cost advantages through economies of scale,
and ﬂexibility in the utilization of production capacities.

76 A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2017

Production of battery-electric vehicles in China
Daimler and BAIC agree to jointly invest €650 million in the
production of battery-electric Mercedes-Benz vehicles at the
local production facility of Beijing Benz Automotive Co. (BBAC)
in Beijing. As part of this strategic framework agreement, the
partner companies will prepare for the local production of
battery-electric vehicles at BBAC by 2020, and aim to establish
the required infrastructure as well as research and develop-
ment capacities in China.

Daimler Buses makes its production network fit for
the future
In order to remain fit for the future at the sites in Europe,
management and works council agree on a future package for
efficiency enhancements in production. Furthermore, Daimler
Buses will continue shaping the future of mobility. Within this
context, in the years ahead, we aim to invest approximately
€340 million.

New Setra double-decker bus continues coach initiative
World premiere of the Setra double-decker, the biggest and
most comfortable coach from Daimler Buses. As a result of
improved aerodynamics, it is significantly more fuel efficient
than its predecessor. In addition, it is equipped as standard
with an emergency braking system with obstacle and pedestrian
recognition, and Sideguard Assist for taking the blind spot
into account is oﬀered as an optional extra.

Mercedes-Benz Vans founds joint venture ViaVan with
US startup Via
Mercedes-Benz Vans enters the ride-sharing market. For this
purpose, the van division of the Daimler Group has founded the
joint venture ViaVan with Via, a New York-based startup. The
technology from Via and the engineering from Mercedes-Benz
Vans form a perfect combination for efficient, cost-effective
and sustainable ride sharing.

Five years of BharatBenz
Daimler’s Indian commercial-vehicle brand is on a successful
path. The vehicles are specially tailored for the Indian market and
the requirements of customers there. Meanwhile, BharatBenz
has delivered more than 60,000 BharatBenz trucks to customers
in India. In recent months, it achieved a double-digit market
share for the first time. The brand is well established among the
top 4 in the Indian market and is actually the number 3 in the
heavy-duty segment.

World premiere of the Mercedes-Benz X-Class
With the “Mercedes-Benz Vans goes global” strategy,
Mercedes-Benz Vans is entering a new market segment.
The Mercedes-Benz X-Class is the first pickup from a
premium manufacturer. The X-Class with space for up to five
persons supplements the traditional strengths of a
midsize pickup with the typical Mercedes-Benz characteristics
of driving dynamics, comfort, design, safety, connectivity
and comprehensive individualization.

1,900

Full speed ahead
into the future:
1,900 young people start their
vocational training at Daimler
Investing today in the qualified
personnel of tomorrow: In Germany alone, approximately 1,900
young people start their careers at 50 Daimler locations.
Dr. Dieter Zetsche visits the 279 new apprentices and students
on their first day at the Mercedes-Benz plant in Sindelfingen.

Daimler Board of Management decides on plan
for future diesel engines
The plan entails the massive expansion of the existing voluntary
service actions on vehicles in customers’ hands, as well as
the rapid market launch of an all-new family of diesel engines.
This package is extended with additional measures on the
occasion of a summit meeting between politicians and repre-
sentatives of the automotive industry.

A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2017 77

Daimler starts with four new modules at the proving
ground and technology center in Immendingen
With the operation of additional testing modules at the site in
Immendingen, Daimler is taking an important step towards the
mobility of the future. Test operations at the Daimler proving
ground and technology center start on the four testing modules:
urban environment, 4x4 ground, hill endurance, and the
“Bertha area,” a proving ground for autonomous vehicles.

IONITY facilitates electric mobility on long distances
With the establishment of the IONITY joint venture for the
development of a high-power charging (HPC) network for electric
vehicles, Daimler is in cooperation with other companies to set
the course for the installation of the largest fast-charging network
in Europe. The installation and operation of up to 400 fast-
charging stations by 2020 should guarantee electric mobility on
long journeys and accelerate its market acceptance.

400

Investment in startup cooperation
Daimler Financial Services (DFS) presents its Startup
Intelligence Center (SIC) in Lisbon. This is where cooperative
ventures and partnerships are fostered with promising
mobility, fintech and insurtech startups. With the Startup
Intelligence Center, DFS is bringing together its various
activities in the area of innovation cooperation management.

Electric vans from Mercedes-Benz Vans
Mercedes-Benz Vans plans to offer all of its commercial
vans with electric drive. This starts with the eVito, which can
be ordered as of November 2017 for delivery as of the second
half of 2018. Further model series are to follow as of 2019. In
addition to the actual vehicles, Mercedes-Benz Vans also offers
a technical ecosystem, for example with an intelligent charging
infrastructure for the vehicles’ operation.

The Board of Management and Supervisory Board decide
on initial steps to strengthen the divisional structure
Daimler is working on how the divisions can be changed into
legally independent entities. This “Project Future” is intended
to strengthen the business units’ future viability so that growth
and earnings potential can be better utilized in the various
markets. The project is to be continued in close consultation with
the employee representatives. Subject to a final assessment,
the goal is to obtain approval for the new entities at the Annual
Shareholders’ Meeting of Daimler AG in 2019.

Daimler Trucks presents E-FUSO
and fully electric heavy truck
Vision One
At the Tokyo Motor Show, Daimler
Trucks announces the full electrification
of all truck and bus model series of
the FUSO brand in the coming years.
Daimler Trucks is thus the first

manufacturer with its own brand for electric trucks and buses.
The first fully electric FUSO eCanter trucks are delivered to
customers in December 2017.

Electric icons
Thomas Built Buses, the subsidiary of Daimler Trucks North
America, presents the first fully electric school bus, which is to
go into series production in early 2019. With the development
of the “Saf-T-Liner C2 Electric Bus,” Thomas Built Buses profited
significantly from the electric-vehicle expertise of Daimler.

Formula 1 World Champion for the fourth time
Lewis Hamilton wins the Formula 1 World Championship for
the fourth time and ensures that the Silver Arrows win the
Driver’s World Championship for the fourth time in succession!
In addition, Mercedes-AMG Petronas Motorsport wins the
Constructors’ World Championship by a large margin.

78 A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET

Daimler and the Capital Market

Global stock markets signiﬁcantly improved in 2017 and reached record levels in several regions.
Daimler’s share price was volatile during 2017 and closed the year at the level of a year earlier.
The Board of Management and the Supervisory Board will propose to the Annual Shareholders’
Meeting that an increased dividend of €3.65 (2016: €3.25) per share be paid for 2017.

A.01
Development of Daimler’s share price and of major indices

End of
2017

End of
2016

17/16

% change

Daimler share price (in euros)

70.80

70.72

DAX 30

Dow Jones Euro STOXX 50

Dow Jones Industrial Average

Nikkei

Dow Jones STOXX Auto Index

12,918

3,504

24,719

22,765

615

11,481

3,291

19,763

19,114

543

+13

+25

+19

+13

A.02
Key ﬁgures per share

Amounts in euros

Net proﬁt

Dividend

Equity (December 31)
Xetra price at year end1
Highest1
Lowest1

1 Closing prices

2017

2016

17/16

% change

9.84

3.65

59.84

70.80

73.25

59.29

7.97

3.25

54.17

70.72

73.64

51.97

+23

+12

+10

-1

+14

Global stock markets significantly improve in 2017
Global stock markets started the year 2017 in an optimistic mood,
with many investors anticipating that the new administration in
the Unites States would implement measures to stimulate the
economy. In this environment, the key US stock-market indices
rose to all-time highs. At the same time, investors in automotive
stocks behaved in a very risk-averse manner. Following a short
phase of uncertainty prior to the presidential elections in France,
stock markets rose signiﬁcantly at the end of April a(cid:5)er the
ﬁrst round of the elections. During this period, the German DAX
share index surpassed its previous record of 12,375 from the
year 2015. The positive development that followed was supported
by the ongoing expansionary monetary policy of the European
Central Bank (ECB) and a course of rather moderate interest-rate
increases in the United States on the part of the Federal
Reserve, which, as expected, raised base interest rates by 25
basis points in March and then again in June. Market volatility
increased in mid-August, partly due to the rising tension between
the US and North Korea. Automotive stocks were also subject
to major ﬂuctuations in this environment, but markets as a whole
then recovered strongly once again in September. Along with
robust economic data and the strong US dollar, the prospect of
a new business-friendly government in Germany had a stimu-
lating eﬀect on the German economy. During the rest of the year,
the global economic recovery and positive ﬁnancial reporting
by European companies increased investors’ propensity to
purchase shares. Many stock-market indices around the globe
reached all-time highs in the fourth quarter. Nevertheless,
expectations regarding the future behavior of central banks
worldwide remained very much on investors’ minds.

The index of the most important shares in the euro zone, the
Dow Jones Euro STOXX 50, rose by 6% in 2017. The leading
German share index, the DAX, performed signiﬁcantly better,
rising by 13%. The DAX also broke the 13,000 mark for the ﬁrst
time ever in October 2017, and reached a new all-time high of
13,479 on November 3. In Japan, the Nikkei index also ﬁnished
the year with a signiﬁcant increase, to 22,765 (+19 %), its highest
level in several years. In the United States, the Dow Jones
reached an all-time high of 24,719 in December 2017 and re-
corded a 25% increase for the year as a whole.

Volatile development of Daimler share price
Automotive stocks were able to carry over their momentum from
the prior year in the early part of 2017, but this momentum
began to dissipate once again at the beginning of the second
quarter. Along with their general concern regarding the sus-
tainability of demand for cars in Western Europe, North America

and Japan, investors were also very much focused on the
further development of the Chinese car market a(cid:5)er adjustments
to subsidies there in late 2016. The discussions regarding diesel
technology and ongoing litigation also had an increasingly
negative eﬀect on automotive stocks. On the other hand, inves-
tors did recognize the fact that business continued to develop
favorably in the automotive industry. Nevertheless, automotive
stocks came under further pressure on global markets in the
months that followed. Discussions regarding the future of diesel
engines now spread to many other countries with a negative
impact on the entire sector, and thus on our share price as well.
Investors believe that the expansion of drivetrain electriﬁcation
in the coming years will lead to a high level of capital investment
and a comparatively lower level of proﬁtability. Investors and
analysts also continued to pay close attention to the various
automotive markets during the year under review. The focus
here was on the development of the car market in the United
States, where a declining number of new registrations and
concerns about residual values led to increased uncertainty on
the capital market as to whether demand could be sustained.
In general, the appreciation of the euro against the dollar had
a negative eﬀect on the shares of companies with a high pro-
portion of exports to dollar-based markets. In this situation,
the Daimler share price dropped to its lowest point of the year
2017 when it fell to €59.29 on July 31. Following the diesel
summit in Germany at the beginning of August, the debate on
diesel technology took on a more objective tone, and greater
clarity was also achieved regarding the measures planned by
the German federal government and automakers. This led to
greater investor conﬁdence in the automotive sector, and many
investors took advantage of the favorable opportunity to
purchase automotive shares. Investors’ new share-price ex-
pectations were also reinforced by the innovations presented
at the Frankfurt International Motor Show (IAA) and by the strate-
gic course adopted by the automotive industry. Our ongoing
product oﬀensive and the solid ﬁnancial results that we recorded
once again in the third quarter of 2017 led to further increases
in our share price in September and October. On November 3,
Daimler’s share price reached €73.25, which was the highest
price for the year. The Daimler share closed at €70.80 on
December 29. At the end of the year, the company had a market
capitalization of €75.7 billion (2016: €75.7 billion). Daimler’s
share price was thus at the same level as a year earlier year and
therefore failed to keep pace with the development of the
German share index DAX (+13%) and the Dow Jones STOXX Auto
Index (+13%). When the dividend payout of €3.25 per share is
included, our shareholders saw the value of their investment
increase by 5%. In the ﬁrst few weeks of the year 2018 our
share price developed very positively. Daimler’s shares were
listed at €73.73 at the end of January, which is 4% above the
closing price at the end of 2017.

Dividend of €3.65 (cid:202) A.02
The Board of Management and the Supervisory Board will
recommend an increased dividend payment of €3.65 per share
for ﬁnancial year 2017 at the Annual Shareholders’ Meeting
on April 5, 2018. The total dividend amount will thus reach the
new record level of €3,905 million (2016: €3,477 million).

A broad shareholder structure (cid:202) A.07
Daimler continues to have a broad shareholder base of
approximately 0.9 million shareholders. Shareholder numbers
decreased slightly during the reporting year, particularly as
fewer private investors purchased our shares. The Kuwait Invest-
ment Authority (KIA) currently owns 6.8% of the company’s

A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET 79

shares, making it Daimler AG’s largest individual shareholder. The
Renault-Nissan Alliance continues to hold 3.1% of Daimler’s
shares. BlackRock Inc., New York, still holds a stake above the
5% reporting limit as deﬁned by Germany’s Securities Trading
Act (WpHG). In November 2017, BlackRock notiﬁed us that its
proportion of the voting rights was 5.95% on November 8, 2017.
In March 2017, Harris Associates L. P., Wilmington, notiﬁed us
that its proportion of the voting rights rose above the 3%
reporting limit to 3.01% on March 9, 2017.

The aforementioned and all other voting-rights notiﬁcations are
published on the Internet at w daimler.com/investors/share/
voting-rights.

Institutional investors hold a total of 71% of our equity capital,
while private investors own 19%. Approximately 65% of our
capital is in the hands of European investors and around 23%
is held by US investors.

A.03
Daimler share price (high/low), 2017

In euros

1/17

2/17

3/17

4/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17

A.04
Share price index

120

115

110

105

100

12/30/16

2/28/17 4/28/17 6/30/17 8/31/17 10/30/17

12/31/17

Daimler AG
Dow Jones STOXX Auto Index
DAX

80 A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET

A.05
Key ﬁgures for Daimler shares

End of 2017

End of 2016

17/16

% change

-10

Share capital (in millions of

euros)

3,070

Number of shares (in millions)

1,069.8

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

Scope

DBRS

75.7

0.9

1.0

6.79%

2.92%

7.52%

3.18%

A-

–

A (low)-

A.06
Stock-exchange data for Daimler shares

ISIN

German Securities

Identiﬁcation Number

Stock exchange symbol

Reuters ticker symbol

Bloomberg ticker symbol

DE0007100000

710000

DAI

DAIGn.DE

DAI:GR

A.07
Shareholder structure as of December 31, 2017

By type of shareholder

Kuwait Investment Authority

Renault-Nissan

Institutional investors

Retail investors

6.8 %

3.1 %

71.2 %

18.9 %

A.08
Shareholder structure as of December 31, 2017

By region

Germany

Europe, excluding Germany

USA

Kuwait

Asia

Rest of the world

34.5 %

30.9 %

22.8 %

6.8 %

2.9 %

2.1 %

With a weighting of 6.79% (2016: 7.52%), Daimler was ranked
sixth in the German share index DAX30 at the end of 2017. In
the Dow Jones Euro STOXX 50 index, our shares had a weighting
of 2.92% (2016: 3.18%), which put Daimler in eleventh place.
Daimler shares are listed on the stock exchanges in Frankfurt
and Stuttgart. A total volume of 942 million shares were traded
in Germany in 2017 (2016: 1,210 million). Daimler shares are also
increasingly being traded on multilateral trading platforms
and in the over-the-counter market.

Employee share purchase plan implemented once again
Staﬀ members entitled to purchase employee shares were
able to do so once again in March 2017. As was the case in the
previous year, price-reduced shares as well as bonus shares
were oﬀered. At 19.8%, the participation rate in the year under
review was signiﬁcantly higher than in previous years (2016:
11.7%). A total of 36,200 employees took part in the program
(2016: 34,500), which is the highest number since 2008. The
total number of shares purchased by employees also increased
substantially once again, from 576,000 in 2016 to approximately
604,000 (of which just under 54,400 were bonus shares) in the
year under review. The high degree of participation in the
employee share-purchase plan was likely due to the positive
outlook for the company, a high proﬁt-sharing payout once
again, and the attractiveness of dividend yields in the current low
interest-rate environment.

Annual Shareholders’ Meeting in the CityCube in Berlin
Our Annual Shareholders’ Meeting was held on March 29, 2017 in
the CityCube in Berlin. Some 6,200 shareholders (2016: 5,500)
attended the meeting. A total of 49.18% (2016: 50.77%) of equity
capital was represented at the meeting (actual attendees and
shareholders who voted by absentee ballot). A large majority of
the shareholders approved each of the agenda points proposed
by the company’s management. For example, the Annual Share-
holders’ Meeting once again approved a very attractive dividend
of €3.25 per share (2016: €3.25) and reelected Dr. Clemens
Börsig as a member of the Supervisory Board of Daimler AG
representing the shareholders. At its subsequent meeting, the
Supervisory Board reelected Dr. Börsig to the Audit Committee,
which in turn elected Dr. Börsig as Chairman of the Audit
Committee. The Annual Shareholders’ Meeting also elected
Bader Mohammad Al Saad, a member of the Executive Commit-
tee of the Board of Directors of Kuwait Investment Authority (KIA),
as a member of the Supervisory Board of Daimler AG represent-
ing the shareholders. The terms for both newly elected Super-
visory Board members will expire at the end of the Annual
Shareholders’ Meeting held in 2022. Important documents and
information related to the Annual Shareholders’ Meeting can be
found on the Internet at w daimler.com/investors/events/
annual-meetings/2017. In the exhibition areas of the CityCube,
Daimler presented its technological expertise and a broad range
of products and services under the motto “Future Mobility.” The
exhibition highlights showcased future mobility: Along with the
elegant Vision Mercedes Maybach 6 and the ﬁrst model from the
EQ brand, as well as a Mercedes-Benz electric truck for heavy-
duty distribution transportation, the presentation also featured
the Vision Van, which attracted a great deal of attention. The
vehicle boasts a fully automated cargo compartment, integrated
drones for autonomous air deliveries and state-of-the-art
joystick control. The Mercedes-Benz Future Bus, a partially
automated city bus with the City Pilot system, oﬀered a preview

A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET 81

Number of online shareholders remains at a high level
Our shareholders continue to make good use of our range of
personalized electronic information and communication. The
increase in online shareholders was particularly high in 2017,
as a total of 95,000 (2016: 86,500) shareholders received the
invitation and the agenda for the Annual Shareholders’ Meeting
by e-mail rather than by post. We would like to thank those
shareholders for helping to protect the environment and cut
costs. As was the case in the past, those shareholders once
again had the opportunity to win attractive prizes in a lottery.
Access to the e-service for shareholders and additional in-
formation can be found at w https://register.daimler.com.

Refinancing benefits from high level of capital-market
liquidity and good ratings
Central banks’ ongoing expansionary monetary policies also
impacted bond markets during the year under review. As a
result of the high level of liquidity, companies with investment-
grade ratings saw their risk premiums remain at a moderate
level.

In 2017, the Group primarily covered its reﬁnancing needs by
issuing bonds. A large proportion of those bonds were sold as
benchmark bond issuances (bonds with high nominal volumes)
in euro and dollar markets. In the US capital market, for example,
Daimler Finance North America LLC issued bonds worth a
total of $6.5 billion in January, May and November 2017. The
bonds had terms of 18 months and three, ﬁve and ten years.
In addition, Daimler AG issued euro bonds in benchmark format
with a total volume of €6.3 billion and terms of seven, eight,
ten, 12 and 20 years. In 2017, Daimler AG also issued four
bonds in China (so-called Panda bonds) worth a total of
CNY 16.0 billion. Furthermore, many smaller bonds were issued
by the Daimler Group in a variety of currencies and markets.

At the end of 2017, Daimler Group companies had issued bonds
that were still outstanding in a volume of €67.1 billion (2016:
€63.1 billion). Besides raising funds through the issuance of
bonds, Daimler also issued a small volume of commercial
paper in 2017.

During the year under review, Daimler conducted asset-backed
security (ABS) transactions in two new countries in addition to
the existing ABS platforms in the United States, Canada, Germany
and China. In the United Kingdom, for example, GBP 0.4 billion
was successfully placed with investors, while the ﬁrst transaction
in Australia had a volume of AUD 0.75 billion. In the United
States, the company generated a reﬁnancing volume of $4.7
billion through three transactions in 2017; in Canada, a volume
of CAD 0.4 billion was generated in one transaction. In addition,
Mercedes-Benz Bank used the Silver Arrow Platform to sell
€1.1 billion in ABS bonds to European investors. And in China,
two ABS transactions were successfully conducted with a
total volume of CNY 10.2 billion.

of local public transportation in the future. Daimler Financial
Services was also on hand at the Annual Shareholders Meeting
to present its mobility services, and Mercedes me and various
connectivity services were on display as well. Some of our
trainees were also at the meeting to provide an insight into their
work. The presentation of our program for the further develop-
ment of our corporate culture, Leadership 2020, showed how
Daimler is responding to the changes occurring with regard to
products, customer expectations and the working world.

Continuation of comprehensive investor relations activities
In 2017, we once again provided institutional investors, analysts,
rating agencies and private investors with timely infor mation
regarding the company’s business development. We organized
road shows for institutional investors and analysts in the
ﬁnance capitals of Europe, North America, Asia and Australia.
We also held many one-on-one meetings at investor
conferences. This was especially the case at the international
motor shows in Geneva and Frankfurt. Sustainability-focused
investors were also able to meet and talk with company
representatives at two events held at the IAA in Frankfurt and
at conferences in Frankfurt in February and in Paris in
November. We reported on our quarterly results in conference
calls and webcasts. The presentations can be viewed on our
website at w daimler.com/investors/events/presentations.
The talks with analysts and investors focused on the latest
earnings expectations for 2017, as well as on business develop-
ments and the proﬁtability of the individual divisions and
regions. In addition, top-level managers from Daimler Financial
Services discussed the strategies and goals for ﬁnancial
services and mobility services at a capital market event held
in London in February. In September, numerous analysts and
investors attended an event in Sindelﬁngen, where Daimler pre-
sented an overview of the latest business developments and
oﬀered a look at the future strategy of the Mercedes-Benz Cars
division with speeches, discussions and workshops. The audio
recordings and charts and illustrations from the events are avail-
able at w daimler.com/investors/events/capital-market-days.

Awards once again for online version of the Annual Report
Our Annual Report, which boasted numerous additional features
for 2016 (w annualreport2016.daimler.com), won prestigious
international awards once again in 2017, including the Stevie
Award. The online report also captured Gold at the 2016 LACP
Vision Awards.

Continual further development of the corporate website
Since December 2016, we have upgraded both the content and
the visuals of numerous sections of our Investor Relations site
at w daimler.com/investors. Among other things, we have
introduced key-ﬁgure modules, information charts, detailed
explanations and quotes. A representative online user survey
revealed that visitors to the Investor Relations site are very
satisﬁed with what they ﬁnd there. The survey also yielded
valuable information on user structure, information require-
ments and the potential for further improvement. The additional
optimization measures we implemented for Internet search
engines also now make it easier for users to ﬁnd and access the
content they need.

82 A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY

Objectives and Strategy

Today, the automotive industry is on the verge of a fundamental transformation. Four future-oriented
ﬁelds are set to radically change the nature of mobility: greater vehicle connectivity, advances in
autonomous driving, the development of digital mobility and transport services, and electric mobility.
Our goal as one of the leading vehicle manufacturers is to become a leading provider of mobility
services as well. To this end, we will further strengthen our core business and lead the way in these
four future-oriented ﬁelds. Our eﬀorts will be supported by a cultural and organizational transfor-
mation. We have not lost sight of our overriding corporate objective: to achieve proﬁtable growth and
increase the value of our company.

Our objectives

Number one in our core business
We want all of our divisions to be the leaders in their business
segments. Our goal for Mercedes-Benz Cars is to play the
leading role in the worldwide premium segment over the long
term. We also aim to enhance the smart brand’s pioneering
role in urban, electric mobility. Daimler Trucks intends to further
strengthen its position as the leading truck manufacturer in
the global truck business. Mercedes-Benz Vans is striving to
achieve further proﬁtable growth with the help of its “Mercedes-
Benz Vans goes global” divisional strategy. Daimler Buses
wants to strengthen its leading position in the segment for buses
above eight metric tons gross vehicle weight. Daimler Financial
Services plans to maintain its position as the best captive ﬁnan-
cial and mobility services provider; it will continue to expand
its mobility services and continue growing in close cooperation
with our other divisions. Through our core business, we are
creating the ﬁnancial foundation for investments in the future of
our company. To this end, we intend to achieve a 9% return
on sales (EBIT in relation to revenue) for the automotive business
on a sustained basis. This overall ﬁgure is based on the return
targets for the individual divisions: 8–10% for Mercedes-Benz
Cars, 8% for Daimler Trucks, 9% for Mercedes-Benz Vans and
6% for Daimler Buses. For Daimler Financial Services, we have
set a target of 17% for return on equity. In general, we want to
achieve proﬁtable growth on a sustained basis, thus increasing
the value of our company.

Leading in the CASE fields
Connected, Autonomous, Shared & Services and Electric:
Our goal is to play the leading role in each one of these future
ﬁelds and to generate additional potential by linking the four
ﬁelds together. We want to expand vehicle connectivity even
further, thus creating added value for our customers. We also
seek to be the leader in the use of digital technologies, both in
our products and services and along the entire value chain.
The digitization of our core processes is the key to our ability
to link individual customer needs with the technologies of
the future and with mobility requirements. We seek to play the
leading role in autonomous driving at all of our divisions.
This will result in the creation of new and attractive business
models for private car customers, ﬂeet customers, and the
public transport and commercial cargo transport sectors. We

are expanding our strong portfolio in the ﬁeld of mobility
services. With our broad customer base and presence in all of
the relevant mobility segments, Daimler Mobility Services
already has a strong foundation for future success. We remain
on course for growth through innovative mobility services
and strong cooperation partners. We are also forging ahead with
the development of new mobility and transport services in the
commercial vehicle segment. In the ﬁeld of electric mobility,
we are establishing an ecosystem of products and services
in order to make electric vehicles as convenient and pleasant to
use as those with combustion engines. We plan to oﬀer the
best electric vehicles on the market in the coming years and to
signiﬁcantly increase our market share in the sector. The
smart brand intends to oﬀer solely cars with electric drive sys-
tems in Europe and North America as of 2020, with the other
regions to follow soon a(cid:5)er. We also plan to become the leader in
the area of electric commercial vehicles for urban applications.

A cultural and organizational transformation for a
successful future
The increasingly dynamic developments and growing challenges
in the automotive sector require rapid innovation as well as
operations that are quick, agile, market-oriented and customer-
focused. We are systematically promoting new approaches to
vehicle development and interdisciplinary cooperation models.
We support and implement promising innovations that are
developed by our employees and external partners. We are also
safeguarding our transformation with new management tools
and team-oriented remuneration systems. We aim to change our
divisions into legally independent entities, thus further focus-
ing and strengthening the divisional structure of the Daimler
Group. With “Project Future”, we are pursuing the goal of
strengthening the future viability of the divisions so that we can
better utilize the growth and earnings potential of the respec-
tive markets.

Integrity is extremely important for our company, especially as
we are undergoing a phase of fundamental transformation.
Integrity guides our dealings with respect to our company and
its employees, business partners and customers. We are ﬁrmly
convinced that conducting business with integrity provides us
with orientation in times of major transformation as well. It
makes us more successful over the long term – and it also ben-
eﬁts society as a whole.

Four strategic focus areas

We plan to achieve our goals through four strategic focus
areas:
– strengthening our global core business (CORE)
– leading in new future ﬁelds (CASE)
– adapting our corporate culture (CULTURE), and
– strengthening our divisional structure (COMPANY).

Strengthening our global core business (CORE)

Mercedes-Benz Cars will continue to implement its growth
strategy with the goal of safeguarding its leading position in the
global premium segment. We will inspire our customers with
our leading brands and outstanding products. New and innova-
tive models in the compact segment, a C-Class model upgrade
and new versions of our iconic G-Class series will be part of
this campaign. We are pursuing three diﬀerent technological
approaches as we move ahead on the road to emission-free
driving: the further improvement of ultra-modern combustion
engines, hybridization, and locally emission-free vehicles
with batteries and fuel cells. One important lever for the improve-
ment of combustion engines is the full electriﬁcation of
the drivetrain through the use of new technologies such as the
integrated starter-generator (ISG) and the 48-volt electrical
system. Systematic hybridization is another important interim
solution on the road to emission-free mobility. We continue
to expand our range of currently eight hybrid vehicles on the
road. By 2022, we plan to oﬀer at least one electriﬁed option
in each segment, with more than 50 variants in total. This includes
more than ten fully electric vehicles, the plug-in hybrid versions,
and the models with 48-volt technology. We are systematically
implementing our architectural and modular strategy in order
to ensure that we can continue our model initiative eﬃciently,
rapidly and at a high level of quality. Our global development
network and the establishment of new technology centers and
digital hubs keep us close to our customers, our markets and
new technologies. We have also designed our global production
network to with the aim to achieve uniform standards and
the high quality of “Made by Mercedes” worldwide. Within the
framework of our growth strategy, we are expanding our pro-
duction network and thus improving our global competitiveness.

Our “Best Customer Experience” initiative is designed to
oﬀer our customers the best experience compared to all other
automakers. All of our sales, service and ﬁnancial services
activities are aligned with each other, from the ﬁrst contact
throughout the entire duration of the customer relationship.
Depending on our customers’ needs, we make use of physical
and digital channels for customer communication.

Our market position in China plays a key role in safeguarding our
market leadership. We have already transformed China into
thebiggest market for Mercedes-Benz cars, thanks to products
that are aligned with Chinese customers’ requirements and
our establishment of local development and manufacturing
facilities. We want to strengthen this position even further.

In order to safeguard the future proﬁtability of Mercedes-Benz
Cars, we intend to optimize the business system and processes
in the context of the “Fit for Leadership” eﬃciency program
with the goal of a further earnings improvement of €4 billion by
2025.

A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY 83

Daimler Trucks is focusing on global growth, technology leader-
ship and the continued implementation of its platform strat-
egy. In everything we do, we focus on our customers. We want
to safeguard our strong position in Europe and North America
and to grow in Brazil in line with the market recovery we expect
to see there. We will therefore invest in our product program
in Brazil during the coming years, as well as in vehicle connec-
tivity and the modernization of our plants in São Bernardo do
Campo and Juiz de Fora. We plan to achieve signiﬁcant growth
in Asia. We launched assembly operations for the Mercedes-
Benz Axor in Indonesia in 2017, so that we will be present with
two strong brands in this Southeast Asian market. We are well
established in India with our local BharatBenz brand. Using this
good position as a starting point, we plan to further develop
through an updated product program as well as in export mar-
kets. Our platform strategy has generated substantial synergy
beneﬁts for us as a vehicle manufacturer. Our customers also
beneﬁt from this strategy, as it speeds up the broad availability
of technologies that are relevant for trucks.

Fuel eﬃciency is a key selling point for commercial vehicles. In
order to improve fuel eﬃciency even further, we are continuously
developing new measures for vehicles and drivetrains. With a
number of measures, the new FUSO Super Great sets standards
in terms of eﬃciency. Additional measures for reducing the
fuel consumption of the Mercedes-Benz Actros and the new
Freightliner Cascadia are planned to be implemented in 2018
and 2019.

The Daimler Trucks division works continuously on improving
its eﬃciency. Levers in this regard are optimizing our production
network and supply chain, integrating new technologies and
reducing our product portfolio’s complexity. We plan to optimize
our ﬁxed costs by €400 million by the end of 2018 in order to
strengthen our competitiveness. This will be achieved through
a range of measures, including the restructuring and optimi-
zation of Mercedes-Benz Trucks’ development, production and
sales organizations in Germany and Brazil. Together with the
cost optimizations previously planned, some of which have
already been implemented, we aim to achieve improvements for
Daimler Trucks with a direct impact on earnings in an amount
of €1.4 billion by the end of 2018. Our goal is for these measures
to become fully eﬀective in the year 2019.

Mercedes-Benz Vans is pursuing three approaches with its
“Mercedes-Benz Vans goes global” strategy: the implementation
of market strategies for global expansion, the use of product
strategies for the further expansion and diﬀerentiation of its prod-
uct portfolio, and the adVANce future initiative, which bundles
the development and commercialization of customer-focused,
holistic transport and mobility solutions. Mercedes-Benz Vans
plans to continue to grow proﬁtably and conquer new markets
in the future. The continued growth of online retail sales of
goods can be expected to lead to increased sales of commercial
vans in the future as well. Our product pipeline is in outstand-
ing shape with the new Mercedes-Benz X-Class – the ﬁrst pre-
mium pickup from Mercedes-Benz Vans – and the new Sprinter,
which will be launched in 2018. We are modernizing our plants
in Ludwigsfelde and Düsseldorf in preparation for the new
Sprinter. Ludwigsfelde is also set to become our ﬁrst fully con-
nected manufacturing facility. Our objective is to completely
digitize all of our van plants worldwide by 2025. We are also
building a new production plant in North Charleston, South
Carolina. This will expand our existing assembly operations and
support our growth on the North American market.

84 A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY

Daimler Buses continues to grow around the globe with the
help of its regional strategies and new products in the city bus
and touring coach segment. With its new ﬂagship model, the
Setra double-decker coach, Daimler Buses aims to safeguard
its current market leadership in this market segment. And
with the new Citaro hybrid city bus, we want for the ﬁrst time
anywhere in the world to oﬀer hybrid technology as optional
equipment for a wide range of city buses with both diesel and
natural-gas engines, rather than in the form of stand-alone
models. The Daimler Buses European production network, which
has manufacturing locations in Germany, France, Spain and
the Czech Republic, is being reorganized to make it more eﬃcient
and more competitive. Within the framework of this reorgani-
zation, the Mannheim plant is being expanded into the center of
competence for city buses and electric mobility. Meanwhile,
the plant in Neu-Ulm is being transformed into the center of
competence for touring coaches, connectivity and autonomous
driving. We are also strengthening our development expertise in
the ﬁelds of electric mobility and autonomous driving. Through
new regional centers, the production of school buses and fully
equipped buses in India and the use of the Brazilian production
location as a hub for exports to other countries in South America,
Africa and Asia, Daimler Buses continues to expand its inter-
national business operations, particularly in emerging markets.
The success of Daimler Buses is primarily the result of its
position as a global manufacturer and distributor of products
featuring cutting-edge technologies. As one of the leaders in
safety technology and with highly eﬃcient vehicles, Daimler
Buses oﬀers an impressive overall package of new and used
vehicles, service and maintenance contracts, ﬁnancing plans
and new mobility solutions.

Daimler Financial Services plans to strengthen its core busi-
ness in the context of its “balancedSTRATEGY”, while also
investing in mobility and digitalization. Daimler Financial Services
will continue to grow in its core business areas of ﬁnancing,
leasing and insurance by oﬀering customized services and mak-
ing use of increasing vehicle connectivity. About half of all the
vehicles delivered by Daimler around the world today are either
ﬁnanced or leased by Daimler Financial Services. At the end
of 2017 the division was ﬁnancing or leasing 4.8 million cars and
commercial vehicles worldwide, and it plans to increase this
number in the future. Daimler Financial Services supports the
worldwide sales of Daimler vehicles in approximately 40
countries. In line with the motto “Engaging customers for life”,
the division focuses on the highest possible degree of cus-
tomer satisfaction and on enhancing customer loyalty. This is
to be achieved by oﬀering a holistic ecosystem and relevant
ﬁnancing and mobility services – ideally throughout the custom-
er’s entire life. In order to focus our business activities even
more eﬀectively on the needs of existing and new customers, we
have expanded the Board of Management of Daimler Financial
Services with the position of Customer Experience Oﬃcer (CXO).
The division is also looking to completely digitize its business
processes in order to become an even faster and more eﬃcient
organization.

Leading in new future ﬁelds (CASE)

As a pioneer of automotive engineering, we seek to be the
leader in all CASE ﬁelds (Connected, Autonomous, Shared &
Services, Electric), and to generate additional potential by
linking up these four ﬁelds.

Connected
Mercedes-Benz Cars customers experience connectivity
through the digital brand, Mercedes me. The digital platform of
the same name brings together all mobility, ﬁnancing and other
services (connect, assist, move and ﬁnance), and also provides
information and news about the Mercedes-Benz brand (inspire).
Customers should be able to access their vehicles online at any
time and from any location. We are also digitalizing the value
chain in order to beneﬁt from the full scope of connectivity. Such
digitization is the only way to eﬀectively link individual cus-
tomer requirements with value-adding potential. And the smart
brand is oﬀering a range of digital services for urban mobility
with “smart ready to …”

Connectivity will be a crucial success factor also in the logistics
sector in the future. Truck connectivity plays an important
role at Daimler Trucks. Our goal is to create a seamless trans-
port logistics system with connected trucks and technologies
to ensure that all vehicles are ideally always fully loaded, with no
downtimes or waiting periods. Our new Truck Data Center
connectivity hardware is the foundation for such a logistics sys-
tem. The module records all internal truck data and serves
as the interface for external communication as well. With Fleet-
Board for Mercedes-Benz Trucks, Detroit Connect for Freight-
liner and Truckonnect for FUSO, we oﬀer digital platforms in all
of the world’s major regions on the basis of the Truck Data
Center. These platforms can be gradually expanded to include
additional services.

With its adVANce strategic initiative, Mercedes-Benz Vans is
underscoring its transformation from a pure vehicle manufac-
turer into a provider of holistic and customer-focused transport
and mobility solutions. Our Vision Van concept vehicle oﬀers
a preview of future delivery transport. Thanks to full connectiv-
ity, the supply chain will be optimized down to the last mile.
Mercedes-Benz Vans Mobility GmbH, which was established
under the roof of Daimler Financial Services in 2017, puts us
at the center of a future business model between connectivity
and sharing, which will enable us to meet the growing demand
for ﬂexible and innovative concepts for the utilization of our
vehicles. The new Mercedes PRO overarching service brand
brings together all commercial transport services on a digital
platform. Mercedes PRO connect is the ﬁrst innovative con-
nectivity solution launched by this umbrella brand.

Connectivity at Daimler Buses also oﬀers beneﬁts for every-
one involved – for example, bus operators in terms of ﬂeet
management and maintenance costs, bus drivers traveling their
routes, and passengers using the e-ticketing service. In 2018,
Daimler Buses will bring together all of its current and future
digital services for buses on its “OMNIplus ON” digital portal,
and will also launch a new preventive maintenance system known
as OMNIplus Uptime. The wide-ranging telematics services
from Fleetboard will also be integrated into the digital portal in
the future.

Daimler Financial Services aims to expand digital business
models in the area of ﬁnancing and mobility services in the
context of its balancedSTRATEGY, and is utilizing connectivity to
further develop its services. For example, the InScore insurance
feature analyzes driving data by means of a factory-installed
telematic control unit. This allows customers who drive safely to
receive a discount of up to 20% on their insurance premium. With
Mercedes pay, our own electronic payment system, customers

A.09
Strategic focus areas

Innovative corporate culture

CULTURE

A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY 85

Leading in new future fields

CASE

Connected, Autonomous,
Shared & Services, Electric

Innovations

Investments
Investments

New
business models

Strengthening global core business

CORE

Financial foundation for
investments in CASE

Forward-looking structure

COMPANY

can easily pay for our mobility and other services using their
smartphone. In this way, Daimler Financial Services is imple-
menting another stage of its “mobility at your ﬁngertips” philoso-
phy. Furthermore, Mercedes-Benz Connectivity Services,
which was established in 2017, oﬀers specialized connectivity
services for vehicle ﬂeets, and the “Connect Business” brand
provides connectivity services for individual companies and large
ﬂeets.

Autonomous
Our approach to autonomous driving is based on the use of
comprehensive safety and assistance systems combined with
vehicle connectivity technology and real-time digital maps.
We have demonstrated our leading position at Mercedes-Benz
Cars with the upgraded S-Class. Our driving assistance sys-
tems have been signiﬁcantly expanded in many of their functions
and are currently regarded as the benchmark in the industry.
We are developing fully automated systems without a driver,
which can be used exclusively or shared with others. With our
research vehicle Mercedes-Benz F 015 Luxury in Motion, we
demonstrated at an early stage the kinds of technological and
social changes that this will bring about. The vehicle’s fully
connected digital interior concept shows how people can use
the additional time that autonomous driving will make avail-
able to them. Our smart Vision EQ concept car oﬀers another
preview of the future of shared and fully automated mobility.
In order to accelerate the development of autonomous driving,
we have launched a number of partnerships – for example
with HERE for high-resolution digital maps and with Bosch for

the joint development of technology for highly automated
and driverless driving. These new technologies can only be
rolled out on a broader scale if changes are made to the
current regulatory framework.

Daimler Trucks is consolidating its excellent position in the
area of safety through the further development of tried-and-
tested safety technologies. With the fourth-generation Active
Brake Assist system and Sideguard Assist – both of which fea-
ture pedestrian detection – Mercedes-Benz Trucks is one of
the leaders for active safety technology. We are also among the
technological pioneers with automated and autonomous
driving systems for trucks, which should lead to another step in
the improvement of transport safety and eﬃciency. Platoon-
ing – the electronic linking of several trucks – is becoming more
important as an interim step on the road to autonomous
driving for trucks. Daimler Trucks is one of the leaders for inno-
vative platooning concepts. In 2016, we successfully tested
our platooning system under real conditions in Europe. In 2017,
we were the ﬁrst manufacturer to test digitally connected
trucks on public highways in the United States, and we also
want to test platooning under real conditions with our ﬂeet
customers in the United States as of 2018.

Mercedes-Benz Vans is also beneﬁting from the further
development throughout the Group of safety and assistance
systems related to automated and autonomous driving. Our
plans here cover everything from automated and autonomous
cargo transport and passenger transport systems.

86 A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY

With its Mercedes-Benz Future Bus with CityPilot, Daimler
Buses has demonstrated the highly advanced stage its
research has reached in the area of partially automated driving
on a BRT route (bus rapid transit) near Amsterdam. BRT sys-
tems are an important element of future urban mobility, and
already facilitate eﬃcient, fast and cost-eﬀective public trans-
port in many cities of the world.

Shared & Services
Daimler Financial Services oﬀers mobility services that make
the division a pioneer in the area of Shared & Services. We are
enlarging our customer base by expanding existing services
and creating additional services for new mobility segments. At
the same time, we are working both independently and with
partners to develop the core expertise we need to establish
new business with ﬂeets of automated and autonomous vehi-
cle vehicles. With car2go, we are currently the world’s leading
company for ﬂexible car-sharing services. The Daimler subsid-
iary mytaxi is the leader in the taxi-ordering app market in
Europe, while moovel oﬀers our customers a platform that
enables them to optimally compare, combine, book and pay for
various mobility services. With our strategic partner Via, we
are now testing ﬂexible shuttle services and pooling concepts
that can complement local public transport systems. We plan
to continue growing in the business customer segment as well.
Mercedes-Benz Van Rental oﬀers customers ﬂexible rental
services for vans and commercial vehicles.

Electric
At Mercedes-Benz Cars, we have signiﬁcantly expanded
our activities in the area of electric mobility. We believe that
by 2025, between 15% and 25 % of our new vehicles will be
all-electric models. All of the electric vehicles and electric
mobility services oﬀered to Mercedes-Benz Cars customers
have been consolidated under our new EQ brand, which stands
for “Electric Intelligence”. We aim to oﬀer more than ten
battery-electric models by 2022, and to this end we will invest
approximately €10 billion. Our modular and scalable electric-
vehicle platform will enable us to oﬀer impressive designs and
a high degree of ﬂexibility in terms of variants and models.
The EQC, a sporty SUV model, is to be launched in 2019. A(cid:5)er
that, we aim to launch a new model every six to eight months.
In 2017, we presented a pre-series model of the new Mercedes-
Benz GLC F-CELL at the IAA, a fuel-cell vehicle with plug-in
hybrid technology. In addition to hydrogen, the purely electric
version of the popular SUV was also able to “ﬁll up” with elec-
tricity. The smart brand plans to oﬀer cars solely with electric
drive systems in Europe and North America by 2020; the
other regions are to follow a short time later. We are establish-
ing a production network to permit the ﬂexible manufacture
of electric vehicles at all of our key production locations world-
wide. This is the only way to ensure that we can react fast
enough to ﬂuctuations in demand.

Daimler Trucks is also focusing more strongly on vehicle elec-
triﬁcation. Worsening traﬃc congestion in urban distribution
transportation and more restrictions for vehicles with combus-
tion engines are making the development of alternative drive
systems also for commercial vehicles increasingly important.
As early as 2006, we started series production of the FUSO
Canter Eco Hybrid for the Japanese market. The FUSO eCanter
is our ﬁrst light-duty series-produced truck with fully electric
drive; we delivered the ﬁrst units to customers in 2017 and large-
scale production is to begin in 2019. With its Mercedes-Benz
Electric Truck concept vehicle, Daimler Trucks is demonstrating
the viability of all-electric transport. The E-FUSO Vision One
shows how electric mobility can be successfully launched also in
the heavy-duty truck segment. Daimler Trucks North America
is also working on an electric Freightliner eCascadia for long-
distance haulage. And Daimler Trucks’ North American sub-
sidiary Thomas Built Buses has presented an all-electric school
bus that is to be launched in 2019.

Mercedes-Benz Vans believes the future of delivery transport
will be increasingly electric, and it is making use of the modular
system employed by Mercedes-Benz Cars for electric vehicles.
Mercedes-Benz Vans plans the electriﬁcation of all its com-
mercial model series. The eVito will be available in the second
half of 2018 and the eSprinter is to follow in 2019.

Daimler Buses is increasingly focusing on the development of
electric drive systems. In late 2018, the division plans to start
series production of a city bus with a fully electric drive system
on the basis of the Mercedes-Benz Citaro. The modular design
of the lithium-ion battery pack will allow individualized solutions
for various applications and requirements in urban transport.
The Mannheim plant shall be developed as the center for electric
mobility at Daimler Buses. In addition, Daimler Buses provides
comprehensive advice to its customers on the subject of electric
mobility with its “eMobility Consulting” initiative.

Daimler Financial Services has been operating a system for
ﬂexible car sharing with electric vehicles for about six years with
car2go, and we are the largest provider in the ﬁeld of ﬂexible,
electric car sharing. Of a total of 14,000 vehicles at 26 locations
worldwide, we have 1,400 electric vehicles and three all-electric
ﬂeets in Stuttgart, Amsterdam and Madrid. car2go thus oﬀers
millions of city dwellers an easy way to experience electric
cars for the ﬁrst time. Furthermore, Daimler Financial Services
supports risk-free access to electric mobility through leasing
plans and overall packages for electric vehicles and accessories.

Adapting our corporate culture (CULTURE)

We are also addressing the cultural challenge associated with
the transformation of the automotive industry by adapting our
corporate culture accordingly. Together with our employees, we
have developed a new management culture within the frame-
work of the Leadership 2020 program. We support interdisciplin-
ary work that is pursued outside of hierarchical structures.
To this end, we enable new teams to be put together for limited
periods of time in order to work on speciﬁc projects (swarm-
ing). We also promote the development of innovations through
the use of modern techniques such as scrum and design think-
ing. With our Incubator, which is an internal startup concept for
employee ideas, as well as our STARTUP AUTOBAHN initiative,
we are supporting the development and implementation of new
business ideas and innovations from employees and external
partners. We develop digital solutions for our customers at our
divisions’ digital units and at our digital hubs. In order to pro-
mote our employees’ enthusiasm for digital technologies and
to enable them to use such technologies eﬀectively, we create
learning programs that teach digital skills. We also promote
knowledge sharing through new event formats and platforms
such as our Social Intranet, blogs and communities. And we
oﬀer hands-on experience with digital technologies during our
DigitalLife Days and road shows at our sites. This is how we
are cooperating with our employees to lay the foundations for
our company’s cultural transformation.

Strengthening our divisional structure
(COMPANY)

In order to respond appropriately to the highly dynamic devel-
opment of our industry, its markets, new competitors and new
technologies, we need to have an organization that enables
rapid and agile action. In our fourth strategic column, “Project
Future”, we are working on how to transform our divisions
into legally independent entities to further focus and strengthen
the Group’s divisional structure. It is intended to form three
legally independent three legally independent business units with
greater business responsibility under the shared roof and
overall management of Daimler AG. These new units would be
Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and
Daimler Financial Services AG, which is already a successful
legally independent company.“Project Future” pursues the
goal of strengthening the divisions as they prepare for the future
so that they can more eﬀectively exploit the growth and earn-
ings potential of their respective markets. The project will be
continued in close consultation with the employee representa-
tives. In this context, the main focus of a balance of interests
is on the extension of the employment guarantee until the
end of 2029. Following the preparation and ﬁnal assessment of
an implementation plan, the Board of Management and the
Supervisory Board must make a decision to implement it and
the plan must be approved by the Shareholders’ Meeting.
The goal is to present a dra(cid:5) proposal for the separations to the
Annual Shareholders’ Meeting of Daimler AG in 2019.

By focusing on these goals and on our strategic focus areas
of CORE, CASE, CULTURE and COMPANY, we will successfully
transform our company from a leading automaker into a
leading provider of mobility services.

A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY 87

A.10

Investments in property, plant and equipment

2016

2017 2018 – 2019

Amounts in billions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Corporate

5.9

4.1

1.2

0.4

0.1

0.04

0.0

6.7

4.8

1.0

0.7

0.1

0.04

0.0

14.8

11.0

2.4

0.7

0.3

0.1

0.3

A.11
Research and development expenditure

Amounts in billions of euros

2016

2017 2018 – 2019

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

7.6

5.7

1.3

0.4

0.2

8.7

6.6

1.3

0.6

0.2

17.8

14.0

2.5

0.9

0.4

Extensive investments in our company’s future

In the coming years, we will continue to forge ahead with our
innovation oﬀensive in order to implement our growth strategy
through the introduction of new products, innovative technolo-
gies and modern manufacturing capacities. The future-oriented
CASE ﬁelds (Connected, Autonomous, Shared & Services and
Electric) will play a key role here. We will invest almost €15 billion
in property, plant and equipment in 2018 and 2019, as well as
nearly €18 billion in research and development projects. With
this plan, we are once again increasing our investment in order
to safeguard the future of our company. (cid:202) A.10 and A.11

The investments in property, plant and equipment will mainly be
used to prepare for the production launches of our new models.
We will also use our investment to realign our manufacturing
facilities in Germany, increase local production in the growth
markets and expand our global production network for electric
vehicles and batteries.

Most of our expenditure for research and development ﬂows
into new products. Important individual projects include the
successor models of the current compact-class cars, as well as
the GLS and GLE oﬀ-road vehicles and the new Sprinter. Other
focus areas at all of our automotive divisions include innovative
drive-system and safety technologies, vehicle connectivity and
the further development of autonomous driving. The plans also
call for substantial funds to be invested in our comprehensive
electric mobility oﬀensive.

WE ARE CONTINUING
ALONG OUR PATH OF
PROFITABLE GROWTH!

Daimler achieved record levels of unit sales and revenue in the year 2017, and Group
EBIT also increased signiﬁcantly. On the basis of solid ﬁnances and a strong core
business, we are focusing our businesses on the future: with outstanding vehicles
and services, with pioneering technologies and business models, with an innovative
and ﬂexible corporate culture, and with an organization that meets the needs of the
markets’ growing dynamism. In 2017, we invested more than €15 billion in the future
of the company, thus creating the right conditions for further proﬁtable growth.

B | COMBINED MANAGEMENT REPORT | CONTENTS 89

B | Combined Management Report

Corporate Proﬁle

Business model
Portfolio changes and strategic partnerships
Important events
Performance measurement system
Corporate governance statement

Economic Conditions and Business
Development

The world economy
Automotive markets
Business development

Proﬁtability

EBIT
Statement of income
Dividend
Net operating proﬁt
Value added

Liquidity and Capital Resources

Principles and objectives of ﬁnancial management
Cash ﬂows
Financial guarantees, contingent liabilities and
other ﬁnancial obligations
Investment
Reﬁnancing
Credit ratings

Financial Position

Daimler AG (condensed version
according to HGB)

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

90
92
93
93
94

95
96
97

101

101
103
105
105
105

107

107
109

110
111
112
114

115

118

118
119
120
120

Sustainability and Integrity

Sustainability at Daimler
Research and development
Innovation, safety and environmental protection
The workforce
Social responsibility
Integrity, compliance and legal responsibility

Overall Assessment
of the Economic Situation

Events a(cid:5)er the Reporting Period

Remuneration Report

Principles of Board of Management remuneration
Board of Management remuneration in
ﬁnancial year 2017
Commitments upon termination of service
Remuneration of the Supervisory Board

Takeover-Relevant Information
and Explanation

Risk and Opportunity Report

Risk and opportunity management system
Risks and opportunities
Industry and business risks and opportunities
Company-speciﬁc risks and opportunities
Financial risks and opportunities
Risks from guarantees, legal and tax risks
Non-ﬁnancial risks
Overall assessment of the risk
and opportunity situation

Outlook

The world economy
Automotive markets
Unit sales
Revenue and earnings
Free cash ﬂow and liquidity
Dividend
Investment
Research and development
The workforce
Overall statement on future development

121

121
121
122
128
129
132

134

135

136

140
142
150

152

155

155
157
157
163
164
167
168

169

170

170
171
172
173
174
174
174
174
175
175

90 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE

Corporate Proﬁle

Business model

Daimler can look back on a tradition covering more than 130
years – a tradition that goes back to Gottlieb Daimler and Carl
Benz, the inventors of the automobile, and features pioneering
achievements in automotive engineering. Today, the Daimler
Group is a globally leading vehicle manufacturer with an unpar-
alleled range of premium automobiles, trucks, vans and buses.
Its product portfolio is rounded out by a range of customized
ﬁnancial services and mobility services. Daimler’s goal is to
continue playing a leading role in the development of products
and services for the future of mobility. The automotive industry
is in the process of a fundamental transformation, and we intend
to play a major role in promoting and shaping that change. With
our strong core business, we are creating the ﬁnancial foundation
for our investments in the future-oriented ﬁelds of Connected,
Autonomous, Shared & Services (ﬂexible use) and Electric –
“CASE” for short. Innovations from the future-oriented CASE
ﬁelds enable us to safeguard the attractiveness and proﬁtability
of our core business.

Daimler AG is the parent company of the Daimler Group, and
has its headquarters in Stuttgart (Mercedesstraße 137, 70327
Stuttgart, Germany). The main business of Daimler AG is the
development, production and distribution of cars, trucks and
vans in Germany and the management of the Daimler Group.
The management reports for Daimler AG and for the Daimler
Group are combined in this management report.

B.01
Consolidated revenue by division

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

55.4%

20.8%

7.7%

2.6%

Daimler Financial Services

13.5%

Thanks to its strong brands, Daimler is active in nearly all the
countries of the world. The Group has production facilities in a
total of 19 countries and more than 8,500 sales centers all
over the world. The global networking of its research and devel-
opment activities as well as its production facilities and sales
organizations gives Daimler considerable competitive advantages
internationally, and also oﬀers additional growth opportunities.

In 2017, Daimler increased its revenue by 7% to €164.3 billion.
The Group’s ﬁve divisions contributed to this total as follows:
Mercedes-Benz Cars 55%, Daimler Trucks 21%, Mercedes-Benz
Vans 8%, Daimler Buses 3% and Daimler Financial Services 13%.
At the end of 2017, Daimler employed a total workforce of more
than 289,000 people worldwide.

The products supplied by the Mercedes-Benz Cars division
comprise a broad spectrum of premium automobiles of the
Mercedes-Benz brand, the Mercedes-AMG high-performance
brand and the Mercedes-Maybach luxury brand. These auto-
mobiles range from compact models to a highly varied program
of oﬀ-road vehicles, roadsters, coupes and convertibles, as
well as S-Class luxury sedans. The portfolio is rounded out by
the Mercedes me brand and the high-quality small cars of
the smart brand. In 2016, we introduced the new EQ brand, which
consolidates all of our activities related to electric mobility.
The most important markets for Mercedes-Benz Cars in 2017
were China with 26% of unit sales, the United States (14%),
Germany (13%) and the other European markets (29%). Within the
framework of its growth strategy, the division continuously
reﬁnes its ﬂexible and eﬃcient production network consisting
of more than 30 plants on four continents. At the same time,
we are preparing our worldwide production network to meet the
requirements of electric mobility. We will manufacture our
future electric vehicles of the EQ product and technology brand
within the framework of normal series production, on the
same assembly lines that are used to produce vehicles with com-
bustion engines. In the future, our sites for the production of
electric vehicles will be our plants in Bremen, Sindelﬁngen and
Rastatt, Germany; Tuscaloosa, Alabama; and Hambach, France.
We will also manufacture electric vehicles for the Chinese mar-
ket at Beijing Benz Automotive Co., Ltd.(BBAC) in China. In the
future, Mercedes-Benz Cars will thus build electric vehicles at
six diﬀerent locations. In parallel, we will expand our global
battery network to ﬁve sites on three continents.

B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE 91

Polo camper vans and recreational vehicles. With the launch of
the Mercedes-Benz X-Class in November 2017, we became the
ﬁrst premium manufacturer to introduce a model series in the
very promising segment of mid-size pickups. The Mercedes-Benz
Vans division has manufacturing facilities on four continents: in
Germany, Spain, the United States, Argentina, China and Russia.
The division is active in the Chinese market through a joint
venture, Fujian Benz Automotive Co., Ltd. The production of the
Citan and the Mercedes-Benz X-Class is part of the strategic
alliance with Renault-Nissan. In Russia, the Sprinter Classic is
built for Mercedes-Benz Vans by the GAZ and YaMZ companies.
The most important markets for vans at present are in the EU30
region, which accounts for 68% of unit sales, and the NAFTA
region (11% of unit sales in the year under review).

The Daimler Buses division with its Mercedes-Benz and Setra
brands is the undisputed industry leader for buses above 8
metric tons in its most important traditional core markets: the
EU30 region, Brazil, Argentina and Mexico. The division’s prod-
uct range comprises city and inter-city buses, touring coaches
and bus chassis. The largest of the division’s 14 production
plants are located in Germany, France, Spain, Turkey, Argentina,
Brazil, Mexico and, since 2015, in India as well. In 2017,
Daimler Buses generated 67% of its revenue in the EU30 region
and 17% in Latin America (excluding Mexico). Whereas we
mainly sell complete buses in Europe, our business in Latin
America, Mexico, Africa and Asia focuses on the production
and distribution of bus chassis.

As the world’s largest manufacturer of trucks above 6 metric tons
gross vehicle weight, Daimler Trucks develops and produces
vehicles in a global network under the brands Mercedes-Benz,
Freightliner, Western Star, FUSO and BharatBenz. The division’s
26 production facilities are located in the NAFTA region (14),
Europe (7), Asia (3) and South America (2). In China, Beijing Foton
Daimler Automotive Co., Ltd. (BFDA), a joint venture with our
Chinese partner Beiqi Foton Motor Co., Ltd., has been producing
trucks under the Auman brand name since 2012. Daimler
Trucks’ product range includes light-, medium- and heavy-duty
trucks for long-distance, distribution and construction-site haul-
age, as well as special vehicles that are used mainly in municipal
applications. Due to close links in terms of production tech-
nology, the division’s product range also includes buses of the
Thomas Built Buses and FUSO brands. In the future, Daimler
Trucks intends to oﬀer vehicles with locally emission-free elec-
tric drive across the entire product portfolio: The product
portfolio will be supplemented with the FUSO eCanter for light-
duty distribution, fully electric trucks from the Mercedes-Benz
brand for heavy-duty distribution, the new product brand E-FUSO
and the fully electric school bus from Thomas Built Buses.
Daimler Trucks’ most important sales markets in 2017 were the
NAFTA region with 35% of unit sales, Asia with 32% and the
EU30 region (European Union, Switzerland and Norway) with 17%.

Mercedes-Benz Vans is a global supplier of a complete range
of vans and associated services. The division’s product range
in the commercial vans segment comprises the Sprinter large
van, the Vito mid-size van (marketed as the “Metris” in the
United States) and the Mercedes-Benz Citan urban delivery van.
The range of Mercedes-Benz vans in the private-customer
segment consists of the V-Class full-size MPV and the Marco

B.02
Daimler Group structure 2017

Mercedes-Benz
Cars

Daimler Trucks

Mercedes-Benz
Vans

Daimler Buses

Daimler
Financial Services

Revenue

€94.7 billion

€35.7 billion

€13.2 billion

€4.4 billion

€23.8 billion

Employees

142,666

79,483

25,255

18,292

13,012

Brands

92 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE

The Daimler Financial Services division supports the sales of
the Daimler Group’s automotive brands in approximately 40
countries. Its product portfolio primarily consists of customized
ﬁnancing and leasing packages for end customers and dealers.
It also includes insurance brokering, ﬂeet management services,
investment products and credit cards, as well as various mobil-
ity services such as the moovel mobility platform, the mytaxi
app and car2go, the world’s leading company for ﬂexible car-
sharing services. The total number of users of our mobility ser-
vices increased to 17.8 million in 2017. During the year under
review, Daimler Financial Services ﬁnanced or leased around
50 % of the vehicles sold by Daimler. The division’s contract
volume of €139.9 billion covers more than 4.8 million vehicles.
Daimler Financial Services also holds a 45% interest in the
Toll Collect consortium, which operates an electronic road-
charging system for trucks on highways in Germany.

Daimler is also active in the global automotive industry and
related sectors through a broad network of subsidiaries, asso-
ciated companies and joint operations. The statement of
investments of Daimler AG in accordance with Section 313 of the
German Commercial Code (HGB) can be found in E Note 40
of the Notes to the Consolidated Financial Statements.

Portfolio changes and strategic partnerships

By means of targeted investments and future-oriented partner-
ships, we strengthened our core business and made use of
additional growth potential in 2017. We also focused on contin-
uously developing our business portfolio and improving our
competitiveness in our core business areas. Our activities revolve
around the future-oriented strategic ﬁelds of Connected,
Autonomous, Shared & Services and Electric (CASE), all of which
will play a major role in shaping the future of mobility. In order
to strengthen our position in these areas, we forged ahead with
our partnerships and made a large number of investments
during the year under review. The most important projects are
brieﬂy described below.

Cooperation with Bosch on the development of highly
automated and driverless driving
In March 2017, the two companies entered into a development
agreement that will bring highly automated and driverless
driving to city streets by the beginning of the next decade. The
objective is to jointly develop so(cid:5)ware and algorithms for a
highly automated driving system. By introducing highly automated
and driverless driving in the urban environment, Bosch and
Daimler aim to improve the ﬂow of traﬃc in cities, enhance
safety on the road and provide an important building block
for the traﬃc systems of the future.

Intelligent charging solutions for electric mobility
Daimler AG became an investor in the American charging solu-
tions provider ChargePoint Inc. in March 2017. ChargePoint’s
core areas of expertise include both the development and pro-
duction of innovative infrastructure solutions for electric
vehicles – ranging from conventional AC (alternating current)
systems to ultra-fast DC (direct current) charging systems
with up to 400 kilowatts. All of the products from ChargePoint

are networked via so(cid:5)ware and can be expanded as needed.
Along with hardware, the US market leader also provides its
customers with customized cloud-based solutions, ranging
from user-speciﬁc energy management systems to well-proven
payment services, and a mobile app for private customers
that provides innovative features previously unavailable in the
European market. Daimler and ChargePoint are systematically
pursuing the same goal: to promote the breakthrough of electric
mobility through the targeted expansion of infrastructure and
services. The strategic partnership of the two companies sup-
plements existing Daimler AG alliances and joint ventures
that are designed to build and expand an ecosystem for electric
mobility.

With the establishment of the IONITY joint venture in November
2017, the BMW Group, Daimler, Ford Motor Company and
Volkswagen with Audi and Porsche laid the foundation for the
creation of the most powerful charging network for electric
vehicles in Europe. The establishment and operation of approx-
imately 400 high-power charging (HPC) stations by 2020 will
be a major step toward enabling long-distance journeys with
electric vehicles, thus helping to establish these vehicles in
the market.

Expansion of strategic partnership with BAIC
In June 2017, Daimler AG and its Chinese partner BAIC Group
signed a framework agreement that will strengthen their stra-
tegic cooperation through investments in the production of
vehicles with alternative drive systems in China. As part of the
investment agreement, Daimler intends to acquire a minority
share in Beijing Electric Vehicle Co., Ltd. (BJEV), a subsidiary of
the BAIC Group. The goal is to strengthen the strategic col-
laboration with BAIC on vehicles with alternative drive systems.
China is already the world’s biggest market for electric vehicles.

In July 2017, the two partners also signed an agreement that
will further strengthen their cooperation within the framework
of the production joint venture Beijing Benz Automotive Co.,
Ltd.(BBAC). The companies plan to jointly invest around RMB
5 billion (approximately €655 million) in the production of
battery-electric Mercedes-Benz brand vehicles at the BBAC
manufacturing facility in Beijing. As part of this strategic
framework agreement, Daimler and BAIC Motor are to prepare
for the local production of battery-electric vehicles at BBAC
between now and 2020. The partners also intend to provide the
infrastructure needed for the local production of battery
cells in China, as well as the required research and development
capacities.

Daimler launches e-payment business
In January 2017, Daimler Financial Services acquired the elec-
tronic payment services provider PayCash Europe SA. With its
entry into the e-payment sector, Daimler is launching its own
electronic payment services provider under the brand name
“Mercedes pay”. The “Mercedes pay” brand is a key component
of Daimler’s mobility and digitization strategy. The new pay-
ment system underscores Daimler’s goal, as a leading provider
of digital mobility services, of making its products and services
even more attractive.

B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE 93

of the employees and those of the company. The key points
include the extension of the employment guarantee to the end
of 2029 (“Safeguarding the Future 2030”) and measures that
will ensure nearly full funding of the company’s pension obliga-
tions. With regard to balancing the interests of the employees
and those of the company, Daimler contributed €3 billion in liquid
funds to the pension plan assets of Daimler AG in the fourth
quarter of the year under review.

This project will be continued in close consultation with the
employee representatives. Following the preparation of an
implementation plan and a ﬁnal assessment, the actual imple-
mentation will have to be decided on by the Board of Manage-
ment and the Supervisory Board and approved by the Annual
Shareholders’ Meeting. The goal is for the dra(cid:5) proposal on
the separation to be presented to the Annual Shareholders’
Meeting for its approval in 2019.

Performance measurement system

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

Value added
Value added is a key element of our performance measurement
system, which is applied at both the Group and the divisional
levels. It is calculated as the diﬀerence between operating proﬁt
and the cost of capital of the average net assets. Alternatively,
the value added of the industrial divisions can be determined
using the main value drivers of return on sales (quotient of EBIT
and revenue) and net assets’ productivity (quotient of revenue
and net assets). (cid:202) B.03

Using a combination of return on sales and net assets’ produc-
tivity within the context of a strategy of proﬁtable revenue
growth provides a basis for the positive development of value
added. Value added shows the extent to which the Group
and its divisions achieve or exceed investors’ minimum return
requirements, thus creating additional value. The quantitative
development of value added and the other ﬁnancial performance
measures is explained in the “Proﬁtability” chapter.
E pages 105 f

B.03
Calculation of value added

Value
added

Profit
measure

–

Net assets

Cost of
capital (%)

Cost of capital

Value
added

Return
on sales

Net assets
productivity

–

Cost of
capital (%)

Net
assets

mytaxi invests in international expansion
Daimler’s mytaxi subsidiary – Europe’s leading taxi app –
acquired 100% of the Greek taxi app operator Taxibeat LTD in
February 2017. Through this acquisition, Daimler is investing
in the further development and expansion of urban mobility sys-
tems in Europe. Daimler will initially continue to use the Taxi-
beat brand name. In June 2017, Daimler also acquired a 100%
interest in Clever Taxi, the taxi app market leader in Romania.
As a result, mytaxi now operates in 11 European countries. In
the third quarter of 2017, we introduced a pooling service
known as mytaxi match, which allows several customers to share
a taxi. The pilot project for the service was launched in Warsaw.

Targeted investments in mobility services
During the year under review, we expanded our range of inno-
vative mobility services in a targeted manner. In August, the
moovel Group acquired the Hamburg startup Familonet, which
oﬀers a locator app. Private car-sharing services have also
been expanded through the acquisition of a minority interest
in Turo, which is the leading peer-to-peer (P2P) marketplace
for vehicle rentals in the United States. Turo plans to enter the
German market in 2018. At the same time, Daimler integrated
its Croove private car-sharing platform into the Turo organization.
With the acquisition of ﬂinc, the leading provider of door-to-
door ride-sharing services, Daimler added yet another compo-
nent to its portfolio of forward-looking mobility solutions.

ViaVan joint venture with the US startup company Via
Mercedes-Benz Vans entered the ride-sharing sector in October
2017 through the establishment of the ViaVan joint venture
with the US startup company Via, which has its headquarters in
New York. Via’s intelligent algorithm enables the creation of a
dynamic mass transportation system that supplements public
transport systems and reduces traﬃc volumes in cities. Tech-
nology from Via and engineering from Mercedes-Benz Vans thus
form a perfect combination for eﬃcient, aﬀordable and sus-
tainable ride-sharing services. Furthermore, Daimler acquired
an equity interest in Via Transportation Inc. in 2017.

Important events

Initial steps taken to strengthen the divisional structure
Daimler AG seeks to further focus and strengthen the business
structure of the Group by establishing legally independent enti-
ties. The plan calls for Mercedes-Benz Cars & Vans and Daimler
Trucks & Buses to become legally independent entities with
greater business responsibility alongside the legally independent
Daimler Financial Services division. This project is designed
to strengthen the divisions as they prepare for the future, so that
they can more eﬀectively utilize the growth and earnings poten-
tial of their respective markets. Daimler’s plan for safeguarding
the future of the company is based on three components:
maintaining and increasing business success, continuing to pre-
pare employees for the future, and keeping investors committed
to the company over the long term.

Daimler plans to invest a three-digit million euro amount in
the initial measures of this plan. None of the aspects of this
project involve cost-cutting or eﬃciency programs, and the
Group has no plans to reduce workforce numbers. Daimler AG
is also not planning to divest itself of individual business units.
The company will consult closely with employee representatives
throughout the project. It has already reached an agreement
in a position paper that addresses ways to balance the interests

Return on sales
As one of the main factors inﬂuencing value added, return on
sales is of particular importance for assessing the industrial
divisions’ proﬁtability. The combination of net proﬁtability and
net assets’ productivity results in the return on net assets
(RONA). If RONA exceeds the cost of capital, value is created
for our shareholders. The measure of proﬁtability for Daimler
Financial Services is not return on sales, but return on equity.

Key performance indicators
The important ﬁnancial indicators for measuring our operating
ﬁnancial performance, in addition to EBIT and revenue, are
the free cash ﬂow of the industrial business, investments, and
expenditure for research and development. Along with the
indicators of ﬁnancial performance, we also use various non-
ﬁnancial indicators to help us manage the Group. Of particular
importance in this respect are the unit sales of our automotive
divisions, which we also use as the basis for our capacity and
human resources planning and workforce numbers.

Non-ﬁnancial performance indicators are also used to deter-
mine the remuneration of our Board of Management members.
Important criteria for annual target achievement also include
integrity and compliance, employee satisfaction and the high
quality of our products.

Details of the development of non-ﬁnancial performance
indicators can be found in the chapters “Economic Conditions
and Business Development” and “Non-Financial Report”.
E pages 95 ﬀ and pages 214 ﬀ

Corporate governance statement

The corporate governance statement pursuant to Section 289f
and Section 315d of the German Commercial Code (HGB)
can be found in this Annual Report on E pages 203 ﬀ and can
also be viewed on the Internet at w daimler.com/corpgov/en.
Pursuant to Section 317 Subsection 2 Sentence 6 of the German
Commercial Code (HGB), the purpose of the audit of the
statements pursuant to Section 289f Subsections 2 and 5 and
Section 315d of the HGB is limited to determining whether
such statements have actually been provided.

94 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE

Proﬁt measure
The measure of operating proﬁt at the divisional level is EBIT
(earnings before interest and income taxes). EBIT thus reﬂects
the divisions’ responsibility for proﬁt and loss. The measure
of operating proﬁt that is used at the Group level is the net oper-
ating proﬁt. It comprises the EBIT of the divisions as well as
proﬁt and loss eﬀects for which the divisions are not held respon-
sible. The latter include income taxes and other reconciliation
items. (cid:202) B.19 on page 105

Net assets
Net assets are the basis for the investors’ required return. The
industrial divisions are accountable for the net operating assets;
all assets, liabilities and provisions for which they are respon-
sible in day-to-day operations are therefore allocated to them.
Performance measurement at Daimler Financial Services is
implemented on an equity basis. Net assets at the Group level
include the net operating assets of the industrial divisions
and the equity of Daimler Financial Services, as well as assets
and liabilities from income taxes and other reconciliation items
which cannot be allocated to the divisions. Average annual net
assets are calculated on the basis of average quarterly net
assets. E page 106

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 inves-
tors expect on their invested capital. The cost of capital of the
Group and of the industrial divisions comprises the cost of
equity as well as the costs of debt and net pension obligations
of the industrial business. The expected returns on liquidity
of the industrial business are considered with the opposite sign.
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 German government bonds) plus a
risk premium reﬂecting the speciﬁc risks of an investment in
Daimler shares. Whereas the cost of debt is derived from the
required rate of return for obligations the Group enters into with
external lenders, the cost of capital for net 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 Group’s cost of capital is the weighted
average of the individually required or expected rates of return.
During the year under review, the cost of capital amounted to
8% a(cid:5)er 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. (cid:202) B.04

B.04
Cost of capital

In percent

2017

2016

Group, a(cid:5)er taxes

Industrial business, before taxes

Daimler Financial Services, before taxes

B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT 95

Economic Conditions
and Business Development

The world economy

With real growth of more than 3% in the year under review, the
world economy had its strongest growth performance since
2011. (cid:202) B.05 Both the industrialized countries and the emerging
markets contributed to this positive development, as the
economic upturn was once again relatively broad-based and
synchronized for the ﬁrst time in several years. During the year
under review, the economic situation of the emerging markets,
which accounted for nearly two thirds of global growth,
improved signiﬁcantly. A key driver of this development was the
increase in prices for industrial raw materials, which were
approximately 20% higher on average compared with the pre-
vious year. The acceleration of global growth was even more
remarkable in view of the fact that the risks associated with
geopolitical developments remained relatively high.

The industrialized countries also beneﬁted from the favorable
global economic environment, as these nations increased their
growth rates to just over 2%. The US economy played a major
role here, posting growth in output of 2.5%, which was
signiﬁcantly higher than the growth recorded in 2016. Increased
investment by companies following the decrease in 2016 served
as a key driver of growth, while private consumption remained
stable. Developments were very positive also in Japan, where
gross domestic product (GDP) rose by about 1.8%.

The economy of the European Monetary Union was particularly
strong in the year under review: Growth of around 2.5%
represents a signiﬁcant improvement on the ﬁgure for 2016.
This was largely due to a higher contribution from exports. The
European Central Bank (ECB) also supported this development
with its ongoing expansionary monetary policy in response to
low inﬂation rates. The German economy recorded above-average
growth (2.2%) in a long-term comparison for the fourth
consecutive year. Despite a signiﬁcant decrease in private
consumption, the economy of the United Kingdom posted
GDP growth of 1.8%, so the economic impact of the Brexit
negotiations continued to be limited.

With a real growth rate of just over 4.5%, the emerging markets
ﬁnally succeeded in overcoming the economic diﬃculties they
had experienced over the previous two years. The turnaround was
particularly pronounced in South America, which recorded slight
growth of just over 1% in 2017 a(cid:5)er undergoing a substantial

downturn in the prior year. The economies of Eastern Europe
also bounced back noticeably during the year under review.
The growth rate for the region more or less doubled, largely due
to the recovery of the Russian economy. Despite receiving less
support from ﬁscal and monetary policy, the Chinese economy
continued to beneﬁt from previous measures in this regard,
and with a growth rate of 6.9%, China actually posted a slight
increase in growth compared with the prior year. The economic
situation in the Middle East remained problematic, with growth
clearly below the long-term trend.

Currency exchange rates remained volatile despite the favorable
global economic environment. Against the US dollar, the euro
moved during the year between $1.03 and $1.21. At the end of
the year, the euro stood at $1.20, making it around 14% stronger
than at the end of 2016. The range of ﬂuctuation of the Japanese
yen against the euro was 116 to 135. By the end of the year,
the euro had appreciated against the yen by about 9%. The British
pound once again fell against the euro (by approximately 3.5%),
but this decrease was not nearly as pronounced as the decrease
recorded in 2016. The euro also appreciated against other key
currencies such as the Russian ruble, the Brazilian real and the
Turkish lira, in some cases recording double-digit increases.

B.05
Economic growth

Gross domestic product, growth rates in %

2016
2017

-1

-2

-3

-4

Total

Europe

NAFTA

Asia

South
America

Source: IHS Global Insight, own calculations

96 B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT

market demand remains at an unusually high level. Whereas
sales of SUVs and pickups increased once again, demand for
traditional sedans was relatively weak by comparison. The Japa-
nese market displayed a solid performance, with market volume
increasing by about 6%. Sales in India were signiﬁcantly higher
than in the prior year. A recovery trend was observed in Brazil,
where the market expanded by just over 9%.

During the year under review, worldwide demand for medium-
and heavy-duty trucks gradually recovered from its previous
weak phase, and experienced an upswing as 2017 progressed.
It should be pointed out, however, that overall demand in the
full year in markets relevant to our operations was only slightly
above the prior-year level.

The pace of recovery on the North American market picked up
in the second half of the year. However, as demand in the ﬁrst
half of the year was signiﬁcantly lower than in the same period
of 2016, the full-year market volume in weight classes 6-8 was
only slightly higher (+1%) than in the previous year. Sales in the
heavy-duty Class 8 segment were at about the same level
as in 2016.

Demand in the EU30 region (European Union, Switzerland and
Norway) approximately maintained the solid market volume
of the previous year. Sales in Western Europe rose somewhat,
while markets in the EU states of Central and Eastern Europe
contracted slightly overall. Demand for trucks in Brazil stabilized
following the slight improvement of overall economic conditions
in the country. No signiﬁcant recovery occurred in Brazil, how-
ever, so the market volume therefore only slightly surpassed
the very low level of the prior year. Following the severe mar-
ket slump in Turkey in 2016, demand improved during 2017, but
also here, the market was only slightly larger than the weak
volume of the previous year. The Russian market underwent
a strong recovery and expanded at a signiﬁcantly double-digit
rate.

Developments in Daimler’s most important Asian markets were
varied. The Japanese market for light-, medium- and heavy-
duty trucks was slightly larger than the solid volume of the prior
year (+1%). In India, on the other hand, demand for medium-
and heavy-duty trucks fell by about 10%. Here, the introduction
of new regulatory and tax measures during the year led to
uncertainty and weak demand that could not be oﬀset in the
ﬁnal months of 2017. Truck sales in China once again rose
sharply, largely due to the favorable economic situation and
regulatory measures that led many truck operators to
replace many older vehicles.

Automotive markets

Global demand for cars continued to develop favorably in 2017,
with the worldwide market volume increasing for the eighth
consecutive year. While the previous high market volume led to
slower growth compared with the previous year, the increase of
more than 2% was nevertheless impressive. Once again, the
growth of the world market was primarily due to contributions
from the Chinese and Western European markets, while sales in
the United States decreased slightly. Key emerging markets
were able to overcome their weaknesses and developed in a
much more positive manner during the year under review.
(cid:202) B.06

Once again, the Chinese market made the biggest contribution
to the growth of the world market, although growth was
significantly lower than in previous years due to the very high
market volume in 2016. A substantial number of advance
purchases were made towards the end of the year because state
tax incentives for purchasers of cars with small engines ended
in January 2018, as had been previously announced, but market
growth for the full year was just over 3%.

Car demand in Europe was slightly higher than in the previous
year. Following the recovery of recent years, the Western
European car market has now reached a solid level and was able
to record slight growth in 2017. Most of the Western European
core markets grew once again; only the UK car market suﬀered
a decrease (of approximately 6%) a(cid:5)er reaching a record volume
in 2016. Sales in Germany were up by nearly 3% from the prior
year. The overall market situation in Eastern Europe improved
considerably. This was largely due to developments in the Russian
market, which posted a signiﬁcant increase of approximately
12% a(cid:5)er recording substantial contraction over the previous
four years.

The US market volume for cars and light trucks decreased by
almost 2% and thus did not quite reach the record volume
of the prior year. Nevertheless, at just over 17 million units,

B.06
Global automotive markets

Unit sales growth rates 2017 in %

Passenger cars
Commercial vehicles

-5

Total

Europe

NAFTA1,2

Asia

South
America1,2

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

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

B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT 97

Demand for vans continued to develop positively in the EU30
region in 2017. Market volume for mid-size and large vans
increased by 9%, while demand for small vans rose by 3%. In
Germany as well, sales in the combined segment for mid-size
and large vans increased by 8%. Demand for large vans in the US
was slightly below the prior year’s level. Demand in the segment
of the van market that we serve in China also decreased slightly.
The market for large vans in Latin America recovered strongly
from the low level of the previous year.

Market volume for buses in the EU30 region was at the high
level of the previous year. The market recovery in Latin America
(excluding Mexico) led to a signiﬁcant improvement in the bus
segment, especially in Brazil, where market volume increased by
10% a(cid:5)er bottoming out in 2016. As a result of the ongoing
diﬃcult situation in Turkey, domestic demand in that country
once again decreased signiﬁcantly compared with the prior
year.

Business development

Unit sales
Daimler increased its total unit sales in the year 2017 by 9%
to 3.3 million vehicles, thus surpassing its growth target. The
Mercedes-Benz Cars and Mercedes-Benz Vans divisions
exceeded the forecasts made at the beginning of the year by
recording signiﬁcant growth (8% and 12% respectively).
Daimler Trucks also posted a signiﬁcant increase of 13% in unit
sales. At the beginning of the year, the division had anticipated
unit sales similar to those of the previous year. Our sales forecast
was successively adjusted as a result of more favorable
market developments in some markets important for us. As we
expected at the beginning of the year, unit sales at Daimler
Buses were also signiﬁcantly higher than in the prior year (+9%).

The Mercedes-Benz Cars division continued along its growth
path in the year under review. Unit sales rose by 8% to the new
record of 2,373,500 vehicles. The Mercedes-Benz brand
increased its unit sales by 9% to 2,238,000 vehicles and was once
again the strongest-selling premium brand in the automobile
industry. Mercedes-Benz is the number one brand in the premium
segment in Germany and numerous other key European
markets, as well as in the United States, Canada, South Korea
and Japan. In addition, we once again signiﬁcantly improved
our position in China.

Unit sales in Europe increased by 5% to 911,700 vehicles.
Signiﬁcant growth was achieved in the volume markets of
France (+9%), Italy (+9%), Spain (+8%) and the United Kingdom
(+4%), and we also increased our unit sales in Germany by 2%
to 282,600 vehicles. Mercedes-Benz continued its success in
China during the year under review. Unit sales in the country
rose by 28% to 595,200 vehicles — much faster growth than the
overall market and our most important competitors. We set
new records for unit sales also in other Asian markets — for
example in Thailand (+31%) India (+14%), South Korea (+9%)
and Taiwan (+7%). Total unit sales in the NAFTA region were at the
prior-year level. Here, sales increased signiﬁcantly in Canada
and Mexico but decreased slightly in the United States as in
the market overall.

The growth was primarily driven by our new E-Class. A(cid:5)er all
model variants became available, sales reached the new record
level of 398,200 units (+31%). Our oﬀ-road vehicles were also
very successful once again. Total unit sales in the SUV segment
increased by 16% to 823,000 vehicles. Demand for our C-Class
models also remained very strong, with sales of these vehicles
increasing slightly to 492,700 sedans, wagons, coupes and
convertibles in 2017. Unit sales of A- and B-Class models did not
quite reach the previous year’s high level. Including the CLA
and CLA Shooting Brake, a total of 420,200 units were delivered.
Sales of the S-Class reached a total of 79,400 sedans, coupes
and convertibles. The upgraded S-Class generated additional
sales momentum in the second half of the year. (cid:202) B.07

B.07
Unit sales structure of Mercedes-Benz Cars

A-/B-Class

C-Class

E-Class

S-Class

SUVs*

Sports Cars

smart

* including GLA

Europe

NAFTA

Asia

Other markets

18%

21%

17%

34%

43%

17%

36%

98 B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT

B.08
Unit sales structure of Daimler Trucks

EU30

Latin America

NAFTA

Asia

Other markets

B.09
Market share1

in %

17%

35%

32%

10%

2017

2016

17/16

Change in % points

Mercedes-Benz Cars

European Union

thereof Germany

United States

China

Japan

Daimler Trucks

Medium- and heavy-duty
trucks EU30

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

Medium- and heavy-duty
trucks India

Mercedes-Benz Vans

Mid-size and large vans EU30

thereof Germany

Small vans EU30

Large vans United States

Daimler Buses

Buses over 8 tons EU30

thereof Germany

Buses over 8 tons Brazil

6.3

10.5

2.0

2.6

1.7

21.0

36.4

40.0

39.3

27.6

19.6

9.1

16.7

27.3

3.1

7.5

28.4

51.6

52.5

1 Based on estimates in certain markets.

6.2

10.4

2.0

2.1

1.7

20.7

37.2

40.0

37.9

29.8

20.4

+0.1

0.0

+0.5

0.0

+0.3

-0.8

0.0

+1.4

-2.2

-0.8

6.8

+2.3

16.8

27.3

3.1

7.6

29.6

50.1

58.4

-0.1

0.0

-0.1

-1.2

+1.5

-5.9

The smart brand sold a total of 135,500 vehicles in 46 markets
worldwide in 2017. The smart was particularly popular in China,
which is now the smart brand’s third-biggest sales market a(cid:5)er
Germany and Italy. E pages 178 ﬀ

Unit sales by Daimler Trucks in 2017 were signiﬁcantly higher
than in the previous year. In total, we delivered 470,700 heavy-,
medium- and light-duty trucks as well as buses of the Thomas
Built Buses and FUSO brands in the year under review (2016:
415,100). Daimler Trucks continues to be the world’s biggest
manufacturer of trucks above 6 tons. (cid:202) B.08

In the EU30 region (European Union, Switzerland and Norway),
we sold 82,300 vehicles in the year under review, slightly
higher than the 79,800 sold in 2016. Our Mercedes-Benz brand
remained the market leader in the medium-duty and heavy-
duty segments, with a share of 21.0% (2016: 20.7%). Following
the slump in Turkey in 2016, we were able to signiﬁcantly
increase our sales in the country to 11,800 units in the year under
review (2016: 9,300). Developments were also very positive
in Russia, where unit sales more than tripled to 8,000 trucks
(2016: 2,300). (cid:202) B.09

Our unit sales in Latin America increased to 30,500 from the
low level of 27,500 vehicles sold in 2016. With sales of 5,600
units (2016: 3,900), the market in Argentina made a major
contribution to this positive development. Sales in our main Latin
American market, Brazil, rose signiﬁcantly to 13,400 units
(2016: 12,100). With our Mercedes-Benz trucks, we achieved a
market share of 27.6% in the medium- and heavy-duty
segments (2016: 29.8%).

In the NAFTA region, we were able to record a signiﬁcant
increase in sales to 165,000 units in the year under review
(2016: 145,700). We further increased our market share in
Classes 6–8 with a market share of 39.8% (2016: 39.3%). In
Class 8 for heavy-duty trucks, we once again achieved a
market share of 40.0% (2016: 40.0%). We also remained the
undisputed market leader in Classes 6–8. At the beginning
of 2017, we started production of the new Freightliner Cascadia,
which oﬀers a number of new features for fuel eﬃciency,
connectivity and safety.

We increased our sales in Asia by 18% to 148,600 trucks. At
44,800 units, sales in Japan were slightly lower than in the
previous year (46,400). Our FUSO brand achieved an overall
market share of 19.6% (2016: 20.4%) in Japan. The new Super
Great heavy-duty truck underscores our determination to further
strengthen our position in the Japanese truck market. Our
sales of 42,700 units in Indonesia were substantially higher than
in the prior year (28,000). Although the volume of the truck
market in India was below the prior-year level, we were able to
increase our sales in the ﬁ(cid:5)h year since the establishment of
the BharatBenz brand to 16,700 trucks (2016: 13,100) and our
market share increased to 9.1% (2016: 6.8%). At 23,600 units
(2016: 17,600), our sales in the Middle East were also substan-
tially higher than the low prior-year level.

B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT 99

In China, the world’s biggest truck market, Daimler AG holds a
50% interest in Beijing Foton Daimler Automotive Co. Ltd. (BFDA),
a joint venture with Beiqi Foton Motor Co. Ltd. Medium- and
heavy-duty trucks of the Auman brand have been produced
there since 2012. In line with the signiﬁcant recovery of the
Chinese truck market, Auman posted a substantial sales increase
to 112,400 units (2016: 77,800). E pages 184 ﬀ

volume in Brazil grew by 10% a(cid:5)er having bottomed out in 2016.
Sales of Mercedes-Benz bus chassis in Brazil rose by a double-
digit rate (+46%) to 7,200 units. We were also able to maintain
our leading market position in Brazil with a market share of
52.5% (2016: 58.4%). In Mexico, sales of 3,400 units (2016:
3,800) were signiﬁcantly lower than in the previous year.
E pages 192 ﬀ

Mercedes-Benz Vans achieved record sales once again in
2017. Unit sales of 401,000 vehicles surpassed the prior-year
ﬁgure by 12%. Whereas we mainly focus on commercial
customers with the Sprinter, Vito and Citan models, the V-Class
is primarily designed for private use. With the X-Class, our
new mid-size pickup, we are addressing various customers for
both private and commercial applications. In the EU30 region,
which is our core region, we increased our unit sales by 9% to
273,300 vehicles, and we continue to be the market leader
for mid-size and large vans with a share of 16.7% (2016: 16.8%).
Double-digit growth was achieved in several European markets,
and the division also set a new record in Germany with sales
of 105,800 units (2016: 96,100). Sales in the NAFTA region
in creased to 44,800 units (2016: 43,400) and the division’s mar-
ket share for large vans in the United States reached 7.5% (2016:
7.6%). Business development was very favorable in Latin America,
where sales rose by 31% to 16,400 units. Unit sales in China
also increased signiﬁcantly, by 75% to 23,800 vans. This devel-
opment was largely due to the success of the Vito and the
V-Class, both of which were launched in China in 2016. In total,
we sold 200,500 Sprinter vans worldwide (2016: 193,400) in the
reporting period, which was the last full year of the current model’s
lifecycle. Vito sales rose signiﬁcantly, by 21% to 111,800 units,
while sales of the Mercedes-Benz Citan reached 26,100 units
(2016: 24,900). The V-Class full-size MPV was very successful;
sales of 59,300 units surpassed the previous year’s ﬁgure by 22%.
The X-Class also got oﬀ to a good start at the end of the year
with sales of 3,300 units. E pages 189 ﬀ

Daimler Buses sold 28,700 buses and bus chassis worldwide in
2017 (2016: 26,200). The signiﬁcant increase is due in particular
to the gradual recovery of the economy in Brazil. The division
maintained its clear market leadership in its most important
traditional markets (EU30, Brazil, Argentina and Mexico).
Continued high demand for complete buses meant that the
division achieved sales in the EU30 region of 8,700 units sold
in the year under review (2016: 8,800). At 28.4% (2016: 29.6%),
market share was once again at a very high level. Sales of
3,100 Mercedes-Benz and Setra buses in Germany were at
the prior year level (2016: 3,100), while the ongoing diﬃcult
situation in Turkey resulted in a signiﬁcant decrease in unit sales,
to 400 vehicles (2016: 600). The market situation in Latin
America (excluding Mexico) improved considerably; bus market

Business at Daimler Financial Services continued to develop
very positively in the year under review. As we had forecast in
the 2016 Annual Report, worldwide contract volume continued
to grow, reaching the new record level of 139.9 billion (+6%) in
2017. Adjusted for currency-translation eﬀects, contract volume
increased by 12%. New business increased by 14% to €70.7
billion, growing at a much faster rate than we had anticipated at
the beginning of the year. Signiﬁcant growth was recorded in
Europe (+15%), while new business in the Americas region was of
the prior-year magnitude (+1%). The growth of new business in
the Africa and Asia-Paciﬁc region (excluding China) was once
again very dynamic at a rate of 16%. In China, new business
actually increased by 56%. In the insurance business, we bro-
kered approximately 2.1 million policies, representing an
increase of 20% compared with the prior year. In ﬁnancial year
2017, Daimler Financial Services was active in ﬂeet management
with the two brands Daimler Fleet Management and Athlon. In
Europe, Daimler Financial Services had a total of 383,300
contracts with ﬂeet customers on its books at the end of 2017,
representing an increase of 6% compared with a year earlier.
Contract volume amounted to €6.4 billion. The total number of
registered users of our mobility services rose to 17.8 million
in the year under review. car2go increased its number of regis-
tered users to 3.0 million at the end of the year and thus
strengthened its position as the world’s leader for ﬂexible car
sharing. The app-based taxi-ordering service mytaxi is Europe’s
biggest taxi network and also continued its growth in 2017; the
number of registered users rose by 85% to 11.1 million at the
end of the year. We further developed the moovel app, with which
customers in Germany can ﬁnd the best way of traveling from
A to B using various modes of transport and can also directly
book and pay for services from providers such as car2go,
mytaxi and Deutsche Bahn (German Railways). With moovel
transit, moovel North America is the leading provider of mobile
ticket solutions for the apps of public transport companies in
the United States. The number of registered moovel users in
Germany and the United States had risen to 3.7 million by the
end of 2017 (2016: 2.2 million). E pages 195 ﬀ

100 B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT

Order situation
The Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans
and Daimler Buses divisions produce vehicles predominantly
to order in accordance with customers’ speciﬁcations. While
doing so, we ﬂexibly adjust the production capacities for the
individual models to changing levels of demand. Due in particular
to strong demand in China and the European markets, the
number of orders placed with Mercedes-Benz Cars during the
year under review was once again above the high level of
orders recorded in the previous year. This was driven on the
product side primarily by the new E-Class, all variants of which
are now available, as well as by the continued strong success
of our oﬀ-road vehicles. Due to the positive development
of demand, we once again increased our production volumes.
Nonetheless, the order backlog at the end of 2017 was higher
than a year before. At Daimler Trucks, both orders received and
the order backlog at year-end were signiﬁcantly higher than a
year earlier. This was primarily due to the revival of demand in
North America and Asia. We increased production volumes
mainly in the second half of the year in response to the higher
demand.

Revenue
In the year 2017, Daimler increased its total revenue by 7% to
€164.3 billion; adjusted for currency-translation eﬀects,
revenue grew by 8%. This means we surpassed our expectations
from the beginning of the year. The divisions Mercedes-Benz
Cars (+6%) and Daimler Financial Services (+15%) increased their
business volumes by signiﬁcant margins. The Daimler Trucks
division also recorded a signiﬁcant increase in revenue of 8%,
primarily due to positive sales development in North America.
Exchange-rate eﬀects had a negative impact on revenue. We had
originally expected a business volume similar to that of the
previous year. Revenue at Mercedes-Benz Vans (+3%) and Daimler
Buses (+4%) rose slightly. At Mercedes-Benz Vans, we had
only expected revenue to stabilize and unit sales to increase
slightly at the beginning of the year, because contract
manufacturing of vans for Volkswagen had been discontinued
at the end of 2016.

In regional terms, Daimler achieved revenue growth in Europe
(+8% to €68.4 billion), in the NAFTA region (+4% to €46.9 billion)
and in Asia (+9% to €38.8 billion).

B.11
Revenue by division and region

2013
2014

2015
2016

2017

In millions of euros

2017

2016

17/16

% change

B.10
Consolidated revenue by region

In billions of euros

Germany

Europe
(without
Germany)

NAFTA region

Asia

Daimler Group

164,330

153,261

Divisions

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

94,695

35,707

13,164

4,351

Daimler Financial Services

23,775

Regions

Europe

thereof Germany

NAFTA region

thereof United States

Asia

thereof China

Other markets

68,437

23,939

46,916

40,459

38,766

18,280

10,211

89,284

33,187

12,835

4,176

20,660

63,417

23,509

44,960

39,169

35,562

15,984

9,322

+15

+14

+10

B | COMBINED MANAGEMENT REPORT | PROFITABILITY 101

Proﬁtability

EBIT

The Daimler Group achieved EBIT of €14.7 billion in 2017
(2016: €12.9 billion), which surpassed the prior-year ﬁgure
signiﬁcantly. (cid:202) B.12 (cid:202) B.13

B.12
EBIT by segment

The development of earnings reﬂects primarily the very good
situation of unit sales in the automotive segments. Accordingly,
the Mercedes-Benz Cars division increased its earnings due in
particular to further growth in unit sales, especially of the SUV
models and the new E-Class. Daimler Trucks also signiﬁcantly
improved its earnings compared with the previous year, mainly
due to increased unit sales in the NAFTA region and the sale
of real estate in Japan. Mercedes-Benz Vans and Daimler Buses
achieved EBIT at the prior-year level. EBIT at Daimler Financial
Services increased signiﬁcantly. Exchange-rate eﬀects had a net
positive impact on operating proﬁt.

The reconciliation of segment earnings to Group EBIT resulted
in income slightly above the prior-year level.

The Mercedes-Benz Cars division signiﬁcantly increased its
EBIT in 2017 and thus met the forecasts made in Annual Report
2016. For the Daimler Trucks division, the EBIT forecast in
Annual Report 2016 was slightly below the prior-year ﬁgure. We
adjusted those assessments gradually upwards as the year
pro gressed in the context of our quarterly reporting, as the divi-
sion’s unit sales increased faster than expected in some key
markets and as expenses for the ﬁxed-cost optimization were
below our expectations. The earnings of Mercedes-Benz Vans
also developed better than we had forecast at the beginning of
the year. We had anticipated a signiﬁcant decrease compared
with the previous year. As the year 2017 progressed, we adjusted
that assessment upwards in the context of our quarterly report-
ing to EBIT in the magnitude of the previous year, as the division’s
unit sales increased faster than expected. Daimler Buses also
achieved EBIT at the prior-year level. It thus did not meet the
forecast made in Annual Report 2016 of EBIT slightly above the
prior-year level. Daimler Financial Services signiﬁcantly increased
its EBIT and thus surpassed the forecast made in Annual
Report 2016.

In millions of euros

% change

2017

2016

17/16

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

9,207

2,380

1,181

243

1,970

8,112

1,948

1,170

249

1,739

+13

+22

- 2

+13

- 316

- 299

Reconciliation
Daimler Group1
1 EBIT, the indicator of operating performance, comprises earnings
before interest income/expense and corporate income taxes.
The reconciliation of the Daimler Group’s EBIT to earnings before
income taxes is included in Note 33 of the Notes to the Consolidated
Financial Statements.

14,682

12,902

+14

B.13
Development of earnings

In billions of euros

EBIT
Net profit (loss)

2013

2014

2015

2016

2017

102 B | COMBINED MANAGEMENT REPORT | PROFITABILITY

2013
2014

2015
2016

2017

B.14
Return on Sales

In %

Mercedes-Benz
Cars

Daimler
Trucks

Mercedes-Benz
Vans

Daimler
Buses

B.15
Return on Equity

Daimler Financial Services

In %

2013

2014

2015

2016

2017

B.16
Reconciliation of Group EBIT to profit before income taxes

In millions of euros

2017

2016

Group EBIT

14,682

12,902

Amortization of
capitalized borrowing costs1
Interest income

Interest expense

- 13

214

- 582

- 12

230

- 546

Profit before income taxes

14,301

12,574

1 Amortization of capitalized borrowing costs is not included in
the internal performance measure EBIT, but is a component of
cost of sales.

The Mercedes-Benz Cars division posted EBIT of €9,207 million
in 2017, which is significantly above the prior-year figure of
€8,112 million. The division’s return on sales was 9.7% (2016:
9.1%)  B.14

The positive earnings development primarily reflects the
increased unit sales of new vehicles. The main drivers were
the SUV segment and the new E-Class. Additional positive
effects on EBIT resulted from exchange-rate effects and income
of €183 million in connection with the remeasurement of the
investment in THERE Holding B.V. now using the equity method.
Negative effects resulted from advance expenditure for new
technologies and future vehicles and from expenses for the
expansion of production capacities. Higher expenses for raw
materials also had a negative impact on EBIT. Furthermore,
expenses for voluntary service activities and expenses for a
specific vehicle recall (€425 million) had a significant impact
on earnings. In the year 2016, EBIT included expenses in
connection with Takata airbags (€480 million) and expenses in
connection with remeasurement of inventories (€238 million).

Daimler Trucks’ EBIT in the year 2017 of €2,380 million was
significantly above the prior-year figure of €1,948 million.
The division’s return on sales was 6.7% (2016: 5.9%).  B.14

The positive development of earnings was primarily the result
of increased unit sales in the NAFTA region. EBIT was also
boosted by income from the sale of real estate at the Kawasaki
site in Japan (€267 million) and by efficiency improvements.
Higher expenses for raw materials and expenses of €172 million
for the fixed-cost optimization had a negative impact on EBIT.

Mercedes-Benz Vans achieved EBIT in 2017 of €1,181 million,
similar to the prior-year level (2016: €1,170 million).
The division’s return on sales was 9.0% (2016: 9.1%).  B.14

EBIT was affected by higher expenses for product ramp-ups
and new technologies. Furthermore, earnings were reduced by
the termination of a contract-manufacturing arrangement.
These effects were offset by the positive development of unit
sales, especially in Europe, China and Latin America, and by
exchange-rate effects. Prior-year EBIT included expenses in
connection with Takata airbags (€83 million) and expenses
from a voluntary severance program at the Düsseldorf plant
(€38 million).

The Daimler Buses division’s EBIT of €243 million in 2017
(2016: €249 million) was at the high prior-year level. The return
on sales decreased slightly to 5.6% (2016: 6.0%).  B.14

33_Ertragslage_E.indd 102

13.02.18 12:34

Further efficiency enhancements and higher unit sales in
Latin America almost offset the inflation-related cost increase
in Latin America and the negative exchange-rate effects.

Daimler Financial Services posted EBIT of €1,970 million
in 2017, thus significantly surpassing its prior-year earnings of
€1,739 million. The division’s return on equity was 17.6%
(2016: 17.4%).  B.15

This positive development was the result of increased contract
volume and a further improvement in the cost-of-risk situation.
On the other hand, there were negative effects from a higher
interest-rate level, increased expenses for the expansion of
mobility services and the digitization of the business system.

The reconciliation of the divisions’ EBIT to Group EBIT com-
prises gains and/or losses at the corporate level and the effects
on earnings of eliminating intra-group transactions between
the divisions.

Items at the corporate level resulted in expenses of €254 million
(2016: €333 million). In 2017, this primarily comprises expenses
related to legal proceedings. On the other hand, the reversal of
an impairment of €240 million of Daimler’s equity investment
in BAIC Motor had a positive effect on earnings. In the previous
year, there were expenses of €400 million in connection with
a legal proceeding, the impairment of €244 million of Daimler’s
equity investment in BAIC Motor, and losses of €241 million
from currency transactions not allocated to business operations.
The gain of €605 million recognized on the contribution of the
Renault S.A.(Renault) and Nissan Motor Company Ltd.(Nissan)
shares into the German pension-plan assets did not offset
those expenses.

The elimination of intra-group transactions resulted in
expenses of €45 million in 2017 (2016: income of €17 million).

The reconciliation of Group EBIT to profit before income taxes
is shown in table.  B.16

B | COMBINED MANAGEMENT REPORT | PROFITABILITY 103

Statement of income

The Group’s total revenue increased by 7.2% to €164.3 billion
in 2017; adjusted for exchange rate effects, it increased by
7.8%. The revenue growth primarily reflects the strong demand
for our products at Mercedes-Benz Cars and Daimler Trucks,
as well as the increased contract volume at Daimler Financial
Services. Further information on the development of revenue
is provided in the “Business development” section of this Com-
bined Management Report.  B.17

Cost of sales amounted to €130.0 billion in 2017, increasing
by 7.2% compared with the previous year. The rise in cost
of sales was caused by higher business volumes and conse-
quentially higher material expenses. The higher material
expenses also reflect increased prices of raw materials. Per-
sonnel expenses and depreciation of equipment on operating
leases also increased. At Daimler Financial Services, the higher
interest-rate level led to higher refinancing costs. Cost of
sales also includes expenses for voluntary service activities
and expenses for a specific vehicle recall of €0.4 billion.
Further information on cost of sales is provided in Note 5 of
the Notes to the Consoli dated Financial Statements.  B.17

Overall, gross profit of 20.9% was at the same level as in the
previous year.

Due to the growth in unit sales, selling expenses increased
by €0.7 billion to €13.0 billion and includes higher expenses for
marketing. As a percentage of revenue, selling expenses
decreased slightly from 8.0% to 7.9%.  B.17

General administrative expenses of €3.8 billion were above
the level of the previous year (2016: €3.4 billion). The increase
was mainly due to higher expenses for personnel and consulting.
As a percentage of revenue, general administrative expenses
increased slightly to 2.3% (2016: 2.2%).  B.17

Research and non-capitalized development costs increased
by €0.7 billion to €5.9 billion in 2017. They were mainly related
to the development of new models, advance expenditure for
the renewal of existing models, and the further development of
fuel-efficient and environmentally friendly drive systems, as
well as safety technologies, autonomous driving and the digital
connectivity of our products. As a proportion of revenue,
research and non-capitalized development costs increased from
3.4% to 3.6%. Further information on the Group’s research
and development costs is provided in the “Research and devel-
opment” section of the “Sustainability” chapter of this
Combined Management Report.  B.17

33_Ertragslage_E.indd 103

13.02.18 12:34

104 B | COMBINED MANAGEMENT REPORT | PROFITABILITY

Other operating income increased to €2.8 billion
(2016: €2.4 billion). This is primarily attributable to income of
€0.4 billion from the sale of property, plant and equipment.
Other operating expense decreased in the year 2017 to €1.0
billion (2016: €1.3 billion), due in particular to expenses con-
nected with a legal proceeding of €0.4 billion in 2016. Further
information on the composition of other operating income and
expense is provided in Note 6 of the Notes to the Consolidated
Financial Statements.  B.17

In 2017, our share of profit from equity-method investments
was significantly higher than the prior-year level at €1.5 billion
(2016: €0.5 billion). The increase was primarily due to improved
earnings at Beijing Benz Automotive Co. Ltd.(BBAC) and the
reversal of the impairment of €0.2 billion of the shares in BAIC
Motor (2016: negative impact from the impairment of €0.2 billion
of the investment in BAIC Motor).  B.17

Other financial expense/income worsened from income of
€0.3 billion to an expense of €0.2 billion. This significant change
is primarily the result of the gain of €0.6 billion recognized in
the previous year from the contribution of the equity interests
in Renault and Nissan at fair value into the German pension-
plan assets. Those gains were previously presented within other
comprehensive income/loss.  B.17

Net interest expense amounted to €0.4 billion
(2016: €0.3 billion).  B.17

The tax expense of €3.4 billion (2016: €3.8 billion) stated under
income tax expense decreased despite the increase in profit
before income taxes. The effective tax rate for 2017 was 24.0%
(2016: 30.1%). This was mainly a result of the law signed in
2017 for a comprehensive tax reform in the United States. Due
to the reduction in the nationwide federal corporate income
tax rate for US companies, the future net tax liabilities of the
US-subsidiaries of Daimler had to be remeasured with the new
tax rate. The remeasurement resulted in an income tax benefit
of €1.7 billion. Opposing the positive impact from the US tax
reform, tax expenses were recognized in 2017 in connection with
the interpretation of tax laws.  B.17

Net profit for the year improved to €10.9 billion
(2016: €8.8 billion). Net profit of €0.3 billion is attributable to
non- controlling interests (2016: €0.3 billion). Net profit
attributable to the shareholders of Daimler AG amounts to
€10.5 billion (2016: €8.5 billion), representing an increase in
earnings per share to €9.84 (2016: €7.97).  B.17

The calculation of earnings per share (basic) is based
on an unchanged average number of outstanding shares
of 1,069.8 million.

B.17
Statement of income1

In millions of euros

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 from equity-method investments, net

Other financial expense, net

Interest income

Interest expense

Profit before income taxes

Income taxes

Net profit

thereof
attributable to
non-controlling interests

thereof
attributable to shareholders
of Daimler AG

Consolidated Industrial Business2

Daimler Financial
Services

2017

2016

2017

2016

2017

2016

164,330

- 129,999

153,261

140,555
- 121,298 - 109,767

132,601

23,775

20,660

- 103,600

- 20,232

- 17,698

34,331

31,963

30,788

29,001

- 12,965

- 12,226

- 12,224

- 11,577

- 3,809

- 5,938

2,824

- 1,042

1,498

- 230

214

- 582

14,301

- 3,437

10,864

- 3,419

- 5,257

2,350

- 1,298

502

275

230

- 546

12,574

- 3,790

8,784

- 2,816

- 5,938

2,621

- 999

1,497

- 230

214

- 577

12,336

- 4,151

8,185

- 2,702

- 5,257

2,200

- 1,267

503

250

229

- 540

10,840

- 3,235

7,605

3,543

- 741

- 993

203

- 43

- 5

1,965

714

2,679

2,962

- 649

- 717

150

- 31

- 1

- 6

1,734

- 555

1,179

339

258

10,525

8,526

1 The columns „Industrial business“ and „Daimler Financial Services“ represent a business point of view.
2 The industrial business comprises the vehicle segments Mercedes-Benz Cars, Mercedes-Benz Trucks, Mercedes-Benz Vans and Daimler Buses.

Intra-group eliminations between the industrial business and Daimler Financial Services are generally allocated to the industrial business.

33_Ertragslage_E.indd 104

13.02.18 12:34

B | COMBINED MANAGEMENT REPORT | PROFITABILITY 105

B.18
Dividend per share

2.25

2.45

3.25

3.65

In euros

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

2013

2014

2015

2016

2017

B.19
Reconciliation to net operating profit

In millions of euros

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

2017

2016

17/16

% change

9,207

2,380

1,181

243

1,970

8,112

1,948

1,170

249

1,739

+13

+22

- 2

+13

- 9

- 5

+24

EBIT of the divisions

14,981

13,218

Income taxes1

Other reconciliation

- 3,555

- 299

- 3,895

- 316

Net operating profit
1 Adjusted for tax effects on interest income/expense and

11,127

9,007

amortization of capi-talized borrowing costs.

B.20
Value added

In millions of euros

2017

2016

17/16

% change

Daimler Group

7,246

5,243

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

6,330

1,369

895

126

518

5,431

935

962

143

439

+38

+17

+46

- 7

- 12

+18

Dividend

In the light of the positive business development in 2017, the
Board of Management and the Supervisory Board will propose
to the Annual Shareholders’ Meeting to be held on April 5,
2018 that the dividend per share for the 2017 financial year be
increased to €3.65 (prior year €3.25). This corresponds to a
total dividend distribution of €3.9 billion to our shareholders,
which is significantly above the high level of €3.5 billion dis-
tributed in the previous year. We aim to achieve a sustainable
dividend development also in the coming years.  B.18

Net operating profit

Table  B.19 shows the reconciliation of the EBIT of the divisions
to net operating profit. In addition to the EBIT of the divisions,
net operating profit also includes earnings effects for which the
divisions are not accountable, such as income taxes and other
reconciliation items.

Value added

As described in the “Performance measurement system” section
of the “Corporate Profile” chapter in chart  B.03, the cost of
capital is the result of net assets and cost of capital expressed
as a percentage, which is subtracted from earnings in order
to calculate value added. The tables  B.20 and  B.21 show
value added and net assets for the Group and for the individual
divisions. Table  B.22 shows how net assets are derived from
the consolidated statement of financial position.

The Group’s value added increased by €2.0 billion
to €7.2 billion in 2017, representing a return on net assets of
22.9% (2016: 19.1%). This was once again substantially higher
than the minimum required rate of return of 8%. The significant
increase in value added was mainly due to the growth in the
divisions’ EBIT. In addition, a positive effect came from the
decrease in income-tax expenses caused by the reduction in
the nationwide federal corporate income tax rate for US com-
panies as a result of the law signed in 2017 for a comprehensive
tax reform in the United States. The increase in average net
assets was mainly attributable to higher investment in fixed
assets and had only a slight negative impact on value added.

Value added at Mercedes-Benz Cars increased by €0.9 billion
to €6.3 billion, primarily reflecting the positive earnings
development due to the increased sales of new vehicles, positive
exchange-rate effects and income in connection with the
remeasurement in the equity investment in THERE Holding B.V.
Opposing effects resulted from advance expenditure for new
technologies and future vehicles, expenses for the expansion of
production capacities and a disadvantageous development
of raw-material prices. Furthermore, expenses for voluntary ser-
vice activities and for a specific vehicle recall had a negative
impact on earnings. In the year 2016, EBIT included expenses in
connection with Takata airbags and expenses in connection
with the remeasurement of inventories. There was a slight neg-
ative impact on value added from the increase in average net
assets to €24.0 billion primarily caused by higher investments
in fixed assets.

33_Ertragslage_E.indd 105

13.02.18 12:34

Daimler Trucks’ value added was significantly higher than
in the previous year at €1.4 billion (2016: €0.9 billion). This
development was primarily the result of the positive development
of earnings due to increased unit sales in the NAFTA region,
the sale of real estate in Japan and eﬃciency improvements.
Higher expenses for raw materials and expenses for the ﬁxed-
cost optimization had a negative impact on EBIT. Average net
assets were close to the prior-year level.

At Mercedes-Benz Vans, value added decreased by €0.1 billion
to €0.9 billion. This development was the result of the increase
in average net assets caused by higher investments in ﬁxed
assets and higher inventories. Despite increasing expenses for
product ramp-ups and production material, as well as the
negative impact of the termination of a contract-manufacturing
arrangement, EBIT remained at the prior-year level due to the
positive development of unit sales.

The value added of the Daimler Buses division was slightly lower
than in the previous year at €126 million (2016: €143 million).
This primarily reﬂects the increase in average net assets due to
higher inventories. EBIT was at the high prior-year level, due
to further eﬃciency enhancements and increasing unit sales in
Latin America.

Daimler Financial Services’ value added of €0.5 billion was
above the prior-year level at €0.4 billion. The division’s return on
equity amounted to 17.6% (2016: 17.4%). The development of
value added primarily reﬂects the higher earnings resulting from
increased contract volume and a better cost-of-risk situation.
On the other hand, a higher interest-rate level, the expansion
of businesses activities and exchange-rate eﬀects impacted
earnings negatively. In addition, average equity increased by
€0.1 billion.

106 B | COMBINED MANAGEMENT REPORT | PROFITABILITY

B.21
Net assets (average)

In millions of euros

2017

2016

17/16

% change

Mercedes-Benz Cars

23,975

22,345

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses
Daimler Financial Services1
Net assets of the divisions
Equity method investments2
Assets and liabilities from
income taxes3
Other reconciliation3

8,421

2,385

978

11,165

46,924

941

2,141

- 1,492

8,448

1,739

887

10,000

43,419

555

3,372

- 292

Daimler Group
1 Total equity.
2 To the extent not allocated to the segments.
3 To the extent not allocated to Daimler Financial Services.

48,514

47,054

- 0

+37

+10

+12

+70

- 37

+411

B.22
Net assets of the Daimler Group at year-end

In millions of euros

Net assets1

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 taxes1
Total equity of
Daimler Financial Services

2017

2016

17/16

% change

12,742

11,145

+14

27,914

18,711

24,492

9,737

26,314

17,433

24,426

8,977

- 16,512

- 15,325

- 11,655

- 10,853

- 27,789

- 26,727

1,719

2,935

12,378

10,448

- 41

+18

Daimler Group
1 To the extent not allocated to Daimler Financial Services.

51,737

48,773

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 107

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 ﬁnan-
cial country risk management. Worldwide ﬁnancial management
is performed within the framework of legal requirements con-
sistently for all Group entities by Treasury. Financial management
operates within a framework of guidelines, limits and bench-
marks, and on the operational level is organizationally separate
from other ﬁnancial functions such as settlement, ﬁnancial
controlling, reporting and accounting.

Capital structure management designs the capital structure
for the Group and its subsidiaries. Decisions regarding the
capitalization of ﬁnancial services companies – as well as pro-
duction, 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 comply with
restrictions on capital transactions and on the transfer of capital
and currencies.

The purpose of liquidity management is to enable the Group
to meet its payment obligations at any time. For this pur-
pose, the Group records the 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 credits, commercial paper
and notes); liquidity surpluses are invested in the money market
or the capital market taking into account risk and return
expectations. The goal is to ensure the level of liquidity regarded
as necessary at optimal costs. Besides operational liquidity,
Daimler maintains additional liquidity reserves, which are avail-
able in the short term. Those additional ﬁnancial resources
include a pool of receivables from the ﬁnancial services business
which are available for securitization in the capital market, as
well as a contractually conﬁrmed syndicated credit facility with
a volume of €9 billion.

Cash management determines the Group’s cash requirements
and surpluses. Via cash-pooling procedures, liquidity is
centrally concentrated on bank accounts of Daimler in various
currencies. Most of the payments between Group companies
are made via internal clearing accounts, so that the number of
external cash ﬂows is reduced to a minimum. Daimler has
established standardized processes and systems to manage
its bank accounts and internal cash-clearing accounts, and to
execute 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 ﬂuc-
tuations in foreign exchange rates and commodity prices, as
well as decisions on asset/liability management (liquidity and
interest rates), are regularly made by the relevant committees.

Management of pension assets includes the investment of
pension assets to cover the corresponding pension obligations.
Pension assets are legally separated from the Group’s assets
and are invested primarily in funds; pension assets are not
available for general business purposes. The funds are allocated
to diﬀerent asset classes such as equities, ﬁxed-interest
securities, alternative investments and real estate, depending
on the expected development of pension obligations and with
the help of a risk-return optimization. The performance of
asset management is measured by comparing with deﬁned ref-
erence indices. Local custodians of the pension assets are
responsible for the risk management of the individual pension
assets. The Global Pension and Healthcare Committee limits
these risks by means of Group-wide binding guidelines. Addi-
tional infor mation on pension plans and similar obligations is
provided in E Note 22 of the Notes to the Consolidated Finan-
cial Statements.

108 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

B.23
Condensed statement of cash ﬂows¹

In millions of euros

Cash and cash equivalents at beginning of period

Proﬁt before income taxes

Depreciation and amortization/impairments

Other non-cash expense and income and
gains/losses on disposals of assets

Change in operating assets and liabilities

Inventories

Trade receivables

Trade payables

Receivables from ﬁnancial services

Vehicles on operating leases

Other operating assets and liabilities

Dividends received from equity-method investments

Income taxes paid

Cash used for/provided by operating activities

Additions to property, plant and equipment and intangible assets

Investments in and disposals of shareholdings

Acquisitions and sales of marketable debt securities

Other

Cash used for investing activities

Change in ﬁnancing liabilities

Dividends paid

Other transactions with shareholders

Internal equity and ﬁnancing transactions

Cash used for/provided by financing activities

Eﬀect of foreign exchange rate changes on cash and
cash equivalents

Cash and cash equivalents at end of period

Consolidated Industrial Business2

Daimler Financial
Services

2017

2016

2017

2016

2017

2016

10,981

14,301

5,676

9,936

8,751

12,574

12,336

5,478

5,521

8,369

10,840

5,398

2,230

1,965

155

- 1,960

- 1,110

- 2,028

- 1,141

- 1,455

- 1,592

1,288

- 11,145

- 3,681

- 48

843

- 3,879

- 1,652

- 10,158

- 687

537

790

- 1,272

- 962

757

- 6,848

- 4,209

2,150

103

- 2,950

3,711

- 8,833

- 3,905

- 2,330

402

- 1,264

- 1,082

1,159

200

642

- 644

842

- 3,715

11,967

- 1,356

- 697

581

194

- 132

1,650

103

- 2,797

- 191

- 510

129

- 11,345

- 4,323

596

- 164

- 626

435

791

- 216

- 2,311

344

12,643

- 13,619

- 8,932

- 10,025

- 8,720

- 133

- 9,518

- 14,666

- 9,425

- 10,903

16,794

- 3,727

–

15,763

- 3,678

- 76

–

13,129

12,009

- 868

- 9

12,072

10,981

8,976

- 3,723

- 20

- 6,233

- 1,000

- 778

9,515

9,876

- 3,674

- 111

- 7,444

- 1,353

- 5

8,751

- 61

102

- 1

- 93

7,818

- 4

6,233

14,129

- 90

2,557

1,567

1,734

- 265

176

- 7,042

- 4,077

500

–

- 153

- 113

- 3,689

- 19

- 3,763

5,887

- 4

7,444

13,362

- 4

2,230

1 The columns “Industrial business« and »Daimler Financial Services” represent a business point of view.
2 The industrial business comprises the vehicle segments Mercedes-Benz Cars, Mercedes-Benz Trucks, Mercedes-Benz Vans and Daimler Buses.

Intra-group eliminations between the industrial business and Daimler Financial Services are generally allocated to the industrial business.

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 business and the automotive business.
Credit risks with ﬁnancial institutions and issuers of securities
arise primarily from investments executed as part of our liquid-
ity management and from trading in derivative ﬁnancial instru-
ments. The management of these credit risks is mainly based
on an internal limit system that reﬂects the creditwor thiness of
the respective ﬁnancial institution or issuer. The credit risk
with customers of our automotive business relates to contracted
dealerships and general agencies, other cor porate customers
and retail customers. In connection with the export business,
general agencies that according to our creditworthiness
analyses are not suﬃciently creditworthy are generally required
to provide collateral such as ﬁrst-class bank guarantees. The
credit risk with end-customers in the ﬁnancial services business
is managed by Daimler Financial Services on the basis of a
standardized risk management process. In this process, mini-
mum requirements are deﬁned for the sales-ﬁnancing and
leasing business and standards are set for credit processes as
well as for the identiﬁcation, measurement and management
of risks. Key elements for the management of credit risks are

appropriate creditworthiness assessments, supported by
statistical risk-classiﬁcation methods, as well as structured
portfolio analysis and portfolio 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. With
equity capital transactions in risk countries, the Group hedges
against political risks with the use of investment protection
insurance such as the German government’s investment guar-
antees. Risks from cross-border receivables are partially pro-
tected with the use of export credit insurance, letters of credit
and bank guarantees in favor of Daimler AG. In addition, a
committee sets and restricts the level of hard-currency credits
granted to ﬁnancial services companies in risk countries.

Further information on the management of market-price
risk, credit-default and liquidity risk is provided in E Note 32
of the Notes to the Consolidated Financial Statements.

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 109

Cash ﬂows

Cash used for/provided by operating activities (cid:202) B.23
resulted in a cash outﬂow of €1.7 billion in 2017 (2016: cash
inﬂow of €3.7 billion). The decrease was primarily due to
eﬀects from the leasing and sales-ﬁnancing business. In addi-
tion, a cash outﬂow of €3.0 billion resulted from the extra-
ordinary contribution to the German pension plan assets. Cash
used for operating activities also reﬂects higher income taxes
paid. Opposing eﬀects were due to the positive business per-
formance. A cash inﬂow of €0.8 billion resulted from the
dividend distributed by Beijing Benz Automotive Co., Ltd. The
payment of the ﬁne of €1.0 billion imposed on Daimler by
the European Commission in the context of the settlement in
the truck antitrust proceedings led to a cash outﬂow in the
prior-year period.

Cash used for investing activities (cid:202) B.23 amounted to
€9.5 billion (2016: €14.7 billion). The change compared with
the prior-year period resulted primarily from lower cash out-
ﬂowsfor investments in shareholdings. The reporting period
was aﬀected by the acquisition of an interest in LSH Auto
International Limited (LSHAI). In the prior-year period, the
acquisition of 100% of the shares of Athlon Car Lease Inter-
national B.V. (Athlon) and the settlement of ﬁnancing liabilities
of Athlon led to cash outﬂows. Positive eﬀects resulted from
acquisitions and disposals of securities in the context of liquid-
ity management. Those transactions led to a net cash inﬂow
in 2017, whereas acquisitions exceeded disposals in the previ-
ous year. The sale of real estate in Japan led to a cash inﬂow
of €0.3 billion. Cash used for investing activities also reﬂects
increased investments in property, plant and equipment and
intangible assets.

B.24
Free cash ﬂow of the industrial business

In millions of euros

Cash provided by
operating activities

Cash used for
investing activities

Change in marketable
debt securities

Other adjustments

Free cash flow of the
industrial business

2017

2016

17/16

Change

11,967

12,643

- 676

- 9,425

- 10,903

+1,478

- 435

- 102

2,311

- 177

- 2,746

+75

2,005

3,874

- 1,869

Cash provided by financing activities (cid:202) B.23 amounted to
€13.1 billion (2016: €12.0 billion). The increase was primarily
caused by higher net cash inﬂows from ﬁnancing liabilities in the
context of reﬁnancing the leasing and sales-ﬁnancing business.

Cash and cash equivalents increased by €1.1 billion compared
with December 31, 2016, a(cid:5)er taking currency-translation
eﬀects into account. Total liquidity, which also includes market-
able debt securities, increased by €0.4 billion to €22.1 billion.

The parameter used by Daimler to measure the ﬁnancial capabil-
ity of the Group’s industrial business is the free cash flow
of the industrial business (cid:202) B.24, which is derived from the
reported cash ﬂows from operating and investing activities.
The cash ﬂows from the acquisition and sale of marketable debt
securities included in cash ﬂows from investing activities
are deducted, as those securities are allocated to liquidity and
changes in them are thus not a part of the free cash ﬂow.

Other adjustments relate to non-cash additions to property,
plant and equipment that are allocated to the Group as their
beneﬁcial owner due to the form of their underlying lease
contracts. Furthermore, adjustments are made for the eﬀects
of ﬁnancing dealerships within the Group. In addition, the
calculation of the free cash ﬂow includes those cash ﬂows to
be shown under cash from ﬁnancing activities in connection
with the acquisition or sale of interests in subsidiaries without
loss of control.

The free cash ﬂow of the industrial business amounted to
€2.0 billion in 2017 and was lower than the prior-year level
of €3.9 billion. The free cash ﬂow of the industrial business
was thus in line with the adjusted forecast made in the Outlook
section of the Interim Report on the third quarter of 2017,
and was primarily inﬂuenced by the cash outﬂow of €3.0 billion
for the extraordinary contribution to the German pension
plan assets. Excluding this payment, which was announced in
the Outlook section of the Interim Report on the third quarter
of 2017, the free cash ﬂow of the industrial business was signiﬁ-
cantly higher than in the previous year and thus signiﬁcantly
surpassed our forecast as adjusted during the year.

110 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

B.25
Net liquidity of the industrial business

In millions of euros

Cash and cash equivalents

Marketable debt securities

Liquidity

Financing liabilities

Market valuation and
currency hedges
for financing liabilities

Financing liabilities
(nominal)

Net liquidity

Dec. 31,
2017

Dec. 31,
2016

9,515

8,894

18,409

- 1,600

8,751

9,498

18,249

1,451

17/16

Change

+764

- 604

+160

- 3,051

- 212

- 249

- 1,812

16,597

1,488

19,737

- 3,300

- 3,140

B.26
Net debt of the Daimler Group

In millions of euros

Dec. 31,
2017

Dec. 31,
2016

Cash and cash equivalents

Marketable debt securities

Liquidity

12,072

10,063

22,135

10,981

10,748

21,729

17/16

Change

+1,091

- 685

+406

Financing liabilities

- 127,124

- 117,686

- 9,438

Market valuation and
currency hedges
for financing liabilities

Financing liabilities
(nominal)

Net debt

- 229

- 290

- 127,353

- 117,625

- 105,218

- 95,896

- 9,728

- 9,322

The €1.9 billion decrease in the free cash flow to €2.0 billion
resulted primarily from the cash outflow for the extraordinary
contribution to the pension plan assets and the higher income
taxes paid. In addition, the free cash flow of the industrial busi-
ness was affected by increased investments in property, plant
and equipment and intangible assets and the acquisition of an
interest in LSHAI. Opposing effects were due to the positive
business performance and the development of operating leases
in the industrial business. A cash inflow of €0.8 billion resulted
from the dividend distributed by Beijing Benz Automotive Co.,
Ltd. and the sale of real estate in Japan led to a cash inflow of
€0.3 billion. The payment of the fine of €1.0 billion imposed on
Daimler by the European Commission in the context of the
settlement in the truck antitrust proceedings led to a cash out-
flow in the prior-year period.

In 2017, the free cash flow of the Daimler Group led to a cash
outflow of €11.9 billion (2016: €9.3 billion). Besides the effects
of the free cash flow of the industrial business, the free cash flow
of the Daimler Group is mainly affected by the leasing and
sales-financing business of Daimler Financial Services. In the
prior-year period, there was an additional effect due to the
acquisition of 100% of the shares of Athlon, including the settle-
ment and assumption of Athlon’s financing liabilities.

The net liquidity of the industrial business  B.25 is
calculated as the total amount as shown in the statement of
financial position of cash, cash equivalents and the market-
able debt securities included in liquidity management, less the
currency-hedged nominal amounts of financing liabilities.

To the extent that the Group’s internal refinancing of the finan-
cial services business is provided by the companies of the
industrial business, this amount is deducted in the calculation
of the net debt of the industrial business.

Compared with December 31, 2016, the net liquidity of the
industrial business decreased from €19.7 billion to €16.6 billion.
The dividend payment to the shareholders of Daimler AG and
negative exchange-rate effects led to a decrease in net liquidity
that was only partially offset by the positive free cash flow.

Net debt at Group level, which primarily results from refinancing
the leasing and sales-financing business, increased compared
with December 31, 2016 from €95.9 billion to €105.2 billion.
 B.26

Financial guarantees, contingent liabilities and
other financial obligations

Within the context of financial guarantees, Daimler generally
guarantees the settlement of the payment obligations of the
main debtor vis-à-vis the holder of the guarantee. The maximum
potential obligation resulting from these guarantees amounts
to €0.7 billion at December 31, 2017 (2016: €0.8 billion); the
liabilities recognized in this context amount to €0.1 billion at
the end of the year (2016: €0.2 billion). The financial guarantees
that the Group has issued relating to bank loans of Toll Collect
GmbH, the operator company for the electronic toll-collection
system in Germany, remain unchanged at €0.1 billion. For
information on risks arising from guarantees, we refer to our
Risk and Opportunity Report in the section “Risks from guaran-
tees, legal and tax risks”.

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 111

The contingent liabilities principally constitute buyback obli-
gations. At December 31, 2017, the best possible estimate for
the loss risk from these guarantees amounted to €1.6 billion
(2016: €1.7 billion). The amounts of the buyback commitments
are close to the fair values of the vehicles to be taken back.
Warranty and goodwill commitments (product guarantees) pro-
vided by the Group in connection with its vehicle sales are
not included in the contingent liabilities. Other contingent liabil-
ities are also included. The best possible estimate for an
obligation from the other contingent liabilities is €0.6 billion
(2016: €0.3 billion).

In the context of its ordinary business operations, the Group
has also entered into other financial obligations in addition
to the liabilities shown in the consolidated balance sheet at
December 31, 2017.

Detailed information on financial guarantees, contingent
liabilities and other financial obligations are provided
in E Note 30 of the Notes to the Consolidated Financial
Statements.

Investment

In the context of our strategy of strengthening our core business,
we aim to make good use of the opportunities presented by
the global automotive markets. At the same time, we intend to
play a major role in shaping the fundamental technological
change occurring in the automotive industry, and to assume a
leading role with the development of the future areas of CASE
(Connected, Autonomous, Shared & Services and Electric). This
requires substantial investment in innovative products and
new technologies, as well as in the expansion of our worldwide
production network. In 2017, we therefore once again signi-
ficantly increased our investment in property, plant and equip-
ment – as already announced in Annual Report 2016 – from
an already high level to €6.7 billion (2016: €5.9 billion).

At December 31, 2017, financial obligations of €4.0 billion
exist in connection with future investments in property, plant
and equipment.

B.27
Investment in property, plant and equipment

In billions of euros

2013

2014

2015

2016

2017

B.28
Investment in property, plant and equipment by division

In millions of euros

% change

2017

2016

16/15

Daimler Group

in % of revenue

Mercedes-Benz Cars
in % of revenue

Daimler Trucks

in % of revenue

Mercedes-Benz Vans
in % of revenue

Daimler Buses

in % of revenue

Daimler Financial Services

in % of revenue

6,744
4.1

4,843
5.1

1,028
2.9

710
5.4

94
2.2

43
0.2

5,889
3.8

4,147
4.6

1,243
3.7

373
2.9

97
2.3

37
0.2

+15

+17

- 17

+90

- 3

+16

At Mercedes-Benz Cars, investment in property, plant and
equipment of €4.8 billion in 2017 was significantly above the
prior-year level (2016: €4.1 billion). The most important
projects included the model upgrade of the S-Class and the
successor models in the compact class, as well as new
combustion engines and transmissions. We also made sub-
stantial investments in the reorganization of our German
production facilities as competence centers and in the expan-
sion of our international production network. At the same
time, we are preparing our worldwide production network for
electric mobility. The main areas of investment at Daimler
Trucks in 2017 were successor generations for existing prod-
ucts, new products, global component projects and the
optimization of the worldwide production network. Total invest-
ment in property, plant and equipment at Daimler Trucks
decreased to €1.0 billion (2016: €1.2 billion). At the Mercedes-
Benz Vans division, the focus of investment was on the next-
generation Sprinter in Germany and the United States. The main
investments at Daimler Buses in the reporting period were in
alternative drive systems, new products and the modernization
of the production network.

112 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

In addition to property, plant and equipment, we also invested
in associated companies and joint ventures in the reporting
period. Through targeted investments, we strengthened our
position especially in the area of mobility services and in the
development of a charging infrastructure for electric mobility.
Also in 2017, Daimler acquired an equity interest of 15% in LSH
Auto International Limited (LSHAI) for €0.3 billion. LSHAI is a
subsidiary of Lei Shing Hong Group and is one of the biggest
Mercedes-Benz dealers worldwide. With this transaction, the
two partners are strengthening their longstanding cooperation.

Furthermore, we capitalized development costs of €2.8 billion
in 2017 (2016: €2.3 billion); this is presented under intangible
assets. E page 264.

Reﬁnancing

The funds raised by Daimler in the year 2017 primarily served
to reﬁnance the leasing and sales-ﬁnancing business. For that
purpose, Daimler made use of a broad spectrum of various
ﬁnancing instruments in various currencies and markets. They
include bank loans, commercial paper in the money market,
bonds with medium and long maturities, customer deposits at
Mercedes-Benz Bank, and the securitization of receivables
from customers in the ﬁnancial services business (asset backed
securities).

Various issuance programs are available for raising longer-term
funds in the capital market. They include the Euro Medium
Term Note program (EMTN) with a total volume of €50 billion,
under which Daimler AG and several subsidiaries can issue
bonds in various currencies. Other local capital-market programs
exist, which are signiﬁcantly smaller than the EMTN program.
Capital-market programs allow ﬂexible, repeated access to the
capital markets.

The continued expansive monetary policy of the central banks
also aﬀected the situation in the bond markets in the reporting
period. The high volumes of available liquidity meant that risk
premiums for companies with investment-grade credit ratings
remained moderate.

In the year under review, the Group covered its reﬁnancing
requirements mainly through the issuance of bonds. A large
proportion of those bonds were placed in the form of so-called
benchmark emissions (bonds with high nominal volumes) in
the US dollar and euro markets. (cid:202) B.30

In the Chinese market, Daimler placed four so-called panda
bonds with a total volume of CNY 16.0 billion. In addition, a
large number of smaller bonds were issued in various currencies
and markets.

Daimler also issued small volumes of commercial paper in 2017.

In 2017, asset-backed securities (ABS) were issued in two new
countries in addition to the already established ABS platforms in
the United States, Canada, China and Germany.

In the United Kingdom, ABS of GBP 0.4 billion were successfully
placed with investors, while the volume of the ﬁrst transaction
in Australia was AUD 0.75 billion. In the United States, a total
reﬁnancing volume of $4.7 billion was generated in 2017 in
three transactions, and CAD 0.4 billion was generated in a trans-
action in Canada. In addition, Mercedes-Benz Bank sold
€1.1 billion worth of ABS bonds to European investors through
the Silver Arrow platform. In China, two ABS transactions
with a total volume of CNY 10.2 billion were successfully placed.

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 113

Bank credit was another important source of reﬁnancing in
2017. Loans were provided by globally active banks as well as
by nationally operating banks. The lenders also included
supra national banks such as the European Investment Bank
and the Brazilian Development Bank (BNDES).

In order to secure suﬃcient ﬁnancial ﬂexibility, Daimler
concluded a €9 billion syndicated credit facility with a consor-
tium of international banks in September 2013. This provides
the Group with ﬁnancial ﬂexibility until the year 2020. More
than 40 European, American and Asian banks participated in
the consortium. Currently, Daimler does not intend to utilize the
credit line.

At the end of 2017, Daimler had not utilized short- and long-term
credit lines totaling €21.0 billion (2016: €18.1 billion). They
include the syndicated credit facility arranged in September
2013 with a consortium of international banks with a volume
of €9 billion.

The carrying values of the main reﬁnancing instruments and the
weighted average interest rates are shown in table (cid:202) B.29.
At December 31, 2017, they are mainly denominated in the fol-
lowing currencies: 43% in euros, 25% in US dollars, 8% in
Chinese renminbi, 4% in Canadian dollars, 4% in British pounds
and 3% in Japanese yen.

At December 31, 2017, the total of ﬁnancial liabilities shown
in the consolidated statement of ﬁnancial position amounted to
€127,124 million (2016: €117,686 million).

Detailed information on the amounts and terms of ﬁnancing
liabilities is provided in E Note 24 and 32 of the Notes to the
Consolidated Financial Statements. E Note 32 also provides
information on the maturities of the other ﬁnancial liabilities.

B.29
Reﬁnancing instruments

Average interest rates

Carrying values

Dec. 31,
2017

Dec. 31,
2016

Dec. 31,
2017

Dec. 31,
2016

in %

In millions of euros

Notes/bonds and
liabilities from
ABS transactions

Commercial
paper

Liabilities
to ﬁnancial
institutions

Deposits in the
direct banking
business

1.88

2.64

1.64

78,110

73,648

2.71

1,045

1,701

3.09

2.96

34,555

29,674

0.42

0.65

11,460

11,642

B.30
Benchmark issuances

Issuer

Volume

Month of
emission

Maturity

Daimler Finance
North America LLC

US$1,400 million

Jan. 2017

Jan. 2020

US$850 million

Jan. 2017

Jan. 2022

US$750 million

Jan. 2017

Jan. 2027

Daimler AG

€1,250 million

Feb. 2017

Feb. 2025

Daimler Finance
North America LLC

Daimler AG

Daimler Finance
North America LLC

US$500 million May 2017

Nov. 2018

US$1,250 million May 2017

May 2020

US$250 million May 2017

Jan. 2022

€1,250 million

Jun. 2017

€1,500 million

Jun. 2017

€1,300 million

Jun. 2017

Jul. 2024

Jul. 2029

Jul. 2037

€1,000 million Nov. 2017

Nov. 2027

US$1,500 million Nov. 2017

Feb. 2021

114 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

Credit ratings

In financial year 2017, the long-term credit ratings of Daimler AG
were upgraded by the two rating agencies Moody’s Investors
Service and DBRS from A3 to A2 and from A (low) to A respec-
tively. Concurrently, Moody’s also upgraded the short-term
rating from P-2 to P-1. For the first time, Daimler received a
credit rating from the European rating agency Scope Ratings
AG. Scope assigned a corporate issuer rating of A and a stable
outlook to Daimler AG and its financing subsidiaries, with a
short-term rating of S-1. The other agencies did not change our
credit ratings compared with the previous year. At the end of
2017, the outlook for Daimler AG was assessed as “stable” by
all five of the agencies it has engaged.  B.31

B.31
Rating

Long-term credit rating

Standard & Poor’s

Moody’s

Fitch

Scope

DBRS

Short-term credit rating

Standard & Poor’s

Moody’s

Fitch

Scope

DBRS

End of 2017

End of 2016

A-

A-1

P-1

S-1

A-

A (low)

A-1

P-2

R-1 (low)

On February 3, 2017, Moody’s Investors Service (Moody’s)
upgraded its long-term rating for Daimler AG and its rated
subsidiaries from A3 to A2. It also upgraded its short-term rat-
ing from P-2 to P-1. The outlook was changed from “positive”
to “stable”. The upgrade was explained with the robust opera-
tional performance in recent years as well as the successful
and ongoing product renewal program. As assessed by Moody’s,
Daimler is well prepared to weather the future challenges
facing the automotive industry such as autonomous driving,
alternative drive systems, fuel consumption and emissions.

Daimler AG for the first time engaged the European rating agency
Scope Ratings (Scope) to issue a corporate rating. On April 27,
2017, Scope assigned an A rating for the creditworthiness of
Daimler AG and its financing companies. The short-term
rating was assessed as S-1 and the outlook as “stable”. Scope
stated that its corporate rating reflects the company’s track
record in recent years and Scope’s expectation for a continua-
tion of the strong market positions held by the Daimler Group’s
leading divisions, Mercedes-Benz Cars and Daimler Trucks.
Scope stated that its positive risk assessment was supported
by the Group’s geographic diversification and the added
benefit from the captive finance business at Daimler Financial
Services. Furthermore, it assessed Daimler’s financial risk
profile as very strong.

On May 26, 2017, Fitch Ratings (Fitch) affirmed its long-term
issuer default rating of A- with a stable outlook for Daimler AG.
Fitch referred to Daimler’s strong business profile and robust
credit metrics. In addition, Fitch mentioned the Group’s wide geo-
graphic and business diversification as well as the strength-
ened profitability of the automotive divisions in recent years.
Fitch expects that increased technological convergence in
the fields of autonomous driving and electric mobility will provide
more synergies between the divisions in the medium term.

On September 15, 2017, S&P Global Ratings (S&P) also
confirmed its long-term corporate rating of A for Daimler AG
with reference to the leading position that the Group has
achieved in the automotive business. The rating agency referred
in particular to the strength of the Mercedes-Benz Cars
division. S&P assumes that Daimler will maintain its competitive
position in the coming years. Furthermore, S&P expects a
continuation of very good financial metrics. The business risk
of Daimler AG is assessed as “satisfactory” and the financial
risk as “minimal”.

On November 29, 2017, the Canadian agency DBRS upgraded its
long-term rating for Daimler AG from A (low) to A, with a stable
outlook. DBRS stated that this change reflects the continually
improving earnings over the past number of years, which has
caused Daimler’s financial risk assessment to strengthen to a
higher level.

The short-term ratings issued by S&P, Fitch and DBRS
remained unchanged in 2017.

B | COMBINED MANAGEMENT REPORT | FINANCIAL POSITION 115

Financial Position

The balance sheet total increased compared with December
31, 2016 from €243.0 billion to €255.6 billion; adjusted for
the eﬀects of currency translation, the increase amounted to
€25.3 billion. Daimler Financial Services accounted for
€150.0 billion of the balance sheet total (2016: €141.8 billion),
equivalent to 59% of the Daimler Group’s total assets
(2016: 58%).

The increase in total assets was primarily due to the growth
of the ﬁnancial services business and higher trade receivables.
In addition, the higher volume of capital expenditure led to an
increase in intangible assets and property, plant and equipment.
On the liabilities side, the increased reﬁnancing requirement
resulting from the portfolio growth led to increased ﬁnancing
liabilities. Furthermore, there was an increase in shareholders’
equity. Current assets accounted for 42% of the balance sheet
total, which was at the prior-year level. Current liabilities
amounted to 34% of total equity and liabilities, which was slightly
below the prior-year level (2016: 35%).

Intangible assets of €13.7 billion (2016: €12.1 billion)
included €10.3 billion of capitalized development costs (2016:
€8.8 billion), €2.0 billion (2016: €1.4 billion) of franchises,
industrial property and similar rights, as well as €1.1 billion of
goodwill (2016: €1.2 billion). The Mercedes-Benz Car division
accounted for 79% (2016: 76%) and Daimler Trucks for 10%
(2016: 14%) of development costs. Capitalized development
costs amounted to €2.8 billion in 2017 (2016: €2.3 billion), and
accounted for 32% of the Group’s total research and develop-
ment expenditure (2016: 31%) E see page 264.
Property, plant and equipment E see page 265 increased
to €28.0 billion (2016: €26.4 billion). In 2017, €6.7 billion
was invested worldwide (2016: €5.9 billion), in particular at our
production and assembly sites for new products and tech-
nologies and for the expansion and modernization of production
facilities. The sites in Germany accounted for €4.0 billion of
the capital expenditure (2016: €3.6 billion).

Equipment on operating leases and receivables from
financial services rose to a total of €133.5 billion
(2016: €127.4 billion). The increase adjusted for exchange-rate
eﬀects of €14.5 billion was primarily caused by the higher
level of new business at Daimler Financial Services. The growth
in business operations reﬂected the successful course of
business, especially in Asia and Europe. The growth in the sales-
ﬁnancing business was especially signiﬁcant in China and
other Asian countries. The leasing and sales-ﬁnancing business as
a proportion of total assets was at the prior-year level of 52%.

Equity-method investments of €4.8 billion (2016: €4.1 billion)
mainly comprised the carrying amounts of our equity interests
in Beijing Benz Automotive Co., Ltd., BAIC Motor Corporation Ltd.,
There Holding B.V. and LSH Auto International Limited. See
Note 13 of the Notes to the Consolidated Financial Statements
for further information.

Inventories increased from €25.4 billion to €25.7 billion,
equivalent to 10% of total assets, and were thus at the prior-year
level. The increase adjusted for exchange-rate eﬀects of
€1.4 billion applied to all automotive divisions.

Trade receivables amounted to €12.0 billion, which is above
the prior-year level of €10.6 billion. The Mercedes-Benz Cars
division accounted for 43% of these receivables and the Daimler
Trucks division accounted for 24%.

Cash and cash equivalents increased compared with the end
of 2016 by €1.1 billion to €12.1 billion.

Marketable debt securities decreased compared with
December 31, 2016 from €10.7 billion to €10.1 billion. Those
assets included the debt instruments that are allocated
to liquidity, most of which are traded in active markets. They
generally had an external rating of A or better.

116 B | COMBINED MANAGEMENT REPORT | FINANCIAL POSITION

Other financial assets increased by €1.1 billion to €6.8 billion.
They primarily consisted of derivative ﬁnancial instruments,
equity instruments in non-consolidated subsidiaries and other
investments, as well as loans and other receivables due from
third parties. The increase was primarily attributable to higher
positive fair values of currency derivatives.

Other assets of €9.0 billion (2016: €9.5 billion) primarily com-
prised deferred tax assets and tax refund claims. The decrease
in deferred tax assets primarily related to eﬀects from the
measurement of derivatives not recognized in proﬁt and loss.

The Group’s equity increased compared with December 31,
2016 from €59.1 billion to €65.3 billion; adjusted for the eﬀects
of currency translation, the increase amounted to €8.8 billion.
The increase in equity was mainly due to net proﬁt of €10.9 billion
E see page 104 and the remeasurement of derivative ﬁnancial
instruments not recognized in proﬁt and loss of €1.7 billion. The
increase was partially oﬀset by the dividend of €3.5 billion paid
out to Daimler’s shareholders and eﬀects from currency trans-
lation of €2.7 billion. Equity attributable to the share hol ders
of Daimler AG increased to €64.0 billion (2016: €58.0 billion).

In relation to the 5% increase in the balance sheet total, equity
increased by the disproportionally high rate of 10%. Due to the
eﬀects described above, the Group’s equity ratio of 24.0% was
above the level at the end of 2016 (22.9%); the equity ratio for
the industrial business was 46.4% (2016: 44.7%). It is necessary
to consider that the equity ratios at the end of 2016 and 2017
are adjusted for the paid and proposed dividend payments.

Provisions decreased from €26.8 billion to €24.6 billion; as
a proportion of the balance sheet total, they were slightly
below the prior-year level at 10% (2016: 11%). They primarily
comprised provisions for pensions and similar obligations
of €5.8 billion (2016: €9.0 billion), which mainly consists of the
diﬀerence between the present value of deﬁned beneﬁt
pension obligations of €31.7 billion (2016: €31.2 billion) and the
fair value of the pension-plan assets applied to ﬁnance those
obligations of €27.2 billion (2016: €23.4 billion). The decrease
in provisions for pensions and similar obligations is primarily
due to the extraordinary contribution of €3.0 billion into the
German pension plan assets. Provisions also related to liabili-
ties from income taxes of €1.6 billion (2016: €1.7 billion), from
product warranties of €6.7 billion (2016: €6.1 billion) and for
personnel and social costs of €4.4 billion (2016: €4.3 billion),
as well as other provisions of €6.2 billion (2016: €5.7 billion).

B.32
Statement of ﬁnancial position¹

in millions of euros

Assets

Intangible assets

Property, plant and equipment

Equipment on operating leases

Receivables from ﬁnancial services

Equity-method investments

Inventories

Trade receivables

Cash and cash equivalents

Marketable debt securities

thereof current

thereof non-current

Other ﬁnancial assets

Other assets

Total assets

Equity and liabilities

Equity

Provisions

Financing liabilities

thereof current

thereof non-current

Trade payables

Other ﬁnancial liabilities

Other liabilities

Total equity and liabilities

Consolidated

Industrial Business²

Daimler Financial
Services

At December 31,
2016

2017

At December 31,
2016

2017

At December 31,
2016

2017

13,735

27,981

47,714

85,787

4,818

25,686

11,990

12,072

10,063

9,073

990

6,801

8,958

12,098

26,381

46,942

80,507

4,098

25,384

10,614

10,981

10,748

9,648

1,100

5,736

9,499

12,789

27,914

18,711

- 109

4,670

24,492

9,737

9,515

8,894

8,893

- 10,933

- 61

255,605

242,988

105,619

65,314

24,617

127,124

48,746

78,378

12,474

11,522

14,554

59,133

26,810

117,686

47,288

70,398

11,567

12,869

14,923

52,936

23,591

1,600

- 19,435

21,035

11,655

7,622

8,215

11,199

26,314

17,433

- 87

4,043

24,426

8,977

8,751

9,498

9,497

- 11,045

1,637

101,146

48,685

25,768

- 1,451

- 20,480

19,029

10,853

9,645

7,646

946

29,003

85,896

148

1,194

2,253

2,557

1,169

180

989

17,734

9,019

149,986

12,378

1,026

125,524

68,181

57,343

819

3,900

6,339

899

29,509

80,594

958

1,637

2,230

1,250

151

1,099

16,781

7,862

141,842

10,448

1,042

119,137

67,768

51,369

714

3,224

7,277

255,605

242,988

105,619

101,146

149,986

141,842

Intra-group eliminations between the industrial business and Daimler Financial Services are generally allocated to the industrial business.

B | COMBINED MANAGEMENT REPORT | FINANCIAL POSITION 117

B.33
Balance sheet structure Daimler Group

In billions of euros

2016
2017

Assets

149

141

Equity and liabilities

Non-current assets

103

Current assets

107

102

thereof liquidity

256

243

256

Equity

Non-current liabilities

Current liabilities

Financing liabilities of €127.1 billion were above the prior-year
level (€117.7 billion). The increase of €16.2 billion adjusted for
exchange-rate eﬀects was primarily due to the reﬁnancing of the
growing leasing and sales-ﬁnancing business. 53% of the
ﬁnancing liabilities were accounted for by bonds, 27% by liabili-
ties to ﬁnancial institutions, 9% by deposits in the direct
banking business and 9% by liabilities from ABS transactions.

Trade payables increased to €12.5 billion due to the higher
volume of business (2016: €11.6 billion). The Mercedes-Benz Cars
division accounted for 63% of those payables and the Daimler
Trucks division accounted for 20%.

Other financial liabilities of €11.5 billion (2016: €12.9 billion)
mainly consisted of liabilities from residual-value guarantees,
liabilities from wages and salaries, deposits received and accrued
interest on ﬁnancing liabilities. The decrease was primarily
caused by lower negative fair values of currency derivatives.

Other liabilities of €14.6 billion (2016: €14.9 billion) primarily
comprise deferred income, tax liabilities and deferred taxes.
The tax reform in the United States aﬀected the deferred tax
liability. This was oﬀset in particular by an increase in
deferred income due to the expansion of business activity.

Further information on the assets presented in the statement of
ﬁnancial position and on the Group’s equity and liabilities is
provided in the Consolidated Statement of Financial Position
E see page 240 , the Consolidated Statement of Changes in
EquityE see page 242 and the related notes in the Notes to the
Consolidated Financial Statements.

118 B | COMBINED MANAGEMENT REPORT | DAIMLER AG

Daimler AG

Condensed version according to the German Commercial Code (HGB)

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

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 activities of the
Daimler Group.

Revenue increased by €5.5 billion to €112.7 billion and was
thus higher than our expectations as stated in the “Outlook”
section of last year’s Annual Report. Revenue in the car
business increased by 6% to €87.0 billion due to higher unit
sales of vehicles and components. Despite the termination
of a contract-manufacturing agreement, revenue in the com-
mercial-vehicle business increased by 1% to €25.7 billion.

Cost of sales increased by 6% to €101.9 billion. Increases in
unit sales and expenses for new products and technologies led
to higher cost of sales. Research and development expenses,
which are included in cost of sales, were signiﬁcantly higher than
in the previous year at €7.6 billion (2016: €6.6 billion); as a pro-
portion of revenue, they amounted to 6.8% (2016: 6.1%). Research
and development expenses were primarily related to the
renewal and expansion of the product portfolio, especially with
regard to the model series of the SUVs, the compact class
and the S-Class, as well as the successor model of the Sprinter.
In addition, work is continuing on new generations of engines,
alternative drive systems and the intensiﬁcation of the module
strategy. At the end of the year, approximately 20,000 people
were employed in the area of research and development.

1 Unit sales relate solely to new vehicles. 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 to external customers and
to subsidiaries of Daimler AG, as well as contract manufacturing by
Daimler AG are not counted in unit sales.

The vehicles are produced at the domestic plants of Daimler
AG, as well as under contract-manufacturing agreements by
domestic and foreign subsidiaries and by producers of special
vehicles. Daimler AG distributes its products through its own
sales-and-service network, which is organized in seven regional
centers for cars and seven for commercial vehicles, through
foreign sales subsidiaries and through third parties.

The annual ﬁnancial statements of Daimler AG are prepared in
accordance with the German Commercial Code (HGB). The
consolidated ﬁnancial statements are prepared in accordance
with the International Financial Reporting Standards (IFRS), as
adopted by the European Union (EU). This results in some diﬀer-
ences with regard to recognition and measurement, primarily
relating to intangible assets, provisions, ﬁnancial instruments,
the leasing business and deferred taxes.

The main performance indicators for Daimler AG are unit sales,
revenue and net proﬁt.

Proﬁtability

The development of proﬁtability was aﬀected in ﬁnancial year
2017 by the decrease in operating proﬁt by €0.7 billion to
€1.1 billion, as well as by the increase in ﬁnancial income by
€0.4 billion to €5.9 billion. (cid:202) B.34

Daimler AG slightly increased its unit sales in 2017, as had been
forecast in the previous year. Unit sales in the car business
increased by 3% to 1,870,000 vehicles1. The SUV segment was
particularly successful in 2017, with a 16% increase in sales
to 639,000 units1. The E-Class segment recorded growth of 11%
to 274,000 units1. Due to the lifecycle of the C-Class, sales of
336,000 units1 in this segment were lower than in the previous
year (2016: 375,000). Sales of trucks amounted to 106,000
(2016: 101,000) units1 and sales of vans increased by 5% to
357,000 units1.

Selling expenses increased by €0.9 billion to €7.3 billion. This
was primarily due to higher expenses for marketing, commis-
sions and outgoing freight. As a proportion of revenue, selling
expenses increased from 6.0% to 6.5%.

General administrative expenses of €2.0 billion were
slightly above the prior-year level (2016: €1.8 billion). In relation
to revenue, they amounted to 1.8% (2016: 1.7%).

Other operating expense, net amounted to €0.4 billion
(2016: €0.7 billion). The prior-year figure mainly comprised
expenses in connection with a legal proceeding.  B.34

Financial income increased by €0.4 billion to €5.9 billion, pri-
marily due to improved income from investments in subsidi-
aries and associated companies. This mainly reflects increased
dividend distributions as well as lower impairments of invest-
ments in subsidiaries. On the other hand, financial income was
affected by increased interest expense relating to pensions.
This primarily resulted from a decrease in the discount rate. In
the previous year, there was a positive effect from a change
in the law on the calculation of the discount rate.

The income tax expense amounts to €2.0 billion (2016:
€1.4 billion). The increase primarily reflects tax expenses for
prior periods relating to tax assessments of previous years.
The figure for 2016 includes tax benefits recognized for prior
periods.

Net profit decreased from €5.9 billion to €5.0 billion, and was
thus in line with the expectations stated in the “Outlook”
section of last year’s Annual Report. The development primarily
reflects the lower operating profit as well as a higher income
tax expense. There was an opposing effect from the improved
financial income.

The economic situation of Daimler AG is primarily deter-
mined by its business operations and those of its subsidiaries.
Daimler AG participates in the operating results of its sub-
sidiaries through profit distributions. The economic situation of
Daimler AG is therefore fundamentally the same as that of
the Daimler Group, which is described in the chapter “Overall
Assessment of the Economic Situation”. E page 134

B | COMBINED MANAGEMENT REPORT | DAIMLER AG 119

Financial position, liquidity and
capital resources

The balance sheet total of €107.3 billion is €9.1 billion higher
than at year-end 2016.  B.35

Non-current assets increased by €2.6 billion to €42.7 billion,
mainly due to the higher amounts of financial assets and fixed
assets. Investment in property, plant and equipment (excluding
leased assets, approximately €3.1 billion) mainly comprises
investments for the production of the new A-Class models and
the new Sprinter, as well as investments in engine and trans-
mission projects.

Inventories increased compared with December 31, 2016
by €0.4 billion to €9.5 billion. The increase is mainly related to
finished products and goods.

Receivables, securities and other assets increased compared
with December 31, 2016 by €3.4 billion to €49.5 billion. The
main reason for this development was growth of €2.3 billion in
receivables due from subsidiaries and associated companies,
as well as the increase in securities of €0.8 billion. Cash and
cash equivalents increased by €0.1 billion to €1.8 billion.

Gross liquidity – defined as cash and cash equivalents and
other marketable securities as well as fixed-term deposits
presented under other assets – of €9.6 billion was higher than
a year earlier (2016: €8.5 billion).

The net defined-benefit plan asset results from the fair value of
the special-purpose assets in excess of the settlement amount
of the pension obligations. The increase in financial year 2017
to €3.5 billon (2016: €0.9 billion) is primarily due to the extraor-
dinary contribution of €3.0 billion to the German pension plan
assets.

B.34
Condensed income statement of Daimler AG

In millions of euros

Revenue

Cost of sales (including R&D expenses)

Selling expenses

General administrative expenses

Other operating expense, net

Operating profit

Financial income

Income taxes

Net profit

2017

2016

112,685

-101,874

107,178

-96,271

-7,312

-2,010

-355

1,134

5,866

-2,018

4,982

-6,454

-1,844

-749

1,860

5,430

-1,422

5,868

Transfer to retained earnings

-1,077

-2,391

Distributable profit

3,905

3,477

120 B | COMBINED MANAGEMENT REPORT | DAIMLER AG

Cash provided by operating activities amounted to
€7.2 billion in 2017 (2016: €8.5 billion). The decrease primarily
reﬂects higher cash-eﬀective contributions to pension plan
assets, increased working capital and higher income tax pay-
ments. On the other hand, utilization of provisions was lower
than in the previous year.

Cash flows from investing activities resulted in a net cash
outﬂow of €6.5 billion in 2017 (2016: €6.1 billion). The increase
is primarily a reﬂection of capital measures within ﬁnancial
assets as well as increased investment in property, plant and
equipment. Positive eﬀects resulted from acquisitions and
sales of securities within the framework of liquidity management.

Cash flows from financing activities resulted in a net cash
outﬂow of €0.6 billion (2016: €2.7 billion). This is explained by
the reduction compared with the previous year in the cash out-
ﬂow from the Group’s internal transactions in connection with
central ﬁnance and liquidity management. There were oppos-
ing eﬀects of reduced cash inﬂows from the lower assumption
of external ﬁnancing liabilities than in the previous year. Cash
ﬂows from ﬁnancing activities include the payment of the divi-
dend for the year 2016 in an amount of €3.5 billion.

B.35
Balance sheet structure of Daimler AG

In millions of euros

Assets

Non-current assets

Inventories

Receivables, securities and other assets

Cash and cash equivalents

Current assets

Prepaid expenses

Net defined-benefit plan asset

Equity and liabilities

Share capital

(Conditional capital €500 million)

Capital reserve

Retained earnings

Distributable proﬁt

Equity

Other provisions

Provisions

Trade payables

Other liabilities

Liabilities

Deferred income

Dec. 31,
2017

Dec. 31,
2016

42,700

9,466

49,516

1,782

60,764

384

3,462

40,107

9,071

46,120

1,660

56,851

339

891

107,310

98,188

3,070

11,480

23,637

3,905

42,092

13,981

6,499

43,838

50,337

900

107,310

11,480

22,560

3,477

40,587

11,847

6,077

38,935

45,012

742

98,188

Equity increased in 2017 by €1.5 billion to €42.1 billion. This
change primarily resulted from the net proﬁt for 2017, of which,
in accordance with Section 58 Subsection 2 of the German
Stock Corporation Act (AktG), €1.1 billion was transferred to
retained earnings. The equity ratio at December 31, 2017
was 39.2% (December 31, 2016: 41.3%). As stated in the notes to
the annual ﬁnancial statements according to the German
Commercial Code (HGB), Daimler AG holds no treasury shares
at December 31, 2017.

Provisions increased compared with December 31, 2016 by
€2.1 billion to €14.0 billion. This was primarily due to increased
obligations from sales transactions, provisions for warranty
obligations, and provisions relating to legal proceedings.

Liabilities increased by €5.3 billion to €50.3 billion, primarily
due to increased ﬁnancing liabilities, as well as trade payables.

Risks and opportunities

The business development of Daimler AG is fundamentally sub-
ject to the same risks and opportunities as that of the Daimler
Group. Daimler AG generally participates in the risks of its sub-
sidiaries and associated companies in line with the percentage
of each holding. Risks and opportunities are described in the
“Risk and Opportunity Report”. E pages 155 ﬀ Risks may
additionally arise from relations with subsidiaries and associated
companies in connection with statutory or contractual obli-
gations (in particular with regard to ﬁnancing), as well as from
the impairment of investments in subsidiaries and associated
companies.

Outlook

Due to the interrelations between Daimler AG and its sub-
sidiaries and the relative size of Daimler AG within the Group,
we refer to the statements in the “Outlook” chapter, which
largely reﬂect our expectations also for the parent company.
E pages 170 ﬀ For ﬁnancial year 2018, we expect Daimler
AG to achieve net proﬁt at the level of 2017. This will result from
a higher planned operating proﬁt and a lower income tax
expense, which will be oﬀset by the anticipated decrease in
ﬁnancial income. We expect Daimler AG to achieve unit sales
and revenue in 2018 at the prior-year level.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 121

Sustainability and Integrity

Sustainability at Daimler

Sustainability is one of the basic principles of our corporate
strategy as well as a benchmark for our success as a company.
As a vehicle manufacturer with global operations, we face
industry-speciﬁc challenges. To ensure that our business success
is sustainable, we need to exploit the associated opportunities
and minimize the risks. To this end, we have drawn up a Group-
wide sustainability strategy, which is part of our corporate
strategy and makes sustainability a fundamental corporate
principle. Additional information on sustainability at Daimler
can be found in the “Non-Financial Report” section of this Annual
ReportE pages 214ﬀ. The “Non-Financial Report” is also
available on the Internet at w daimler.com/nonﬁnancial-report.
The new Daimler Sustainability Report for ﬁnancial year 2017
will available on the Group’s website in late March 2018.
w daimler.com/sustainability

Research and development

Research and development as key success factors
Research and development have always played a key role at
Daimler. Gottlieb Daimler and Carl Benz invented the automobile
more than 130 years ago. Today, we are shaping the future of
mobility. Our goal is to oﬀer our customers fascinating products
and customized solutions for needs-oriented, safe and sus-
tainable mobility. Our technology portfolio and our key areas of
expertise are focused on this objective.

The expertise, creativity and motivation of our employees in
research and development are key factors behind our vehicles’
market success. At the end of 2017, Daimler employed 24,600
men and women at its research and development units around
the world (2016: 24,200). A total of 16,800 of those employees
(2016: 16,300) worked at Group Research & Mercedes-Benz Cars
Development, 5,300 (2016: 5,600) at Daimler Trucks, 1,300
(2016: 1,200) at Mercedes-Benz Vans and 1,200 (2016: 1,200) at
Daimler Buses. Around 5,200 researchers and development
engineers (2016: 5,400) worked outside Germany.

Our international research and development network
Our global research and development network comprises
35 locations in 15 countries. Our biggest facilities are in
Sindelﬁngen and Stuttgart-Untertürkheim in Germany. Our most
important research facilities in North America are the US R&D
headquarters in Sunnyvale, California; in Long Beach, California;
in Portland, Oregon; and in Redford, Michigan. Our most
important facilities in Asia are in Bangalore, India; the Global
Hybrid Center in Kawasaki, Japan; and our research and
development center in Beijing. Mercedes-Benz Research &
Development India (MBRDI), with headquarters in Bangalore)
is Daimler’s largest R&D center outside Germany. Activities at
MBRDI focus on digitization, simulations and data science.
Mercedes-Benz Research & Development China is also an
integral part of the Daimler Group’s research network.
Among other things, it plays an important role in understanding
Chinese customers’ expectations and local requirements.
Along with our internal activities, we also maintain close contacts
with external research institutions. For example, we work
together with various renowned research institutes around the
world and participate in international exchange programs for
next-generation scientists. In November 2017, we opened new
digital hubs in Tel Aviv and Seattle.

Targeted involvement of the supplier industry
In order to achieve our ambitious goals, we also cooperate
very closely with research and development units in the supplier
industry. Daimler must be closely intermeshed with supplier
companies in order to deal with the rapid pace of technological
change in the automotive industry and the need to quickly
bring new technologies to market maturity. Such cooperation is
all the more important in light of the increasing digitization of
processes throughout all stages of the value chain. Strong part-
ners from the supplier industry are also essential for our
eﬀorts to develop and oﬀer new concepts for future mobility.
As part of our joint research and development work, we aim to
ensure that the Group retains the key technological expertise it
needs to maintain the uniqueness of our brands and safeguard
the future of the automobile in general.

122 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

B.36
Research and development expenditure

In billions of euros

total
thereof capitalized

2013

2014

2015

2016

2017

B.37
Research and development expenditure by division

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

2017

2016

17/16

% change

8,711
2,773

6,642
2,388

1,322
45

565
310

194
30

7,572
2,315

5,671
2,008

1,265
57

442
238

202
11

+15
+20

+17
+19

+5
-21

+28
+30

-4
+173

Patents ensure freedom of action and safeguard
our brands
On January 29, 1886, Carl Benz registered a patent for a “vehicle
powered by a gas engine”. Since then, we have reﬁned auto-
mobiles with more than 114,000 patents and have launched
pioneering innovations. We continued this tradition in 2017 by
registering nearly 1,900 new ideas for patents, with an increasing
focus on the CASE technologies. These patents are important
to the company primarily for two reasons: Firstly, the patents
secure Daimler a certain amount of “freedom of action” that
enables us to manufacture and sell our products around the world
and avoid legal conﬂicts with third parties. Secondly, they
enable “exclusivity”, the goal of which is to establish exclusive
positioning of selected Daimler features on the market and
thus diﬀerentiate ourselves from the competition. In addition
to industrial property rights, which safeguard our innovations
for future mobility over the long term, the unique visual aspects
of our products are protected with more than 7,800 designs
registered in 2017 (2016: 9,100). The decrease primarily reﬂects
a review of our intellectual-property strategy. Our portfolio of
more than 35,800 trademarks worldwide (2016: 32,800), serves
to protect the Mercedes-Benz brand, our new EQ brand for
electric mobility and all our other product brands in each relevant
market.

€8.7 billion for research and development
We want to continue shaping mobility through our pioneering
innovations in the years ahead, while moving ahead with
digitization throughout the Group. As announced in our Annual
Report 2016, we therefore increased our very high level of
investment in research and development by 15% to €8.7 billion
in 2017. Of that amount, €2.8 billion (2016: €2.3 billion) was
capitalized as development costs, which amounts to a capitali-
zation rate of 32% (2016: 31%). The amortization of capitalized
research and development expenditure totaled €1.3 billion during
the year under review (2016: €1.3 billion). With a rate of
5.3% (2016: 4.9%), research and development expenditure also
remained at a high level in comparison with revenue. Research in
the year under review focused on new vehicle models, extremely
fuel-eﬃcient and environmentally friendly drive systems, new
safety technologies, autonomous driving systems and the digital
connectivity of our products.

The most important development projects at Mercedes-Benz
Cars focused on the successor models of the GLS and GLE
oﬀ-road vehicles, the new compact class, the EQ electric brand
and the new generation of diesel and gasoline engines. We also
invested in vehicle connectivity and autonomous driving systems
and in the development of additional innovative safety tech-
nologies. Mercedes-Benz Cars spent a total of €6.6 billion on
research and development in 2017, which once again marked
a signiﬁcant increase from the prior-year ﬁgure (€5.7 billion).
Daimler Trucks invested €1.3 billion in research and develop-
ment projects. The division’s most important projects were in the
areas of emission standards and fuel eﬃciency, customized
products and technologies for important growth markets, and the
successor generations for existing products. R & D expenditure
at Mercedes-Benz Vans focused mainly on the new Sprinter
generation, the expansion of the portfolio in the form of the
new X-Class pickup, and the further development of the Vito and
the V-Class. Daimler Buses primarily focused its development
activities on new products, the fulﬁllment of future emissions
standards and measures to further reduce fuel consumption.
Alternative drive systems, in particular electriﬁcation technology,
also played a key role in our development activities during the
year under review.
(cid:202) B.36 (cid:202) B.37

Innovation, safety and environmental protection

Innovations for the future of mobility
We aim for the best possible customer utility, high standards of
safety, environmental compatibility and eﬃciency. In order to
work on achieving these goals in parallel, we rely on innovative
concepts and environmentally sound product development.

In this context, we are focusing on CASE — these four letters
stand for the four future-oriented strategic ﬁelds of connectivity
(Connected), autonomous driving (Autonomous), ﬂexible use
and services (Shared & Services) and electric drive systems
(Electric). We are moving ahead consistently in all of these
areas at all of our divisions, and we are also linking them in an
intelligent way to create a comprehensive target concept for
our vehicles, services and business models. In this manner, we
are underlining our claim to play a dominant role in the
mobility of the future.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 123

Our “road to emission-free driving”
Our “Road to Emission-free Driving” initiative deﬁnes the primary
focal points for developing new, extremely fuel-eﬃcient and
environmentally friendly drive-system technologies at all of our
automotive divisions. We are pursuing this approach along the
entire value chain. To this end, we are addressing all relevant
aspects and exploiting potential in all areas of development
for everything from lightweight engineering to optimized aero-
dynamics, the use of clean and eﬃcient fuels, the creation of
electric drive systems, and the implementation of sustainable
mobility concepts.

Our drive system strategy for reducing emissions has three
components. First, highly eﬃcient combustion engines remain
part of the solution for us, and this applies to both gasoline
and diesel engines. We are also focusing on additional plug-in-
hybrid and electric vehicle models.

We believe that combustion engines will continue to form
the backbone of personal mobility until electric vehicles can
achieve a breakthrough in the market. This is one of the main
reasons why we continue to invest in the improvement of com-
bustion engine technology, thus making a contribution to
reducing the fuel consumption and emissions of each and every
vehicle. At the same time, we have launched a broad-based
electric-mobility oﬀensive at all of our divisions. We are pursuing
a holistic approach here. For example, along with partial and
fully electric drive systems, we are also investing in fast-charging
networks, hydrogen infrastructure and so(cid:5)ware solutions.

Innovative vehicle and drive-system technologies from Daimler
demonstrate what we have already achieved in this regard.
The following examples illustrate our approach to the mobility
of the future.

Biggest engine offensive in the history of Mercedes-Benz
The new OM 654 four-cylinder diesel engine, which was
launched in the new E-Class in 2016, is the ﬁrst member of the
modular engine family that will be utilized across the product
range of Mercedes-Benz Cars and also at Mercedes-Benz Vans.
Several diﬀerent output ratings are planned for the engine,
which will be installed either longitudinally or transversely in
vehicles with front, rear or all-wheel drive. In this way,
Mercedes-Benz intends to equip its range of diesel cars in
Europe with this engine generation by 2019.

Four more members of the all-new engine family made their
debut in 2017: an inline six-cylinder engine (diesel and gasoline
variants), a new four-cylinder gasoline engine and a new
biturbo V8. Forward-looking new technologies such as the
integrated starter-generator (ISG), the 48-volt electrical
system and the electric auxiliary compressor also had their
world premieres. The ISG is responsible for hybrid functions,
such as boost eﬀect and energy recovery, and thus enables fuel
savings that were previously typical of high-voltage hybrid tech-
nology. Our new S-Class models, which have been delivered to
customers since mid-2017, are a particularly good example of
how we have been able to increase fuel eﬃciency even further.
For example, the Mercedes-Benz S 350 d 4MATIC (fuel con-
sumption in l/100 km urban: 6.9–6.7/extra-urban: 5.0–4.8/
combined: 5.7–5.5; CO2 emissions, combined: 150–145 g/km)
with its new six-cylinder diesel engine consumes signiﬁcantly
less fuel than its predecessor, despite higher output, while the
Mercedes-Benz S 450 4MATIC (fuel consumption in l/100 km
urban: 9.6–9.3/extra-urban: 6.0–5.6/combined: 7.3–7.0; CO2
emissions, combined: 167–159 g/km) achieves outstanding fuel
eﬃciency with the newly developed M 256 six-cylinder
gasoline engine.

Fuel-efficient trucks
In recent years, we have also continuously reduced the fuel
consumption of our commercial vehicles as well as their CO2
emissions. For example, since 2011, we have been able to
reduce the average fuel consumption of the Mercedes-Benz
Actros heavy-duty truck by a total of about 15% compared to
the proven Actros predecessor model through the introduction of
the new Euro VI model, the Predictive Powertrain Control (PPC)

B.38
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
batteries or fuel cells

Energy for the future

Clean fuels for internal combustion engines

Energy sources for locally emission-free driving

124 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

anticipatory cruise control system, our latest generation of
engines and the Actros with a second-generation drivetrain,
which we presented at the IAA Commercial Vehicles Show in
2016. The new drivetrain technologies will also be used in the
Antos and Arocs truck models.

The fact that Mercedes-Benz provides its customers with
particularly fuel-eﬃcient vehicles has been demonstrated by
the more than 4,000 comparison drives that had been carried
out throughout Europe by the end of 2017. In these comparison
drives, customers tested Mercedes-Benz trucks in their ﬂeet
against vehicles manufactured by the main competitors. The
results speak for themselves: The Mercedes-Benz trucks came
out on top more than 90% of the time, with 11% lower fuel con-
sumption on average.

Our trucks also set the standards for fuel eﬃciency in North
America, where we presented the Freightliner New Cascadia,
our ﬂagship in North America, in the fall of 2016. The truck’s
aerodynamic shape and state-of-the-art drivetrain components
have helped to reduce fuel consumption by up to 8% compared
to the predecessor model, the Cascadia Evolution, which was
already an extremely economical vehicle.

In Europe, we plan to reduce the fuel consumption of our truck
ﬂeet by an average of 20% over the period of 2005 to 2020.
We are conﬁdent that we will achieve this ambitious target, and
we took a clear step in that direction with the introduction of
the new generation of the OM 471 heavy-duty truck engine in
2015 and the slightly smaller OM 470 in 2016.

New FUSO Super Great truck sets efficiency standards
With the latest generation of the FUSO ﬂagship, the world’s
largest manufacturer of commercial vehicles is setting new
standards for eﬃciency, safety and connectivity in Japan. A
range of new technologies has reduced the truck’s fuel consump-
tion by up to 15%. The powertrain components in the new FUSO
Super Great were taken from the current product platforms and
were only slightly adjusted to meet the speciﬁc requirements
of the Japanese market. Daimler Trucks’ global platform strategy
enables consistent quality standards, cost beneﬁts through
economies of scale, and ﬂexibility in the utilization of production
capacity. The 10.7-liter OM470 engine used in the new FUSO
Super Great complies with the JP17 emission standard in Japan.
It also comes with the HDEP (Heavy Duty Engine Platform)
Fuel Eﬃciency Package and has been further optimized in terms
of fuel consumption, emission eﬃciency and payload compared
with the previous drivetrain. Deliveries to customers of the new
truck started in May 2017.

Clean and efficient drive technology for buses
Daimler is also very advanced in terms of exhaust a(cid:5)er treatment
technology for the bus sector. For example, all Mercedes-Benz
and Setra model series were made available with Euro VI tech-
nology at a very early stage. Despite the use of this complex
exhaust treatment technology, we were able to achieve a further
reduction in the fuel consumption of our already economical
buses with the application of the new Mercedes-Benz engines.

For example, various vehicle optimization measures have led
to further signiﬁcant reductions in the fuel consumption of our
touring coaches equipped with the new OM 471 diesel engine,
despite higher performance.

The new Mercedes-Benz Tourismo coach is also much more
eﬃcient than the predecessor model. Its fuel consumption was
reduced primarily through optimized aerodynamics and an
all-new and lighter body. New optional extras such as Predictive
Powertrain Control (PPC) and Eco Driver Feedback (EDF)
enable fuel consumption and thus emissions to be reduced even
further.

The Mercedes-Benz Citaro NGT with natural-gas drive is even
cleaner and quieter than the already eﬃcient Citaro equipped
with the ultra-modern Euro VI diesel engine. Moreover, the Citaro
NGT’s all-new M 936 natural-gas engine makes the bus the
benchmark in its segment. The Citaro NGT is also even more
eﬃcient than its predecessor model — and when organic
natural gas is used, the vehicle is virtually CO2-neutral. In
parallel with the further optimization of the combustion
engine, the next step along the path into the future is the battery-
electric Mercedes-Benz Citaro — an all-electric city bus which
Daimler Buses plans to have ready for series production and on
the road by the end of 2018.

Comprehensive electric mobility offensive
Daimler launched a broad-based electric mobility oﬀensive at all
of its divisions back in 2016. The models include new plug-in
hybrids from Mercedes-Benz Cars, new electric smart models,
the DENZA 400, which we developed with our partner BYD for
the Chinese market, the new FUSO eCanter and the new GLC
pre-series model with fuel cells, which we presented at the
Frankfurt Motor Show (IAA) in September 2017. The electric
mobility oﬀensive also includes new concept vehicles that oﬀer
a clear preview of the future of electric mobility: the Concept EQ,
the Concept EQA and the smart vision EQ fortwo, as well as
the Mercedes-Benz electric truck and the E-FUSO Vision One
truck - both for heavy-duty distribution transport.

EQ — our electric mobility brand
Mercedes-Benz has consolidated all of its activities in the
area of electric mobility into the new EQ product brand. EQ
stands for Electric Intelligence, which in turn is derived from
the Mercedes-Benz brand values of emotion and intelligence.
EQ oﬀers a comprehensive electric mobility ecosystem of
products, services, technologies and innovations. The new brand
was heralded by the near-production Concept EQ from 2016
and the compact Concept EQA, which was presented at the
Frankfurt Motor Show (IAA) in September 2017.

With the Concept EQA study, Mercedes-Benz has shown
what an EQ model in the compact-car segment could look like.
In combination with the intelligent operating strategy from
Mercedes-Benz, the concept car achieves a range of approxi-
mately 400 kilometers. The Concept EQA provides a glimpse
of the technological future. It can be charged using a wall box and
is also prepared for rapid charging. Thanks to an integrated

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 125

on-board fast charger, it should be possible in the future to
charge an electric car in about ten minutes so that it can
drive another 100 kilometers.

By 2022, Daimler intends to oﬀer more than ten all-electric
models in the passenger-car segment alone: from the smart to
a large SUV. The ﬁrst series-produced battery-electric model
under the EQ brand will be launched in the SUV segment before
the end of this decade. It will be followed by a model initiative
that will gradually expand the product range of Mercedes-Benz
Cars with all-electric models. The new generation of electric
vehicles will be based on an architecture developed especially
for battery-electric models. This architecture is scalable in
every respect and can be used in all model series: Wheelbase
and track width as well as all other system components,
especially the battery, are variable thanks to the modular system.

Broad range of plug-in hybrid cars
Plug-in hybrid vehicles combine the best aspects of combustion
engines and electric drive systems. This helps to reduce overall
consumption and increase performance, as the electric motor is
used to take over from or support the combustion engine in
situations where the latter is less eﬃcient. With eight plug-in
hybrid models, we already oﬀer a broad range of plug-in hybrid
vehicles in the premium segment. Our powerful battery already
enables all-electric driving. The battery can be recharged
externally. The new S-Class with hybrid drive, which we plan to
launch in 2018, already has an all-electric range of up to 50
kilometers. We aim to achieve signiﬁcantly longer ranges for
plug-in hybrids as technological advances are made. This will
enable our customers to drive locally emission-free to a very
large extent in everyday situations. In such a setup, the combus-
tion engine is used for longer distances, which means our plug-in
hybrids are perfect for any driving requirement. We believe that
plug-in hybrid technology will be extremely successful as we
move into the next decade, and that is why hybrid systems are
a key component of our drive-system strategy.

The use of 48-volt on-board electrical systems enables hybrid
functions ranging from energy recovery and boost eﬀect to
initial acceleration and maneuvering in the all-electric mode.
This means that such functions can be used for the ﬁrst time
without high-voltage components, which eliminates the need for
the additional safety equipment that normally has to be used
in high-voltage networks. This enables us to noticeably reduce
the fuel consumption of our high-volume models and to oﬀer
customers greater agility and comfort.

E-Class plug-in hybrid impressive in environmental audit
In February 2017, the Mercedes-Benz E 350 e plug-in hybrid
model (fuel consumption in l/100 km, combined: 2.1; CO2
emissions in g/km: 49; electricity consumption in kWh/100 km:
11.5) successfully completed the TÜV validation audit for the
German Environmental Certiﬁcate. This certiﬁcate is awarded
on the basis of a lifecycle assessment in which independent
experts at the TÜV Süd technical inspection authority assess the
integration of environmental aspects into the product design
and development process, as well as the environmental impact
of a car throughout its entire life cycle.

The E 350 e also makes a big impression in other areas besides
driving. For example, during its lifecycle (material manufacture,
production, driving for 250,000 kilometers calculated with
certiﬁed consumption ﬁgures and recycling) and when the hybrid
model is charged externally with the European electricity mix,
the vehicle emits around 44% less CO2 than the predecessor
model, the E 350 CGI, which has comparable performance
data and a conventional engine. If the calculation is based on the
use of renewable energy for external charging, CO2 emissions
can be reduced by 63%. The picture is much the same in terms
of energy consumption, as the E 350 e consumes 31%/48%
less primary energy over all of its lifecycle phases.

Preproduction phase begins for the GLC F-CELL
With the unveiling of the two GLC F-CELL preproduction cars
at the Frankfurt Motor Show in 2017, Daimler presented yet
another milestone on the road to emission-free driving. The GLC
F-Cell is a fuel-cell electric car using a lithium-ion battery as an
additional energy source that can be externally charged by means
of plug-in technology. Intelligent interplay between the battery
and the fuel cells, as well as a short refueling time, will make the
GLC F-CELL a practical vehicle for long-distance travel in the
future. The preproduction model carries 4.4 kilograms of hydrogen
on board and produces enough energy to achieve a range of
more than 400 kilometers in the New European Driving Cycle
(NEDC). Daimler has developed a completely new fuel-cell
system for this world ﬁrst. Compared to the B-Class F-CELL,
which has been on the market since 2010 (fuel consumption:
0.97 kg H₂/100 km; CO₂ emissions, combined: 0 g/km), the
overall drive system oﬀers around 40 percent more output.
The fuel-cell system is around 30 percent more compact than
before; it can be housed entirely in the engine compartment
for the ﬁrst time, and is installed on the usual mounting points
like a conventional engine. In addition, the use of platinum in
the fuel cells has been reduced by 90 percent, which conserves
resources and also lowers system costs — without any com-
promises in terms of performance.

To date, fuel-cell vehicles from Mercedes-Benz, which include
the B-Class F-CELL and the Mercedes-Benz Citaro FuelCELL
Hybrid city bus, have driven more than 18 million kilometers
and have thus demonstrated the market maturity of this drive
conﬁguration. The pre-series version of the GLC F-CELL repre-
sents a further milestone on the road to series-produced
fuel-cell vehicles. Market-speciﬁc sales concepts, including the
option of a rental model, are currently being evaluated.

smart vision EQ fortwo: car sharing for the city of tomorrow
At the Frankfurt Motor Show in September 2017, the smart
brand presented the smart vision EQ fortwo, oﬀering a preview
of car sharing in the future. The concept car is our vision of
the form future urban mobility might take. As a fully autonomous
vehicle connected in swarms with other cars in the ﬂeet, the
smart vision EQ fortwo could move on its own through a city and
drive to locations where it is needed at a given time. The
electric car could be equipped with a 30kWh lithium-ion battery
that is recharged autonomously and inductively. It would do
this by driving to one of many hub stations located around a city.

126 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Vehicles not in use could store energy, and a bidirectional
charging system would allow cars with surplus energy to return
it to the power grid. In this manner, smart is assuming
responsibility for an important function for the energy transition.

In the future, Daimler plans to oﬀer its commercial vehicle
customers a comprehensive lineup of battery-electric vehicles
ranging from vans and light trucks to heavy-duty distribution
trucks and electric city buses.

Electric trucks for heavy-duty distribution transportation
In July 2016, we became one of the ﬁrst commercial vehicle
manufacturer to present an all-electric truck for heavy-duty
distribution transportation. The planned key speciﬁcations of
this Mercedes-Benz vehicle are as follows: a battery output
of 212 kWh, a range of up to 200 kilometers and a payload of
12.8 metric tons with a gross vehicle weight of 26 metric tons.

Our electric truck concept met with a very positive response,
as evidenced by the many inquiries we received from our
customers a(cid:5)er we presented the truck at the IAA Commercial
Vehicles Show in October 2016. We forged ahead with the
development, establishment and testing of our Customer Inno-
vation Fleet in 2017. In 2018, we intend to begin practical tests
of our Mercedes-Benz Electric Truck Innovation Fleet for heavy-
duty distribution transportation with customers under real-life
conditions. These tests will allow us to gain further knowledge
about logistics processes and operating costs with electric
trucks. The results will be incorporated into new business models
for all-electric trucks for heavy-duty distribution transportation
within cities.

All-electric trucks are a component of Daimler Trucks’ com-
prehensive electric oﬀensive, which includes the light-duty FUSO
eCanter, which we launched in a small production series on a
global scale in July 2017. The ﬁrst 150 vehicles are destined for
selected customers in Europe, Japan and the United States.

We plan to deliver more than 500 of these trucks to customers
over the coming years. All the experience we gain with the small
production series will ﬂow into the further development of the
battery-electric Canter, with plans for volume production to
begin in 2019. The eCanter can make a contribution to reducing
noise in large cities.

During the Tokyo Motor Show in October 2017, Daimler
announced that it will completely electrify its full range of FUSO
trucks and buses in the years ahead. With E-FUSO, we are
now the ﬁrst truck manufacturer to launch a product brand for
electric mobility with trucks and buses. The E-FUSO Vision One,
which was presented for the ﬁrst time in Tokyo, is a concept for
an all-electric heavy-duty truck with a GVW of approximately
23 metric tons and a payload of around 11 metric tons — which
is only two tons less than the payload of the diesel version.
With a battery capacity of 300 kWh, the E-FUSO Vision One has
a range of up to 350 kilometers. One potential application for
the electric heavy-duty truck is regional inner-city and intra-city
distribution. Growing customer interest, the development of
the necessary infrastructure, and new regulatory measures are
promoting the electriﬁcation of road transport. In this situation,
it may be possible to launch the series-produced version of the
E-FUSO Vision One within the next four years in highly developed
markets such as Japan or Europe.

Electric vehicles from Mercedes-Benz Vans
Mercedes-Benz Vans plans to oﬀer all of its commercial van
models with electric drive systems. This has already started
with the mid-size eVito, which has been available for ordering
since the end of November 2017; deliveries are scheduled to
start in the second half of 2018. The eVito is the second all-
electric production model from Mercedes-Benz Vans; the ﬁrst
was the Vito E-Cell from 2010. With an installed battery capacity
of 41.4 kWh, the new eVito will have a range of up to 150 kilo-
meters. Even under unfavorable conditions, such as low outside
temperatures and with a full payload, the van will have a range
of up to 100 km. The mid-size van is thus perfect for inner-city
deliveries and other commercial operations, as well as for
passenger transport. The battery can be fully charged in around
six hours, and dynamic performance is ensured by an output
of 84 kW and torque of up to 300 Nm. In terms of top speed,
customers can choose between two options: The ﬁrst is a
maximum speed of 80 km/h, which meets all requirements in
city traﬃc and metropolitan areas, while also conserving
energy and increasing the vehicle’s range. If things need to move
faster, the customer can choose a top speed of up to 120 km/h.
The electric Vito is to be followed by the eSprinter in 2019; the
electric van product range will then be rounded out by the Citan.

The holistic electric drive strategy at Mercedes-Benz Vans
focuses not only on the electric van itself, but also on a tech-
nological ecosystem that is optimally aligned with customers’
business needs. This holistic strategy provides for an innovative
complete system solution that covers the entire value chain
for commercial applications. For this reason, strategic partners
and their sector expertise are being incorporated into the
development process at an early stage. One example of this is
our partnership with the Hermes logistics services company.
This partnership was launched with pilot programs in Hamburg
and Stuttgart at the beginning of 2018. A(cid:5)er those programs
are completed, we want to spread the application of the electric
ﬂeet, which is to be used for parcel deliveries and encompass
a total of 1,500 electric Vito and Sprinter vans by 2020, to other
urban areas. The strategic partnership also involves the joint
development of a concept for an eﬃcient charging infrastructure
at Hermes logistics centers, as well as IT services to ensure
optimum management of the electric ﬂeet.

Intelligent charging solutions for electric mobility
For the electriﬁcation of the drivetrain, we are employing a holis-
tic approach that includes both electric vehicles and a broad
range of services needed for electric mobility. Our approach
ranges from the provision of green electricity to intelligent
charging solutions for the home that include customized services
and home energy storage units operating in tandem with
photovoltaic units on roofs, for example.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 127

In March 2017, Daimler acquired an equity interest in the
American charging solutions provider, ChargePoint Inc. This
investment ensures the Group’s access to other customer-
focused electric mobility services. ChargePoint oﬀers solutions
for every segment of the electric mobility charging ecosystem,
which includes companies, the retail sector, public institutions,
ﬂeet customers and private households. In terms of technology,
ChargePoint makes use of the standardized Combined Charging
System (CCS) in Europe, which will enable it to oﬀer maximum
compatibility for future electric vehicle models of all brands.

With the establishment of the IONITY joint venture, the BMW
Group, Daimler, Ford Motor Company and the Volkswagen
Group with Audi and Porsche have laid the foundation for the
creation of the most eﬀective rapid-charging network for
electric vehicles in Europe. The goal is to install about 400
rapid-charging stations along major routes in Europe by 2020.

Our vision of accident-free driving
Vehicle safety is one of our core areas of expertise and a key
component of our product strategy. The Mercedes-Benz brand
has been shaping the development of safety systems for
decades. The company’s innovations, especially those for pro-
tecting vehicle occupants and other road users, have saved
countless lives. Today, Daimler continues to set standards with
regard to safety. Our vision of accident-free driving will
continue to motivate us to make mobility as safe as possible
for everyone in the future.

Partially automated driving in the upgraded S-Class
With the upgraded S-Class, Mercedes-Benz has taken a further
step toward autonomous driving. For example, new and modiﬁed
features have been added to the DISTRONIC active proximity
control and the Active Steering Assist systems. Another highlight
in the new S-Class is the route-based speed adaptation system,
which uses map and navigation data to control handling. With
these and other intelligent equipment features, the new luxury
sedan marks another major step toward autonomous driving.
Improved systems with a range of up to 250 meters enable
even more comfortable automated driving on all types of roads.
In addition, Mercedes-Benz uses Active Body Control with
ROAD SURFACE SCAN system and the CURVE curve-tilting func-
tion to improve ride comfort even further with the help of
intelligent sensors.

Cooperation with Bosch
During the year under review, we entered into a partnership with
Bosch that focuses on the joint development of so(cid:5)ware and
algorithms for a highly automated driving system. The objective
here is to bring highly automated and driverless driving to city
streets by the beginning of the next decade. The project com-
bines the comprehensive vehicle expertise of Daimler with the
system and hardware expertise of the world's biggest automotive
supplier. The resulting synergies are expected to lead to the
early series production of a safe and secure technology.

By introducing highly automated and driverless driving to the
urban environment, Bosch and Daimler aim to improve the ﬂow
of traﬃc in cities, enhance safety on the road and provide an
important building block for the traﬃc system of the future.
Among other things, the technology will enhance the appeal
of car sharing. It will also allow people to make the best possible
use of their time in cars and will open up new mobility
opportunities for people without a driver’s license, for example.
The main objective is to develop a production-ready system
that will enable cars to drive in highly automated mode in cities.
The idea here is that the vehicle should come to the driver,
rather than the other way round. Within a predeﬁned area of a
city, customers will be able to order a car-sharing vehicle or
a robot taxi with their smartphones; the vehicle will then drive
driverless to the user’s location.

X-ray vision for crash tests
The Mercedes-Benz Vehicle Safety unit is cooperating with
various partners from the ﬁelds of research and industry on the
use of ultra-fast X-ray technology to examine speciﬁc areas of
the vehicle body and the interior during a crash test. The X-ray
images can be combined with computer-aided simulation
models to improve the forecasting reliability of crash simulations.
In addition to analyzing the deformation of vehicle bodies and
components, the goal here is to develop alternative passenger
restraint concepts. Interdisciplinary teams in the project are
addressing the challenges of new mobility systems — for example,
the issue of passive safety in conditionally automated driving
systems.

Active Brake Assist 4
An active emergency braking system with pedestrian recognition
that can prevent many accidents and protect more vulnerable
road users is being used for the first time in Mercedes-Benz
trucks. It will also be introduced in Mercedes-Benz and Setra
touring coaches in 2018. The new Active Brake Assist 4 (ABA 4)
system with pedestrian recognition uses acoustic and visual
signals to warn the driver of a potential collision with pedestrians,
in which case it also automatically triggers partial braking.

Active Brake Assist 4 with pedestrian recognition is based on
a new generation of radar technology that is also used in current
Mercedes-Benz car models. This electronically scanning multi-
mode system uses both long and short-range radar. The long-
range radar detects vehicles in multiple lanes and stationary
obstacles at a distance of up to 250 meters in a direct line in
front of the coach. It also registers single-track vehicles, such as
bicycles, at a distance of up to 160 meters, and pedestrians
at up to 80 meters. The short-range radar has a maximum range
of 70 meters and can even recognize pedestrians and vehicles
in front of the coach but at each side of it.

128 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

A comprehensive approach to environmental protection
Protecting the environment is a primary corporate objective
of the Daimler Group. Environmental protection is not separate
from other objectives at Daimler; instead, it is an integral
component of a corporate strategy aimed at long-term value
creation. The environmental and energy-related guidelines
approved by the Board of Management deﬁne the environmental
and energy-related policy of the Daimler Group. This expresses
our commitment to integrated environmental protection that
begins with the underlying factors with an impact on the
environment, assesses the environmental eﬀects of production
processes and products in advance, and takes these ﬁndings
into account in corporate decision-making.

measures. The service measures are being implemented at no
charge to customers. The company is also carrying out
voluntary service measures for V-Class customers. Additional
measures were added to the package following a summit
meeting between the government and the automotive industry
in August 2017. Additional information on this topic can be
found in the “Non-Financial Report” section of this Annual
Report. E pages 218 ﬀ

Conservation of resources: Consistently high recyclability
To make our vehicles more environmentally friendly, we are
working to continuously reduce the resources our automobiles
consume over their entire lifecycles.

A vehicle’s environmental impact is largely decided in the ﬁrst
stages of development. The earlier we integrate environmentally
responsible product development (design for environment or DfE)
into the development process, the more eﬃciently we can
minimize the impact on the environment. E pages 218 ﬀ

During vehicle development, we also prepare a recycling concept
in which all components and materials are examined with a
view to their suitability for the various stages of the recycling
process. As a result, all Mercedes-Benz car models are
85 percent recyclable and 95 percent recoverable.

Car CO2 emissions: 125 g/km
Daimler makes great eﬀorts to reduce the fuel consumption
of its vehicles while enhancing their performance — thus
increasing driving pleasure and safety reserves. As early as 2015,
we were able to reduce the CO2 emissions of newly registered
vehicles from Mercedes-Benz Cars in the EU to an average of
123 grams per kilometer. This means we achieved our 2016
target of 125 g/km ahead of schedule. We were able to maintain
123 g/km in 2016 as well, despite a shi(cid:5) in our sales structure
toward medium-sized and large automobiles. Emissions rose to
125 g/km in 2017, primarily due to a further increase in the
proportion of sales in the EU accounted for by vehicles with high
levels of optional equipment. More detailed information can
be found in the “Non-Financial Report” section of this Annual
Report. E pages 218 ﬀ

Plan for the future of diesel vehicles
We are convinced that diesel engines will continue to be a ﬁrm
element of the drive-system mix, not least due to their low CO2
emissions. The public debate surrounding diesel engines is
leading to increasing uncertainty among customers, however.
For this reason, the Daimler Board of Management approved a
comprehensive plan for diesel engines in July 2017.

The plan calls for an expansion of the current voluntary service
measures for vehicles in customers’ hands, as well as the rapid
market launch of a completely new diesel engine family. As early
as March 2017, Mercedes-Benz began oﬀering its compact-
class customers an improvement in NOX emissions for one
engine variant. In order to eﬀectively reduce the emissions
of other model series, the Daimler Board of Management decided
in July to extend the service measures to include more than
three million Mercedes-Benz vehicles. The measures are being
carried out for most Euro 5 and Euro 6 vehicles in Europe
and other markets in close cooperation with vehicle registration
authorities. Daimler is investing around €285 million in these

The key aspects of our activities in this area are:
– the resale of tested and certiﬁed used parts through

the Mercedes-Benz Used Parts Center,
– the remanufacturing of used parts, and
– the workshop waste disposal system MeRSy

(Mercedes-Benz Recycling System).

Environmental protection in production
Our commitment to the environment is an integral component
of our corporate strategy, which focuses on increasing the
value of the company over the long term. For this reason, we
have established environmental management systems at our
manufacturing facilities with the goal of ensuring that we can
produce our vehicles safely, eﬃciently, at a high level of quality
and in an environmentally friendly manner that complies with all
legal stipulations. We also carry out environmental risk
assessments at all production locations in which the Group has a
majority interest in the ownership structure. We have achieved
a high level of air quality control, climate protection and resource
conservation (in terms of water consumption, waste manage-
ment and soil conservation), and we maintain this high level with
the help of Daimler Group standards. The environmental and
energy-related guidelines approved by the Board of Management
deﬁne the environmental and energy-related policy of the
Daimler Group. The guidelines also express our commitment to
integrated environmental protection that begins with the
assessment of the causes of environment problems and takes
into account the environmental eﬀects of production pro-
cesses and products as early as the planning and development
phases. Additional information on this topic can be found in
the “Non-Financial Report” section of this Annual Report.
E pages 214 ﬀ

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 129

The workforce

Slight increase in the number of employees
On December 31, 2017, the Daimler Group employed a total
of 289,321 men and women (2016: 282,488). As was forecast
in Annual Report 2016, the number of employees increased
slightly (+2%). This increase was primarily a result of the positive
business situation throughout the Group. Workforce numbers
increased at all divisions in 2017. (cid:202) B.40

The number of employees in Germany increased from
170,034 in 2016 to 172,089 in the year under review. Whereas
employee numbers rose in the United States to 23,513
(2016: 21,857), workforce numbers remained constant in Brazil
at 9,800 (2016: 9,782) and in Japan at 10,016 (2016: 10,535).
(cid:202) B.39 Our consolidated subsidiaries in China had a total of
4,099 employees at the end of the year (2016: 3,696). At the
end of the year under review, Daimler AG employed a total of
148,953 men and women (2016: 148,704).

Around the world, we have combined in-house services, such
as those for ﬁnancial processes, human resources (HR), IT and
development tasks, sales functions and certain location-speciﬁc
services, into shared service centers. Some of the shared service
centers are not consolidated because they do not aﬀect our
ﬁnancial position, cash ﬂow or proﬁtability; those companies
employed around 10,000 men and women at the end of 2017.

The Group’s total workforce also does not include the
employees of companies that we manage together with Chinese
partners; on December 31, 2017, they numbered approxi-
mately 19,900 people (2016: 19,500).

Human resources strategy
The key aims of our human resources strategy are to further
increase our attractiveness as an employer and to safeguard the
competitiveness of our workforce. Because our executives
should motivate their employees to achieve top performance,
it is crucial that we further develop our management culture and
establish outstanding leadership capabilities in our manage-
ment. In addition, we want to take on social responsibility and
let diversity ﬂourish in our global company.

High attractiveness as an employer
Our activities and measures for enhancing our attractiveness
as an employer are designed to enable us to recruit and retain
a suﬃcient number of specialized employees and qualiﬁed
managers in the global competition for talented staff. Our
primary objectives here are to ensure attractive and fair
compensation and to establish and maintain a work culture that
enables outstanding performance and a high level of motivation
and satisfaction among our employees and management staﬀ.
Today’s living and working conditions require working times to
be ﬂexibly organized in accordance with individual needs. Our
approach is therefore to challenge our employees to achieve
top performance and support their eﬀorts to do so, rather than
focusing on their mere presence at work. For this reason,
we also seek to improve performance by helping employees
reconcile their professional and personal responsibilities.

B.39
Employees at 12/31/2017

By region

Germany

Europe, excluding Germany

USA

Brazil

Japan

China*

Other

59.5%

14.3%

8.1%

3.4%

3.5%

1.4%

9.8%

* excluding non-consolidated associated companies and joint ventures

B.40
Employees by division

Employees (December 31)

% change

2017

2016

17/16

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Group Functions & Services

289,321

142,666

282,488

139,947

79,483

25,255

18,292

13,012

10,613

78,642

24,029

17,899

12,062

9,909

130 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Diversity management
The statement “diversity shapes our future” underscores the
importance of diversity management as a strategic factor for
success at Daimler. The various skills and talents of our work-
force enable us as a global company to eﬀectively reﬂect the
diversity of our customers, suppliers and investors around the
world.

Daimler’s more than 289,000 employees from over 160 countries
provide the Group with a vibrant mixture of cultures and ways
of life. We have committed ourselves to raising the proportion
of women in senior management positions at the Group to 20%
by the year 2020. The proportion of women in such positions has
continually risen in recent years to reach 17.6% at the end of
2017 (2016: 16.7%). Our instruments for supporting the targeted
promotion of women include mentorships, special events and
training measures, as well as employee networks.

In order to fulﬁll the requirements of new legislation on the equal
participation of women and men in management positions,
the Board of Management has set targets for the proportion of
women at the two executive levels below the Board of Manage-
ment and a deadline for achieving those targets. In setting all
targets, we have taken industry-speciﬁc circumstances into
consideration.

Further details are provided in the Corporate Governance
Report on E pages 203 ﬀ of this Annual Report.

Securing young talent
Daimler takes a holistic approach to securing young talent.
Our "Genius" initiative gives children and teenagers valuable
insights into future technologies and information about jobs in
the automotive industry. Along with technical and commercial
apprenticeships and dual courses of study, we also conduct
various activities that address young talent. In addition, we oﬀer
extensive possibilities to personally interact with the company
via social media, hackathons, competitions and internships.
A(cid:5)er university students graduate, we oﬀer them attractive
opportunities to join our company directly or launch their careers
at Daimler by taking part in our global CAReer training program.

We had 8,097 apprentices and trainees throughout the Group
at the end of 2017 (2016: 7,960). Of that number, 4,409 were in
a training program at Daimler AG (2016: 4,824). A total of 1,278
young people began their vocational training at Daimler during
the year under review (2016: 1,662), and 1,197 of them were
hired a(cid:5)er completing their apprenticeships (2016: 1,448).

Employee qualification
We support our staﬀ with training and continuing education
opportunities throughout their entire careers in order to
safeguard the long-term innovative capability and outstanding
performance of our workforce. Our range of qualiﬁcation
measures includes practical training courses, e-learning, semi-
nars, workshops, specialist conferences and ﬁnancial support
for employees who conduct a course of study while continuing
to work.

Health management and occupational safety
Healthy and motivated employees are important for our
competitiveness. We therefore promote the health and safety
of our employees through numerous programs that focus on
adequate protective measures, ergonomics, the provision of
medical care, nutritional advice, individual exercise courses
and much more. Daimler has a separate function — the Health
& Safety department — that is dedicated to promoting and
ensuring occupational health and safety. This department
deﬁnes, coordinates and monitors all measures associated
with occupational safety, occupational healthcare and the
promotion of good health and a healthy lifestyle.

Further information on employee matters can be found in the
Non-Financial Report of this Annual Report. E pages 222 ﬀ

Social responsibility

The goals associated with our social commitment
As a group of companies with global operations, we regard it
as both our responsibility and our obligation to support social
progress around the world. That is because for us, business
success and social responsibility go hand in hand. As a company,
we strive to contribute to the advancement of society and to
eﬀectively shape, help and promote its development in order to
create recognizable beneﬁts.

In 2017, we spent more than €60 million on donations to non-
proﬁt institutions and on sponsorships of socially beneﬁcial
projects. This does not include our foundations and corporate
volunteering activities or self-initiated projects.

DaimlerWeCare
It is very important to us that our various locations and the
people who work there identify with our activities. We therefore
support the eﬀorts of our employees to promote the common
good, and we also work to improve the social environment in the
communities where we operate. In this context, we focus on
the one hand on ﬁelds of action that arise from our role as a
“good neighbor”. On the other hand, we are involved in projects
in which we can contribute speciﬁc expertise and our core
competencies as an automaker.

We also initiate a variety of aid and assistance projects around
the globe. For example, we implement measures to strengthen
communities and promote education, science, the arts and
culture, and nature conservation, and we also support initiatives
that improve road safety. (cid:202) B.41 All of these issues are
addressed in various projects organized and managed under
the DaimlerWeCare brand. Our approach here is based
on three pillars: “For our employees”, “For our locations” and
“Worldwide”.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 131

B.41
Donations and sponsoring in 2017

Charity & Community

Arts & Culture

Education

Science & Technology &
Environment

Political dialog

69%

10%

14%

Funding through foundations
Our activities in areas such as sports, science and research are
carried out under the auspices of foundations. For example,
we use the Daimler and Benz Foundation to fund interdisciplinary
research that addresses issues related to the interaction
between humans, the environment and technology. We also
support interdisciplinary research projects with the Daimler
Fund in the Donors’ Association. This fund has helped create
several endowed professorships, such as the one for “Elec-
triﬁed Commercial Vehicle Drive Systems” at Esslingen Univer-
sity of Applied Sciences, the junior endowed professorship for
“Sensor Merging and Tracking Driver Assistance Systems” at
Ulm University of Applied Sciences, and the junior endowed
professorship for “Digital Transformation” at Freie Universität
Berlin.

The Laureus Sport for Good Foundation uses sports to help
achieve sustained improvement of the lives of socially disad-
vantaged or sick children and teenagers. A large number of
children and teenagers around the world have participated in
Laureus sports projects and in this manner have been able to
discover their own strengths and potential for the ﬁrst time.
For example, donations from the Laureus Sport for Good Foun-
dation were used to fund the Indigo Youth Movement project in
South Africa. Here, a camp was set up near Durban in which
young villagers were taught how to skateboard. The camp
community oﬀers them a protected environment in which they
can develop greater self-conﬁdence and learn how to improve
their lives.

More information on the projects promoted by the Group and
the activities related to our social commitment can be found in
the Daimler Sustainability Report and on our website under
“Sustainability”. w daimler.com/sustainability

Further information on social matters can be found in the
Non-Financial Report of this Annual Report. E pages 227 ﬀ

For our employees
Since 2006, Daimler Financial Services has been staging a
Day of Caring that focuses on non-proﬁt projects that help local
communities. Under the motto “Oﬀering help where help is
needed”, thousands of employees around the world once again
rolled up their sleeves and lent a hand in 2017 by leaving their
oﬃces and picking up a paintbrush, hammer or garden rake.
A wide variety of social institutions and initiatives were
supported — from hospitals and kindergartens to the SOS
Children’s Villages organization.

The ProCent initiative is another example of our employees’
commitment to society. In this initiative, Daimler employees
voluntarily donate the cent amounts of their net salaries to
socially beneﬁcial projects. The company matches every cent
that is donated. More than €800,000 was collected in this
manner in 2017. One of the recipients of donations from the
ProCent initiative in 2017 was the Spitalverein Oﬀenburg
voluntary hospital aid association, which used a donation of
around €10,000 to help build a new 250-square-meter play-
ground for young patients at Ortenau Hospital in Oﬀenburg-
Gengenbach.

For our locations
We support a wide variety of initiatives that strengthen the
communities at our locations. The integration of refugees is a
very important issue in Germany, for example. Here, we support
not only labor market integration with our “bridge internships”,
but also the social integration of people who have been forced
to ﬂee their homes. A key aspect here involves improving
access to education with programs such as our Genius knowledge
community and the Daimler Children's University in Sindelﬁngen.

We want to help preserve the diversity of natural habitats for
future generations. For many years now, we have therefore been
supporting projects and initiatives carried out by environmental
organizations near our locations around the world. One such
project, which is being conducted in cooperation with the
Global Nature Fund, is helping to restore severely damaged
mangrove forests in Asia. Environmental protection measures
and speciﬁc funding programs — near our production location
in Chennai in southern India, for example — are being
implemented to get the local population extensively involved
in the project. The goal here is to work with local partner
organizations to restore the mangrove forests to their original
state and then ensure that they remain protected.

Worldwide
Another environmental project that Daimler is supporting in
cooperation with the Global Nature Fund is EcoKarst. The
objective of this project is to contribute to the protection and
sustainable economic development of seven protected karst
areas in the Danube region. The idea is to achieve a balance
between the maintenance and strengthening of ecosystems
and their sustainable use.

In India, Brazil and Mozambique, we are carrying out projects
with Caritas International that promote the sustainable use of
water resources. Climate change is threatening to make entire
tracts of land uninhabitable in those three countries. Project
workers are creating reliable water supply systems and providing
training and useful knowledge to local farmers. As a result,
the farmers can now cultivate plants that do not require addi-
tional irrigation, such as tamarind and passion fruit.

132 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Integrity, compliance and legal responsibility

For Daimler, integrity, compliance and legal responsibility are
not merely abstract concepts — they are inseparable from our
daily business activities. That is because only those who act
responsibly can achieve sustained success over the long term.
For us, this involves more than just obeying laws, as we also
seek to align our activities with shared principles and values.

Organizationally established at the highest level
Because of their strategic signiﬁcance, we have combined the
responsibilities for integrity, compliance and legal aﬀairs within
a single area headed by a member of the Board of Management.
This division supports the business divisions and units in their
eﬀorts to ensure that these issues remain an integral com-
ponent of their organizations. We view integrity and compliance
as ﬁrm elements of our corporate culture that contribute to
our company’s lasting success and are already a natural part of
our daily business. The basis for this is our Integrity Code,
which deﬁnes guidelines for our everyday business conduct,
oﬀers our employees orientation, and helps them make the
right decisions even in diﬃcult business situations. The Integrity
Code is supplemented by other in-house principles and
guidelines.

A culture of integrity
Integrity is one of the four corporate values that form the
foundation of our business activities. For us, integrity means
acting in accordance with ethical principles. This also includes
our determination to ensure compliance with all applicable laws,
internal regulations and voluntary commitments. We expect all
of our employees and business partners to adhere to the princi-
ples of our culture of integrity out of a sense of conviction. Our
goal is to make integrity a permanent part of our corporate
culture.

Organization of integrity management
The Integrity Management unit is responsible for the long-term
promotion of the culture of integrity at our company. The unit’s
experts for change management, corporate-responsibility
management, training, consulting and communication develop
innovative and employee-focused approaches that promote a
culture of integrity at the company. These experts also support
disseminators throughout the Daimler organization in their
integrity-related activities. The unit’s goal is to further establish
and maintain a common understanding of integrity in order to
reduce risks and help ensure the sustained success of the com-
pany. The Head of Integrity Management reports directly to
the member of the Board of Management responsible for Integ-
rity and Legal Aﬀairs.

Our Integrity Code forms the basis of our business conduct.
The Integrity Code is one of the most important results of the
employee dialogues we have been conducting since 2011. It is
based on a shared understanding of values agreed upon with our
employees, and it lays out the principles for our everyday
business conduct. These principles are based on compliance
with laws. They include fairness, responsibility, mutual respect,
transparency and openness. The Code applies for all employees
of Daimler AG and the Group and is available in 23 langua-
ges. A guide is available on the Group’s intranet to support
the employees in their application of the Code in everyday
situations, providing answers to frequently asked questions.
w daimler.com/sustainability/integrity/at-a-glance.html

Requirements for management staff
Our Integrity Code also deﬁnes requirements for executives and
managers, who are expected to serve as role models in terms
of ethical behavior and to provide employees with orientation.
To help them optimally fulﬁll their responsibilities, the new
web-based Integrity@Work training program includes a manage-
ment module that is compulsory for all management staﬀ and
which communicates a shared understanding of the role of our
executives and managers with regard to integrity, compliance
and the law. Furthermore, selected seminars during the training
of new managers and the further training of senior executives
include modules on the subject of integrity.

In addition, integrity and compliance requirements are impor-
tant criteria for the target achievement of our executives.
They are also part of the agreed objectives for the remuneration
of the Board of Management. E page 138

Contact and advice center
Our “Infopoint Integrity” is available to our employees around
the world as a central contact and advice center. The Infopoint
team oﬀers advice on integrity-related issues in the daily working
environment and puts employees in touch with the right contact
partner if necessary. A worldwide network of local compliance
and legal contact persons is also available to our employees.

Communication measures
We conduct an ongoing open dialogue with our employees in
order to ensure that ethical behavior continues to be established
in the company’s daily business. We regularly address integrity
issues in our internal media and make a wide range of materials
available to our business units. During the year under review,
we introduced an app that provides information on integrity,
compliance and legal aﬀairs. We also place great value on
face-to-face discussions. For this reason, we regularly conduct
individually designed dialogue events with employees at all
levels of the hierarchy, as well as with external stakeholders.
These events are held both in Germany and at our locations
abroad.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 133

We use various event formats to get employees to think about
integrity by approaching the issue from diﬀerent perspectives.
At these events, we also increase the participants’ awareness
of the importance of making ethical decisions. For example,
we conduct business simulations that enable employees to
experience and discuss the relevance of integrity to daily
business operations from a new viewpoint. The things we
focused on in 2017 included events that addressed the topic of
integrity in technical ﬁelds. We also have a network of integrity
contact persons who help the business units address speciﬁc
issues in a targeted manner. In addition, we produce target-
group-speciﬁc materials for managers who wish to raise aware-
ness of integrity and potential ethical dilemma situations in
their departments.

Compliance and legal responsibility
Compliance is an indispensable part of the culture of integrity
at Daimler. For us, compliance means acting in accordance
with laws and regulations. Our objective here is to ensure that
all Daimler employees worldwide are always able to carry out
their work in a manner that is in compliance with applicable laws,
regulations, voluntary commitments and our basic values, as
is set out in binding form in our Integrity Code. Our compliance
activities focus on adhering to all applicable anti-corruption
regulations, the maintenance and promotion of fair competition,
adherence to legal and regulatory stipulations related to product
development, the observance of and respect for human rights,
compliance with data protection laws and our own data pro-
tection policy, adherence to sanctions and the prevention of
money laundering. Our Legal and Compliance department
advises and supports all of our corporate units worldwide with
regard to their business operations, processes and services,
in order to minimize legal and business risks.

Our Compliance Management System (CMS) serves
as the foundation
Our Compliance Management System (CMS) is designed to
prevent inappropriate or illegal behavior by Daimler and its
employees. The measures needed for this are deﬁned by Group
Compliance and the Legal department in a process that also
takes the company’s business requirements into account. Our
CMS consists of basic principles and measures that aim to
ensure compliant behavior throughout the company. The CMS
is based on national and international standards and is
applied on a global scale at all Daimler AG units and majority
holdings. The systematic minimization of compliance risks is
also extremely important, and for this reason we analyze and
assess the compliance risks of all our business units every year.
These analyses are based on centrally compiled information on
all business units; speciﬁc additional details are taken into
account in line with the given risk assessment. The results of the
analyses form the basis of our risk management.

More detailed information on the Daimler Compliance Manage-
ment System can be found in the “Non-Financial Report”
section of this Annual Report. E pages 229 ﬀ

In order to ensure an independent external assessment of
our Antitrust Compliance Program, KPMG AG Wirtscha(cid:5)s-
prüfungs gesellscha(cid:5) audited the Compliance Management
System for antitrust law in accordance with the 980 standards
of the Institute of Public Auditors in Germany. This audit,
which was based on the principles of appropriateness and
eﬀective implementation, was successfully completed at
the end of 2016.

134 B | COMBINED MANAGEMENT REPORT | OVERALL ASSESSMENT OF THE ECONOMIC SITUATION

Overall Assessment of the Economic Situation

In the opinion of the Board of Management, the Daimler Group’s
economic situation continues to be very satisfactory at the
time of publication of this Annual Report. In recent years, we
have implemented our strategy eﬀectively and with great
determination. This has led us onto a stable and proﬁtable growth
path, along which we have made great progress, also in the
past year. We will continue along that path in order to remain
sustainably competitive and proﬁtable. Against this backdrop,
we intend to take the lead in shaping the fundamental transfor-
mation process of the automotive industry.

For that purpose, we have prioritized four strategic areas for
action, which are closely interrelated:
1. CORE (strengthening the global core business)
2. CASE (leading in new future ﬁelds)
3. CULTURE (adapting the corporate culture)
4. COMPANY (strengthening the divisional structure)

We continue to expand our core business as a basis for us to
take a leading role in the new CASE areas. CORE and CASE are
inseparably connected and mutually dependent. In this context,
we need a corporate culture that strengthens and supports both
areas. In order to enhance our focus on markets and custom-
ers and to facilitate cooperation with other companies, we are
reviewing whether we should make our divisions even more
independent.

We succeeded in strengthening our core business also in the
year 2017, with signiﬁcant increases in the Daimler Group’s rev-
enue, unit sales and EBIT. The growth targets we announced at
the beginning of the year were in some cases actually surpassed.

In the year under review, we increased our unit sales to a total
of 3.3 million cars and commercial vehicles (2016: 3.0 million),
enabling us to further strengthen our market positon in the core
business. Thanks to numerous new and successful products,
Mercedes-Benz Cars and Mercedes-Benz Vans sold more vehicles
than ever before. The consistency of our growth path is dem-
onstrated by the fact that December 2017 was the 58th consec-
utive record month for sales to end-customers at Mercedes-
Benz Cars. The Daimler Trucks and Daimler Buses divisions also
signiﬁcantly increased their unit sales. And driven above all
by the positive development of the automotive business and a
further increase in the proportion of those vehicles leased

or ﬁnanced by Daimler, the Daimler Financial Services division
also continued to grow in 2017. The Daimler Group’s revenue
therefore also increased signiﬁcantly: by 7% to €164.3 billion.
Adjusted for exchange-rate eﬀects, revenue actually grew by 8%.

The Daimler Group’s operating proﬁt (EBIT) of €14.7 billion
was signiﬁcantly higher than in the previous year (€12.9 billion).
The divisions Mercedes-Benz Cars, Daimler Trucks and Daimler
Financial Services all achieved signiﬁcant EBIT growth, while
Mercedes Benz Vans and Daimler Buses maintained their high
level of prior-year earnings. In the overall vehicle business, return
on sales we achieved our target value of 9%. Daimler Financial
Services’ return on equity of 17.6% surpassed its target of 17%.

As a result of the positive development of earnings, we once
again achieved a very good return on net assets of 22.9%
(2016: 19.1%). We therefore once again earned substantially more
than our targeted minimum return on capital employed (8%).
This is reﬂected by our value added of €7.2 billion, which was
signiﬁcantly higher than the prior-year ﬁgure (2016: €5.2 billion).

In line with the ongoing high level of earnings, we continue
to have very sound key ﬁnancial metrics. This was conﬁrmed
by the rating agencies in their publications during the year. In
early February 2017, Moody’s raised Daimler’s long-term credit
rating from A3 to A2 and the short-term rating from P-2 to P-1.
And in November 2017, the Canadian rating agency DBRS also
raised the long-term rating from A (low) to A.

The Group’s overall equity ratio and the equity ratio of the indus-
trial business increased in the year under review to 24.0% and
46.4% respectively (2016: 22.9% and 44.7%). The net liquidity of
the industrial business decreased to €16.6 billion at the end
of 2017 (2016: €19.7 billion). This decrease is almost entirely
explained by an extraordinary contribution of €3 billion to the
German pension plan assets of Daimler AG. Mainly for the same
reason, the free cash ﬂow of the industrial business – the
param eter we use to measure ﬁnancial strength – decreased
to €2.0 billion (2016: €3.9 billion). Without this eﬀect, at
€5.0 billion the free cash ﬂow of the industrial business would
have been higher than in the previous year and higher than
the dividend distribution in the year 2017, despite a signiﬁcant
increase to in advance expenditure for new products and tech-
nologies.

B | COMBINED MANAGEMENT REPORT | EVENTS AFTER THE REPORTING PERIOD 135

Daimler Financial Services is a pioneer in the ﬁeld of shared
and services with its mobility services. We invested in the
expansion of these businesses in 2017 and we aim to achieve
further growth with them. The total number of registered
users of our mobility services increased to 17.8 million at the
end of 2017. With car2go, Daimler is the world’s leading
company for ﬂexible car sharing. The Daimler subsidiary mytaxi
is the market leader for taxi-ordering apps in Europe, and
with moovel, we oﬀer our customers a platform with which they
can optimally compare, combine, book and pay for various
mobility services.

In order to successfully make the transition from vehicle pro-
ducer to full-range supplier of innovative mobility solutions,
we must adapt our company to face the new challenges. In doing
so, we aim to combine the ﬂexibility and risk culture of the
digital industry with the perfection and innovativeness of our
company’s strong traditions. Together with our workforce,
we are therefore developing a new and ﬂexible corporate culture
under the roof of “Leadership 2020”. In addition, we are work-
ing in “Project Future” on how we can change our divisions into
legally independent entities, in order to further focus and
strengthening the divisional structure of the Daimler Group.

With the four strategic areas for action – CORE, CASE, CULTURE
and COMPANY – we have set the course for a successful
future. Against this backdrop, we look to the coming years with
great conﬁdence, and aim to continue our proﬁtable growth.

Events a(cid:5)er the
Reporting Period

Since the end of the 2017 ﬁnancial year, there have been no
further occurrences that are of major signiﬁcance for Daimler.
The course of business in the ﬁrst weeks of 2018 conﬁrms the
statements made in the “Outlook” section of this Annual Report.

We want our shareholders to participate appropriately in the
very good level of earnings achieved by Daimler once again
in 2017. At the Annual Shareholders’ Meeting on April 5, 2018,
the Board of Management and the Supervisory Board will
therefore propose a dividend of €3.65 per share (prior year:
€3.25). The dividend distribution will thus increase to the
record level of €3.9 billion (prior year: €3.5 billion).

On the basis of our proﬁtable core business, we increased the
expenditure for securing our future in 2017 from an already very
high level by a total of €2.0 billion to €15.5 billion: €8.7 billion for
research and development (2016: €7.6 billion) and €6.7 billion for
investment in property, plant and equipment (2016: €5.9 billion).

This substantial expenditure is necessary because we, as the
inventor of the automobile, intend to play a major role in shaping
the mobility of the future. To achieve this goal, we are increas-
ingly focusing on CASE – the four strategic areas for the future:
connected, autonomous, shared and services, and electric.
We intend to be leaders in each of these areas and to utilize
additional potential by linking up the four areas.

We see great growth opportunities in the area of electric
mobility in particular. By the year 2022, we aim to electrify each
segment across the entire Mercedes-Benz portfolio. Our goal
is to oﬀer our customers at least one electriﬁed alternative in
each segment – from the compact car to the large SUV. In total,
we plan to launch more than 50 electriﬁed versions, including
more than ten fully electric vehicles, the plug-in hybrid versions
and the models with 48-volt technology. Under the new brand
EQ, which stands for electric intelligence, we oﬀer Mercedes-
Benz Cars’ customers both vehicles and services in connection
with electric mobility. We are progressing with electriﬁcation
also with our commercial vehicles. With the FUSO eCanter, our
ﬁrst fully electric light-duty truck from a limited production
series, we started deliveries to customers in 2017; unlimited
large-series production is to start in 2019. The Mercedes-Benz
electric truck concept vehicle shows how fully electric transport
is possible with a gross vehicle weight of up to 26 tons. Electric
drive will soon be available also for vans from Mercedes-Benz:
The eVito will be available as of the second half of 2018 and
the eSprinter is to follow in 2019. And Daimler Buses plans to
put a fully electric bus on the road in 2018.

With the upgraded S-Class, Mercedes-Benz has taken another
step towards automated driving. For example, Active Distance
Assist DISTRONIC and Active Steering Assist have been further
developed with new and modiﬁed functions. Daimler Trucks
also has a leading position in the ﬁeld of autonomous driving.
Platooning concepts, electronically linking up several trucks
driving in a convoy, are gaining importance as an intermediate
stage. We successfully tested the system under real-life condi-
tions in Europe on several occasions in 2016, and we plan to test
platooning in real operation with ﬂeet customers in the United
States as of 2018.

136 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Remuneration Report

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 vertical comparison focuses on the ratio of Board of
Management remuneration to the remuneration of the senior
executives and the entire workforce of Daimler AG in Germany,
also in terms of development over time. The Supervisory Board
has deﬁned the group of senior executives for this purpose.

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 applicable
law. The adequate combination of non-performance-related and
performance-related components of remuneration is designed to
create an incentive to secure the Group’s long-term success.
The ﬁxed component of remuneration is paid as a base salary;
the variable components are intended to reﬂect, clearly and
directly, the joint performance of the members of the Board of
Management as a whole, as well as the long-term performance
of the Group. The interests of all stakeholders, in particular those
of the shareholders as the owners of the Company and those of
the employees, are harmonized through the focus on the Group’s
long-term success.

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 appropri-
ateness, based on a horizontal and vertical comparison. In the
horizontal comparison, 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 performance
parameters;

– the relative weighting of the components, that is, the relation-
ship between the ﬁxed base salary and the short-term and
long-term variable components;

– and the target remuneration consisting of base salary, annual
bonus and long-term variable remuneration, also with con-
sideration of entitlement to a retirement pension and fringe
beneﬁts.

In carrying out this review, the Presidential Committee and
the Supervisory Board consult independent external advisors.

If the review results in a need for changes to the remuneration
system for the Board of Management, the Presidential Com-
mittee submits the relevant proposals to the entire Supervisory
Board for its approval.

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 as well as on total remuneration limits.
It also decides on the relevant performance parameters and
the respective targets that are to be used in the bonus calcula-
tions for the upcoming ﬁnancial year. Furthermore, individual
targets and compliance goals are decided upon for each member
of the Board of Management and additional non-ﬁnancial goals
related to sustainability are drawn up for the Board of Manage-
ment as a whole. Both the individual goals, including the com-
pliance goals, and the non-ﬁnancial goals for the Board of
Management as a whole are taken into consideration along with
the ﬁnancial performance parameters a(cid:5)er the end of the
ﬁnancial year when the annual bonus is decided upon by the
Supervisory Board.

For the long-term variable component of remuneration, which
is referred to as the Performance Phantom Share Plan (PPSP),
the Supervisory Board sets an amount to be granted for the
upcoming ﬁnancial year in the form of an absolute amount in
euros and sets the respective performance targets.

A(cid:5)er the end of each year, the achievement of both ﬁnancial and
non-ﬁnancial targets by the Board of Management as a whole is
measured in order to determine the amount of the annual bonus.
The degree of achievement of individual targets by members
of the Board of Management is used as the basis for measuring
target achievement for the Board of Management as a whole.
The Presidential Committee then calculates the annual bonus and
submits its proposal to the Supervisory Board for its approval.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 137

The system of Board of Management remuneration in 2017
The ﬁxed base salary and the annual bonus each comprise
approximately 30% of the target remuneration, while the variable
component of remuneration with a long-term incentive eﬀect
(PPSP) makes up approximately 40% of the target remuneration.
(cid:202) B.42

As before, only 50% of the annual bonus is paid out in the
March of the following ﬁnancial year. The other 50% is paid out
a year later (deferral) with the application of a bonus-malus
rule, depending on the development of the Daimler share price
compared with an automotive index (Dow Jones STOXX Auto
Index) E pages 78 f, which Daimler AG uses as a benchmark
for the relative share-price development. Both the delayed
payout of the portion of the annual bonus (with the use of the
bonus-malus rule) and the variable component of remuneration
from the PPSP with its link to additional, ambitious comparative
parameters and to the share price reﬂect the recommendations
of the German Corporate Governance Code and give due con-
sideration to both positive and negative business developments.

The maximum amounts of remuneration of Board of Manage-
ment members are limited, both overall and with regard to the
variable components.

As in the prior year, the maximum amounts of remuneration
of the members of the Board of Management were set for
ﬁnancial year 2017 at 1.9 times the target remuneration for its
members and 1.5 times the target remuneration for its Chair-
man. The target remuneration consists of the base salary, the
target annual bonus and the grant value of the PPSP, excluding
fringe beneﬁts and retirement beneﬁt commitments. With
the inclusion of fringe beneﬁts and retirement beneﬁt commit-
ments from the respective ﬁnancial year, the maximum limit
of total remu neration increases by these amounts. The possible
cap on the amount exceeding the maximum limit takes place
with the payment of the PPSP issued in the relevant ﬁnancial
year, i.e. for the year 2017, with payment of the PPSP in 2021.
(cid:202) B.43

The individual components of the remuneration system are
as follows:

The base salary is ﬁxed remuneration relating to the entire
year, oriented towards the area of responsibility of each Board
of Management member and paid out in twelve monthly
installments. (cid:202) B.44

B.42
Remuneration structure

Target remuneration consists of non-performance-related
and performance-related components:

base salary
(non-performance-related) approx. 30%

short- and medium-term
performance-related
components

approx. 30%

long-term performance-related
components

approx. 40%

B.43
Maximum limit of total remuneration1 2017

Chairman of the Board of Management

Members of the Board of Management

1.5 times the target
remuneration1
1.9 times the target
remuneration1

Base salary in 2017
+ target bonus = 100% of the 2017 base salary
+ PPSP value when granted for 2017

Target remuneration1 in 2017

Base salary in 2017
+ annual bonus for 2017

(50% paid out in 2018 + 50% in 2019)

+ PPSP payment for 2017 (in 2021)
incl. dividend equivalent payments

Total remuneration1 in 2017

The possible cap on the amount exceeding the maximum limit
takes place with the payment of the PPSP for 2017 in 2021.
1 Excluding fringe beneﬁts and retirement beneﬁt

commitments in all cases.

B.44
Base salary – fixed E page 137
base salary – fixed – oriented towards the area of responsibility

base salary
(non-performance-related) approx. 30%
paid out in twelve monthly
installments

138 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

B.45
Annual bonus – short- and medium-term
performance-related remuneration E page 138

B.46
Annual bonus1 in 2017

dependent upon

short- and medium-term
performance-related
components

approx. 30%

annual bonus 2017 = target bonus × overall target achievement

target bonus
= 100% of
base salary
2017

target achievement EBIT

+/- target achievement for the

Board of Management as a whole
(derived from individual targets)

+/- target achievement for the

Board of Management as a whole:
non-financial targets

- non-achievement of individual

compliance targets

overall target achievement

time of payment of annual bonus 2017

50% of annual bonus = in March of the year after the reporting year (2018)

50% of annual bonus (deferral) = in March of the second year after the

amount paid out = 50% of annual bonus × “relative share performance”1

reporting year (2019)

1 Depending on the development of the Daimler share price compared with the
Dow Jones STOXX Auto Index.

EBIT target achievement
Range of possible target achievement:
0% – 200%

– 50% relates to a compari-
son of actual EBIT in 2017
with EBIT targeted for 2017

Target achievement for the
Board of Management as a whole
(derived from individual targets)
Range of possible target achievement:
-25% – +25%

Target achievement for the
Board of Management as a whole:
non-ﬁnancial targets
Range of possible target achievement:
-10% – +10%

Non-achievement of individual
compliance targets
Range of possible target achievement:
-25% – 0%

Maximum target achievement
(total cap):

– 50% relates to a compari-
son of actual EBIT in 2017
with actual EBIT in 2016

Individual target agreements
in 2017

For 2017: Further development
and permanent establishment
of the corporate value of integ-
rity; diversity and the mainte-
nance and enhancement of a
high level of employee satis-
faction and product quality.

Compliance agreements in
2017

235% of the target bonus

1 May be subject to retention or repayment claims

The annual bonus is variable remuneration, the level of
which is primarily linked to the operating proﬁt of the Daimler
Group (EBIT). For the past ﬁnancial year, the annual bonus
was also linked to the target for the ﬁnancial year determined
by the Supervisory Board (derived from the level of return
targeted for the medium term and the growth targets), the actual
result compared with the prior year, the combined performance
of the Board of Management members, additional non-ﬁnancial
sustainability-related targets for the Board of Management
as a whole and, as a possible individual reduction component,
the non-achievement of compliance targets. With the actual-
actual comparison, achievement of EBIT at the prior year level
constitutes target achievement of 100%. With the target-actual
comparison, the particularly ambitious deﬁnition of the targeted
EBIT that is oriented towards the competition constitutes
target achievement of 150%. (cid:202) B.45 (cid:202) B.46

Primary reference parameters:
– 50% relates to a comparison of actual EBIT in 2017 with

EBIT targeted for 2017.

– 50% relates to a comparison of actual EBIT in 2017 with

actual EBIT in 2016.

Amount with 100% target achievement
(target annual bonus):
In 2017, this is equivalent to the respective base salary.

Range of possible target achievement:
0 to 200%, that is, the annual bonus due to EBIT achievement
has an upper limit of double the base salary and may also
be zero. Both primary performance parameters, each of which
relates to half of the bonus, can vary between 0% and 200%.
For the primary performance parameter deﬁning 50% of the
annual bonus, “comparison of actual EBIT in the ﬁnancial
year with the EBIT targeted for the ﬁnancial year”, the limits of
the unchanged possible range of 0 to 200% are deﬁned as a
deviation of +/- 3% from prior-year revenue.

For the other primary performance parameter, which also relates
to half of the annual bonus, “comparison of actual EBIT in
the ﬁnancial year with actual EBIT in the prior year”, the limits
of the unchanged possible range of 0 to 200% are deﬁned
as a deviation of +/- 2% of the prior-year revenue.

In addition, the Supervisory Board uses individual target
agreements as a basis for measuring the target achievement
for individual Board of Management members and then uses
this target achievement value to measure the overall target
achievement of the Board of Management as a whole. This
overall target achievement result can lead to an addition or
reduction of up to 25% from the degree of target achievement
as measured on the basis of the primary performance parame-
ters. Only in exceptional cases may the Supervisory Board
deviate from this overall performance assessment and make
individual additions or deductions within the range described
above. In addition, on the basis of the sustainability-related non-
ﬁnancial targets for the Board of Management as a whole, an
amount of up to 10% can be added or deducted, depending on
the predeﬁned key ﬁgures/assessment basis. The non-ﬁnan-
cial targets deﬁned for 2017 were the further development and
permanent establishment of the corporate value of integrity,
the promotion of diversity in the sense of increasing the share
of women in management positions and the maintenance
and enhancement of a high level of employee satisfaction and
product quality.

As was the case in previous years, further qualitative targets
were agreed upon with the individual members of the Board
of Management with regard to the sustained implementation
and embedment of the compliance management system. The
complete 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.

B.47
Performance Phantom Share Plan (PPSP)
– long-term performance-related remuneration E page 139

long-term performance-related
remuneration

approx. 40%

amount when granted in euros E page 139

price of Daimler shares when issued

= preliminary number
of phantom shares
(virtual shares)
three-year dividend entitlement

after expiry of third plan year

preliminary number of phantom shares × performance factor
= final number of phantom shares, dividend entitlement in fourth year

after expiry of fourth plan year

final number of phantom shares × Daimler share price at end of plan
= amount paid out

Time of payment of Performance Phantom Share Plan 2017
in February of the year 2021

In this context, agreements were reached with the members of
the Board of Management allowing for the partial reduction or
complete elimination of the annual bonus for any member who
clearly violates our Integrity Code. If it is not possible to reduce
a future bonus payment, or a payment that has yet to be made,
the Board of Management member in question will be required
to pay back the amount of the bonus reduction. The Supervisory
Board has the ﬁnal decision on all such bonus reductions.

The total amount to be paid out from the annual bonus is limited
to 2.35 times the base salary of the respective ﬁnancial year.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 139

B.48
PPSP 2017

dependent upon

Development of
performance factors

Development of the
Daimler share price

– 50% relates to the “return on sales”

achieved in a three-year comparison with
the deﬁned group of competitors
E page 140
Bandwidth of possible target achievement:
0% – 200%1

– 50% relates to the “relative share perfor-

mance”, i.e. the development of Daimler’s
share price in a three-year comparison
with the development of a share-price
index for the deﬁned group of competitors.
Bandwidth of possible target achievement:
0% – 200%

Price when issued and price at the end of the
plan period
Bandwidth of possible price development:

maximum of 2.5 times the issue price

Maximum performance development (total cap):
2.5 times the amount granted
(including dividend equivalent payments throughout the plan period)

Stock ownership guidelines
Share purchase obligation of up to 25% of the gross remuneration
until the deﬁned number of shares (between 20,000 and 75,000) have
been purchased (shares to be held until the end of the term of service)

1 Maximum of 195% if, in the event of target achievement of 195% –
200%, the strategic return target of 9% has not been reached.

The Performance Phantom Share Plan (PPSP) is a variable
element of remuneration with long-term incentive eﬀects. At the
beginning of the plan, the Supervisory Board speciﬁes a grant
value (absolute amount in euros) in the context of setting the
individual annual target remuneration. This amount is divided
by the relevant average price of Daimler shares calculated over
a predeﬁned long period of time, which results in the prelimi-
nary number of phantom shares allocated. Also at the beginning
of the plan, performance targets are set for a period of three
years (performance period). Depending on the achievement of
these performance targets with a possible range of 0% to 200%,
a(cid:5)er three years the phantom shares allocated at the beginning
of the plan are converted into the ﬁnal number of phantom
shares allocated.

A(cid:5)er another plan year has elapsed (retention period), the
amount to be paid out is calculated from this ﬁnal number of
phantom shares and the applicable share price at that time.
The share price relevant for the payout under this plan is
also relevant for allocating the preliminary number of phantom
shares for the plan newly issued in the respective year.
(cid:202) B.47 (cid:202) B.48

140 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Performance parameters for Plan 2017:
– 50% relates to the Group’s return on sales in a three-year

phantom shares allocated. This maximum amount includes the
dividend equivalent paid out during the four-year plan period.

comparison with a group of competitors comprising all listed
vehicle manufacturers with an automotive component of
more than 70% by revenue and an investment-grade credit
rating (BMW, Ford, Fuji Heavy, Honda, Hyundai, Isuzu,
Kia, Mazda, Nissan, Paccar, Suzuki, Toyota, Volvo and Volks-
wagen). For the measurement of success, the competitors’
average return on sales is calculated over a period of three
years. Target achievement occurs to the extent to which
Daimler’s return on sales deviates by a maximum of +/-2 per-
centage points from 105% of the calculated average of
the competitors.

– Target achievement of 100% only occurs when the aver-

age return on sales of the Daimler Group reaches 105% of
the average return on sales of the group of competitors.
Target achievement of 200% occurs if Daimler’s return on
sales exceeds 105% of the average of the competitors
by 2 percentage points or more. An additional limitation
was implemented starting with PPSP 2015: If a target
achievement of between 195% and 200% occurs in the
third year of the performance period, the maximum
target achievement calculated from the performance
parameter of return on sales compared to the group of
competitors will only be deemed to be 200% if the actual
return on sales for Daimler’s automotive business
reaches at least the strategic target for return on sales
(currently 9%). Otherwise, target achievement will be
limited to 195%.

– Target achievement of 0% occurs if Daimler’s return
on sales is 2 percentage points or more lower. In
the deviation range of +/- 2 percentage points, target
achievement varies in proportion to the deviation.
– 50% relates to “relative share performance”, i.e. the develop-
ment of Daimler’s share price in a three-year comparison
with the development of a share-price index for the deﬁned
group of competitors. If the development of Daimler’s share
price (in percent) is the same as that of the index (in percent),
target achievement is deemed to be 100%. If the develop-
ment of Daimler’s share price (in percent) is 50 percentage
points or more below (above) the development of the index,
target achievement is deemed to be 0% (200%). In the deviation
range of +/- 50 percentage points, target achievement varies
in proportion to the deviation.

Value upon allocation:
Determined annually by the Supervisory Board; for 2017,
approximately 1.4 times the base salary.

Range of possible target achievement:
0 to 200%, that is, the plan has an upper limit. It may also
be zero.

Value of the phantom shares on payout:
During the four-year period between the allocation of the pre-
liminary phantom shares and the payout of the plan proceeds,
the phantom shares earn a dividend equivalent in the amount
of the actual dividend paid on ordinary Daimler shares.

The terms governing the PPSP include a provision that allows for
the partial reduction or complete elimination of the annual
bonus for any member of the Board of Management who clearly
violates the Integrity Code that applies to all employees and
Board of Management members, or any other professional obli-
gations, prior to the payout of the plan proceeds. The Super-
visory Board has the ﬁnal decision on all such bonus reductions.

Guidelines for share ownership
As a supplement to these three components of remuneration,
“Stock Ownership Guidelines” exist for the Board of Manage-
ment. These guidelines 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 Management membership.
The number of shares to be held is set between 20,000 and
75,000. In fulﬁllment of the guidelines, up to 25% of the
gross remuneration out of each Performance 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.

Appropriateness of Board of Management remuneration
In accordance with Section 87 of the German Stock Corporation
Act (AktG), the Supervisory Board of Daimler AG once again
had an assessment of the system of Board of Management
remuneration carried out by an external remuneration
expert in 2017. The result was that the remuneration system
as described above was conﬁrmed as being in conformance
with the requirements of applicable law. The remuneration sys-
tem was approved by the Annual Shareholders’ Meeting in
2014 with an approval ratio of 96.8%.

Board of Management remuneration
in ﬁnancial year 2017

Board of Management remuneration in 2017 pursuant to
Section 314 Subsection 1 No. 6 of the German Commercial
Code (HGB)
The total remuneration granted by Group companies (excluding
retirement beneﬁt commitments) to the members of the
Board of Management of Daimler AG is calculated as the total of
the amounts of
– the base salary in 2017,
– the half of the annual bonus for 2017 payable in 2018 and

measured as of the end of the reporting period,

– the half of the medium-term share-based component of
the annual bonus for 2017 payable in 2019 with its value
at the end of the reporting period (entitlement depending
on the development of Daimler’s share price compared
with the Dow Jones STOXX Auto Index),

– the value of the long-term share-based remuneration (PPSP)

at the time when granted in 2017, and
– the taxable non-cash beneﬁts in 2017.

The value of the phantom shares to be paid out depends on
target achievement measured according to the criteria described
above and on the share price relevant for the payout. This
share price is limited to 2.5 times the share price at the beginning
of the plan. In addition, the amount to be paid out is limited to
2.5 times the absolute euro amount speciﬁed at the beginning
of the plan, which is relevant for the preliminary number of

For both of the share-based components – the second 50% of
the annual bonus and the PPSP with a long-term orientation –
the amounts actually paid out can deviate signiﬁcantly from the
values described depending on the development of the Daimler
share price and on the achievement of the relevant target param-
eters. Upward deviation is possible only as far as the maximum
limits described above. Both components can also be zero.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 141

The possible limits with regard to the annual bonus and the
PPSP are shown in tables (cid:202) B.49 and (cid:202) B.50.

The total remuneration of the Board of Management for the ﬁnan-
cial year 2017 amounts to €35.0 million (2016: €31.8 million).
Of that total, €9.5 million was ﬁxed, that is, non-performance-

related remuneration (2016: €10.0 million), €15.3 million
(2016: €11.6 million) was short-term and medium-term variable
performance-related remuneration (annual bonus with defer-
ral), and €10.2 million was variable performance-related remu-
neration granted in the ﬁnancial year 2017 with a long-term
incen tive eﬀect (2016: €10.2 million). (cid:202) B.51

B.49
Annual bonus
(short- and medium-term variable remuneration of the
Board of Management members active at year-end)

B.50
PPSP 2013 (paid in 2017)
(long-term variable remuneration (cid:2) B.55)

Maximum 235% of the base salary
+ 10% of the base salary
+ 25% of the base salary

ACTUAL
197% of the base salary

200% of the
base salary

+ 5% of the base salary

+ 20% of the base salary

50% medium-term
50% medium-term
(deferral)
(deferral)

172% of the
base salary

50% short-term
50% short-term

50%
50%
medium-term
medium-term
(deferral)
(deferral)

50%
50%
short-term
short-term

235

200

175

150

125

100

500

450

400

350

300

250

200

150

100

ACTUAL
100%

Maximum
theoretically 500%
of the grant value

With more than 250% target
achievement, the total cap¹ applies.

ACTUAL
315%

Maximum
200% 191%

ACTUAL

Maximum
250%

ACTUAL
165%

Non-achievement of compliance
targets -25% - 0 % (not applied in 2017)

Joint performance
+/- 25%

Non-financial success parameters
+/- 10%

Financial success
parameters 0% – 200%

1 Positive target achievement of the defined performance criteria “unit-sales
development, revenue development, transformation in future technologies,
change in the corporate culture (Leadership 2020)”

Grant value (from
which is derived
the preliminary
number of phantom
shares with the
share price at
beginning of plan)

Performance factor
0% - 200% (from
which is derived
the final number of
phantom shares
with the share price
at beginning of plan)

Development of
Daimler share price
from beginning
until end of plan,
maximum 2.5 times
the issue price
(share price in €)

Overall target
achievement
final number of
phantom shares
times share price
at end of plan
(amount paid out
in €)

1 Amount paid out including dividend-equivalent
payments of PPSP 2013

B.51
Board of Management remuneration in 2017

Base salary

Variable remuneration
(annual bonus)
Short-term Medium-term

Remuneration (PPSP)
Number Value when granted
(2017: at share price €67.49)
(2016: at share price €62.94)

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard1

Martin Daum2

Renata Jungo Brüngger

Ola Källenius

Wilfried Porth

Britta Seeger

Hubertus Troska

Bodo Uebber

Dr. Thomas Weber

2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016

2,008
2,008
92
824
677
–
812
781
812
781
812
781
812
–
812
781
947
928
–
781

Total

7,784
7,665
1 Board of Management remuneration paid until Feb. 10, 2017
2 Board of Management remuneration paid from March 1, 2017

2017
2016

1,978
1,516
90
622
667
–
800
590
800
590
800
590
800
–
800
590
932
701
–
590

7,667
5,789

1,978
1,516
90
622
667
–
800
590
800
590
800
590
800
–
800
590
932
701
–
590

7,667
5,789

Total

8,617
7,610
272
3,216
3,054
–
3,455
2,989
3,455
2,989
3,502
3,036
3,455
–
3,455
2,989
4,057
3,559
–
3,053

39,315
40,838
–
18,236
15,446
–
15,446
16,336
15,446
16,336
16,148
17,078
15,446
–
15,446
16,336
18,464
19,528
–
17,345

2,653
2,570
–
1,148
1,043
–
1,043
1,028
1,043
1,028
1,090
1,075
1,043
–
1,043
1,028
1,246
1,229
–
1,092

151,157
162,033

10,204
10,198

33,322
29,441

142 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

B.52

Taxable non-cash beneﬁts and other fringe beneﬁts

In thousands of euros

Dr. Dieter Zetsche1
Dr. Wolfgang Bernhard2
Martin Daum3
Renata Jungo Brüngger

Ola Källenius

Wilfried Porth

Britta Seeger
Hubertus Troska4
Bodo Uebber

Prof. Dr. Thomas Weber

2017

2016

167

235

108

146

366

470

107

–

618

131

–

107

393

171

–

635

163

129

1,703
Total
1 (2016: including an anniversary bonus of €418,464)
2 Board of Management remuneration paid until Feb. 10, 2017
3 Board of Management remuneration paid from March 1, 2017
4 For the fulﬁllment of disclosure obligations pursuant to Section 285

2,347

No. 9a of the German Commercial Code (HGB), this amount is
reduced by €197,508 for the year 2017 (2016: €208,136). The cor-
responding fringe beneﬁts were granted and borne by a subsidiary
and are thus not included in the remuneration to be disclosed in
the annual ﬁnancial statements of the parent company, Daimler AG.

The granting of non-cash beneﬁts in kind, primarily the reim-
bursement of expenses for security precautions and the
provision of company cars, resulted in taxable beneﬁts for
the members of the Board of Management in 2017 as
shown in table (cid:202) B.52.

Commitments upon termination of service

Retirement provision
In 2012, Daimler introduced a new company retirement beneﬁt
plan for new entrants and new appointments for employees
paid according to collective bargaining wage tariﬀs as well as
for executives: the “Daimler Pensions Plan”. This retirement
beneﬁt system features the payment of annual contributions
by Daimler, but is oriented toward the capital market. Daimler
makes a commitment to guarantee the total of contributions
paid, which are invested in the capital market according to a
precautionary investment concept.

The Supervisory Board of Daimler AG has approved the appli-
cation of this system for all members of the Board of Manage-
ment newly appointed since 2012. The amount of the annual
contributions results from a ﬁxed percentage of the base
salary and the total annual bonus for the respective ﬁnancial
year calculated as of the balance sheet date. This percentage
is 15%. This calculation takes into consideration the targeted
level of retirement provision for each Board of Management
member – also according to the period of membership – and
the resulting annual and long-term expense for the Company.
The contributions to the retirement provision are granted until
the age of 62. The beneﬁt from the pension plan is payable
to surviving Board of Management members at the earliest
at the age of 62, irrespective of their age upon retirement. If
a member of the Board of Management retires due to dis-
ability, the beneﬁt is paid as a disability pension, even before
the age of 62.

The Pension Capital system was used from the beginning of 2006
until the end of 2011. The pension agreements of active Board
of Management members that were valid until that time were
modiﬁed accordingly. All Board of Management members
newly appointed during that period were subject exclusively to
the Pension Capital system.

Under this system, each Board of Management member is
credited with a capital component each year. This capital com-
ponent comprises an amount equal to 15% of the sum of
the Board of Management member’s ﬁxed base salary and the
total annual bonus for the respective ﬁnancial year on the
balance sheet date, multiplied by an age factor equivalent to
a rate of return of 6% until 2015 and 5% as of 2016 (Wolfgang
Bernhard and Wilfried Porth: 5% for all years). These contribu-
tions to pension plans are granted only until the age of 60.
The beneﬁt from the pension plan is payable to surviving Board
of Management members at the earliest at the age of 60,
irrespective of their age upon retirement. If a member of the
Board of Management retires due to disability, the beneﬁt
is paid as a disability pension, even before the age of 60.

Payments under the Pension Capital system and the Daimler
Pensions Plan can be made in three ways:
– as a single amount;
– in twelve annual installments, whereby interest accrues

on each partial amount from the time payments commence
until the payout is complete (Pension Capital 6% or 5%;
Daimler Pensions Plan in accordance with applicable law);
– as an annuity with annual increases (Pension Capital 3.5%

or in accordance with applicable law; Daimler Pensions Plan
in accordance with applicable law).

The contracts specify that if a Board of Management member
passes away before retiring for reason of age, the spouse/
registered partner or dependent children is/are entitled to the
full committed amount in the case of the Pension Capital
system, and to the credit amount reached plus an imputed
amount until the age of 62 in the case of the Daimler Pensions
Plan. If a Board of Management member passes away a(cid:5)er
retiring for reason of age, in the case of payment of twelve
annual installments, the heirs are entitled to the remaining
present value. In the case of a pension with beneﬁts for surviving
dependents, the spouse/registered partner or dependent
children is/are entitled to 60% of the discounted terminal value
(Pension Capital), or the spouse/registered partner is
entitled to 60% of the actual pension (Daimler Pensions Plan).

Until the end of 2005, the pension agreements of Board
of Management members included 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;
an analogous implementation of this commitment for the
corresponding hierarchical level applied to Wilfried Porth for
the period prior to his serving as a member of the Board of
Management. Such pension claims remained in eﬀect a(cid:5)er the
conversion to the Pension Capital system but were frozen at
the level reached at the beginning of 2006.

Payments of these retirement pensions start upon request
when the term of service ends at or a(cid:5)er the age of 60, or are
paid as disability pensions if the term of service ends before
the age of 60 due to disability. The respective agreements pro-
vide for 3.5% annual increases starting when beneﬁts are

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 143

received (with the exception that Wilfried Porth’s beneﬁts are
adjusted in accordance with applicable law). The agreements
include a provision by which a spouse of a deceased Board of
Management member is entitled to 60% of that member’s
pension.

That amount can increase by up to 30 percentage points
depending on the number of dependent children.

Departing Board of Management members with pension agree-
ments (pension commitments) modiﬁed as of the beginning of
2006 receive, for the period between the end of the last contract
period and reaching the age of 60, payments in the amounts
of the pension commitments granted as described in the pre-
vious section. Departing Board of Management members are
also provided with a company car, in some cases for a deﬁned
period. These payments are made until the age of 60, possibly
reduced due to other sources of income, and are subject to
annual percentage increases described above in the explanation
of these pension agreements.

Service costs for pension obligations according to IFRS amounted
to €2.0 million in ﬁnancial year 2017 (2016: €2.8 million). The
present value of the total deﬁned beneﬁt obligation according
to IFRS amounted to €82.7 million as of December 31, 2017
(December 31, 2016: €95.7 million). Taking age and period of
service into account, the individual entitlements, service
costs and present values are shown in the table.
(cid:202) B.53

Commitments upon early termination of service
In the case of early termination without an important reason,
Board of Management service contracts include commitments
to payment of the base salary and provision of a company car
until the end of the original service period at a maximum. Such
persons are only entitled to payment of the annual bonus pro
rata for the period until the end of the contract of service or of
the Board of Management membership takes eﬀect. Entitle-
ment to payment of the performance-related component of
remuneration with a long-term incentive eﬀect (PPSP) that
has already been allocated is deﬁned by the conditions of the
respective plans. To the extent that the payments described
above are subject to the provisions of the so-called severance
cap of the German Corporate Governance Code, their total
including fringe beneﬁts is limited to double the annual remu-
neration and may not exceed the total remuneration for the
remaining period of the service contract.

In the event of an early termination of the service contract, both
the short-term and the delayed medium-term component
(deferral) of the annual bonus, and the proceeds from the long-
term PPSP, are paid out not when the contract is terminated
but instead at the points in time agreed upon in the service
contract or in the terms and conditions of the PPSP plan.

In connection with the early termination of the Board of
Management membership of Dr. Wolfgang Bernhard by mutual
agreement, eﬀective midnight on February 10, 2017, it was
agreed that the payments to be made by the Company pursuant

B.53
Individual entitlements, service costs and present values for members of the Board of Management

Annual pension
(as regulated until 2005)
as of age 60

Service cost
(for pension, pension
capital and Daimler
Pensions Plan)

Present value1 of obliga-
tions (for pension,
pension capital and
Daimler Pensions Plan)

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard2

Martin Daum3

Renata Jungo Brüngger

Ola Källenius

Wilfried Porth

Britta Seeger

Hubertus Troska

Bodo Uebber

Prof. Dr. Thomas Weber

Total

2017
2016

1,050
1,050

–
–

156
156

–
–

275
275

–
300

–
708

46
367

102
–

245
117

248
235

282
247

122
–

238
239

690
649

–
264

1,481
1,781

1,973
2,826

42,738
43,533

–
3,230

2,860
–

938
654

2,651
2,345

10,280
9,597

1,072
–

4,909
4,611

17,263
17,007

–
14,716

82,711
95,693

1 The amounts of the present values are primarily due to the low level of the relevant discount rate.
2 Dr. Bernhard pro rata until Feb. 10, 2017
3 Mr. Daum pro rata from March 1, 2017

144 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

to the contract of service would continue to be granted until
the end of the original contract of service on February 28, 2018.
Accordingly, Dr. Bernhard receives a base salary of €869,744,
short-term variable remuneration of €721,430 (value at the con-
tract date to be paid in 2018), medium-term variable remuner-
ation of €721,430 (value at the contract date to be paid in 2019
with application of the bonus/malus rule), and fringe beneﬁts
of €11,570. Service cost amounts to €365,244 (in accordance
with Section 285 No. 9a of the German Commercial Code (HGB)
€306,077). Entitlement relating to long-term variable remuner-
ation (PPSP) and the company pension are paid out pursuant
to the contractual provisions.

Sideline activities of Board of Management members
The members of the Board of Management should accept
management board or supervisory board positions and/or any
other administrative or honorary functions outside the Group
only to a limited extent. Furthermore, they require the consent
of the Supervisory Board before commencing 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 statutory supervisory
boards or comparable boards of business enterprises, they are
disclosed in the notes to the annual ﬁnancial statements of
Daimler AG, which is published on our website. In general, Board
of Management members have no right to separate remuner-
ation for board positions held at other companies of the Group.

Loans to members of the Board of Management
In 2017, 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
Management of Daimler AG and their survivors
Payments made in 2017 to former members of the Board of
Management of Daimler AG and their survivors (including
payments made to Dr. Bernhard a(cid:5)er termination of his Board
of Management membership) amounted to €19.0 million
(2016: €15.6 million). Pension provisions according to IFRS for
former members of the Board of Management and their
survivors amounted to €270.5 million as of December 31, 2017
(2016: €252.9 million).

Details of Board of Management remuneration in 2017
pursuant to the requirements of the German Corporate
Governance Code
The following tables show for each individual member of the
Board of Management on the one hand the beneﬁts granted
for the ﬁnancial year and on the other hand the payments
made in or for the reporting year and the retirement pension
expense in or for the year under review in accordance with
the recommendations of Clause 4.2.5 paragraph 3 of the German
Corporate Governance Code.

The total of “beneﬁts granted” for ﬁnancial year 2016
is calculated from
– the base salary in 2016,
– the taxable non-cash beneﬁts and other fringe beneﬁts in 2016,
– the half of the annual bonus payable in 2017 for 2016 at the

value for target achievement of 100%,

– the half of the share-based annual bonus payable in 2018 for

2016 at the value for target achievement of 100%,

– the value of the long-term share-based remuneration (PPSP)

at the time when granted in 2016 (payable in 2020), and

– the retirement pension expense in 2016 (service costs in 2016).

B.54
Beneﬁts granted

In thousands of euros

Base salary

Taxable non-cash beneﬁts and
other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral
(50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Total remuneration
Total limit1 for components of remuneration
granted in the reporting year
Excluding
– Taxable non-cash beneﬁts and other fringe beneﬁts
– Retirement pension expense (service costs)

Dr. Dieter Zetsche
Chairman of the Board of Management,
Head of Mercedes-Benz Cars

Jan. 1 – Dec. 31
2016

Jan. 1 – Dec. 31 Jan. 1 – Dec. 31
2016
max.

min.

2017

Dr. Wolfgang Bernhard
Daimler Trucks & Buses

Jan. 1 – Feb. 10
min. max.

2017

2,008

618

167

2,626

2,175

1,004

2,570

4,578

708

2,653

4,661

–

2,360

7,000

0 11,720

–

824

131

955

412

1,148

1,972

367

101

–

108

–

216

7,912

6,836

2,175 13,895

3,294

239

147

363

10,149

10,224

5,464

348

1 Total limit = maximum amount (cid:198) 1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe beneﬁts and retirement pension commitments).

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 145

Martin Daum
Daimler Trucks & Buses

Renata Jungo Brüngger
Integrity & Legal Aﬀairs

Jan. 1 – Dec. 31
2016

March 1 – Dec. 31
max.

min.

Jan. 1 – Dec. 31
2016

2017

Jan. 1 – Dec. 31
max.
min.

–

677

781

812

235

912

338

1,043

1,719

102

235

912

102

235

912

795

2,750

4,340

102

107

888

108

920

108

920

391

406

391

406

1,028

1,810

117

1,043

1,855

245

108

920

954

2,750

4,658

245

2,733

1,014

5,354

2,815

3,020

1,165

5,823

4,662

5,058

5,176

Beneﬁts granted

In thousands of euros

Base salary

Taxable non-cash beneﬁts and
other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus,
medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

1 Total limit = maximum amount (cid:198) 1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe beneﬁts and retirement pension commitments).

Beneﬁts granted

Ola Källenius
Group Research & Mercedes-Benz Cars
Development

Wilfried Porth
HR and Labor Relations Director & Mercedes-Benz
Vans

Jan. 1 – Dec. 31
2016

2017

Jan. 1 – Dec. 31
max.
min.

Jan. 1 – Dec. 31
2016

2017

Jan. 1 – Dec. 31
max.
min.

In thousands of euros

Base salary

Taxable non-cash beneﬁts and
other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral
(50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

781

812

781

812

393

1,174

907

391

406

391

406

1,028

1,810

235

1,043

1,855

248

907

954

2,750

4,658

248

171

952

146

958

146

958

391

406

391

406

1,075

1,857

247

1,090

1,902

282

146

958

954

2,875

4,783

282

3,219

3,010

1,155

5,813

3,056

3,142

1,240

6,023

5,058

5,176

5,153

5,271

1 Total limit = maximum amount (cid:198) 1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe beneﬁts and retirement pension commitments).

146 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Beneﬁts granted

In thousands of euros

Base salary

Taxable non-cash beneﬁts and
other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral
(50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Britta Seeger
Mercedes-Benz Cars Marketing & Sales

Jan. 1 – Dec. 31
2016

2017

Jan. 1 – Dec. 31
max.
min.

Jan. 1 – Dec. 31
2016

2017

Hubertus Troska
Greater China

Jan. 1 – Dec. 31
max.
min.

–

812

781

812

366

635

470

1,178

1,416

1,282

406

1,043

1,855

122

954

2,750

4,658

122

391

406

391

406

1,028

1,810

239

1,043

1,855

238

954

2,750

4,658

238

3,155

1,300

5,958

3,465

3,375

1,520

6,178

5,176

5,058

5,176

1 Total limit = maximum amount (cid:198) 1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe beneﬁts and retirement pension commitments).

Beneﬁts granted

In thousands of euros

Base salary

Taxable non-cash beneﬁts and
other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral
(50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Bodo Uebber
Finance & Controlling,
Daimler Financial Services

Prof. Dr. Thomas Weber
Group Research &
Mercedes-Benz Cars Development

Jan. 1 – Dec. 31
2016

2017

Jan. 1 – Dec. 31
max.
min.

Jan. 1 – Dec. 31
2016

2017

Jan. 1 – Dec. 31
max.
min.

928

947

163

107

1,091

1,054

464

473

464

473

1,229

2,157

649

1,246

2,192

690

1,112

3,288

5,512

690

3,897

3,936

1,744

7,256

6,025

6,095

–

781

129

910

391

1,092

1,874

264

3,048

5,187

–

1 Total limit = maximum amount (cid:198) 1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe beneﬁts and retirement pension commitments).

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 147

The total of “beneﬁts granted” for ﬁnancial year 2017
is calculated from
– the base salary in 2017,
– the taxable non-cash beneﬁts and other fringe beneﬁts in 2017,
– the half of the annual bonus payable in 2018 for 2017 at

the value for target achievement of 100%,

– the half of the share-based annual bonus payable in 2019 for

2017 at the value for target achievement of 100%,

– the value of the long-term share-based remuneration (PPSP)

at the time when granted in 2017 (payable in 2021), and

– the retirement pension expense in 2017 (service costs in 2017).

The total of “payments made” for ﬁnancial year 2016
is calculated from
– the base salary in 2016,
– the taxable non-cash beneﬁts and other fringe beneﬁts in 2016,
– the half of the annual bonus payable in 2017 for 2016 at

the value as of the end of the reporting period in ﬁnancial
year 2016,

The caps possible to ensure the total maximum amount shown
in the table of beneﬁts granted in ﬁnancial year 2016 are
implemented with the payout of PPSP 2016, which constitutes the
last payment to be made of the components of remuneration
granted in ﬁnancial year 2016. For ﬁnancial year 2016, therefore,
the possible cap would take place in 2020, the year that PPSP
2016 is paid out.

The total of “payments made” for ﬁnancial year 2017
is calculated from
– the base salary in 2017,
– the taxable non-cash beneﬁts and other fringe beneﬁts in 2017,
– the half of the annual bonus payable in 2018 for 2017 at

the value as of the end of the reporting period,

– the half of the share-based annual bonus paid in 2017 for

2015 (deferral),

– the value of the long-term share-based remuneration

(PPSP 2013) paid in 2017,

– the dividend equivalent of the current PPSP (2014, 2015,

– the half of the share-based annual bonus paid in 2016 for

2016 and 2017) paid in 2017, and

2014 (deferral),

– the retirement pension expense in 2017 (service costs in 2017).

– the value of the long-term share-based remuneration

(PPSP 2012) paid in 2016,

– the dividend equivalent of the current PPSP (2013, 2014,

2015 and 2016) paid in 2016, and

– the retirement pension expense in 2016 (service costs in 2016).

The caps possible to ensure the total maximum amount shown
in the table of beneﬁts granted in ﬁnancial year 2017 are
implemented with the payout of PPSP 2017, which constitutes the
last payment to be made of the components of remuneration
granted in ﬁnancial year 2017. For ﬁnancial year 2017, therefore,
the possible cap would take place in 2021, the year that PPSP
2017 is paid out.

B.55
Payments made

In thousands of euros

Base salary

Taxable non-cash beneﬁts and other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2012

Payment of PPSP 2013

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Dividend equivalent PPSP 2017

Total

Retirement pension expense (service costs)

Dr. Dieter Zetsche
Chairman of the Board of Management,
Head of Mercedes-Benz Cars

Dr. Wolfgang Bernhard
Daimler Trucks & Buses

Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Feb. 10
2017

2017

2016

2,008

618

2,626

1,516

1,727

6,417

–

395

141

121

133

–

2,008

167

2,175

1,978

2,175

–

6,181

–

152

121

133

128

10,450

708

10,868

–

824

131

955

622

670

2,567

–

158

–

4,190

367

101

892

–

2,472

–

3,454

Total remuneration

13,784

13,043

5,512

3,601

148 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Payments made

In thousands of euros

Base salary

Taxable non-cash beneﬁts and other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2012

Payment of PPSP 2013

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Dividend equivalent PPSP 2017

Total

Retirement pension expense (service costs)

Martin Daum1
Daimler Trucks & Buses

Renata Jungo Brüngger1
Integrity & Legal Aﬀairs

Jan. 1 – Dec. 31 March 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31
2017

2017

2016

–

677

235

912

667

–

775

102

781

107

888

590

–

320

–

812

108

920

800

–

488

–

1,000

117

1,407

245

Total remuneration

–

1,789

2,005

2,572

1 Payments from the long-term variable remuneration also include amounts granted before the Board of Management membership.

Payments made

In thousands of euros

Base salary

Taxable non-cash beneﬁts and other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2012

Payment of PPSP 2013

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Dividend equivalent PPSP 2017

Total

Retirement pension expense (service costs)

Ola Källenius1
Group Research &
Mercedes-Benz Cars Development

Wilfried Porth
HR and Labor Relations Director
& Mercedes-Benz Vans

Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31
2017

2017

2016

781

393

1,174

590

–

411

–

812

907

800

846

–

457

–

1,138

235

2,272

248

781

171

952

590

652

2,567

158

–

4,132

247

812

146

958

800

846

–

2,472

–

4,340

282

Total remuneration

2,547

3,427

5,331

5,580

1 Payments from the long-term variable remuneration also include amounts granted before the Board of Management membership.

Payments made

In thousands of euros

Base salary

Taxable non-cash beneﬁts and other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2012

Payment of PPSP 2013

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Dividend equivalent PPSP 2017

Total

Retirement pension expense (service costs)

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 149

Britta Seeger1
Mercedes-Benz Cars Marketing & Sales

Hubertus Troska
Greater China

Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31
2017

2017

2016

–

812

366

1,178

800

–

123

–

982

122

781

635

1,416

590

652

1,369

–

158

–

2,926

239

812

470

1,282

800

846

–

2,472

–

4,330

238

Total remuneration

–

2,282

4,581

5,850

1 Payments from the long-term variable remuneration also include amounts granted before the Board of Management membership.

Payments made

In thousands of euros

Base salary

Taxable non-cash beneﬁts and other fringe beneﬁts

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2012

Payment of PPSP 2013

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Dividend equivalent PPSP 2017

Total

Retirement pension expense (service costs)

Bodo Uebber
Finance & Controlling,
Daimler Financial Services

Prof. Dr. Thomas Weber
Group Research &
Mercedes-Benz Cars
Development

Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31 Jan. 1 – Dec. 31
2017

2017

2016

928

163

1,091

701

775

3,068

–

189

–

4,921

649

947

107

1,054

932

1,005

–

2,956

–

5,147

690

781

129

910

590

652

2,725

–

168

–

4,302

264

–

Total remuneration

6,661

6,891

5,476

150 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Remuneration of the Supervisory Board

Supervisory Board remuneration in 2017
The remuneration of the Supervisory Board is determined by the
Annual 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 March 2017 and eﬀective for the ﬁnan-
cial year beginning on January 1, 2017 specify that the mem-
bers 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
€144,000 a(cid:5)er the conclusion of the ﬁnancial year. The Chair-
man of the Supervisory Board receives an additional €288,000
and the Deputy Chairman of the Supervisory Board receives
an additional €144,000. The members of the Audit Committee are
paid an additional €72,000, the members of the Presidential
Committee are paid an additional €57,600 and the members of
the other committees of the Supervisory Board are paid an
additional €28,800; an exception is the Chairman of the Audit
Committee, who is paid an additional €144,000. Additional
payments are made for activities in a maximum of three com-
mittees; any persons who are members of more than three
such committees receive additional payments for the three most
highly paid functions. Members of a Supervisory Board com-
mittee are only entitled to remuneration for such membership
if the committee has actually convened to fulﬁll its duties in
the respective year.

In connection with the remuneration adjustment, all members
of the Supervisory Board have made a self-commitment to
purchase Company shares in the amount of 20% of their gross
annual salary (excluding committee remuneration and the
meeting fee) every year and to hold these shares until the end
of one year a(cid:5)er they have le(cid:5) the Company’s Supervisory
Board (voluntary obligation in accordance with the “comply or
explain” principle).

This does not apply to Supervisory Board members whose
Supervisory Board remuneration is subject in a mandatory
or voluntary manner to the guidelines of the German Trade
Union Confederation on the transfer of supervisory board
remuneration to the Hans Böckler Foundation, or to the same
extent is subject to a transfer to the employer or claim to
payment due to a service or employment contract. In the event
that a lower amount of the Supervisory Board remuneration
is transferred or credited, the voluntary commitment applies
to 20% of the amount not transferred or credited. With this
voluntary commitment, the members of the Supervisory Board
are expressing their focus on and commitment to the long-
term, sustainable success of the Company.

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. The meeting
fee is paid only once if several meetings of the Supervisory
Board and/or its committees are held on the same calendar day.

The individual remuneration of the members of the
Supervisory Board is shown in table. (cid:202) B.56

In ﬁnancial year 2017, no remuneration was paid for services
provided personally beyond the aforementioned board and com-
mittee activities, in particular for advisory or agency services,
except for the remuneration paid to the members of the Super-
visory Board representing the employees in accordance with
their contracts of employment.

The remuneration of all the activities of the members of the
Supervisory Board of Daimler AG in the year 2017 was thus
€4.2 million (2016: €3.5 million).

Loans to members of the Supervisory Board
No advances or loans were made to members of the Super-
visory Board of Daimler AG in 2017.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 151

Function(s) remunerated

Total in 2017

B.56
Supervisory Board remuneration

Name

In euros

Dr. Manfred Bischoﬀ

Michael Brecht1
Dr. Paul Achleitner

Bader M. Al Saad

Sari Baldauf
Bettag, Michael1
Dr. Clemens Börsig

Dr. Bernd Bohr

Dr. Jürgen Hambrecht

Petraea Heynike

Andrea Jung

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 and the Nomination Committee

Member of the Supervisory Board (since March 29, 2017)

Member of the Supervisory Board and the Nomination Committee

Member of the Supervisory Board

Member of the Supervisory Board and Chairman of the Audit Committee

Member of the Supervisory Board (until March 29, 2017)
Member of the Supervisory Board and the
Presidential Committee

Member of the Supervisory Board

Member of the Supervisory Board and the Audit Committee

Joe Kaeser
Ergun Lümali1
Wolfgang Nieke1
Dr. Bernd Pischetsrieder
Valter Sanches2
Jörg Spies1
Elke Tönjes-Werner1
Sibylle Wankel1
Dr. Frank Weber
Roman Zitzelsberger1
1 The employee representatives have stated that their board remuneration is to be transferred to the Hans-

Member of the Supervisory Board and the Presidential Committee

Member of the Supervisory Board

Böckler Foundation, in accordance with the guidelines of the German Trade Union Federation.

2 Mr. Sanches has directed that he receive no remuneration and that his board remuneration is to be paid to

the Hans-Böckler Foundation.

536,000

436,300

183,800

115,177

184,900

153,900

302,300

38,018

215,900

153,900

152,800

230,300

153,900

152,800

150,600

153,900

217,000

152 B | COMBINED MANAGEMENT REPORT | TAKEOVER-RELEVANT INFORMATION AND EXPLANATION

Takeover-Relevant Information and Explanation

(Report pursuant to Section 315a Subsection 1 and Section 289a Subsection 1 of the German Commercial Code (HGB))

Composition of share capital
The share capital of Daimler AG amounted to approximately
€3,070 million at December 31, 2017. It is divided into
1,069,837,447 registered shares, each of which accounts for
approximately €2.87 of equity capital. Pursuant to Section 67
Subsection 2 of the German Stock Corporation Act (AktG), only
those persons registered as shareholders in the register of
shareholders are considered to be shareholders of the Company.
With the exception of treasury shares, from which the Com-
pany does not have any rights, 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 in accor-
dance with the dividend payout approved by the Annual Share-
holders’ Meeting. The rights and obligations arising from the
shares are derived from the provisions of applicable law, in par-
ticular Sections 12, 53a ﬀ, 118 ﬀ and 186 of the German Stock
Corporation Act. There were no treasury shares at December 31,
2017.

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 Cor-
poration 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. Eligible participants in the Performance
Phantom Share Plans (PPSP) of Executive Level 1 and eligible
members of the Board of Management are obliged by the
Plans’ terms and conditions and by the Stock Ownership Guide-
lines to acquire Daimler shares with a part of their Plan income
up to a deﬁned target volume and to hold them for the duration
of their employment at the Daimler Group. For the other per-
sons eligible for PPSP, this obligation no longer applies since
payment of PPSP 2013 in February/March 2017.

Provisions of applicable law and of the Articles of
Incorporation concerning the appointment and dismissal of
members of the Board of Management and amendments
to the Articles of Incorporation
Members of the Board of Management are appointed and dis-
missed on the basis of Sections 84 and 85 of the German Stock
Corporation Act (AktG) and Section 31 of the German Code-
termination Act (MitbestG). In accordance with Section 84 of
the German Stock Corporation Act, the members of the Board
of Management are appointed by the Supervisory Board for a
maximum period of oﬃce of ﬁve years. However, the Super-
visory Board of Daimler AG has decided generally to limit the
initial appointment of members of the Board of Management
to three years. Reappointment or the extension of a period of
oﬃce is permissible, in each case for a maximum of ﬁve years.

Pursuant to Section 31 Subsection 2 of the German Code-
termination Act (MitbestG), the Supervisory Board appoints the
members of the Board of Management with a majority com-
prising at least two thirds of its members’ votes. If no such
majority is obtained, the Mediation Committee of the Super-
visory Board has to make a suggestion for the appointment
within one month of the vote by the Supervisory Board in
which the required majority was not reached. The Supervisory
Board then appoints the members of the Board of Management
with a majority of its members’ votes. If no such majority is
obtained, voting is repeated and the Chairperson of the Super-
visory Board then has two votes. The same procedure applies
for dismissals of members of the Board of Management.

In accordance with Article 5 of the Articles of Incorporation,
the Board of Management has at least two members. The num-
ber of members is decided by the Supervisory Board. Pursuant
to Section 84 Subsection 2 of the German Stock Corporation Act
(AktG), the Supervisory Board can appoint a member of the
Board of Management as its Chairperson. If a required member
of the Board of Management is lacking, an aﬀected party can
apply in urgent cases for that member to be appointed by the
court pursuant to Section 85 Subsection 1 of the German Stock
Corporation Act (AktG). Pursuant to Section 84 Subsection 3 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 Chairperson of the Board of Manage-
ment if there is an important reason to do so.

B | COMBINED MANAGEMENT REPORT | TAKEOVER-RELEVANT INFORMATION AND EXPLANATION 153

Pursuant to Section 179 of the German Stock Corporation Act
(AktG), the Articles of Incorporation can only be amended by
a resolution of an Annual Shareholders’ Meeting. Unless other-
wise required by applicable law, resolutions of the Annual
Shareholders’ Meeting – with the exception of elections – are
passed pursuant to Section 133 of the German Stock Corpo-
ration Act (AktG) and Article 16 Subsection 1 of the Articles of
Incorporation with a simple majority of the votes cast and if
required with a simple majority of the share capital represented.
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; no use is made in the
Articles of Incorporation of the possibility to stipulate a larger
majority of the share capital. Amendments to the Articles of
Incorporation that only aﬀect the wording can be decided
upon by the Supervisory Board in accordance with Article 7
Subsection 2 of the Articles of Incorporation. Pursuant to
Section 181 Subsection 3 of the German Stock Corporation
Act (AktG), amendments to the Articles of Incorporation
take eﬀect upon being entered in the Commercial Register.

Authorization of the Board of Management to issue or
buy back shares
By resolution of the Annual Shareholders’ Meeting of April 1,
2015, the Company was authorized to acquire its own shares
during the period until March 31, 2020 for all legal purposes
in a volume of up to 10% of the share capital at the time of the
resolution of the Annual Shareholders’ Meeting. The shares
can be used, under the exclusion of shareholders’ subscription
rights, for, among other things, corporate mergers and acquisi-
tions or else can be sold for cash to third parties at a price that
is not signiﬁcantly below the market price at the time of the
sale. The shares can also be used to service debt on convertible
bonds and/or bonds with warrants, or can be issued to employ-
ees of the Company and employees and members of executive
bodies of aﬃliated companies pursuant to Section 15 ﬀ of
the German Stock Corporation Act (AktG). The Company’s own
shares can also be canceled.

In addition, the Board of Management is authorized under other
deﬁned circumstances and with the consent of the Super-
visory Board to exclude shareholders’ subscription rights for
shares they acquire. The Company’s own shares in a volume
of up to 5% of the share capital existing at the time of the reso-
lution of the Annual Shareholders’ Meeting can also be
acquired with the application of derivative ﬁnancial instruments
(put or call options, forwards or a combination of these ﬁnan-
cial instruments), whereby the terms of the derivatives may not
exceed 18 months and must be terminated on March 31, 2020,
at the latest.

No use was made of this authorization to acquire the
Company’s own shares during the reporting period.

By resolution of the Annual Shareholders’ Meeting held on
April 9, 2014, the Board of Management was authorized with
the consent of the Supervisory Board to increase the share
capital of Daimler AG in the period until April 8, 2019, wholly
or in partial amounts, on one or several occasions, by up to
€1 billion by issuing new registered shares of no par value in
exchange for cash or non-cash contributions, and with the
consent of the Supervisory Board under certain conditions and
within deﬁned limits to exclude shareholders’ subscription
rights (Approved Capital 2014). Subscription rights can, under
these deﬁned conditions, be excluded in the event of a capital
increase through non-cash contributions for the purposes of
an acquisition, and in the case of a capital increase through
cash contributions, if the issue price of new shares is not sig-
niﬁcantly below the market price at the time of the issue.

No use has yet been made of Approved Capital 2014.

By resolution of the Annual Shareholders’ Meeting held on
April 1, 2015, the Board of Management, with the consent of the
Supervisory Board, is authorized to issue during the period
until March 31, 2020 convertible bonds and/or bonds with war-
rants or a combination of those instruments (commercial
papers) in a total nominal amount of up to €10 billion with a
maximum term of ten years, and to grant the owners/lenders
o(cid:5)hose 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 may be issued in exchange for
consideration in cash, but also for consideration in kind, in
particular for a participation in other companies. The respective
terms and conditions may also provide for mandatory con-
version or an obligation to exercise the option rights. The bonds
can be issued once or several times, wholly or in installments,
or simultaneously in various tranches. They can also be issued
by companies aﬃliated with Daimler AG pursuant to Section
15 ﬀ of the German Stock Corporation Act (AktG).

Inter alia, the Board of Management was also authorized under
certain circumstances, within certain limits and with the
consent of the Supervisory Board to exclude shareholders’ sub-
scription rights to the bonds. Subscription rights can, under
these deﬁned conditions, be excluded when bonds are issued
in exchange for non-cash contributions, particularly within
the framework of a merger or acquisition, and when bonds are
issued in exchange for cash contributions, if the issue price
is not signiﬁcantly below the theoretical market price of the
bonds at the time of the issue. No use has yet been made of
this new authorization to issue convertible bonds and/or bonds
with warrants.

In order to service the debt of the convertible bonds and/or
bonds with warrants issued as a result of the authorization, the
Annual Shareholders’ Meeting of April 1, 2015, also approved
a conditional increase in the share capital of up to €500 million
(Conditional Capital 2015).

154 B | COMBINED MANAGEMENT REPORT | TAKEOVER-RELEVANT INFORMATION AND EXPLANATION

Material agreements taking effect in the event of a
change of control
Daimler AG has concluded various material agreements, as listed
below, that include clauses regulating the possible event of
a change of control, as can occur as a result of a takeover bid:
– A non-utilized syndicated credit line for a total amount

of €9 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

€2.0 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.

– Guarantees and securities for credit agreements of consoli-

dated subsidiaries for a total amount of €131 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
applications 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 Company. 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 cooperation agreement with Ford concerning the joint

predevelopment of a fuel-cell system. In the event of a change
of control of one of the parties to the agreement, the agree-
ment provides for the right of termination for the other party. A
change of control is deemed to occur at a threshold of 50%
of the voting rights of the company in question or upon authori-
zation to appoint a majority of the members of its managing
board.

– A master cooperation agreement on wide-ranging strategic

cooperation with Renault S.A., Renault-Nissan B.V. and Nissan
Motor 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 agreement. A change of control as
deﬁned by the master cooperation agreement occurs if a third
party or several third parties acting jointly acquire, legally
or economically, directly or indirectly, at least 50% of the voting
rights in the company in question or are authorized to appoint
a majority of the members of its managing board. Under the
master cooperation agreement, several cooperation agree-
ments were concluded between Daimler AG on the one side
and Renault and/or Nissan on the other, which provide for
the right of termination for a party to the agreement in the case
of a change of control of another party. These agreements
primarily concern a new architecture for small cars, the shared
use and development of fuel-eﬃcient diesel and gasoline
engines and transmissions, the development and supply of a
small urban delivery van, the development, production and

supply of pickups, the use of an existing architecture for com-
pact cars, and the joint production of Inﬁniti/Nissan and
Mercedes-Benz compact vehicles in a 50-50 joint venture in
Mexico. A change of control is deemed to occur at a thresh-
old of 50% of the voting rights of the company in question or
upon authorization to appoint a majority of the members of
its 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 with BAIC Motor Co., Ltd. related to a jointly

held company for the production and distribution of cars of the
Mercedes-Benz brand in China, by which BAIC Motor Co.,
Ltd. is given the right to terminate the agreement or exercise
a put or call option in the case that a third party acquires
one third or more of the voting rights in Daimler AG.

– An agreement related to the establishment of a joint venture

with Beiqi Foton Motor Co., Ltd. for the purpose of producing
and distributing heavy-duty and medium-duty trucks of the
Auman brand. This agreement gives Beiqi Foton Motor Co., Ltd.
the right of termination in the case that one of its competitors
acquires more than 25% of the equity or assets of Daimler AG
or becomes able to inﬂuence the decisions of its Board of
Management.

– An agreement between Daimler and Robert Bosch GmbH
related to the joint establishment and joint operation of
EM-motive GmbH for the development and production of
traction and transmission-integrated electric motors as
well as parts and components for such motors for automotive
applications and for the sale of those articles to the Robert
Bosch Group and the Daimler Group. If Daimler should become
controlled by a competitor of Robert Bosch GmbH, Robert
Bosch GmbH has the right to terminate the consortium agree-
ment without prior notice and to acquire all the shares in
the joint venture held by Daimler at a fair market price.
– An agreement between Daimler AG, BMW AG and Audi AG

related to the acquisition of the companies of the HERE Group
and the associated establishment of There Holding B.V. In
the event of a change of control of one of the parties to the
agreement, the agreement obligates the party in question
to oﬀer its shares in There Holding B.V. to the other parties to
the agreement (shareholders). A change of control of Daimler
AG occurs if a person gains control over Daimler AG, whereby
control is deﬁned as (i) having control of more than 50% of
the voting rights, (ii) being able to control more than 50% of the
voting rights eligible to vote at the shareholders’ meetings
on all or nearly all matters, or (iii) the right to determine the
majority of the members of the Board of Management or of
the Supervisory Board. A change of control also occurs if com-
petitors of the HERE Group or certain possible competitors
of the HERE Group in the technology industry acquire a share-
holding of at least 25% of Daimler AG. If none of the other
parties acquire these shares, the agreement gives them the
right to dissolve There Holding B.V.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 155

Risk and Opportunity Report

The Daimler Group is exposed to a large number of risks that
are directly linked with the business activities of its divisions or
which result from external inﬂuences. A risk is understood as
the danger that events, developments or actions will prevent the
Group or one of its divisions from achieving its targets. At the
same time, it is important for the Daimler Group to identify oppor-
tunities so that they can be utilized in the course of its busi-
ness activities, thus safeguarding and enhancing the Group’s
competitiveness. An opportunity is understood as the possibil-
ity to safeguard or to surpass the planned targets of the Group or
a division as a result of events, developments or actions. The
divisions have direct responsibility for recognizing and manag-
ing business risks and opportunities at an early stage. As part
of the strategy process, risks related to the planned long-term
development and opportunities for further proﬁtable growth
are identiﬁed and integrated into the decision-making process.
In order to identify business risks and opportunities at an early
stage and to assess and manage them consequently, eﬀective
management and control systems, which are clustered into a
risk and opportunity management system, are applied. Risks and
opportunities are not oﬀset. The system is described below.

B.57
Assessment of probability of occurrence/possible impact

Level

Low

Medium

High

Probability of occurrence

0% < Probability of occurrence ≤ 33%

33% < Probability of occurrence ≤ 66%

66% < Probability of occurrence < 100%

Level

Low

Possible impact

€0 <

Medium

€500 million ≤

High

Impact

< €500 million

< €1 billion

≥ €1 billion

Risk and opportunity management system

The risk management system with regard to existence-
threatening and other material risks is integrated into the
value-based management and planning system of the Daimler
Group. It is an integral part of the overall planning, manage-
ment and reporting process in the legal entities, divisions and
corporate functions. The risk management system is intended
to systematically and continually identify, assess, control, moni-
tor and report risks threatening Daimler’s existence and other
material risks, in order to support the achievement of corporate
targets and to enhance risk awareness at the Group.

The opportunity management system at the Daimler Group
is based on the risk management system. The objective of
opportunity management is to recognize the possible opportuni-
ties arising in business activities as a result of positive devel-
opments at an early stage, and to use them in the best possible
way for the Group by taking appropriate measures. By taking
advantage of opportunities, planned targets should be secured
or overachieved. Opportunity management considers relevant
and realizable opportunities that have not yet been included in
any planning.

In the context of operative planning, risks and opportunities –
with consideration of appropriate risk and opportunity catego-
ries – are identiﬁed and assessed for a two-year planning
period. Furthermore, the discussions for the derivation of mid-
term and strategic targets in the context of strategic planning
include the identiﬁcation and assessment of risks and opportu-
nities relating to a longer period. The reporting of risks and
opportunities in the Management Report generally relates to
a period of one year. Besides the reporting at speciﬁc times,
risk and opportunity management is established as a continuous
task within the Group. In addition to the regular reporting,
there is also an internal reporting obligation within the Group for
material risks arising unexpectedly. The central Group Risk
Management regularly reports the identiﬁed risks and opportu-
nities to the Board of Management and the Supervisory Board.

156 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Risk assessment takes place on the basis of probability of
occurrence and possible impact according to the levels low,
medium and high. These levels also apply to the possible
impact of opportunities. An analysis of the probability of occur-
rence is not considered here. When assessing the impact of
a risk or opportunity, its eﬀect on EBIT is generally considered.

The system includes principles and procedures as well as
preventive and detective controls. Among other things, it is
regularly checked, if
– the Group’s uniform ﬁnancial reporting, valuation and

accounting guidelines are continually updated and regularly
taught and adhered to;

Group level, risks and opportunities below €500 million are
classiﬁed as low, between €500 million and €1 billion as medium,
and above €1 billion as high. For the quantiﬁcation of each
risk and opportunity category in the Management Report, the
individual risks and opportunities are summarized for each cat-
egory. The assessment of the dimensions probability of occur-
rence and possible impact is based on the levels shown in table
(cid:202) B.57 and is conducted before measures are implemented. In
addition to the quantiﬁable risks and opportunities, risk man-
agement also considers qualitative risks and opportunities, which
primarily comprise those risks connected with aspects pre-
sented in the non-ﬁnancial report. In the context of describing
the risk and opportunity categories, signiﬁcant changes in
comparison to the prior year are explained.

Risk management is based on the principle of completeness.
This means that at the level of the individual entities, all concrete
risks enter the risk management process. General uncertain-
ties without any clear indication of a possible eﬀect on earnings
are monitored within the internal control system (ICS).

The scope of consolidation for risk and opportunity management
corresponds to the scope of consolidation of the consolidated
ﬁnancial statements and goes beyond that if necessary. The risks
and opportunities of the divisions and operating units, impor-
tant associated companies, joint ventures, joint operations and
the corporate departments are included.

The tasks of the employees responsible for risk and opportunity
management include, besides the identiﬁcation and assess-
ment of risks and opportunities, the development of measures
and the initiation of such measures, if necessary. The objective
of such measures is to avoid, reduce or transfer risks. The utili-
zation or enhancement of an opportunity, and its partial or full
implementation, also require measures to be taken. The cost-
eﬀectiveness of a measure is assessed before its implemen-
tation. The development of all risks and opportunities of the indi-
vidual entities and of the related measures that have been
initiated are continually monitored. The management activities
take place at the level of the divisions based on individual risks
and opportunities.

The internal control and risk management system with
regard to the accounting process has the objective of ensuring
the correctness and eﬀectiveness of accounting and ﬁnancial
reporting. It is designed in line with the internationally recognized
framework for internal control systems of the Committee of
Sponsoring Organizations of the Treadway Commission (COSO
Internal Control – Integrated Framework), is continually devel-
oped further, and is an integral part of the accounting and
ﬁnancial reporting processes in all relevant legal entities and
corporate functions.

– transactions within the Group are accounted

for and properly eliminated;

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

– processes are established to guarantee the completeness

of ﬁnancial reporting;

– processes are established for the segregation of duties and
for the “four-eyes principle” (dual accountability) in the
context of preparing ﬁnancial statements, and authorization
and access rules exist for relevant IT accounting systems.

The eﬀectiveness of the internal control system is systematically
assessed with regard to the corporate accounting process.
The ﬁrst step consists of risk analysis and the deﬁnition of con-
trol. Signiﬁcant risks are identiﬁed relating to the processes
of corporate accounting and ﬁnancial reporting in the main legal
entities and corporate functions. The controls required are
then deﬁned and documented in accordance with Group-wide
guidelines. Random samples are regularly tested to assess the
eﬀectiveness of the controls. Those tests constitute the basis
for self-assessment of the appropriate magnitude and eﬀec-
tiveness of the controls. The results of this self-assessment are
documented and reported in a Group-wide IT system. Identiﬁed
weaknesses are eliminated with consideration of their potential
eﬀects. At the end of the annual cycle, the selected legal enti-
ties and corporate functions conﬁrm the eﬀectiveness 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 regu-
larly informed about the main control weaknesses and the eﬀec-
tiveness of the control mechanisms installed. However, the
internal control and risk management system for the accounting
process cannot ensure with absolute certainty that material
false statements in accounting are avoided.

The organizational embedding and monitoring of risk and
opportunity management takes place through the risk manage-
ment organization established at the Group. In this context,
the divisions, corporate functions and legal entities are requested
to report on concrete risks and opportunities at regular inter-
vals. This information is passed on to Group Risk Management,
which processes the information and provides it to the Board
of Management and the Supervisory Board as well as to the
Group Risk Management Committee (GRMC).

In order to ensure the complete presentation and assessment
of existence-threatening and other material risks of the Group,
as well as the control and risk processes with regard to the
corporate accounting process, Daimler has established the
GRMC. It is composed of represen tatives of Accounting &
Financial Reporting, the Legal Department, Group Compliance
and Technical Compliance, and is chaired by the Board of
Management Member for Finance & Controlling/Daimler Finan-
cial Services. The internal auditing department contributes
material ﬁndings on the internal control and risk management
system.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 157

Responsibility for operational risk management and for the
risk management processes lies directly with the divisions,
corporate functions and legal entities.

Reports regarding the current risk situation and the eﬀective-
ness, functionality and appropriateness of the internal control
and risk management system are regularly presented to the
Board of Management and to the Audit Committee of the Super-
visory Board of Daimler AG. Furthermore, the responsible
managers regularly discuss risks and opportunities out of busi-
ness 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 con-
cerning the internal control and risk management system of
the Group are adhered to. If required, measures are then initi-
ated in cooperation with the respective management. External
auditors audit the system for the early identiﬁcation of risks
which is integrated in the risk management system for its
general suitability to identify risks threatening the existence of
the Group; in addition, they report to the Supervisory Board
on any signiﬁcant weaknesses that have been recognized in the
internal control and risk management system.

Risks and opportunities

The following section describes the risks and opportunities
that can have a signiﬁcant inﬂuence on the proﬁtability, cash
ﬂows and ﬁnancial position of the Daimler Group. In general,
the reporting of risks and opportunities takes place in relation
to the individual segments. If no segment is explicitly men-
tioned, the risks and opportunities described relate to all the
automotive divisions.

In addition, risks and opportunities that are not yet known
or classiﬁed as not material can inﬂuence proﬁtability, cash
ﬂows and ﬁnancial position.

Industry and business risks and opportunities

The following section describes the industry and business
risks and opportunities of the Daimler Group. A quantiﬁcation
of these risks and opportunities is shown in table (cid:202) B.58.

Economic risks and opportunities
Economic risks and opportunities constitute the framework for
the risks and opportunities listed in the following categories
and are integrated as premises into the quantiﬁcation of these
risks and opportunities. Overall economic conditions have a
signiﬁcant inﬂuence on vehicle sales markets and thus on the
Group’s success.

Like the majority of economic research institutes, Daimler
expects the world economy to grow by more than 3% once again
in 2018, following the perceptible acceleration of growth in
2017. Economic developments in 2017 are described in detail
in the “Economic Conditions and Business Development”
section of this Management Report; growth assumptions for
2018 are explained in the “Outlook” section E pages 95 ﬀ
and 170 ﬀ.

Economic risks and opportunities are linked with assumptions
and forecasts concerning general developments. The relation-
ship between risks and opportunities at the beginning of the
year 2018 is more balanced than in the previous year; however,
numerous risks continue to exist for the world economy.

In the United States, the tax reform recently passed and a
generally more expansive ﬁscal policy could result in additional
impetus that has not previously been considered. If a signiﬁ-
cantly more dynamic investment activity ensues there, leading
to stronger growth in combination with positive employment
and income eﬀects, this could boost demand in all automotive
divisions. As the Daimler Group generates a substantial pro-
portion of its revenue in the United States, especially in the
Mercedes-Benz Cars, Daimler Trucks and Daimler Financial
Services divisions, these developments would have consider-
able consequences for the Group’s success. Furthermore,
stronger growth in the United States would also have spillover
eﬀects on the rest of the world. However, the disadvantages
of such an expansionary ﬁscal policy are a worsening of the debt
situation in the United States and the risk that the central
bank (“Fed”) might feel forced to raise interest rates more sig-
niﬁcantly than previously assumed in order to counteract
strong inﬂationary pressure. This would increase the existing
risks arising from the Fed’s exit from its expansive monetary
policy and from the increase in the federal funds rates. As a
result, increasing lending rates could dampen the recovery
of the real-estate market and companies’ propensity to invest.
There is also the risk of sharp falls in share prices triggering
a chain reaction on global stock markets, resulting in major

B.58
Industry and business risks and opportunities

Risk category

Probability
of occurrence

General market risks

Risks relating to leasing
and sales ﬁnancing

Procurement market risks

Risks relating to the legal
and political framework

Low

Impact

Opportunity category

Impact

High

Low

High

General market opportunities

High

Opportunities relating to leasing
and sales ﬁnancing

Procurement market opportunities

Opportunities relating to the legal
and political framework

Low

158 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

market adjustments and phases of exceptional volatility in
the global ﬁnancial markets. Such developments could have a
negative impact on the investment climate worldwide, with
negative eﬀects on the world economy.

In Europe, political risks regarding the stability of the EU and the
monetary union have decreased somewhat since the results of
the elections in 2017. Nonetheless, separatist tendencies such
as in Catalonia or upcoming parliamentary elections in Italy
mean that a resurgence of the euro crisis cannot be ruled out.
In addition, there are still signiﬁcant risks in the banking
sector of some member states and the volume of defaulting
loans is very high in some countries. Another crucial factor
for economic development in Europe is the ongoing progress of
the Brexit negotiations. Failure to reach an agreement could
have a negative impact on the business climate and thus on the
development of the British economy and to a lower extent the
euro zone, which would potentially make trading conditions more
diﬃcult. The European market continues to be very important
for Daimler across all divisions; in fact, it is the biggest sales
market for the Mercedes-Benz Cars and Mercedes-Benz Vans
division. These risks exist along with opportunities for stronger
growth due to even stronger dynamism from consumption and
investment in the euro zone, which would also boost demand
for motor vehicles in the important European market.

Due to China’s enormous importance as a growth driver for the
world economy in recent years, a downturn in China’s economy
would represent a considerable risk to the world economy.
The enormous growth in debt that has been observed since the
global ﬁnancial crisis, especially in the corporate sector, repre-
sents a signiﬁcant risk. If the government’s eﬀorts to restrict
credit growth lead to a more signiﬁcant growth slowdown than
currently expected, this would result in a perceptible cooling-oﬀ
for the world economy. Within China, a slowdown could result
in an excessive increase in credit defaults, which would then
lead to turbulence in the banking sector and the ﬁnancial
markets. In particular for the Mercedes-Benz Cars division, for
which China is now the biggest individual sales market by a
large margin, the aforementioned risks could result in signiﬁcant
negative eﬀects on its unit sales. In addition, a drop in demand
in China would trigger another fall in the price of oil and other
(industrial) raw materials, with extremely disadvantageous
eﬀects for raw-material exporting countries worldwide, especially
in Latin America, the Middle East and Sub-Saharan Africa.
This would have a negative impact on demand for the automotive
divisions in those regions. On the other hand, growth in 2018
could also turn out to be stronger than expected if the Chinese
government pursues less tight monetary and ﬁscal policies
than currently anticipated. The resulting stronger growth in over-
all economic consumption would create additional opportuni-
ties, especially for the Mercedes-Benz Cars division.

The prospects of the emerging markets remain stable compared
with the previous year, but continue to be connected with some
risks, primarily of an external nature. For example, a signiﬁcant
increase in interest rates in the United States could cause
diﬃculties in particular for those emerging markets with high
current account deﬁcits and high levels of foreign debt,
resulting in signiﬁcant currency depreciation (e. g. Turkey, South
Africa and Brazil). Financial-market turbulences going as far as
currency crises would be possible consequences and could have
a massive impact on the economies of the aﬀected countries.
Lower growth in world trade and lower raw-material prices (e. g.
a drop in the oil price) than currently forecast would have a
negative impact on growth for exporters of raw materials. As
Daimler is already very active in those countries, or their mar-
kets play a strategic role, this would have signiﬁcantly negative
eﬀects on the Group’s prospective unit sales. However,
import-dependent economies such as India would beneﬁt from
lower price levels. Furthermore, stronger growth in world
trade and higher raw-material prices would create positive impe-
tus in emerging markets that export raw materials, leading
to stronger economic growth and thus increased demand for
motor vehicles.

In view of the positive economic situation in many parts of the
world, including Europe and some major emerging markets,
the opportunity exists that the world economy will grow in 2018
at a higher rate than hitherto assumed. A stronger increase in
worldwide demand would support raw-material prices and would
have positive eﬀects on raw-material exporters in South
America, the Middle East and Africa.

Further risks exist from geopolitical tension, such as between
Saudi Arabia and Iran or in North Korea, but countries like
Russia and Turkey also continue to represent considerable con-
flict potential. Should further terrorist attacks or assassina-
tions in Europe or other major economies lead to an additional
high degree of uncertainty, investment and consumer conﬁ-
dence could be severely undermined with a resulting impact on
the real economy. In addition, an increase in terrorist attacks
would accelerate the already growing inﬂux into populist parties,
thereby promoting isolationism and adversely aﬀecting world
trade, with enormous costs to the world economy.

General market risks and opportunities
The risks and opportunities for the economic development
of automotive markets are strongly aﬀected by the cyclical
situation of the global economy as described above. The
assessment of market risks and opportunities is linked to
assumptions and forecasts about the overall development
of markets in the regions in which the Daimler Group is active.
The possibility of markets developing better or worse than
assumed in the planning, or of changing market conditions,
generally exists for all divisions of the Daimler Group.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 159

Potential eﬀects of the risks on the development of unit sales
are included in risk scenarios. The risks can cause changes in
the planned business activities and the related vehicle sales and
inventories. In particular, the partially unstable macroeco-
nomic environment as well as political or economic uncertainty
could be causes in this context. Diﬀerences between the
divisions exist due to the partly varying regional focus of their
activities. Discussions about the future of diesel technology and
the related legal uncertainties are also responsible for changes
in customer demand, which can have a negative impact on
the sale of diesel vehicles and possibly also on earnings. The
development of markets, unit sales and inventories is conti-
nually analyzed and monitored by the divisions; if necessary,
speciﬁc marketing and sales programs are implemented. Clear
strategies have been formulated for each division for proﬁtable
growth and eﬃcient progress.

Volatilities with regard to market developments can also mean
that the overall market or regional conditions for the automo-
tive industry might develop better than assumed in the internal
forecasts and premises upon which the Group’s target plan-
ning is based. This can lead to market opportunities. Opportu-
nities can also arise from an improvement in the competitive
situation or a positive development of demand for the divisions.
However, the existing market opportunities of the divisions
of the Daimler Group can only be utilized if production can be
aligned accordingly, and if this is enabled by regional condi-
tions. In addition, any gaps between demand and supply have
to be recognized and covered in good time. The measures
that could be initiated by the Daimler Group to utilize potential
opportunities include a combination of local sales and mar-
keting activities, as well as central strategic product and capacity
planning.

As the target achievement of the Daimler Financial Services
division is closely connected with the business development in
the automotive divisions, the existing volume risks and
opportunities are reﬂected in the Daimler Financial Services
segment.

Due to the partly diﬃcult ﬁnancial situation of some dealerships
and vehicle importers, support actions might become neces-
sary to ensure the performance of the business partners. The
sources of these risks lie in the respective risk environment.
Supporting actions would adversely aﬀect the proﬁtability, cash
ﬂows and ﬁnancial position of the automotive divisions. Further
risks may result from the dependency on certain dealerships. In
certain circumstances, relationships with new business partners
may have to be developed. The ﬁnancial situation of strategi-
cally relevant dealerships and vehicle importers is continually
monitored. If required, payment conditions are adjusted and
additional guarantees are obtained. Risks of this kind exist for
dealerships and vehicle importers of the divisions Mercedes-
Benz Cars, Daimler Trucks and Mercedes-Benz Vans.

The successful product portfolio of the Daimler Group con-
tributes to its advantageous positioning compared with the
competitors. Possibly rising competitive and price pressure
above all aﬀect the segments Mercedes-Benz Cars and Daimler
Trucks. Aggressive pricing policies, the introduction of new
products by competitors, or pricing pressure in the a(cid:5)ersales
business can make it more diﬃcult to achieve expected prices.
This might result in lower revenue, the failure to achieve the
products’ planned proﬁtability, or lower market share. The
extent of such risks is related to the magnitude of a division’s
sales volume. Continuous monitoring of competitors is carried
out in order to recognize these risks at an early stage. Depending
on the situation, product-speciﬁc and possibly regionally diﬀer-
ent measures are taken to support weaker markets. They include
the use of new sales channels, actions designed to strengthen
brand awareness and brand loyalty as well as sales and mar-
keting campaigns. Daimler also applies various programs to
boost sales, which include ﬁnancial incentives for customers.

Further risks at Mercedes-Benz Cars, Mercedes-Benz Vans and
Daimler Financial Services relate to the development of used
vehicle markets and thus to the residual values of the vehicles
produced. In particular, the uncertainty existing in connection
with diesel vehicles can have a negative impact on residual val-
ues. As part of the established residual-value management
process, certain assumptions are made at local and corporate
levels regarding the expected level of prices, based upon which
the cars to be returned in the leasing business are evaluated.
If changing market developments lead to a negative deviation
from assumptions, there is a risk of lower residual values of used
cars. Depending on the region and the current market situa-
tion, the measures taken generally include continuous market
monitoring as well as, if required, price-setting strategies or
sales promotion measures designed to regulate vehicle inven-
tories. The quality of market forecasts is veriﬁed by periodic
comparisons of internal and external sources, and, if required,
the determination of residual values is adjusted and further
developed with regard to methods, processes and systems.
On the other hand, opportunities can arise from a positive
development of residual values caused by a favorable market
environment for used vehicles as well as reductions in price
reductions granted on new vehicles.

In addition, a residual-value risk from non-Daimler vehicles
exists for the Daimler Financial Services companies that operate
commercial ﬂeet management and leasing management,
because most of those vehicles are not covered by manufactur-
ers’ residual-value guarantees. Residual-value risk is taken
into account through a high level of diversiﬁcation with regard to
brands, regions, customers and lease periods. Used-vehicle
prices are continually monitored both locally and centrally, so
that the residual-value risk from a drop in market prices can
be forecast in good time and suitable countermeasures may be
initiated.

160 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Despite increasing residual-value risks, the probability of
occurrence of general market risks across all segments has
decreased compared with the previous year from “medium”
to “low” as a result of the improved market positioning of the
automotive divisions compared with their competitors.

Risks and opportunities relating to the leasing and
sales-financing business
In connection with the sale of vehicles, Daimler oﬀers its
customers a wide range of ﬁnancing possibilities – primarily
of leasing and ﬁnancing the Group’s products. The resulting
risks for the Daimler Financial Services segment are mainly due
to borrowers’ worsening creditworthiness, so receivables
might not be recoverable in whole or in part because of cus-
tomers’ insolvency (default risk or credit risk). Daimler
counteracts credit risks by means of creditworthiness checks
on the basis of standardized scoring and rating methods and
the collateralization of receivables, as well as an eﬀective risk
management with a ﬁrm focus on monitoring both internal
and macroeconomic leading indicators. Other risks associated
with the leasing and sales-ﬁnancing business involve the
possibility of increased reﬁnancing costs due to changes in
interest rates (interest rate risk).

An adjustment of credit conditions for customers in the leas-
ing and sales-ﬁnancing business caused by higher reﬁnancing
costs could reduce the new business and contract volume of
Daimler Financial Services, also reducing the unit sales of the
automotive divisions. Risks and opportunities also arise from
a lack of matching maturities with reﬁnancing. The risk of mis-
matching maturities is minimized by coordinating reﬁnancing
with the periods of ﬁnancing agreements, from the perspective
of interest rates as well as liquidity. Any remaining risks from
changes in interest rates are managed by the use of derivative
ﬁnancial instruments. Further information on credit risks and
the Group’s risk-minimizing actions is provided in E Note 32
of the Notes to the Consolidated Financial Statements.

Possible regard residual-value risks for the automotive
divisions and the companies in the Daimler Financial Services
division that operate commercial ﬂeet management and leas-
ing management are described in the section “General Market
Risks and Opportunities.”

The extent of the risks and opportunities and the probability
of occurrence of the risks relating to the leasing and sales-
ﬁnancing business continue to be assessed as low.

Procurement market risks and opportunities
Procurement market risks arise for the automotive divisions in
particular from ﬂuctuations in prices of raw materials and
energy. There are also risks of ﬁnancial bottlenecks of suppliers
and of capacity bottlenecks caused by supplier delivery failures
or by insuﬃcient utilization of production capacities at suppliers.
The risk situation relating to probability of occurrence and
impact has not changed compared with the previous year. Oppor-
tunities in the raw-material markets continue to exist due to
positive price developments for relevant raw materials. Com-
pared with the previous year, however, the extent of those
opportunities has decreased from “medium” to “low” as a result
of more pessimistic assumptions concerning the future develop-
ment of raw-material prices.

Raw-material prices continued to feature signiﬁcant volatility
in 2017. Due to almost completely unchanged macroeconomic
conditions, price ﬂuctuations are expected with uncertain and
uneven trends in the near future. On the one hand, raw-material
markets can be impacted by political crises and uncertainties –
combined with possible supply bottlenecks – as well as by
volatile demand for speciﬁc raw materials; this increases the
risk from raw-material prices for the individual automotive
segments. Generally, the ability to pass on the higher costs of
commodities and other materials in the form of higher prices
for the manufactured vehicles is limited because of strong com-
petitive pressure in the international automotive markets.

Supplier risk management aims to identify potential financial
bottlenecks for suppliers at an early stage and to initiate
suitable countermeasures. Although the crisis of recent years is
over, the situation of some of suppliers remains diﬃcult due
to a high degree of competitive pressure. This has necessitated
individual or joint support actions by vehicle manufacturers to
safeguard their production and sales. In the context of supplier
risk management, regular reporting dates are set for suppliers
for which we have received early warning signals and made cor-
responding internal assessments. On those dates, the suppliers
report their key performance indicators to Daimler and decisions
are made concerning any required support actions.

Due to the planned electriﬁcation of new model series and a
shi(cid:5) in customer demand from diesel to gasoline engines, the
Mercedes-Benz Cars segment in particular is faced with the
risk that Daimler will require changed volumes of components
from suppliers. This could result in over- or under-utilization
of production capacities for certain suppliers. If supplier can-
not cover their ﬁxed costs, there is the risk that suppliers
could demand compensation payments. Necessary capacity
expansion at suppliers’ plants could also require cost-eﬀective
participation.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 161

Risks and opportunities related to the legal and
political framework
The automotive industry is subject to extensive governmental
regulation worldwide. Risks and opportunities from the legal
and political framework have a considerable impact on Daimler’s
future business success. Regulations concerning vehicles’
emissions, fuel consumption and certification play a partic-
ularly important role. Complying with these varied and o(cid:5)en
diverging regulations all over the world requires strenuous eﬀorts
on the part of the automotive industry. In the future, Daimler
expects to spend an even larger portion of its research and devel-
opment budget to ensure compliance with these regulations.
Nonetheless, it has been possible to reduce the assessment of
risks and opportunities related to the legal and political frame-
work to “low” for the probability of occurrence. This is mainly
because issues for the year 2018 have been taken into consid-
eration in the planning. The potential impact of the risks and
opportunities remains unchanged at “high.”

Many countries and regions have already implemented stricter
regulations to reduce vehicles’ emissions and fuel con-
sumption or are currently preparing such laws. They relate for
example to the environmental impact of vehicles, including
emission levels, fuel economy and noise, as well as pollutants
from the emissions caused by the production facilities. Non-
compliance with regulations applicable in the various regions
might result in signiﬁcant penalties and reputational harm
and in the case of violations of regulations concerning vehicles’
environmental compatibility, might even mean that vehicles
could not be or could no longer be registered in the relevant
markets. The cost of compliance with these regulations is
signiﬁcant, especially for conventional engines, and Daimler
expects a signiﬁcant increase in costs in this context.

The Mercedes-Benz Cars segment faces risks with respect to
regulations on average ﬂeet fuel consumption in the Chinese
market. In the European Union, the EU Commission made an
ambitious proposal in November 2017 on future regulations
concerning the CO2 emissions of new vehicles (period of 2021
to 2030). Legislation in the United States on greenhouse gases
and fuel consumption impacts German premium manufacturers
and thus also the Mercedes-Benz Cars division harder than
US manufacturers, for example. Similar legislation exists or is
being prepared in many other countries, as in Japan, South
Korea, India, Canada, Switzerland, Mexico, Saudi Arabia, Brazil
and Australia. Daimler gives these targets due consideration in
its product planning. The increasingly ambitious targets require
signiﬁcant proportions of plug-in hybrids or cars with other
types of electric drive. The market success of these drive sys-
tems is greatly inﬂuenced by regional market conditions, for
example the battery-charging infrastructure and state support.

If the negative headlines on diesel engines and the threat of
driving bans on diesel vehicles were to unsettle customers,
resulting in lasting shi(cid:5)s in the drive-system portfolio (fewer
diesel and more gasoline engines), additional development and
production measures would have to be taken to meet the CO2
ﬂeet limits applicable as of 2020. On the other hand, diﬀerenti-
ating bans in cities that privilege diesel vehicles with good
emission levels could result in competitive advantages for our
new 4 and 6-cylinder engines (OM 654 and OM 656) with their
very good exhaust emissions.

Pursuant to EU Directive 2006/40/EC, since January 1, 2011,
vehicles only receive type approval if their air-conditioning units
are ﬁlled with a refrigerant that meets certain criteria with
regard to climate friendliness. For vehicles produced on the basis
of type approvals granted previously, the directive allowed a
period of transition until December 31, 2016. Mercedes-Benz
vehicles fully comply with these legal requirements as of
January 1, 2017 through the application of CO2 air-conditioning
and the refrigerant R1234yf in combination with a specially
developed safety device that will be used depending on each
vehicle’s conﬁguration. In December 2016, the EU Commission
initiated infringement proceedings against the Federal Republic
of Germany in the European Court of Justice (ECJ). The Com-
mission sees a contravention of the European type-approval
directive and of the Directive on emissions from air-condi-
tioning systems in motor vehicles by the German authorities.
In March 2017, Germany’s Federal Motor Vehicle Transport
Authority issued Daimler AG with an injunction requiring the
changeover of those vehicles from the ﬁrst half of 2013 in
which the previously used refrigerant R134a was used for reasons
of safety. Daimler considers the claim to be unfounded and
has ﬁled an objection to the order. At present, the Group does
not assume that these issues will result in material eﬀects on
its proﬁtability, cash ﬂows or ﬁnancial position.

Strict regulations for the reduction of vehicles’ emissions and
fuel consumption create potential risks also for the Daimler
Trucks and Daimler Buses divisions, because it will be hard
to fulﬁll the statutory requirements in some countries. For
example, legislation has been in eﬀect in Japan since 2006 and
in the United States since 2011 on the reduction of greenhouse-
gas emissions and fuel consumption by heavy-duty commercial
vehicles. In China, fuel-consumption legislation was dra(cid:5)ed
in 2017 which aﬀects our exports of heavy-duty trucks to that
country with strict requirements as of 2019/2020. The Euro-
pean Commission is currently working on methods for measur-
ing the CO2 emissions of heavy-duty commercial vehicles that
will have to be applied as of 2019. It has also decided to present
a standard for limiting heavy-duty commercial vehicles’ CO2
emissions in the ﬁrst half of 2018. We expect that the limits to
be conﬁrmed by the EU Parliament and Council will have to be
met as of approximately 2025. Other countries such as India,
South Korea and Brazil are also working on dra(cid:5) proposals
for reducing the fuel consumption of heavy-duty commercial
vehicles.

162 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Furthermore, many countries such as China, India and Brazil are
working on the regulation of emissions, which will raise their
standards at least to the level of Euro VI limits. Daimler Trucks
and Daimler Buses will therefore have to apply the latest tech-
nologies in order to fulﬁll these requirements.

Very demanding regulations for CO2 emissions are also planned
or have been approved for light commercial vehicles. This will
present a challenge for Mercedes-Benz Vans, especially in the
long term. In the United States, Mercedes-Benz Vans is aﬀected
to varying degrees by fuel-consumption and greenhouse-gas
regulations for both light-duty and heavy-duty vehicles. The
stricter limits planned for the years 2021 to 2027 will also aﬀect
Mercedes-Benz Vans. The proposals presented by the EU
Commission in November 2017 for limiting the CO2 emissions of
light commercial vehicles, if conﬁrmed by the EU Parliament
and Council, are very ambitious.

In addition to the described emission and fuel-consumption
regulations, traffic-policy restrictions for the reduction of traﬃc
jams, noise and emissions are becoming increasingly impor-
tant in cities and urban areas worldwide. In China for example,
limited access to vehicle registration is continuing, and now
also imported plug-in hybrid vehicles are being speciﬁcally
excluded from access to registration (e. g. in Beijing, Guang-
zhou and Shenzhen). This development can have a dampening
eﬀect on the development of unit sales, especially in growth
markets. Pressure to reduce personal transport is increasingly
being applied in European cities through discussions of bans
on vehicles entering or driving in inner cities, especially those
with diesel engines.

These discussions or bans on vehicles with conventional drive
systems can increase demand for vehicles with alternative drive
systems, especially for electric vehicles, as well as for mobility
services including car-sharing services. In order to utilize the
resulting opportunities, Daimler is present in the market with
the provision of innovative mobility services (including car2go,
moovel, mytaxi and Via).

Daimler continually monitors the development of statutory
and political conditions and attempts to anticipate foreseeable
requirements and long-term targets at an early stage in the
process of product development. The biggest challenge in the
coming years will be to oﬀer an appropriate range of drive
systems and the right product portfolio in each market, while
fulﬁlling customers’ wishes, internal ﬁnancial targets and
statutory requirements. With an optimal product portfolio and
market-launch strategy, competitive advantages may also arise.

The position of the Daimler Group in key foreign markets could
also be aﬀected by an increase in bilateral free-trade
agreements. If bilateral agreements are concluded without the
involvement of the European Union or without the conclusion
of equivalent agreements by the EU, the position of the Daimler
Group could be signiﬁcantly impacted. At the same time, EU
free-trade agreements could also result in opportunities for the
Daimler Group vis-à-vis competitors in countries which are
not parties to such agreements.

Furthermore, the danger exists that individual countries will
attempt to defend and improve their competitiveness in the
world’s markets by resorting to interventionist and protec-
tionist actions. This applies to the markets of developing
countries and emerging economies, but also to Europe, the
United States and China, and is manifested above all in the
form of local-content rules aﬀecting the entire value chain. In
addition, attempts are being made to limit growth in imports
through barriers to market access such as by making certifi-
cation processes more diﬃcult, delaying certiﬁcation and
imposing other complicated customers procedures, while attract-
ing direct foreign investment by means of appropriate industrial
policies. Changes in tax subsidies or the like have the potential
to signiﬁcantly inﬂuence the overall market development and
increase uncertainty in the planning process.

In order to adapt to these requirements, Daimler has already
increased its local value added in major markets, and has thus
taken appropriate action in good time. However, on the basis
of our production locations’ increasing proximity to the various
markets, further opportunities also exist for the Daimler Group,
relating for example to the utilization of market potential or
logistical advantages.

B.59
Company-speciﬁc risks and opportunities

Risk category

Probability
of occurrence

Impact

Opportunity category

Impact

Production and technology risks

Information technology risks

Personnel risks

Risks related to equity interests
and joint ventures

Low

High

Medium

Low

Medium

Production and technology opportunities

Information technology opportunities

Personnel opportunities

–

Opportunities related to equity interests
and joint ventures

Low

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 163

Company-speciﬁc risks and opportunities

The following section describes the company-speciﬁc risks
and opportunities of the Daimler Group. A quantiﬁcation of
these risks and opportunities is shown in table (cid:202) B.59.

Production and technology risks and opportunities
Key success factors for achieving the desired level of prices
for the products of the Daimler Group – and hence for the
achievement of corporate targets – are brand image, design
and quality, and thus the acceptance of products by custom-
ers, as well as technical features based on innovative research
and development. Convincing solutions, which for example
support accident-free driving or further improve the products’
fuel consumption and emissions, such as hybrid or electric
vehicles, are of key importance for safe and sustainable mobil-
ity. Innovations and technology opportunities for the progres-
sive and future-oriented design of the product range ﬂow into
the strategic product planning of the automotive divisions.
However, due to increasing technical complexity, the continu-
ally rising extent of requirements in terms of emissions, fuel
consumption and safety, as well as meeting and steadily raising
the Daimler Group’s quality standards, product launches and
manufacturing in the automotive divisions are also subject to
production and technology risks.

In the context of product launches, the required parts and
equipment components have to be available. To avoid restrictions
in this context, the related processes are continually evaluated
and improved. In order to secure and enhance the long-term
future viability of production facilities, modernization, expan-
sion, construction and restructuring measures are carried out
as required. The execution of modernization activities and
the launch of new products are generally connected with high
investments. For example, stipulations, plant reconstruction
or delays in the ramp-up phase of an innovation or during a prod-
uct’s lifecycle can lead to a short-term reduction in production
volumes. Those automotive segments are aﬀected which are
currently launching a new product or have planned a related
production ramp up. In this context, it is also necessary to con-
sider dependencies between contractual and cooperation part-
ners, as well as possible changes in regional conditions, which
have to be included in the local decision-making process.

In principle, there is a danger that infrastructure problems or the
failure of production equipment or production plants may
cause internal bottlenecks that would consequently generate
costs. With the parallel failure of several production plants, the
resulting eﬀects could accumulate. These risks mainly exist for
the Mercedes-Benz Cars segment. The production equipment
is continually maintained and modernized. As a precaution, spare
parts are held available or, if required, redundant machines
are purchased for the production plants that might be at risk.

Insuﬃcient availability of vehicle components at the right time,
interruptions in the supply chain and possible interruptions in
supply by energy providers can lead to bottlenecks, especially
at the Mercedes-Benz Cars division. In order to avoid such
bottleneck situations, importance is placed upon being able
to compensate for capacity constraints through forward
planning. In addition, supply chains and the availability and qual-
ity of products are continuously monitored within the context
of managing the entire value chain. Supplier management is
undertaken for the prevention of risks with the aim of increas-
ing inventories in good time and building up alternative supply
lines, as required.

Warranty and goodwill cases could arise in the Daimler Group
if the quality of the products does not meet the requirements,
regulations are not fully complied with, or support cannot be
provided in the required form in connection with product prob-
lems and product care. Quality problems with components in
vehicles from external suppliers – as for example in connection
with the industry-wide problems with Takata airbags – can
require technical adjustments that can lead to considerable
expenses. Possible claims in connection with such risks are
examined and, if necessary, the appropriate measures are initi-
ated for the aﬀected products. This can reduce the products’
proﬁtability and generate follow-up costs. The Daimler Group
works continually and intensively to maintain product quality
at a very high level, along with growing product complexity, in
order to avoid the need for correction measures on end products
and thus to supply customers with the best possible products.

The probability of occurrence and possible impact of produc-
tion and technology risks are unchanged compared with the
previous year across all segments.

Information technology risks and opportunities
The digitization strategy that is systematically pursued at
Daimler oﬀers new possibilities for enhancing customer bene-
ﬁts and enterprise value. However, it also includes risks from
the increasing IT dependency of products and business and pro-
duction processes. In addition, speciﬁc risks exist due to the
use and availability of new technologies in connection with digiti-
zation, which amongst others can aﬀect the products, their
use, or business operations. In addition, risks from cybercrime
and hacker attacks cannot be ruled out.

It is essential for a global company like Daimler AG that
information is available and can be exchanged in an up-to-date,
complete and correct form. Appropriately secure IT systems
and a reliable IT infrastructure must be used to protect informa-
tion. The Daimler Group intends to identify and evaluate risks
that could result in the interruption of business processes due
to the failure of IT systems or which could cause the loss or
corruption of data, over the entire lifecycle of applications and
IT systems.

164 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Due to growing requirements concerning the conﬁdentiality,
integrity and availability of data, Daimler has deﬁned various
preventive and corrective measures so that the related risks
are minimized and possible damage is limited. These measures
are continually adapted to changing circumstances. For exam-
ple, the Group minimizes potential interruptions of operating
processes in data centers by means of mirrored data sets,
decentralized data storage, outsourced data backups and IT
systems designed for high availability. Emergency plans are
developed, employees are trained sensitized, and further tech-
nical and organizational precautions are taken in order to
maintain operating capability. Speciﬁc threats are analyzed and
countermeasures are coordinated at a central cyber security
center. The protection of products and services from danger
caused by hacking and cybercrime is continually developed.

Despite all precautionary measures, disturbances in information
processing and therefore negative impacts on the business
processes and on IT-based services cannot be completely ruled
out.

The impact and probability of occurrence of IT risks remain
unchanged compared with the previous year.

Personnel risks and opportunities
The success of the Daimler Group is highly dependent on its
employees and their expertise. They are involved in their
respective activities and working processes with their ideas
and suggestions, and thus make signiﬁcant contributions to
improvements and innovations every day.

Competition for highly qualiﬁed staﬀ and management is still
very intense in the industry and the regions in which Daimler
operates. Future success also depends on the extent to which
the Daimler Group succeed over the long term in recruiting,
integrating and retaining specialist employees. The established
human resources instruments take such personnel risks into
consideration, while contributing toward the recruitment and
retention of staﬀ with high potential and expertise and ensur-
ing transparency with regard to the resources of the Daimler
Group. One focus of human resources management is the
targeted personnel development and further training of the
workforce. Employees beneﬁt for example from the range of
courses oﬀered by the Daimler Corporate Academy and from
transparency in the context of performance management.
Management culture and principles are currently being further
developed in a Group-wide project.

Due to demographic developments, the Group has to cope with
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. This issue is addressed by taking appropriate
measures in the area of generation management. If this risk
occurs, depending on the extent of the personnel shortage, an
impact is to be expected on the business activities and thus
also on the earnings of the Daimler Group.

There is no segment-speciﬁc assessment of the human resources
risk because the described risks are not related to any speciﬁc
business segment, but are valid for all segments in the respective
regions. Overall, personnel risks are reduced compared to
the previous year in terms of impact from “medium” to “low”. The
probability of occurrence remains unchanged.

Risks and opportunities related to associated companies,
joint ventures and joint operations
Cooperation with partners in associated companies, joint ven-
tures and joint operations and other types of partnership is of
key importance for Daimler. Along with ensuring better access
to growth markets and new technologies, these shareholdings
and partnerships help to utilize synergies and improve cost
structures in order to successfully respond to the competitive
situation in the automotive industry. Through investments in
startups, Daimler promotes innovative approaches in many areas
of the Group.

The Daimler Group generally participates in the risks and
opportunities of associated companies, joint ventures and joint
operations in line with its ownership interest.

Risks and opportunities can arise from the remeasurement of an
associated company, joint venture or joint operation relating
to the corresponding carrying value for the segment to which it
is allocated. Furthermore, the business activities of an associ-
ated company, joint venture or joint operation, or a disposal or
acquisition of a stake in such an entity, could cause ﬁnancial
obligations or an additional ﬁnancing requirement, but could
also cause higher income or cash inﬂows in excess of the tar-
gets set. Such risks are also generally connected with startups
whose further development is not yet foreseeable. Risks exist
in the Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz
Vans and Daimler Financial Services segments, as well as in
the associated companies, joint ventures and joint operations
directly allocated to the Group.

All associated companies, joint ventures and joint operations
are subject to a continuous monitoring process so that they
can be promptly supported if required and their proﬁtability
can be ensured. The recoverable value of investments is also
continually monitored.

Due to the development of the quoted portfolio and the increas-
ing, risky investments in startups, the possible impact of risks
in this category has increased compared with the previous year
from “low” to “medium.” The probability of occurrence remains
unchanged.

Financial risks and opportunities

The following section deals with the ﬁnancial risks and oppor-
tunities of the Daimler Group. Risks and opportunities can have
a negative or positive eﬀect on the proﬁtability, cash ﬂows
and ﬁnancial position of the Daimler Group. The probability of
occurrence and possible impact of these risks and opportuni-
ties is presented in table (cid:202) B.60.

In principle, the Group’s operating and ﬁnancial risk exposures
underlying its ﬁnancial risks and opportunities can be divided
into symmetrical and asymmetrical risk and opportunity proﬁles.
With the symmetrical risk and opportunity proﬁles (e. g. cur-
rency exposures), risks and opportunities exist equally, while
with the asymmetrical risk and opportunity proﬁles (e. g. credit
and country exposures), the risks outweigh the opportunities.

Daimler is generally exposed to risks and opportunities from
changes in market prices such as currency exchange rates,
interest rates, commodity prices and share prices. Market price
changes can have a negative or positive inﬂuence on the

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 165

Group’s proﬁtability, cash ﬂows and ﬁnancial position. Daimler
manages and monitors market price risks and opportunities
primarily in the context of its operational business and ﬁnancing
activities, and applies derivative ﬁnancial instruments for
hedging purposes where needed, thus limiting both market price
risks and opportunities.

In addition, the Group is exposed to credit and country-related
risks, risks of restricted access to capital markets and risks
of early credit repayment requirements. As part of the risk
management process, Daimler regularly assesses these risks
by considering changes in key economic indicators and market
information. Pension plan assets to cover retirement and
healthcare beneﬁts (market-sensitive investments including
equities and interest-bearing securities) are not included in
the following analysis.

Interest rate risks and opportunities
Changes in interest rates can create risks and opportunities
for business operations as well as for ﬁnancial transactions.
Daimler employs a variety of interest-rate sensitive ﬁnancial
instruments to manage the cash requirements of its business
operations on a day-to-day basis. Most of these ﬁnancial instru-
ments are held in connection with the ﬁnancial services busi-
ness of Daimler Financial Services, whose policy is generally
to perform term-congruent reﬁnancing. 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 inter-
est rates. The funding activities of the industrial business and
the ﬁnancial services business are coordinated at Group
level. Derivative interest rate instruments such as interest rate
swaps are used to achieve the desired interest rate maturities
and asset/liability structures (asset and liability management).

Exchange rate risks and opportunities
The Daimler Group’s global orientation means that its business
operations and ﬁnancial transactions are connected with risks
and opportunities related to ﬂuctuations in currency exchange
rates. This applies in particular to ﬂuctuations against the euro
of the US dollar, Chinese renminbi, British pound and other
currencies such as those of growth markets. An exchange rate
risk or opportunity arises in business operations primarily
when revenue is generated in a currency diﬀerent from that of
the related costs (transaction risk). This applies in particular
to the Mercedes-Benz Cars division, as a major portion of its
revenue is generated in foreign currencies while most of its
production costs are denominated in euros. The Daimler Trucks
division is also exposed to such transaction risks, but to a
lesser degree because of its worldwide production network.
Regularly updated currency risk exposures are successively
hedged with suitable ﬁnancial instruments (predominantly cur-
rency forwards and options) in accordance with exchange
rate expectations, which are continually reviewed, whereby both
risks and opportunities are limited. Any overcollateralization
caused by changes in exposure is generally reversed by suitable
measures without delay. Exchange rate risks and opportunities
also exist in connection with the translation into euros of the net
assets, revenues and expenses of the companies of the
Group outside the euro zone (translation risk); these risks are
not generally hedged.

Equity price risks and opportunities
The Group is subject to equity price risks in connection with
its listed associated companies and joint ventures. As of
December 31, 2017, the only shares that Daimler holds are
shares that are included in the consolidated ﬁnancial state-
ments using the equity method (primarily BAIC Motor). The
Group does not include these investments in a market price
risk analysis. The section “Risks and opportunities related to
associated companies, joint ventures and joint operations”
provides more information on equity risks and opportunities.

Commodity price risks and opportunities
As already described in the section “Procurement market risks
and opportunities”, the Group’s business operations are
exposed to changes in the market prices of purchased parts,
components and raw materials. The Group addresses these
procurement risks by means of concerted commodity and sup-
plier risk management. To a minor degree, derivative ﬁnancial
instruments are used to reduce the Group’s market price risks
related to the purchase of certain metals.

B.60
Financial risks and opportunities

Risk category

Exchange rate risks

Interest rate risks

Commodity price risks

Credit risks

Country risks

Risks of restricted capital-market access

Risks of credit repayment requirements

Risks relating to pension plans

Risks from changes in credit ratings

Probability
of occurrence

Impact

Opportunity category

Impact

Low

High

Low

Exchange rate opportunities

Interest rate opportunities

Commodity price opportunities

Credit opportunities

Country opportunities

Medium

Opportunities of restricted capital-market access

Low

High

Low

Opportunities of credit repayment requirements

Opportunities relating to pension plans

Opportunities from changes in credit ratings

High

Low

–

High

Low

166 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Credit risks
The Group is exposed to credit risks which result primarily
from its ﬁnancial services activities and from the operations of
its vehicle business. Credit risks also arise from the Group’s
liquid assets. The following statements pertain to risks arising
from the Group’s liquid assets; risks related to leasing and
sales ﬁnancing are addressed on E page 160. Should defaults
occur, this would adversely aﬀect the Group’s ﬁnancial position,
cash ﬂows and proﬁtability. In recent years, the limit method-
ology for exposures with ﬁnancial institutions has been contin-
ually further developed in order to counteract the diminished
creditworthiness of the banking sector since the ﬁnancial crisis.
In connection with investment decisions, priority is placed on
the borrowers’ very high creditworthiness and on balanced risk
diversiﬁcation. Most liquid assets are held in investments with
an external rating of “A” or better.

Country risks
Daimler is exposed to country risks that primarily result from
cross-border ﬁnancing or collateralization for Group companies
or customers (e. g. Turkey), from investments in subsidiaries
and joint ventures, and from cross-border trade receivables (e. g.
China). Country risks also arise from cross-border cash depos-
its with ﬁnancial institutions. The Group addresses these risks
by setting country limits (e. g. for cross-border ﬁnancing of
customers and for hard-currency portfolios from ﬁnancial ser-
vices companies) and through investment-protection insurance
against political risks in high-risk countries. Daimler also has
an internal rating system that divides all countries in which it
operates into risk categories.

Risks of restricted access to capital markets
Daimler covers its reﬁnancing needs, among other things, by
means of borrowing in the capital markets. Access to capital
markets in individual countries may be limited by government
regulations or by a temporary lack of absorption capacity. In
addition, pending legal proceedings as well as Daimler’s own
business policy considerations may temporarily prevent the
company from covering any liquidity requirements by means of
borrowing in the capital markets.

Risks of credit repayment requirements
Daimler may be required to make premature repayment of
special-purpose loans in the case of adverse results of ongoing
legal proceedings. It is to be expected that the resulting reﬁ-
nancing requirement will have to be concluded at a higher cost.

Further information on ﬁnancial risks, risk-limiting measures
and the management of these risks is provided in E Note 32
of the Notes to the Consolidated Financial Statements.
Information on the Group’s ﬁnancial instruments is provided
in E Note 31 of the Notes to the Consolidated Financial
Statements.

Risks and opportunities relating to pension plans
Daimler has pension beneﬁt obligations and to a lesser degree
obligations relating to healthcare beneﬁts, which are largely
covered by plan assets. The balance of pension obligations less
plan assets constitutes the carrying amount or funded status
of those employee beneﬁt plans. The measurement of pension
obligations and the calculation of net pension expense are
based on certain assumptions. Even small changes in those
assumptions such as a change in the discount rate could
have a negative or positive effect on the funded status and
Group equity in the current ﬁnancial year, or could lead to
changes in the periodic net pension expense in the following
ﬁnancial year. The fair value of plan assets is determined to
a large degree by developments in the capital markets. Unfa-
vorable or favorable developments, especially relating to
equity prices and ﬁxed-interest securities, can reduce or increase
the carrying value of plan assets. The currently increased volatil-
ity of ﬁnancial markets raises the risks and opportunities relating
to the measurement of both pension obligations and plan
assets. The structure of pension obligations is taken into con-
sideration with the determination of the investment strategy
for the plan assets in order to reduce ﬂuctuations of the funded
status. A change in the composition of pension assets can
have an additional positive or negative impact on the fair value
of the plan assets. Further information on the pension plans
and their risks is provided in E Note 22 of the Notes to the
Consolidated Financial Statements.

Risks and opportunities from changes in credit ratings
Daimler’s creditworthiness is assessed by the rating agencies
S&P Global Ratings, Moody’s Investors Service, Fitch Ratings,
Scope Ratings and DBRS. Risks and opportunities exist in con-
nection with potential downgrades or upgrades to credit ratings
by these rating agencies. Downgrades could have a negative
impact on the Group’s ﬁnancing if such a downgrade leads to
an increase in the costs for external ﬁnancing or restricts the
Group’s ability to obtain ﬁnancing. A credit rating downgrade
could also damage the company’s reputation or discourage inves-
tors from investing in Daimler AG. A risk to the credit rating of
the Daimler Group could also arise if the earnings and cash ﬂows
anticipated from the Group’s growth could not be realized.
Credit rating upgrades could lead to lower borrowing costs for
the Group and also facilitate its access to ﬁnancing sources
in the money and capital markets. If the positive development
of the Group continues and its cash ﬂow and proﬁtability also
develop positively, opportunities could arise for an upgrade of
the credit rating on the part of the rating agencies.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 167

Risks from guarantees, legal and tax risks

The Group continues to be exposed to risks from guarantees
as well as legal risks and tax risks. Provisions are recognized
for those risks if and insofar as they are likely to be utilized
and the amounts of the obligations can be reasonably estimated.
No quantitative assessment of these risks is carried out.

Risks from guarantees
Issuing guarantees results in liability risks for the Group. For
example, Daimler holds an equity interest in the road-charging
system in Germany, which records the use of autobahns and
selected federal highways by commercial vehicles and charges
tolls accordingly. 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 through Daimler
Financial Services AG 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 Financial Services AG has assumed
with the other partners in the Toll Collect consortium (Deutsche
Telekom AG and Coﬁroute S.A.) supporting obligations of Toll
Collect GmbH toward the Federal Republic of Germany. These
guarantees are connected with the toll system and a call option
of the Federal Republic of Germany, i.e. the possibility of the
Federal Republic of Germany to take over the shares in Toll
Collect GmbH. Claims could be made under those guarantees if
toll revenue is lost for technical reasons, if certain contractually
deﬁned performance parameters are not fulﬁlled, if additional
claims are made by the Federal Republic of Germany, if the
ﬁnal operating permit is not granted, if Toll Collect GmbH fails to
meet contractual obligations, if it fails to have the required equip-
ment available, or if the Federal Republic of Germany takes over
Toll Collect GmbH. The maximum loss risk for the Group from
these risks can be substantial. Additional information is provided
in E Note 29 (Legal proceedings) and E Note 30 (Financial
guarantees, contingent liabilities and other ﬁnancial obligations)
of the Notes to the Consolidated Financial Statements.

Legal risks
Various legal proceedings, claims and government investigations
(legal proceedings) are pending against Daimler AG and its
subsidiaries on a large number of topics, including vehicle safety,
emissions, fuel economy, ﬁnancial services, dealer, supplier
and other contractual relationships, intellectual property rights,
warranty claims, environmental matters, antitrust matters
(including actions for damages) and shareholder litigation. Prod-
uct-related litigation involves claims alleging faults in vehicles,
some of which have been made as class actions. If the outcome
of such legal proceedings is detrimental to Daimler, the Group
may be required to pay substantial compensatory and punitive
damages or to undertake service actions, recall campaigns,
monetary penalties or other costly actions. Some of these legal
proceedings may have an impact on the Group’s reputation.

The automotive industry is subject to extensive governmental
regulations worldwide. Laws in various jurisdictions regulate
occupant safety and the environmental impact of vehicles,
including emission levels, fuel economy and noise, as well as
the pollutants generated by the plants where vehicles are
produced. Noncompliance with regulations applicable in the
different regions could result in significant penalties and
reputational harm or the inability to sell vehicles in the rele-
vant markets. The cost of compliance with these regulations
is significant, and in this context, Daimler expects a significant
increase in such costs.

Currently, Daimler is subject to governmental information
requests, inquiries and investigations as well as litigation relat-
ing to environmental, securities, criminal, antitrust and other
laws and regulations in connection with diesel exhaust emissions.
Several federal and state authorities and institutions worldwide
have inquired about and/or are investigating test results, the
emission control systems used in Mercedes-Benz diesel vehi-
cles and/or Daimler’s interaction with the relevant federal and
state authorities as well as related legal issues and implications,
including, but not limited to, under applicable environmental,
securities, criminal and antitrust laws. These authorities include,
amongst others, the U.S. Department of Justice (“DOJ”), which
has requested that Daimler conduct an internal investigation, the
U.S. Environmental Protection Agency (“EPA”), the California
Air Resources Board (“CARB”) and other US state authorities,
the U.S. Securities and Exchange Commission (“SEC”), the
European Commission, with which Daimler has filed a leniency
application, as well as national cartel authorities and other
authorities of various foreign states as well as the German Fed-
eral Financial Supervisory Authority (“BaFin”) and the German
Federal Motor Transport Authority (“KBA”). The Stuttgart district
attorney’s office is conducting criminal investigation proceed-
ings against Daimler employees on the suspicion of fraud and
criminal advertising, and searched the premises of Daimler at
several locations in Germany. Further, Daimler comprehensively
responded to the diesel emissions committee of inquiry of the
German Parliament. Daimler continues to fully cooperate with
the authorities and institutions. Irrespective of such coopera-
tion by Daimler, it is possible that further civil and criminal inves-
tigative and enforcement actions and measures relating to
Daimler and/or its employees will be taken, such as subpoenas,
i.e. legal instructions issued under penalty of law in the pro-
cess of taking evidence, or other requests for documentation,
testimony or other information, further search warrants, a
notice of violation or an increased formalization of the govern-
mental proceedings. Additionally, delays in obtaining regulatory
approvals necessary to introduce new or recertify existing diesel
models could occur. In light of the notices of violation that were
issued by US environmental authorities to another vehicle manu-
facturer in January of 2017 and the related complaint filed by the
United States against such manufacturer in May 2017, identifying
functionalities, apparently including functionalities that are com-
mon in diesel vehicles, as undisclosed Auxiliary Emission Control
Devices (AECDs) and, in some unspecified cases, as imper-
missible, and in light of the ongoing governmental information
requests, inquiries and investigations, and our own internal

168 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Non-ﬁnancial risks

As a company with worldwide activities, Daimler AG is at the
focus of public interest. In this context, the relevant stake-
holders’ perception is of crucial importance and can aﬀect the
reputation of the entire Daimler Group E page 214 “Non-
Financial Report.” A key role in the public’s current perception
is played by the company’s approach to environmental,
employee and social matters, ﬁghting corruption and bribery,
and respecting human rights.

Risks arise above all in connection with the public debate about
diesel vehicles and the related fundamental reconsideration
of methods for measuring emissions. Due to the replacement of
the NEDC (New European Driving Cycle) with the new measur-
ing method WLTP (Worldwide Harmonized Light Vehicles Test
Procedure), the ﬂeet CO2 average has worsened. In light of
today’s knowledge, this would make it more diﬃcult to achieve
the CO2 targets as of 2020. Furthermore, there has been some
pressure in the past two years on diesel technology, which is
important for compliance with the challenging CO2 targets in
the EU, because of air-quality problems in cities (exceeding the
NOx limits). For this reason, the Real Driving Emissions (RDE)
legislation entered into force in the EU in July 2017. Complying
with emission limits under real driving conditions (on the road
and not, as previously, only on the test bench) is very ambitious
legislation that since September 2017 has required very
complex technology for exhaust-gas a(cid:5)ertreatment, as well as
detailed documentation. The current public focus on vehicle
emissions as well as their measurement and impact on people
and the environment jeo pardizes the reputation of the automo-
tive industry and in particular of the diesel engine, and could
result in damage to Daimler’s reputation. With the develop-
ment of a new generation of diesel engines, Daimler has found
a convincing technical solution with regard to reducing emis-
sions and will successively introduce this innovation throughout
the product range.

investigation, it cannot be ruled out that the various authorities
might reach the conclusion that Mercedes-Benz diesel vehicles
have similar functionalities. The inquiries and investigations as
well as the replies to the governmental information requests
and our internal investigation are still ongoing and open; hence,
Daimler cannot predict the outcome at this time. If these or
other inquiries, investigations, legal actions and/or proceedings
result in unfavorable ﬁndings, an unfavorable outcome or
otherwise develop unfavorably, Daimler could be subject to
signiﬁcant monetary penalties, remediation requirements,
vehicle recalls, process improvements, mitigation measures and
the early termination of promotional loans, and/or other sanc-
tions, measures and actions, including further investigations by
these or other authorities and additional litigations. The occur-
rence of the aforementioned events in whole or in part could
cause signiﬁcant collateral damage including reputational
harm. In addition, Daimler’s ability to defend itself in litigations
could be impaired by unfavorable ﬁndings, results or develop-
ments in any of the governmental information requests, inquiries,
investigations, legal actions and proceedings discussed above.
Therefore, it cannot be ruled out that the risks discussed above
may materially adversely impact our proﬁtability, cash ﬂows
and ﬁnancial situation.

As legal proceedings are fraught with a large degree of uncer-
tainty, it is possible that a(cid:5)er their ﬁnal resolution, some of
the provisions we have recognized for them could prove to be
insuﬃcient. As a result, substantial additional expenditures
may arise. This also applies to legal proceedings for which the
Group has seen no requirement to recognize a provision.

Although the ﬁnal result of any such litigation may inﬂuence
the Group’s earnings and cash ﬂows in any particular 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 proceed-
ings is provided in E Note 29 of the Notes to the Consoli-
dated Financial Statements.

Tax risks
Daimler AG and its subsidiaries operate in many countries
worldwide and are therefore subject to numerous diﬀerent
statutory provisions and tax audits. Any changes in legislation
and jurisdiction, as well as diﬀerent interpretations of the law
by the ﬁscal authorities – especially in the ﬁeld of cross-border
transactions, may be subject to considerable uncertainty. It
is therefore possible that the provisions recognized will not be
suﬃcient, which could have negative eﬀects on the Group’s
net proﬁt and cash ﬂows.

Any changes or interventions by the ﬁscal authorities are
continuously monitored by the tax department and measures
are taken if required.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 169

be inﬂuenced by the Daimler Group and provided that the
required measures are ﬁnancially viable, the Group takes appro-
priate action to realize those opportunities.

In order to recognize risks and opportunities at an early stage
and to deal successfully with the current risk and opportunity
situation, the established risk and opportunity management
system is continually monitored and further developed.

Overall assessment of the risk and
opportunity situation

The overall view of the Group’s risk and opportunity situation is
the sum of the described individual risks and opportunities of all
risk and opportunity categories for the divisions, the corporate
functions and the legal entities.

As well as the risk categories described above, unpredictable
events such as natural disasters, political instability or terrorist
attacks can disturb production and business processes. Emer-
gency plans are therefore prepared to allow the resumption of
business operations as soon as possible. As far as possible,
precautionary measures are taken and insurance policies are
arranged. Risks relating to compliance are also included in the
risk management process and are continually monitored. Regular
training courses are carried out to prevent compliance viola-
tions. In addition to the described risks, other risks can occur
that adversely aﬀect the public perception and therefore the
reputation of the Daimler Group. Public interest is focused on
Daimler’s position with regard to individual issues in the ﬁelds
of sustainability, integrity and social responsibility. Furthermore,
customers, business partners and capital markets are inter-
ested in how the Group reacts to the technological challenges
of the future, how it succeeds in oﬀering up-to-date and tech-
nologically leading products in the markets, and how business
operations take place under the given conditions. As one of
the fundamental principles of business activity, Daimler places
particular priority – also in the selection of suppliers – on
adherence to applicable laws and ethical standards. Furthermore,
the secure handling of sensitive data is a precondition for
business relationships with customers and suppliers in a trusting
and cooperative environment.

Compared with the previous year, risks from associated com-
panies, joint ventures and joint operations have increased as a
result of increasing in risky investments in startups. However,
the overall view of the Daimler Group’s risk and opportunity
situation remains essentially unchanged. No risks are recogniz-
able – neither on the balance sheet date nor at the time of
preparing the consolidated ﬁnancial statements – that either
alone or in combination with other risks could endanger the
continued existence of the Group. But since considerable eco-
nomic and industry risks still exist, setbacks on the way to sus-
tainably achieving growth and proﬁtability targets cannot be
completely ruled out. New competitors in the IT sector for exam-
ple and the Group’s current strategy, among other things in
connection with electric mobility, pose further challenges for
the Daimler Group and are connected with risks and opportuni-
ties. By eﬀectively and ﬂexibly focusing production and sales
activities on changing conditions, the divisions of the Daimler
Group strive to utilize the opportunities oﬀered so that they can
fulﬁll or surpass their respective targets and plans. As far as can

170 B | COMBINED MANAGEMENT REPORT | OUTLOOK

Outlook

The statements made in the Outlook chapter are based on the
operational planning of Daimler AG as approved by the Board
of Management and the Supervisory Board in December 2017.
That planning is based on the premises we set regarding the
economic situation and the development of automotive markets.
It involves assessments made by Daimler, which are based on
relevant analyses by various renowned economic research insti-
tutes, international organizations and industry associations, as
well as on the internal market analyses of our sales companies.
The prospects for our future business development as presented
here reﬂect the targets of our divisions as well as the opportunities
and risks presented by the anticipated market conditions and
the competitive situation during the planning period. Against this
backdrop, we adjust our expectations for business development
to reﬂect updated forecasts for the development of the various
automotive markets. The statements made below are based on
the facts known to us at the beginning of 2018.

Our assessments for the year 2018 are based on the assumption
of generally stable economic conditions and the expectation
that the positive trend of the global economy and of worldwide
demand for motor vehicles will continue. The development
we have outlined is subject to various opportunities and risks,
which are explained in detail in the Risk and Opportunity
Report. E pages 155 ﬀ

The world economy

At the beginning of 2018, the world economy continues to
develop with solid growth. We assume that this dynamism will
also continue as the year progresses. Growth prospects for
both the advanced economies and the emerging markets are
similarly positive as they were last year.

Most economic indicators suggest that the economy of the
European Monetary Union (EMU) will grow at an above-average
rate also in 2018. On the basis of robust domestic demand and
a solid contribution from foreign trade, economic growth of close
to 2.5% should be possible. The European Central Bank will
make use of the favorable economic outlook to gradually cut
back its very expansive monetary policy of recent years. This
applies in particular to the probable phasing out of the exten-
sive bond-buying program. From today’s perspective, however,
increases in key interest rates are not yet on the agenda. Growth
prospects for the German economy are also positive and it
could expand by 2.5% this year. As the year 2018 will probably
continue to be impacted by uncertainty relating to the EU exit
conditions for the United Kingdom, the British economy is
likely to continue its rather moderate development, an economic
slump in the UK is unlikely.

In the United States, the available leading indicators point
towards a continuation of the economy’s solid upswing. In
view of stable domestic demand, moderate inﬂation and low
unemployment, the US Federal Reserve is likely to maintain
its slightly restrictive monetary policy with only small inter-
est-rate rises. In connection with stimulus from the tax
reform passed in late 2017, this could result in overall growth of
just above 2.5%, and thus slight acceleration compared with 2017.

The growth prospects of the Japanese economy also remain
relatively stable. Although growth in private consumption and
investment should weaken slightly, an increase in gross domes-
tic product (GDP) of between 1 and 1.5% is expected.

The emerging economies should achieve aggregate growth in
output of just over 4.5% in 2018, as in the previous year and
thus in line with their long-term trend. The prospects of the Chi-
nese economy, based on its very robust development in the
year 2017, are favorable for this year as well. However, due to
reduced state economic stimulus and rather more restrictive
lending, most analysts anticipate a slight decrease in growth
to about 6.5%. While the economies of Central and Eastern
Europe will probably not quite match their strong growth of the
previous year, an acceleration of growth is expected for the

B | COMBINED MANAGEMENT REPORT | OUTLOOK 171

South American economies. But with anticipated GDP growth
of 2 to 2.5%, South America remains below its potential. The
further stabilization of raw-material prices should help the
countries of the Middle East, but their expected growth rates
of just under 3% remain below average for that region.

Thanks to the continuation of a positive investment climate
worldwide, overall demand for medium- and heavy-duty
trucks should increase signiﬁcantly in most of the regions
relevant to us.

Overall, the world economy should grow in 2018 by signiﬁcantly
more than 3%, a similarly favorable rate of expansion as in the
previous year.

Automotive markets

In 2018, worldwide demand for cars is likely to increase again
from an already high level. According to current forecasts, slight
growth of approximately 2% is to be expected. Slight market
growth is expected once again in Europe and China. The US
market will be similar to its prior-year volume and the recovery
of demand in the emerging markets should continue.

In Europe, we expect a slight increase in overall car sales. As
the market volume in Western Europe is now above average
again, we expect demand to remain fairly stable. In Eastern
Europe, however, a signiﬁcant increase in sales volumes is
anticipated primarily due to the ongoing recovery of the Rus-
sian market. The US market for cars and light trucks should
maintain its high level of approximately 17 million units sold.
Despite the favorable economic outlook, we believe a further
increase is unlikely because the market can be regarded as
being fairly saturated at this level.

The Chinese car market continues to be signiﬁcantly aﬀected
by regulatory conditions. At the beginning of the year, the tax
rate on purchases of cars with small engines (up to 1.6 liters)
was raised back to its normal level of 10%. As this led to pur-
chases being brought forward to late 2017, more moderate
demand is to be expected in the ﬁrst months of this year. In
full-year 2018, the Chinese market should expand slightly
nonetheless. In Japan, we assume that the car market will
under go a slight downward correction, but demand in India
should continue to grow signiﬁcantly.

In the NAFTA region, a cyclical recovery of the truck market is
to be expected and we anticipate a signiﬁcant increase in overall
sales in weight classes 6-8.

In an ongoing favorable economic environment, we assume
that demand in the EU30 region (European Union, Switzerland
and Norway) will maintain the robust market volume of the previ-
ous year. A(cid:5)er the long weakness of demand of recent years in
Brazil, it is to be expected that a somewhat livelier economic
recovery will also bring about signiﬁcant growth of the truck
market, although from a very low level. The Turkish market
should also grow signiﬁcantly from its present low level. In Rus-
sia, we expect further signiﬁcant growth in demand for trucks.

The most important Asian markets from Daimler’s perspective
are likely to present a varied picture in 2018. In the Japanese
market for light-, medium- and heavy-duty trucks, we anticipate
a slight market correction at an ongoing solid level. We expect
a positive development of the Indonesian truck market. In India,
demand for medium- and heavy-duty trucks should recover
signiﬁcantly from the market contraction of 2017. In the Chi-
nese market, a signiﬁcant correction is to be expected following
the extremely high volume of the previous year.

In the EU30 region in 2018, we expect slight market growth
for small vans, for the combined segment of mid-size and
large vans, and for the segment of mid-size pickups. In the
United States, demand for large vans should be slightly
stronger than in the previous year. The market for large vans
in Latin America should continue its recovery in 2018. In
China, we also expect a significant recovery of demand in
the market we address there.

We expect a market volume for buses in the magnitude of the
previous year in the EU30 region. The market situation in Latin
America will be inﬂuenced by the economic upturn in Argen-
tina and Brazil. Following the signiﬁcant decline until 2016 and the
turnaround in 2017, we assume that the signiﬁcant market
recovery will continue in 2018.

172 B | COMBINED MANAGEMENT REPORT | OUTLOOK

Unit sales

Mercedes-Benz Cars will continue along its growth path in
2018. We intend to slightly increase our total unit sales, thus
reaching a new record level. Growth is anticipated above all in
China. This expectation is based on our attractive and innova-
tive model portfolio, which is more diverse than ever before.

Mercedes-Benz will launch more than a dozen new and
upgraded automobiles in 2018. Sales should be boosted in par-
ticular by our E-Class and C-Class model families. And our new
generation of the compact cars, which will be launched with
the A-Class this spring, should have a positive impact on unit
sales. Our product range will become even more attractive as
a result of several model upgrades. Above all, the new S-Class
sedan, which has been delivered to customers also as a coupe
and convertible since the beginning of 2018, should stimulate
demand in the luxury segment. With the new CLS coupe, which
had its premiere at the Los Angeles Auto Show in 2017, we
intend to continue this model series’ success story.

We are well positioned also with our SUVs, including the
upgraded GLA, which we launched in 2017. The new G-Class
will make its mark in this segment as of this spring, and the
GLC models should continue along their growth path. In addi-
tion, our sports-car and high-performance brand Mercedes-
AMG continues to be an important sales driver. More and more
customers are fascinated by the broad and appealing range
of automobiles oﬀered by Mercedes-AMG, which we are con-
tinually expanding.

We are systematically expanding our worldwide production net-
work for electric mobility. Under the new brand EQ, which
stands for “Electric Intelligence,” we will oﬀer not only vehicles
but also services in connection with electric mobility. By the
year 2022, we want to electrify each segment across the entire
Mercedes portfolio. Our goal is to oﬀer our customers at least
one electriﬁed alternative in each segment - from the compact
car to the large SUV. We plan to have a total of more than 50
electriﬁed models by the year 2022. This will include more than
ten fully electric vehicles, the plug-in hybrids and the models
with 48-volt technology.

As of the year 2020, the smart brand intends to sell solely cars
with electric drive in Europe and North America, and the other
regions will follow. The new electric-drive models of the smart
fortwo, smart fortwo Cabrio and smart forfour (electricity con-
sumption combined: 13.1–12.9 kWh/100 km; CO2 emissions
combined: 0 g/km) combine the agility of a smart with locally
emission-free driving at an aﬀordable price – the ideal combina-
tion for urban mobility.

Daimler Trucks assumes that its total unit sales in 2018 will be
signiﬁcantly higher than in the previous year, primarily due to
the perceptible recovery of major markets. In the NAFTA region,
we anticipate unit sales signiﬁcantly higher than the prior-year
level as a result of the ongoing market recovery apparent since
the second quarter of 2017. In the EU30 region, we expect unit
sales to be in the magnitude of the previous year. In Brazil, we
assume that unit sales in 2018 will signiﬁcantly surpass the
low level of 2017. With our attractive product portfolio in the
Indian market, we expect to signiﬁcantly increase our unit sales
and to further strengthen our market position. Furthermore,
with the expanded range of FUSO vehicles from Indian produc-
tion, we have the opportunity to generate additional sales in
Asia, Africa and Latin America. Our unit sales in Indonesia
should grow signiﬁcantly once again, and we expect to sell a
similar number of trucks in Japan as we did in 2017.

Mercedes-Benz Vans plans to signiﬁcantly increase its unit
sales in the year 2018. Growth is expected to be particularly
strong in China and the United States. We anticipate signiﬁ-
cant growth also in the EU30 region, due not least to the new
X-Class. In the context of our “Mercedes-Benz Vans goes global”
strategy for the division, we have expanded our portfolio with
the Mercedes-Benz X-Class, a premium pickup for markets in
Europe, South Africa, Aus tralia and New Zealand. In Latin
America, market launch is planned for the year 2019. We expect
additional growth in 2018 from the new Sprinter, which we will
produce also in North America in the future.

Daimler Buses assumes that it will be able to defend its mar-
ket leadership in its most important traditional core markets for
buses above 8 tons with innovative, future-oriented and high-
quality products. We expect total unit sales in 2018 to be signif-
icantly above the prior-year level. We assume that unit sales in
the EU30 region will increase perceptibly. A(cid:5)er the signiﬁcant
increase in unit sales in Latin America last year, we anticipate
a further signiﬁcant recovery in 2018. A positive development of
unit sales is expected also in India.

Daimler Financial Services aims to achieve ongoing growth in
the coming years. In 2018, we expect further growth in contract
volume. This will be primarily driven by the strong develop-
ment of new business in 2017, which should continue at the
same high level this year. We are utilizing new market poten-
tial above all in China, and by means of new and digital pos-
sibilities for customer contacts – in particular through the
systematic further development of our online sales channels.
We continue to see good growth opportunities in the ﬁeld of
innovative mobility services, where we are active with the brands
car2go, moovel and mytaxi, as well as with equity interests in
Blacklane and FlixBus and various startup companies.

On the basis of our assumptions concerning the development
of automotive markets and the divisions’ planning, we expect
the Daimler Group to slightly increase its total unit sales in
2018.

B | COMBINED MANAGEMENT REPORT | OUTLOOK 173

Revenue and earnings

We assume that the revenue of the Daimler Group will also
increase slightly in 2018, as a result of the overall positive
development of unit sales in the automotive divisions.
Exchange-rate eﬀects are likely to have a rather negative
impact on the development of revenue in the year 2018.
This applies above all to our business in the NAFTA region.

Our divisions currently have very attractive product ranges,
which have been expanded and systematically renewed in
recent years. We therefore assume that Daimler will proﬁt to
an above-average extent from the slight growth in global
demand for motor vehicles that we expect in the year 2018,
and will be able to strengthen or defend its position in major
markets. At Mercedes-Benz Cars, additional growth this year
will be primarily driven by the E-Class models, the GLC SUV,
the new convertible models and the new A-Class. On the other
hand, revenue growth will be dampened by the anticipated
development of exchange rates and lifecycle eﬀects from some
car models, as well as by a changing sales structure. Mercedes-
Benz Cars therefore anticipates revenue in 2018 only at the
high prior-year level despite a slight increase in unit sales. Due
to generally positive expectations for markets and unit sales,
the Daimler Trucks division plans for slight revenue growth, while
the Mercedes-Benz Vans, Daimler Buses and Daimler Financial
Services divisions anticipate signiﬁcant increases in revenue.

In regional terms, we expect further slight growth in revenue
in Asia and Europe. In China, we have created the right con-
ditions for further growth with new sales outlets, additional
production capacities and a broad product range. However,
growth in unit sales in China will have a disproportionately low
impact on revenue growth, as the share of local production will
continue to increase. Our Chinese associated company, Beijing
Benz Automotive China (BBAC), is included in our consolidated
ﬁnancial statements using the equity method of accounting.

The growth in unit sales and revenue that we anticipate will
have a generally positive impact on earnings in 2018. We have
laid the foundations for a lasting high level of earnings with
various programs for improved proﬁtability, which we already
implemented in the years 2013 to 2015. Since then, we have
continuously been taking further measures in all divisions for
the long-term and structural optimization of our business sys-
tem. At Mercedes-Benz Cars for example, we aim to achieve
further eﬃciency improvements in the context of the F4L (Fit
for Leadership) program. Daimler Trucks is also working contin-
uously on eﬃciency improvements with its optimization pro-
gram. In combination with the cost optimizations we have so far
planned and partially already implemented, we aim to achieve
proﬁt-eﬀective improvements for Daimler Trucks in an amount
of €1.4 billion by the end of 2018. These programs are expected
to become fully eﬀective in the year 2019.

We are standardizing and modularizing our production processes
throughout the Group. In this context, we are making intelli-
gent use of vehicle platforms, allowing us to achieve further
cost advantages. In parallel, we are pushing forward with digi-
tal connectivity: in all divisions and at all stages of the value
chain – from development to production to sales and service.
In this way, we are opening up additional scope to become
even faster, more ﬂexible and more eﬃcient - to the beneﬁt of
our customers.

However, earnings will be reduced by the continuation of very
high expenditure: for our model oﬀensive, for innovative tech-
nologies (especially for reducing fuel consumption and for elec-
triﬁcation), for the digitization of our products and processes,
and for the expansion and modernization of the worldwide pro-
duction capacities. As a result, our advance expenditure aimed
at securing a successful future will once again be substantially
higher in 2018 than in the previous year. E page 174

On the basis of the market developments we anticipate, the
aforementioned factors and the planning of our divisions, we
assume that Group EBIT in 2018 will be of the magnitude of the
previous year.

The individual divisions have the following expectations for
EBIT in the year 2018:
Mercedes-Benz Cars: at the prior-year level,
Daimler Trucks: signiﬁcantly above the prior-year level,
Mercedes-Benz Vans: slightly below the prior-year level,
Daimler Buses: signiﬁcantly above the prior-year level, and
Daimler Financial Services: at the prior-year level.

At Mercedes-Benz Cars, positive eﬀects will result from the
anticipated growth in unit sales. They will be oﬀset, however,
by the signiﬁcant increase in advance expenditure for new
products and technologies, a less favorable sales structure
and negative exchange-rate eﬀects.

Both Daimler Trucks and Daimler Buses should proﬁt from
rising unit sales and the eﬃciency-enhancing measures.

Daimler Financial Services assumes that its earnings will
develop positively as a result of further growth in contract vol-
ume and the optimization of business processes. Increased
investment in new businesses and the advance of digitization,
as well as higher interest rates and exchange-rate eﬀects, will
probably have a negative impact on earnings.

Against the backdrop of high advance expenditure for the
Sprinter model change, higher costs from the production
ramp-up of the new models and negative exchange-rate eﬀects,
Mercedes-Benz Vans anticipates a slight decrease in earn-
ings. The expected growth in unit sales is unlikely to fully oﬀset
these negative eﬀects.

174 B | COMBINED MANAGEMENT REPORT | OUTLOOK

Free cash ﬂow and liquidity

The anticipated development of earnings in the automotive
divisions will have a positive impact on the free cash ﬂow of
the industrial business. There will be a negative eﬀect, how-
ever, from the further increase in advance expenditure for
new products and technologies. Under these conditions, we
assume that the free cash ﬂow of the industrial business
should be signiﬁcantly higher than in the previous year and
also higher than the dividend distribution planned in 2018. It
must be taken into consideration, however, that the free
cash ﬂow of the industrial business in 2017 was reduced by an
extraordinary contribution of €3 billion to the German pen-
sion fund assets.

For the year 2018, we aim to have liquidity available in a vol-
ume appropriate to the general risk situation in the ﬁnancial
markets and to Daimler’s risk proﬁle. When measuring the
level of liquidity, we give due consideration to possible reﬁ-
nancing risks caused for example by temporary distortions in
the ﬁnancial markets. We continue to assume, however, that
we will have very good access to the capital markets and the
bank market also in the year 2018. We aim to cover our fund-
ing needs in the planning period primarily by means of bonds,
commercial paper, bank loans, customer deposits in the
direct banking business and the securitization of receivables
in the ﬁnancial services business; the focus will be on bonds
and loans from globally and locally active banks. In view of
the very good liquidity situation of the international capital
markets and our strong creditworthiness, we expect a contin-
uation of very attractive reﬁnancing conditions in 2018. An
additional goal is to continue securing a high degree of ﬁnan-
cial ﬂexibility.

Dividend

At the Annual Shareholders’ Meeting on April 5, 2018, the Board
of Management and the Supervisory Board will propose an
increased dividend of €3.65 per share for the year 2017 (prior
year: €3.25). This represents a total distribution of €3.9 billion
(prior year: €3.5 billion). With this proposal, our shareholders
are participating in the Company’s success.

We aim to maintain a sustainable dividend development also
in the coming years. In setting the dividend, our target is
generally to distribute approximately 40% of the net proﬁt
attributable to Daimler shareholders.

Investment

In order to achieve our ambitious growth targets, we will sys-
tematically expand our product range in the coming years.
At the same time, we want to be able to play a leading role in
the far-reaching technological transformation of the automo-
tive industry. This applies in particular to the increasing elec-
triﬁcation of our product portfolio and to the digital connec-
tivity of our products and processes along the entire value chain.
By intelligently connecting the constantly growing volumes
of data, we will create eﬃciency advantages, improve our
product quality and facilitate the ongoing ﬂexibilization of the
production process. Against this backdrop, we will once

again signiﬁcantly increase our investment in property, plant
and equipment in the year 2018.

Following the signiﬁcant increase in the year 2017, capital
expenditure at Mercedes-Benz Cars will increase again in
2018. This is primarily due to the product oﬀensive and the
expansion of production capacities. The most important proj-
ects include the successor models of the current compact
class, the C-Class, the product ramp-up of the new GLE and
GLS, and the new gasoline and diesel engines of the new
engine series. Substantial investment is planned also for the
realignment of our German production sites, for the expan-
sion of our international production network, and for the
worldwide production network for electric mobility. Daimler
Trucks will mainly invest in successor generations of existing
products, in new products, in global component projects, in
the optimization of its worldwide production network and in
the new Daimler Trucks Campus. At Mercedes-Benz Vans, the
focus of capital expenditure will be on production of the next
generation of the Sprinter in Germany and the United States.
Key projects at Daimler Buses are improvements in the pro-
duction network and advance expenditure for new models, in
particular for the development of an electrically powered city
bus.

Research and development

With our research and development activities, our goal is to fur-
ther strengthen Daimler’s competitive position against the
backdrop of upcoming technological challenges. We want to
create competitive advantages above all by means of innovative
solutions for low emissions and safe mobility. In addition, we
intend to utilize the growth opportunities oﬀered by worldwide
automotive markets with new and attractive products. We are
increasingly focusing on the strategic areas for the future of
connectivity, autonomous driving, ﬂexible use and services, and
electric drive. We aim to occupy a leading position in these
areas, both individually and by linking them up intelligently. In
order to achieve our goals, we will once again slightly increase
our total expenditure for research and development in 2018. At
Mercedes-Benz Cars, a large part of that expenditure will ﬂow
into the renewal and expansion of our model range. The divi-
sion’s most important projects are the successor models of the
compact cars, the GLE and GLS SUVs, and the new C-Class.
We are also working hard on new, low-emission combustion
engines, electric mobility, the connectivity of our vehicles, and
innovative safety technologies for autonomous driving. At Daim-
ler Trucks, the focus will be on activities in the areas of fuel eﬃ-
ciency and emission reductions, as well as expenditure for tai-
lored products and technologies for important growth markets.
The topics of electric mobility, connectivity and automated
driving also play an increasingly important role. Key projects
at Mercedes-Benz Vans are the successor generation of the
Sprinter and the further development of the Vito and V-Class.
Furthermore, Mercedes-Benz Vans is pushing forward with the
electriﬁcation of its commercial model series. Another impor-
tant topic is the connectivity of products and processes, espe-
cially the innovative connectivity solution, Mercedes PRO. An
important area of research and development at Daimler Buses
is to meet future emission standards and to increase fuel eﬃ-
ciency. Also at Daimler Buses, other focus areas are alternative
drive systems, electriﬁcation and connectivity.

B | COMBINED MANAGEMENT REPORT | OUTLOOK 175

With the four strategic areas for action - CORE, CASE, CUL-
TURE and COMPANY - we are setting the course for a successful
future, and we reached some important milestones in 2017.
Against this backdrop, we look to the year 2018 with conﬁdence.
We expect both unit sales and revenue to be higher than in the
previous year, and should continue to achieve a high level of
earnings despite the high volume of expenditure to safeguard
our future.

Forward-looking statements
This document contains forward-looking statements that reﬂect our current
views about future events. The words “anticipate,” “assume,” “believe,” “esti-
mate,” “expect,” “intend,” “may,” ”can,” “could,” “plan,” “project,” “should”
and similar expressions 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 important markets; a deterioration of our reﬁnancing
possibilities on the credit and ﬁnancial markets; events of force majeure
including natural disasters, acts of terrorism, political unrest, armed con-
ﬂicts, industrial accidents and their eﬀects on our sales, purchasing, produc-
tion or ﬁnancial services activities; changes in currency exchange rates; a
shi(cid:5) in consumer preferences towards smaller, lower-margin vehicles; a pos-
sible lack of acceptance of our products or services which limits our ability to
achieve prices and adequately utilize our production capacities; price
increases for fuel or 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 eﬃ-
ciency-optimization measures; the business outlook for companies in which
we hold a signiﬁcant equity interest; the successful implementation of strate-
gic cooperations and joint ventures; changes in laws, regulations and govern-
ment policies, particularly those relating to vehicle emissions, fuel economy
and safety; the resolution of pending government investigations or of investi-
gations requested by governments and the conclusion of pending or threat-
ened future legal proceedings; and other risks and uncertainties, some of
which we describe under the heading “Risk and Opportunity Report” in this
Annual Report. If any of these risks and uncertainties materializes or if the
assumptions underlying any of our forward-looking statements prove to be
incorrect, the actual results may be materially diﬀerent from those we
express or imply by such statements. We do not intend or assume any obliga-
tion to update these forward-looking statements since they are based solely
on the circumstances at the date of publication.

The workforce

Due to the growth in unit sales and revenue we anticipate,
production volumes will continue rising in 2018. At the same
time, the eﬃciency-enhancing measures we have implemented
at all divisions in recent years are now taking eﬀect. The
medium- and long-term measures we have taken for structural
improvements in our business processes should facilitate
further eﬃciency progress. Against this backdrop, we assume
that we will be able to achieve our growth targets with only
slight workforce growth. Additional jobs will be created in par-
ticular through the expansion of our international production
network, as well as in the area of research and development
for projects in the future areas of electric mobility and digiti-
zation. Companies that we operate together with Chinese
partners and whose employees are not included in the ﬁgures
for the Daimler Group are also likely to recruit additional
employees.

Overall statement on future development

At the end of the 2017 ﬁnancial year, we continue to be on a
path of stable and proﬁtable growth. We will consistently imple-
ment our strategy also in the coming years, thus creating the
basis for further growth.

- We are very well positioned in our markets with innovative
products and services. We are increasingly succeeding in
addressing new target groups, utilizing additional market
potential and strengthening our market position worldwide.
With the eﬃciency programs that have been implemented
in all divisions in recent years, we have improved our cost
structures on a sustained basis and thus laid the founda-
tions for a high level of proﬁtability. We are currently taking
further measures in all divisions for the long-term and
structural optimization of the business system. In this way, we
are strengthening our core business (CORE) and creating the
ﬁnancial basis to invest in the future of the company.

- We will therefore signiﬁcantly increase our advance expendi-
ture for new products and technologies once again in 2018.
Especially in the strategic, future-oriented areas of connectiv-
ity, autonomous driving, ﬂexible use and services, and electric
drive, as well as by intelligently linking up those areas (CASE),
we will therefore play a leading role also in the future.

- Together with the workforce, we are developing a new leader-
ship culture under the heading of “Leadership 2020” that will
allow us to successfully shape our future. In this way, we are
meeting the challenges of the digital world and creating the
basis for cultural changes at the Group (CULTURE).

- To enable us to react ﬂexibly to the high dynamism of the

environment, markets, new competitors and technologies,
we need an organization that facilitates rapid and agile
action. In the context of “Project Future,” we aim to further
focus Daimler’s divisional structure, thus strengthening the
future viability of the various businesses (COMPANY).

WE CONVINCE WITH
INNOVATIVE VEHICLES
AND SERVICES!

The divisions of the Daimler Group developed extremely successfully in the year 2017,
and in some cases signiﬁcantly surpassed their growth targets. The Mercedes-Benz
Cars and Mercedes-Benz Vans divisions set new records for unit sales, thanks to
numerous new and successful products. The Daimler Trucks and Daimler Buses divi-
sions also signiﬁcantly increased their unit sales. Due to the positive development of
the automotive business, the Daimler Financial Services division also continued its
steady growth. And we further improved the Group’s market position with innovative
products and services.

C | The Divisions

C | THE DIVISIONS | CONTENTS 177

Mercedes-Benz Cars

178 – 183

Daimler Buses

192 – 194

– Mercedes-Benz Cars achieves record unit sales once again
– World premiere of upgraded Mercedes-Benz S-Class
– Continuation of dream-car oﬀensive
– Mercedes-AMG achieves six-digit unit sales for the ﬁrst time
– smart focuses on electric mobility
– Deepened partnership in China
– Comprehensive future plan for diesel engines
– Mercedes wins drivers’ and constructors’ world

– Signiﬁcant growth in unit sales
– Market leadership defended in most important traditional

core markets above eight tons gross vehicle weight

– Positive development of business with bus chassis in Brazil
– Presentation of new Mercedes-Benz Tourismo and

Setra S 531 DT double-decker

– Strategic cooperation for on-demand mobility
– First customer for Mercedes-Benz Citaro fully electric city

championships in Formula 1

bus

– EBIT signiﬁcantly above prior-year level at €9.2 billion

– EBIT of €243 million at prior-year level (2016: €249 million)

(2016: €8.1 billion)

Daimler Trucks

184 – 188

Daimler Financial Services

195 – 197

– Signiﬁcant increase in unit sales
– FUSO eCanter is the first fully electric light-duty truck in

– New records for new business and contract volume
– Further increase in number of automotive insurance policies

series production from Daimler Trucks

brokered

– Presentation in Japan of E-FUSO, the Group’s own product

brand for electric trucks and buses

– Presentation of the fully electric school bus from Thomas

Built Buses

– Truck platooning on public highways in the United States
– Connected Mercedes-Benz Arocs in driverless test

operation

– New connectivity solutions for the logistics industry
– EBIT signiﬁcantly above prior-year level at €2.4 billion (2016:

– Europe-wide growth of ﬂeet business
– Successful progress with digitization of ﬁnancial services
– Expanded range of innovative mobility services
– car2go upgrades its ﬂeet and expands its range of services
– moovel oﬀers mobile-ticketing app for transportation

companies

– mytaxi continues its expansion and now has 120,000 regis-

tered taxi drivers in 70 cities

– Toll4Europe operates Europe-wide road-charging system for

€1.9 billion)

trucks

– EBIT signiﬁcantly above prior-year level at €2.0 billion (2016:

€1.7 billion)

Mercedes-Benz Vans

189 – 191

– Unit sales at record level
– Growth driven by V-Class and Vito
– First details of new Sprinter
– Market launch of Mercedes-Benz X-Class
– Expansion of Marco Polo family with new HORIZON
– eVito in the ecosystem for electriﬁcation
– First results from adVANce future initiative
– EBIT of €1.2 billion at prior-year level (2016: €1.2 billion)

178 C | THE DIVISIONS | MERCEDES-BENZ CARS

Mercedes-Benz Cars

Mercedes-Benz Cars continued to grow proﬁtably in 2017. Unit sales and revenue increased signi-
ﬁcantly once again and earnings before interest and taxes reached a record level, despite the con-
siderable advance investment we made in our product oﬀensive and new technologies. Our most
important new model in the year under review was the upgraded S-Class. We also continued our
dream car initiative with new attractive coupes and convertibles. In addition, we oﬀered a preview
of our upcoming electric-mobility oﬀensive and the future of mobility by presenting the EQA and
smart vision EQ fortwo concept vehicles at the Frankfurt Motor Show.

C.01
Mercedes-Benz Cars

€ amounts in millions

% change

2017

2016

17/16

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

94,695

9,207

9.7

89,284

8,112

9.1

4,843

4,147

6,642
2,388

5,671
2,008

2,411,378 2,235,352

2,373,527 2,197,956

Employees (December 31)

142,666

139,947

+13

+17

+17
+19

C.02

Unit sales Mercedes-Benz Cars

in thousands

Mercedes-Benz

thereof A-/B-Class

C-Class

E-Class

S-Class
SUVs1
Sports cars

smart

Mercedes-Benz Cars

thereof Europe

Thereof Germany

NAFTA region

thereof United States

Asia

thereof China

1 Including the GLA

2017

2016

17/16

% change

2,238

2,054

420

493

398

823

136

2,374

1,014

320

403

338

859

619

435

490

304

712

144

2,198

980

314

406

347

715

488

-3

+31

-6

+16

-10

-6

-1

-3

+20

+27

Ongoing growth
The Mercedes-Benz Cars division consists of the Mercedes-
Benz brand with the Mercedes-AMG, Mercedes-Maybach and
Mercedes me sub-brands, as well as the smart brand and
the new EQ brand for electric mobility. The division continued
along its path of proﬁtable growth in the year under review,
with unit sales increasing by 8% to the new record level of
2,373,500 vehicles and revenue rising by 6% to €94.7 billion.
(cid:202) C.01 Mercedes-Benz Cars was able to improve its market
position in nearly all regions. And despite considerable advance
investment in our product oﬀensive and new technologies,
we were able to increase EBIT by 13% to €9.2 billion.

Mercedes-Benz once again posts record unit sales
The Mercedes-Benz brand set a new record once again in
2017, with unit sales increasing by 9% to 2,238,000 vehicles.
(cid:202) C.02 The Mercedes-Benz brand therefore not only grew
signiﬁcantly faster than the global car markets, it was once
again the premium brand with the highest unit sales in the
automotive industry. The Mercedes-Benz brand is the number
one manufacturer in the premium segment in Germany,
numerous other core European markets, the United States,
Canada, South Korea and Japan. We also signiﬁcantly
improved our position in China once again in the year under
review.

Mercedes-Benz increased its unit sales in Europe by 5% to
911,700 vehicles in 2017. Substantial growth was achieved in
the volume markets of France (+9%), Italy (+9%), Spain (+8%)
and the United Kingdom (+4%), and we also increased our unit
sales in Germany by 2% to 282,600 vehicles. Mercedes-Benz
continued its success in China during the year under review.
Unit sales in the country rose by 28% to 595,200 vehicles,
which means we signiﬁcantly outperformed both the market as
a whole and our most important competitors. We also set new
records for unit sales in other Asian markets – for example in
Thailand (+31%), India (+14%), South Korea (+9%) and Taiwan
(+7%). Total unit sales in the NAFTA region were at the prior-year
level: Sales increased signiﬁcantly in Canada and Mexico but
decreased slightly in the United States and the NAFTA market
overall.

C | THE DIVISIONS | MERCEDES-BENZ CARS 179

A perfect combination of performance and design: the AMG version of the E-Class convertible.

The growth was primarily driven by our new E-Class. A(cid:5)er all
model variants became available, sales reached the new record
level of 398,200 units (+31%). Our oﬀ-road vehicles were also
very successful once again. All in all, sales in the SUV segment
increased by 16% to 823,000 units. Demand for our C-Class
models also remained very strong, with sales of these vehicles
increasing slightly to 492,700 sedans, wagons, coupes and
convertibles in 2017. Unit sales of A-Class and B-Class models
did not quite reach the previous year’s high level. Including
the CLA and CLA Shooting Brake, a total of 420,200 units were
delivered to customers. Unit sales of the S-Class totaled
79,400 sedans, coupes and convertibles. The upgraded S-Class
generated additional sales momentum in the second half of
the year.

Fit for Leadership 4.0
Since 2012, “Fit for Leadership” has served as the central
component of our strategy for shaping the future of Mercedes-
Benz Cars. Fit for Leadership utilizes a holistic approach that
aims to achieve continuous growth, to establish competitive
structures and to improve eﬃciency on an ongoing basis.
The program is being systematically pursued. With the further
development of program activities in the context of Fit for
Leadership 4.0, we aim to achieve an additional eﬃciency
improvement of €4 billion by the year 2025. This should
also help to oﬀset the high advance expenditure in the future
for the impending technological transformation and to
safeguard the division’s return on sales in the corridor of
8-10% over the long term.

electric additional compressor also had their world premieres
in the new S-Class. The ISG is responsible for hybrid functions
such as power boost and energy recovery, and thus enables
fuel savings that were previously achieved only by high-voltage
hybrid technology. The improved third-generation plug-in-
hybrid system is now available in the S-Class for the ﬁrst time.
With a signiﬁcant increase in battery capacity to 13.3 kWh,
the use of state-of-the-art lithium-ion technology and an opti-
mized operating strategy, ranges for all-electric driving of
over 50 kilometers (NEDC) can be achieved.

Dream car initiative continues
The E-Class family was renewed entirely within one year and
fully rounded out in 2017 with the addition of a coupe and a
convertible model. The new E-Class coupe combines expres-
sive coupe proportions, a clear and sensuous design, and long-
distance comfort for four occupants with the beauty and clas-
sic virtues of a gran turismo. The new E-Class convertible has
been thrilling customers in Europe and the United States since
September 2017. At once both hot and cool, the vehicle’s
design idiom represents beauty and intelligence. We also
unveiled the coupe and convertible models of the updated
S-Class in both their series-production and AMG versions at
the Frankfurt Motor Show in September 2017. These models
beneﬁt from extensive new features that were introduced in
the sedan – for example extensively enhanced driver assis-
tance systems, the state-of-the-art widescreen dashboard, a
new-generation steering wheel and the holistic ENERGIZING
comfort control system. E pages 10 f

World premiere of the upgraded S-Class
In April 2017, the upgraded S-Class with numerous innovations
had its world premiere at Auto Shanghai. One of the highlights
was an all-new and highly eﬃcient engine program featuring a
range of new technologies for electriﬁcation of the powertrain.
In addition, the Intelligent Drive system has taken another step
along the road to driverless driving. For example, new and
modiﬁed features have been added to the DISTRONIC active
proximity control system and Active Steering Assist. Forward-
looking new technologies such as the integrated starter
generator (ISG) with a 48-volt onboard power system and the

EQ – the brand for electric mobility
In 2016, Mercedes-Benz consolidated all of its activities in the
area of electric mobility into a new product and technology
brand known as EQ. The new brand was heralded by the near-
production Concept EQ in 2016 and the compact Concept
EQA presented at the Frankfurt Motor Show in September 2017.
The Concept EQA is equipped with an electric motor on both
the front and rear axles. It has a total output of more than 200 kW
and maximum torque of over 500 Nm. It takes only around
ﬁve seconds for the electric vehicle to accelerate from 0 to
100 km/h. The basis of the vehicle’s outstanding handling

180 C | THE DIVISIONS | MERCEDES-BENZ CARS

and safety is an electric all-wheel drive system with axle-vari-
able torque distribution and a battery installed deep inside
the vehicle ﬂoor between the axles. In combination with the
intelligent operating strategy from Mercedes-Benz, the Con-
cept EQA is able to achieve a range of up to 400 km, depending
on the installed battery capacity.

Daimler plans to oﬀer more than ten all-electric models in the
passenger-car segment alone by 2022 – from the smart to the
large SUV. The ﬁrst battery-electric series-produced model
from the EQ brand will be launched in the SUV segment before
the end of this decade. It will be followed by a model oﬀensive
that will gradually supplement the product range of Mercedes-
Benz Cars with purely electric models. The new generation
of electric vehicles will be based on an architecture developed
especially for battery-electric models, which in every respect
shall be scalable and suitable for use in all model series: Wheel-
base and track width as well as all other system components,
especially the batteries, will be variable thanks to the modular
system.

Mercedes-Maybach: perfection blended with exclusivity
Mercedes-Maybach stands for the highest levels of exclusivity
and individuality. The luxury brand, which was launched in
November 2014, combines the perfection of the Mercedes-Benz
S-Class with the exclusivity of a Maybach. The Mercedes-
Maybach S 600 Pullman launched in early 2016 (fuel consump-
tion in l/100 km urban: 19.6 / extra-urban: 10.3 / combined:
13.6; CO2 emissions in g/km combined: 314) has a face-to-face
seating conﬁguration and is a clear top-of-the-line model.
The brand’s ﬁrst convertible was launched in the spring of 2017
as a limited edition of 300 units. A preview of the form the
luxury brand might take in the future is oﬀered by the concept
cars Vision Mercedes-Maybach 6 and Vision Mercedes-
Maybach 6 Cabriolet – a sensational coupe and a luxurious
convertible.

Mercedes-AMG: the sports-car and performance brand
The brand claim of “Driving Performance” reﬂects the two
core competencies of Mercedes-AMG: the ability to provide an
unparalleled driving experience and the ability to serve as a
driving force in the high-performance segment. The Mercedes-
AMG sports-car brand enhances the fascination of Mercedes-
Benz with nearly 60 models. The brand’s dynamic vehicles espe-
cially attract young and sporty customers to the brand with
the three-pointed star. Mercedes-AMG models diﬀer greatly from
their series-produced cousins in terms of both engineering
and appearance, thus strengthening the authenticity and distinc-
tive identity of the Mercedes-AMG brand. The Mercedes-AMG
Project ONE concept vehicle marks yet another milestone in the
strategic further development of Mercedes AMG as a sports-
car and high-performance brand. The two-seat hypercar brings
state-of-the-art and eﬃcient Formula 1 hybrid technology
from the racetrack to the road in virtually identical form for the
ﬁrst time ever. Together with the four-door AMG GT Concept,
the Mercedes-AMG Project ONE oﬀers yet another preview of
how AMG will use its high-performance hybrid-drive strategy
to deﬁne driving performance in the future.

The sports-car and high-performance brand from Mercedes-
Benz ﬁnished the year of its 50th anniversary with a new
record: For the ﬁrst time, the brand sold signiﬁcantly more
than 100,000 units.

smart: focus on electric mobility
At the Frankfurt Motor Show in September 2017, Daimler
announced that the smart brand plans to sell solely smart models
with electric drive systems in Europe and North America
starting in 2020. The other regions will then follow soon a(cid:5)er-
wards. The new electric drive models – the smart fortwo,
smart fortwo convertible and smart forfour (electricity consump-
tion combined: 13.1–12.9 kWh/100 km; CO2 emissions com-

AMG provides a preview of alternative drive concepts with the four-door hybrid show car Mercedes-AMG GT Concept.

C | THE DIVISIONS | MERCEDES-BENZ CARS 181

Concept for future mobility: The smart vision EQ fortwo is the first fully automated sharing concept car for the city of the future.

bined: 0 g/km) combine the agility of a smart with locally
emission-free driving at an aﬀordable price – the ideal combi-
nation for urban mobility.

With its “smart vision EQ fortwo” concept car, the brand pre-
sented its vision of the future of urban mobility at the 2017
Frankfurt Motor Show. This car-sharing concept vehicle, which
is of course both electric and fully automated, illustrates the
future possibilities for personalized and highly ﬂexible public
transport with maximum eﬃciency. E page 33

The range of services oﬀered for the smart brand is being
continuously expanded. One example is “smart ready to drop.”
This service, which is oﬀered in cooperation with various
logistics companies, enables parcels to be delivered to the trunk
of a customer’s car and also allows for the pick-up of returns
using the same system.“smart ready to share” enables car shar-
ing in closed groups – e.g. within a family, between friends
or at small companies – in an extremely user-friendly manner
with the help of an app that eliminates the need to hand over
keys to the next user.

The smart brand sold a total of 135,500 vehicles in 46 markets
worldwide in 2017. The smart was particularly popular in
China, which is now its third-biggest sales market a(cid:5)er Germany
and Italy.

Strengthened partnership in China
Sustainable development with local partners is crucial for con-
tinuing our business success in China. The signing of two
framework agreements has further strengthened cooperation
between Daimler and BAIC Motor in their production joint
venture, Beijing Benz Automotive Co., Ltd.(BBAC). Daimler and
BAIC Motor are jointly investing in the production of battery-
electric vehicles in Beijing and in the construction of a new
battery factory that will further pave the way for the launch
of vehicles equipped with alternative drive systems. In this way,
we are creating the foundation for further sustainable growth
and continued success in the future for Daimler in China, which
is now by far the world’s biggest automotive market.

With the upgraded Mercedes-Benz S-Class presented at Auto
Shanghai in April 2017, we have opened up a new dimension of
driving also in China.

All in all, we were able to increase sales of Mercedes-Benz
brand vehicles in China to the new record level of 595,200 units,
an increase of 28% from the prior year. More than two thirds
of the vehicles we sold in China during the reporting year were
manufactured locally at facilities operated by our BBAC joint
venture.

182 C | THE DIVISIONS | MERCEDES-BENZ CARS

Global production network for electric mobility
In the year under review, our manufacturing facilities continued
to build vehicles without interruption throughout the summer
months in order to meet the ongoing high demand for our models
on global markets. Within the framework of its growth strategy,
the Mercedes-Benz Cars division is continually further develop-
ing its ﬂexible and eﬃcient production network with more than
30 locations on four continents. In 2017, for example, we laid
the foundation stone for a new engine plant in Jawor, Poland,
and began building a new vehicle manufacturing facility near
Moscow in Russia.

Comprehensive plan for the future of diesel engines
We are convinced that diesel engines will continue to be an
integral part of the drive-system mix, not least due to their low
CO2 emissions. The debate surrounding diesel engines is
leading to increasing uncertainty among customers, however.
For this reason, the Daimler AG Board of Management approved
a comprehensive plan for the future of diesel engines in July
2017. The plan calls for a massive expansion of the current vol-
untary service measures for vehicles in customers’ hands, as
well as the rapid market launch of a completely new family of
diesel engines.

At the same time, we are preparing our worldwide production
network for the requirements associated with electric mobility.
We will manufacture our future electric vehicles from the EQ
product and technology brand within the framework of normal
series production on the same lines used to produce vehicles
with combustion engines. In the future, our production locations
for electric vehicles will be our plants in Bremen, Sindelﬁngen
and Rastatt, as well as in Tuscaloosa, Alabama, and Hambach.
We will also manufacture electric vehicles for the Chinese
market at Beijing Benz Automotive Co., Ltd.(BBAC). Mercedes-
Benz Cars will thus build electric vehicles at six locations in
the future. At the same time, we will expand our global battery
network to ﬁve sites on three continents. In the spring of 2017,
the foundation stone was laid for a second battery production
facility in Kamenz. BBAC will supply the Chinese market with
appropriate batteries, and battery production plants will be
added to our manufacturing facilities in Untertürkheim (Stuttgart)
and Tuscaloosa. With these and other measures, Mercedes-
Benz Cars is using new technologies to strengthen its strategic
approach to shape the future of mobility.

As early as 2016, Mercedes-Benz began oﬀering diesel vehicles
that were able to meet the Real Driving Emissions (RDE) limits
that went into eﬀect in the EU in 2017. This achievement was
made possible by an all-new modular family of eﬃcient and
clean diesel engines. In the future, this modular engine family
will be utilized across the entire product range of Mercedes-
Benz Cars and also at Mercedes-Benz Vans. The new engines’
exemplary emissions have also been conﬁrmed by measure-
ments conducted at independent institutes.

Best Customer Experience
“Best Customer Experience”(BCE) is a global sales and market-
ing program at the Mercedes-Benz Cars division. The key
drivers of our growth strategy are innovative products and entry
into new markets and market segments. The program seeks
to more strongly align the division’s sales and marketing organi-
zation with changing customer wishes and requirements and
in this manner to generate additional growth. Our goal here is to
make the Mercedes-Benz brand more attractive to new and
also younger target groups while also strengthening the brand

An icon is reinvented: The new Mercedes-Benz G-Class is better than ever for either on- or off-road driving.

C | THE DIVISIONS | MERCEDES-BENZ CARS 183

Winners of both the Drivers’ and the Constructors’ World Championship in Formula 1 racing:
Lewis Hamilton celebrates the fourth consecutive win for Mercedes-AMG Petronas Motorsport in Kuala Lumpur.

loyalty of established customers. Our BCE program thus sys-
tematically focuses on customers and their need for personal
assistance at every point of contact with the brand, its prod-
ucts and its services. To this end, Mercedes-Benz is using new
sales channels and digital portals as innovative interfaces with
the brand. Various sales formats, such as those using new digi-
tal channels, supplement the services oﬀered at traditional
Mercedes-Benz dealerships and showrooms.

An important component of Best Customer Experience is
the “Mercedes me” digital ecosystem, which enables personal-
ized interaction with the Mercedes-Benz brand. This makes
customer contact with Mercedes-Benz more individualized,
convenient and transparent. For example, customers can
use Mercedes me to obtain information on and utilize services
for mobility, connectivity, customer support, ﬁnancing and
lifestyle. Mercedes me is now used by more than one million
satisﬁed customers in 36 markets. E page 32

The Mercedes-Benz brand’s “She’s Mercedes” initiative spe-
ciﬁcally addresses women with the aim of making the brand
more appealing to women and increasing the proportion of
female customers. Along with community and inspiration plat-
forms, the initiative also oﬀers training for sales staﬀ and
seeks to increase the number of women in sales positions.
E page 32

#4TheTeam: success in motorsports
Mercedes-AMG Petronas Motorsport captured both the
Drivers’ and the Constructors’ World Championship in the For-
mula 1 racing series for the fourth consecutive year in 2017.
A special aspect of this achievement is that the team was able
to defend its titles despite the extensive changes made to
Formula 1 regulations. Last year marked the fourth time that
Lewis Hamilton has won the Drivers’ Championship. And
with the Mercedes-AMG Project ONE show car at the Frankfurt
Motor Show, we presented for the ﬁrst time a car that could
bring Formula 1 hybrid technology from the racetrack to the
road. Mercedes-AMG Motorsport also recorded six victories
and 14 podium ﬁnishes in 18 races in the German DTM touring
car series. As part of the strategic repositioning of our motor-
sports activities, we have decided to end our participation in
the DTM series a(cid:5)er the 2018 season and to participate in
Formula E in the future. This will enable us to demonstrate the
performance capability of our intelligent battery-electric
drive systems in a motorsports setting as well, and it will add
an emotional component to the EQ brand. Participation in
motorsports is an important factor of success for Daimler – not
just in terms of the signiﬁcant image enhancement and exten-
sive publicity provided by the races, but also with regard to
the valuable experience we gain through the use of hybrid tech-
nologies and lightweight designs in our motorsports activities.

184 C | THE DIVISIONS | DAIMLER TRUCKS

Daimler Trucks

Our Daimler Trucks division achieved signiﬁcant growth in both unit sales and earnings in 2017.
In all that we do, our focus is on our customers. In order to oﬀer them our best products and solu-
tions, we work continuously on innovations. Our focus is on trucks that are eﬃcient and electric,
safe, automated and connected. In order to best meet the needs of our customers in the various
regions, we are further expanding our presence in our core markets and in new markets. Using
global platforms, our engineers worldwide develop outstanding technologies and utilize economies
of scale and the advantage of speed. Our corporate culture is the foundation for the implemen-
tation of our strategy: Across national borders and departmental boundaries, we at Daimler Trucks
collaborate entrepreneurially, internationally and openly.

C.03
Daimler Trucks

€ amounts in millions

Change in %

2017

2016

17/16

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant, and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

35,707

33,187

2,380

6.7

1,948

5.9

1,028

1,243

1,322
45

1,265
57

476,325

411,265

470,705

415,108

Employees (December 31)

79,483

78,642

+22

-17

+5
-21

+16

+13

C.04
Unit sales of Daimler Trucks

In thousands

Total

EU30

thereof Germany

United Kingdom

France

NAFTA region

thereof United States

Latin America (excluding Mexico)

thereof Brazil

Asia

thereof Japan

Indonesia

For information purposes:

BFDA (Auman Trucks)

Total (including BFDA)

2017

2016

17/16

Change in %

471

415

165

140

149

112

583

146

122

125

493

+13

+12

+13

+15

+11

+18

-3

+53

+44

+18

Positive business development with only moderate market
dynamism
Daimler Trucks signiﬁcantly increased its unit sales to the number
of 470,700 vehicles in 2017 (2016: 415,100). Revenue of €35.7
billion was also signiﬁcantly higher than in the previous year
(2016: €33.2 billion). Overall, Daimler Trucks had little tailwind
from its relevant markets last year, but nonetheless signiﬁcantly
increased its EBIT to €2.4 billion (2016: €1.9 billion). We have
taken an important step with the ongoing optimization of ﬁxed
costs, especially at the Mercedes-Benz brand, in order to
bring Daimler Trucks up to the targeted level of proﬁtability in the
coming years. Together with the cost optimizations previously
planned, some of which have already been implemented, we
aim to achieve improvements for Daimler Trucks with a direct
impact on earnings in an amount of €1.4 billion by the end of
2018. Our goal is for these measures to become fully eﬀective
in the year 2019.

Unit sales significantly higher than in the previous year
Our total unit sales of 470,700 vehicles were 13% higher than
the prior-year number of trucks sold. In the EU30 region
(European Union, Switzerland and Norway), we sold 82,300
vehicles in 2017, which is slightly above the prior-year level
(2016: 79,800). Our Mercedes-Benz brand maintained its market
leadership in the medium- and heavy-duty segment with a
share of 21.0% (2016: 20.7%). Sales of 31,700 units in Germany
were in the magnitude of the prior-year level (2016: 31,500).
In Turkey, we achieved signiﬁcant sales growth a(cid:5)er the weak
development of the previous year and sold 11,800 units (2016:
9,300). The local Daimler company had its 50th anniversary in
the summer of 2017. The sales organization for Turkey, the
local product development department for trucks and buses,
and the plants in Aksaray (trucks) and Hoşdere (buses) are
organized under the roof of Mercedes-Benz Türk. The sales
development was positive also in Russia, where we more
than tripled our sales to 8,000 units (2016: 2,300).

C | THE DIVISIONS | DAIMLER TRUCKS 185

Road eﬃciency: The Mercedes-Benz Actros provided evidence of its fuel eﬃciency at the event Driving Experience Portugal 2017.

We increased our truck sales in Asia by 18% to 148,600 units.
In Japan, our sales of 44,800 trucks were slightly below
the prior-year level (2016: 46,400). Our FUSO brand achieved
a 19.6% share of the overall Japanese truck market (2016:
20.4%). The new heavy-duty Super Great truck underscores
our ambition to further expand our position in the Japanese
market and sets new standards for eﬃciency, safety and con-
nectivity. The new FUSO ﬂagship, like the latest heavy-duty
trucks from Freightliner and Mercedes-Benz, utilizes compo-
nents from our global platform strategy such as the common
powertrain and standardized electric/electronics architecture. In
Indonesia, our sales of 42,700 units were signiﬁcantly higher
than in the previous year (2016: 28,000). The ﬁrst Mercedes-
Benz truck drove oﬀ the assembly line at our Indonesian
assembly plant in Wanaherang. Daimler Trucks will produce
heavy- duty Mercedes-Benz trucks for the Indonesian market
there, so we will be present in Indonesia with the two brands
FUSO and Mercedes-Benz in the future. In the Middle East,
our sales of 23,600 trucks last year were signiﬁcantly higher
than the low prior-year volume (2016: 17,600).

Our sales of 30,500 trucks in Latin America were above the
low level of the previous year (2016: 27,500). There was a
signiﬁcant contribution from the positive sales development in
Argentina, where 5,600 units were sold (2016: 3,900). In
Brazil, the region’s main market, we increased our sales signiﬁ-
cantly to 13,400 vehicles (2016: 12,100). With our trucks of
the Mercedes-Benz brand, we achieved a share of 27.6% in the
medium- and heavy-duty segment (2016: 29.8%). In the next
ﬁve years, we will invest approximately €600 million in Brazil in
the modernization of the product lineup, in digital services and
in the two plants in São Bernardo do Campo and Juiz de Fora.
Both those plants are to meet the highest production stan-
dards by 2022, making them even more competitive.

The positive development of unit sales in the NAFTA region made
a major contribution to our growth, especially in the second
half of the year. We were able to signiﬁcantly increase our sales
to 165,000 units (2016: 145,700). We further increased our
market share in weight classes 6-8 to 39.8% (2016: 39.3%) and
in heavy-duty class 8 we once again achieved a market share
of 40.0% (2016: 40.0%). In classes 6-8, we continued to be the
undisputed market leader. The new Freightliner Cascadia has
been in production since the beginning of 2017 and is equipped
with our integrated powertrain. Approximately 95% of our
heavy-duty engines in our trucks in the United States and Canada
meanwhile stem from our own engine platform. We were able
to increase the proportion of Freightliner Cascadia and Western
Star 5700 XE trucks with the DT12 automated trans mission to
approximately 75 % in the United States and Canada. Local pro-
duction of the medium-duty DD8 engine started in Detroit in
late 2017, marking a further milestone of our platform strategy.
Production of the DD5 engine will follow in 2018.

186 C | THE DIVISIONS | DAIMLER TRUCKS

The FUSO eCanter is our ﬁrst light-duty truck from series production with purely electric drive.

In India, the ﬁrst half of the year was aﬀected by weaker demand
in connection with regulatory and tax changes. Although the
Indian truck market contracted compared with the previous year,
we were able to signiﬁcantly increase our unit sales to 16,700
BharatBenz trucks in the ﬁ(cid:5)h year since the brand was launched
and our market share grew to 9.1% (2016: 13,100 and 6.8%).
This development was aided by, among other things, the new
emission standard Bharat Stage IV, which our BharatBenz
truck already fulﬁlled before it was introduced in April 2017.
Meanwhile, more than 60,000 BharatBenz trucks are on the
roads in India and a further 14,000 trucks have been exported
from there to more than 40 other markets in Asia, Latin
America and Africa.

Presence in important growth regions
In China, the world’s biggest truck market, Daimler AG has a 50%
stake in Beijing Foton Daimler Automotive Co. Ltd.(BFDA), a
joint venture with Beiqi Foton Motor Co. Ltd. Medium- and heavy-
duty trucks of the Auman brand have been produced there
since 2012. Along with the signiﬁcant market recovery in China,
sales of 112,400 Auman trucks were signiﬁcantly higher than
in the previous year (2016: 77,800). More than 460,000 Auman
trucks have been sold since the joint venture was established.
In Iran, Mercedes-Benz Trucks signed a framework agreement
on a joint venture with the Iran Khodro Industrial Group in 2017.
This creates a basis for future sales and a(cid:5)ersales activities for

Mercedes-Benz trucks in Iran. In addition, Daimler Trucks
signed a supply agreement for the FUSO brand with Mayan, a
company of the Mammut Group. The supply of FUSO trucks
to customers in Iran started in 2017.

Electrification has top priority
Mercedes-Benz presented a fully electric heavy-duty truck for
distribution transport already in 2016. Last year, we launched
the new Japanese product brand, E-FUSO, a separate brand
for electric trucks and buses. It is planned to have an additional
electric version of each FUSO truck and bus model in the com-
ing years. With the presentation of the new fully electric E-FUSO
Vision One heavy-duty truck for inner-city and regional distri-
bution transport, we are underscoring our claim to be a pioneer
in the ﬁeld of electric commercial vehicles. The Vision One
has a battery capacity of 300 kWh and a range of up to 350 kilo-
meters. We intend to launch the series-produced version of
the heavy-duty distribution trucks from FUSO in mature markets
in four years. E page 34 In New York last September, we
handed over the FUSO eCanter to customers including United
Parcels Services (UPS). According to our market knowledge,
this is the world’s ﬁrst fully electric light-duty truck from series
production. In Europe and Japan, other leading logistics pro-
viders were among the ﬁrst customers of the small-series pro-
duction. They will use the fully electric light-duty truck for
various tasks in urban delivery transport. In the coming years,

C | THE DIVISIONS | DAIMLER TRUCKS 187

we plan to deliver 500 trucks of this generation to selected
customers. Large-scale series production will probably begin in
2019. The development of the vehicle beneﬁted from extensive
experience gained from several customer test phases in Portugal
and Germany. Production of the eCanter models for Europe
and the United States started in Tramagal, Portugal in July 2017.
The trucks for Japan are produced in Kawasaki, where the
ﬁrst rapid-charging station for electric trucks in the Japanese
market has been in operation since May. Thomas Built Buses,
a subsidiary of Daimler Trucks North America, presented a fully
electric school bus in September, which is to go into produc-
tion in 2019. The 160 kWh battery should allow a range of up to
160 kilometers and the range can be extended with additional
battery modules if required. With the development of the Saf-T-
Liner C2 electric bus, Thomas Built Buses proﬁted signiﬁcantly
from the electric-drive expertise within the Daimler Group. In
parallel with its activities on the vehicle side, Daimler Trucks
invested last year in the Israeli company StoreDot Ltd. and
agreed with it on a strategic partnership. StoreDot is a pioneer
for nanotechnology materials and is one of the leading com-
panies for electric-charging systems and energy-storage mate-
rials. The main area of cooperation is the rapid charging of
batteries to provide customers with better vehicle utilization.

Truck platooning on public highways in the United States
In the past ﬁnancial year, Daimler Trucks was the ﬁrst truck
manufacturer to test digitally connected trucks on public high-
ways in the United States. This so-called platooning makes
use of co nnectivity and partially automated driving to reduce the
gaps between trucks on the road, and can result in better
fuel eﬃciency, easier work for the drivers and enhanced safety.
Tests with three Mercedes- Benz Actros trucks driving in par-
tially automated mode and connected had previously been car-
ried out in Germany in 2016. Daimler Trucks North America
(DTNA) linked two Freightliner New Cascadia trucks with the
use of Wi-Fi-based V2V communication in connection with
driver-assistance systems featured in the new Cascadia under
the product name Detroit Assurance 4.0. They include Adap-
tive Cruise Control, Lane Departure Assist and Active Brake
Assist 4. DTNA is thus responding to growing customer inter-
est in solutions for automated and connected driving in trucks.
Together with ﬂeet customers in the United States, DTNA is
examining the impact of platooning solutions on ﬂeet operations.

The trucks were previously tested on the new DTNA test grounds
in the desert of Oregon. This new facility with an area of over
35 hectares allows our vehicles to be tested for the NAFTA region
under diﬃcult climatic conditions. Test drives of automated
vehicles are also to be carried out there.

The new Freightliner Cascadia features impressive fuel eﬃciency, connectivity and safety.

188 C | THE DIVISIONS | DAIMLER TRUCKS

Connected Mercedes-Benz Arocs trucks in driverless
test operation
Daimler Trucks continues to work on reducing the burden on
drivers by means of automated driving in normal road traﬃc,
while enhancing safety on highways and freeways. In parallel,
Daimler Trucks is also testing driverless vehicles in closed-oﬀ
areas. This oﬀers further potential, for example to signiﬁcantly
increase customers’ productivity. Fitted with a Remote Truck
Interface (RTI), which in the technological context will be devel-
oped for automated driving, four Mercedes-Benz Arocs trucks
demonstrated a new dimension of snow removal on an airﬁeld.
Using the RTI, all vehicles are fully connected with telematics
systems and can either lead or follow in a convoy. Vehicle func-
tions can be controlled remotely and thus allow the truck con-
voy to be driven from outside the driver’s cab. Following vehicles
in the convoy can therefore be used to clear snow in driverless
mode. The project was initiated in close collaboration between
the Daimler innovation incubator Lab1886, Daimler Trucks and
Fraport AG.

New connectivity solutions for the logistics sector
and truck servicing
The Truck Data Center forms the basis for our truck-related
digital services and is installed in vehicles from all Daimler
Trucks brands as a key component of the platform strategy.
The connectivity module receives truck data, evaluates it and
communicates with the infrastructure, other vehicles and
other logistics participants. Using linked connectivity solutions
from Fleetboard, Detroit Connect and Truckonnect that
are tailored to local customers’ needs, logistics companies
receive extensive insights and useful analyses for their ﬂeets,
as well as access to new digital connectivity services. Big data
and technology oﬀer new potential for signiﬁcantly increasing
the proﬁtability of the logistics sector. Using a variety of new
apps, it is possible to display relevant information such as
ﬂeet utilization, vehicle position, cost-savings potential, fuel
consumption and driving-style evaluation. And for the opti-
mization of vehicle servicing, Daimler Trucks last year launched
a new digital service: Mercedes-Benz Uptime. This connects
the truck with the Mercedes-Benz service organization and the
transport company, thus facilitating signiﬁcantly better
plannability and higher eﬃciency through maximum vehicle
availability. Unplanned repairs can be avoided to a great
extent and scheduled workshop visits can be further optimized.

The Truck Data Center connectivity module will be the brain of the connected truck across the Daimler Trucks brands.

C | THE DIVISIONS | MERCEDES-BENZ VANS 189

Mercedes-Benz Vans

Mercedes-Benz Vans continued on its successful course of recent years, with a new record for
unit sales in 2017. At €1.2 billion, EBIT remained at the high level of the previous year. Growth was
mainly driven by the mid-size segment with the Vito van and the V-Class full-size MPV. We con-
tinued our “Mercedes-Benz Vans goes global” growth strategy by expanding our product range to
include the X-Class — the ﬁrst pickup from a premium manufacturer. Mercedes-Benz Vans’ future-
oriented “adVANce” initiative delivered its ﬁrst concrete results, and the division is systematically
forging ahead with its transformation from a vehicle manufacturer into a supplier of transportation
and mobility solutions for cargo and passengers. Among other things, Mercedes-Benz Vans plans
to electrify its commercial ﬂeet, beginning with the Vito in the second half of 2018.

New record for unit sales
Mercedes-Benz Vans set a new sales record once again in
ﬁnancial year 2017, with an increase of 12% to 401,000 units.
At €13.2 billion, revenue was also higher than in the previous
year (2016: €12.8 billion). EBIT reached €1,181 million and was
thus at the high prior-year level.

Continued growth
Mercedes-Benz Vans’ products remained very successful in
ﬁnancial year 2017. Our Sprinter, Vito and Citan vans are
tailored mainly to commercial customers, while the V-Class
is designed primarily for private use. The X-Class is targeted
at a variety of private and commercial customers.

Unit sales in the EU30 region, our core market, rose by 9% to
273,300 vans in the year under review. The markets grew
at double-digit rates for example in the United Kingdom (+12%),
Spain (+10%), Italy (+13%), Poland (+17%), Switzerland (+10%)
and Austria (+14%). Mercedes-Benz Vans posted substantial
growth (+10%) also in its important German market. We also set
a new record in Germany of 105,800 units sold (2016: 96,100).
Unit sales developed favorably also in Turkey (+14%) and
Russia (+6%).

Mercedes-Benz Vans continued to grow also in the NAFTA
region, where sales rose to 44,800 units (2016: 43,400).
This included a new record of 34,200 units sold in the United
States (2016: 33,700).

Sales developed very favorably in Latin America, increasing sig-
niﬁcantly by 31% to 16,400 units. Sales in China once again
rose sharply (+75%) compared with the prior year, driven by
the new models launched in the mid-size segment in 2016.

We sold a total of 200,500 units of the Sprinter worldwide in
2017 (2016: 193,400), which was the last full year of the current
model’s life cycle. The successor generation of the Sprinter
is already set for market launch in the ﬁrst half of 2018. Sales
of vehicles in the mid-size segment were signiﬁcantly higher
than in the previous year, totaling 171,100 units in 2017 (2016:
140,800). Sales also rose in the commercial segment, with
Vito sales increasing signiﬁcantly by 21% to 111,800 vehicles.
Meanwhile, sales of the Mercedes-Benz Citan reached 26,100
units (2016: 24,900). Sales of the V-Class full size MPV rose by

22% to 59,300 units in the year under review. The X-Class also
got oﬀ to a good start at the end of the year, with sales totaling
3,300 units.

C.05
Mercedes-Benz Vans

€ amounts in millions

% change

2017

2016

17/16

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant and equipment

Research and development
expenditure
thereof capitalized

Production

Unit sales

13,164

1,181

12,835

1,170

9.0

710

565
310

9.1

373

442
238

405,129

368,574

401,025

359,096

Employees (December 31)

25,255

24,029

+90

+28
+30

+10

+12

C.06
Unit sales by Mercedes-Benz Vans

2017

2016

17/16

% change

401,025

359,096

273,297

249,860

105,781

44,815

34,158

16,378

33,641

23,801

32,894

96,130

43,354

33,749

12,497

22,526

13,636

30,859

+12

+10

+31

+49

+75

Total

EU30

thereof Germany

NAFTA

thereof United States

Latin America
(excluding Mexico)

Asia

thereof China

Other markets

190 C | THE DIVISIONS | MERCEDES-BENZ VANS

Mercedes-Benz Vans invests in its future
Mercedes-Benz Vans is continuing the successful implementa-
tion of its “Mercedes-Benz Vans goes global” growth strategy.
At the same time, we have laid the foundation for further growth
in the future. Building on its strong position, Mercedes-Benz
Vans announced in February 2017 that it would invest a total of
over €2.0 billion in 2017 and 2018 alone. This money is being
used to expand and update the division’s product range and to
establish new services. The investments particularly focus on
the new Mercedes-Benz X-Class and the new Sprinter, as well as
on innovative holistic solutions for the vehicles from Mercedes-
Benz Vans.

Market launch of the Mercedes-Benz X-Class
Mercedes-Benz Vans has been delivering the new X-Class, the
ﬁrst pickup from a premium automaker, to customers in Europe
since late 2017. South Africa and Australia will follow in early
2018 and we plan to launch the model in Argentina and Brazil
in 2019. The mid-size pickup segment is global in scope, is a
volume market and is set to grow further. The X-Class has room
for up to ﬁve people. It augments the strengths of a mid-size
pickup with the typical properties of the Mercedes-Benz brand:
dynamic handling, comfort, great design, high safety, good
connectivity and a comprehensive range of customization options.
Customers can choose between three variants, rear-wheel
drive, engageable all-wheel drive or permanent all-wheel drive
(permanent all-wheel drive as of mid-2018), a six-speed
manual or seven-speed automatic transmission, and a diverse
range of accessories developed by Mercedes-Benz.

Preview of the new Sprinter: The transformation of a
vehicle into an integrated system solution
Mercedes-Benz Vans will launch the new Sprinter in Europe in
the second quarter of 2018, with other markets to follow
successively. The division already announced speciﬁc details
of the new full-size van in 2017. The new Sprinter will be
fully connected in order to be a part of the Internet of things.
In addition, the vehicle’s unique scalability, electric drive
system and customized hardware solutions for the cargo space,
as well as a combination of van-sharing and rental services,
will make it the ﬁrst integrated system solution from Mercedes-
Benz Vans. These innovations are integrated solely on the
basis of each customer’s sector-speciﬁc needs, and they sig-
niﬁcantly ease the daily work of drivers and ﬂeet managers.

Mercedes-Benz Vans is the only manufacturer of full-size vans
that continues to produce in Germany. In this context,
Mercedes-Benz Vans is investing a total of €450 million in the
lead plant of the global Sprinter production network in
Düsseldorf, and in the Sprinter plant in Ludwigsfelde. The bat-
tery-electric Sprinter will be produced in Düsseldorf, and
this location will serve as the global competence center for the
electric-drive Sprinter. In 2017, the plant in González Catán
near Buenos Aires, Argentina, also began making preparations
for production of the new Sprinter. The division will invest
US$150 million in this facility and will create more than 500
additional jobs there. At the same time, construction of the
new Sprinter plant in North Charleston, South Carolina, con-
tinues to progress. Mercedes-Benz Vans is investing roughly
half a billion dollars in the new plant and will create up to 1,300
jobs there.

The new Mercedes-Benz X-Class is the ﬁrst pickup from a premium manufacturer.

C | THE DIVISIONS | MERCEDES-BENZ VANS 191

The Mercedes-Benz eVito has been available to order since November 2017, with deliveries to commence in the second half of 2018.

New HORIZON added to the Marco Polo family
In January 2017, Mercedes-Benz Vans added a new member to
its range of compact camper vans. Following the Marco Polo
and the Marco Polo ACTIVITY, our product range is now supple-
mented by the new Marco Polo HORIZON. Thanks to its ver-
satile seating conﬁguration oﬀering up to seven seats and ﬁve
beds, the Marco Polo HORIZON combines maximum function-
ality with the high-quality design of the V-Class. The compact
new camper van from Mercedes-Benz is geared toward trend-
conscious adventurers who are looking for a versatile and func-
tional vehicle for short vacation trips and outdoor activities,
but also appreciate a stylish image.

Full speed ahead: first concrete results of the
future-oriented “adVANce” initiative
With its future-oriented “adVANce” initiative, Mercedes-Benz
Vans is evolving from a manufacturer of globally successful
vans into a provider of holistic system solutions for the trans-
portation of goods and passengers. The division is thus
playinga pioneering role in its sector. We aim to develop new
business models and tailored solutions that are adapted to
our customers’ respective sectors.

In November 2017, Mercedes-Benz Vans provided information on
its plans to oﬀer all of its commercial van models with electric
drive systems. This has already started with the mid-size eVito,
which has been available to order since the announcement
was made. Deliveries of the eVito will begin in the second half
of 2018, followed by the eSprinter in 2019. The product range
will be rounded out by the Citan. The electric-drive strategy of
Mercedes-Benz Vans focuses not only on the electric van itself,
but also on a technological ecosystem that is optimally aligned
with customers’ business needs. Here, the division is taking
a holistic approach based on ﬁve pillars (“Holistic Ecosystem”,
“Sector Focus”, “Cost Eﬀectiveness”, “Co-Creation” and
“Technology Transfer”) in order to create an innovative integrated
system solution. This solution covers the entire value chain
for commercial applications. Customer co-creation plays a key
role in product development, so strategic partners and their
sector expertise are being incorporated into the development

process. Hermes, a provider of logistics services, is a good
example of that. In early 2018, Hermes and Mercedes-Benz Vans
will launch the partnership they agreed upon in the spring
of 2017 with a pilot phase in Hamburg and Stuttgart. A(cid:5)er the
projects are completed, we will expand the electric ﬂeet to a
total of 1,500 electric Vito and Sprinter vans by 2020, and launch
it for parcel deliveries in other metropolitan areas. The
strategic partnership also involves the joint development of a
concept for an eﬃcient charging infrastructure at Hermes
logistics centers, as well as IT services to ensure optimal man-
agement of the electric ﬂeet. The two partners also plan to
develop integrated system solutions to boost the eﬃciency of
the entire delivery process. They are also working together to
create additional eﬃciency drivers, such as intelligent systems
for the cargo space that will enable the vehicle to be loaded
and unloaded faster.

In July 2017, Mercedes-Benz Vans Mobility GmbH launched
its ﬁrst mobility service in the German market. Called Mercedes-
Benz Van Rental, this innovative and highly ﬂexible rental
service from the Daimler subsidiary is mainly targeted at com-
mercial van customers. In addition, Mercedes-Benz Vans is
entering the business of shared mobility and ride sharing. To
this end, the Vans division teamed up with the successful US
startup Via to create the ViaVan joint venture for the European
market. The new ridesharing service will be launched in a
major European city in early 2018. A(cid:5)er that, the service will
be gradually expanded to other cities.

Mercedes-Benz Vans is also studying new delivery models,
including the combination of vans and drones. For example, the
division cooperated with the US drone system developer
Matternet and the Swiss online marketplace siroop to run a
three-week pilot project in Zürich during the year under
review. The project involved the use of vans and drones for the
eﬃcient on-demand delivery of e-commerce products.

192 C | THE DIVISIONS | DAIMLER BUSES

Daimler Buses

In 2017, business development at Daimler Buses was strongly inﬂuenced by the recovering
economic conditions in Latin America and a signiﬁcant sales increase in India. Lower demand for
our buses in Turkey had a negative impact. Our earnings, which were at the very good level of
the previous year, enabled us to achieve a 5.6% return on sales. As the market leader in its most
important traditional core markets, Daimler Buses focuses on innovative and pioneering city
buses and coaches. In 2017, Daimler Buses once again presented itself as a future-oriented manu-
facturer with new products and digital services, a “future package” for our production network,
and the implementation of the CASE strategy.

C.07
Daimler Buses

€ amounts in millions

% change

2017

2016

17/16

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

Employees (December 31)

4,351

4,176

243

5.6

194
30

249

6.0

202
11

28,518

28,676

18,292

26,180

26,226

17,899

-2

-3

-4
+173

C.08
Unit sales by Daimler Buses

Total

EU30

thereof Germany

Latin America
(excluding Mexico)

thereof Brazil

Mexico

Asia

Other markets

2017

2016

17/16

% change

28,676

26,226

8,687

3,057

12,740

7,201

3,440

2,348

1,461

8,838

3,063

9,837

4,937

3,780

1,759

2,012

-2

-0

+30

+46

-9

+33

-27

Earnings at the prior-year level
Daimler Buses sold 28,700 buses and bus chassis worldwide in
ﬁnancial year 2017 (2016: 26,200). The signiﬁcant increase
was due in particular to the gradual recovery of the economy in
Brazil. The division thus maintained its clear market leadership
in its most important traditional core markets (EU30, Brazil,
Argentina and Mexico). Sales of complete buses in the EU30
region were at the same high level as in the previous year.
Revenue grew by 4% and EBIT of €243 million was at the prior-
year level (2016: €249 million).

Varied business development in the core regions
In the EU30 region, the Daimler Buses brands Mercedes-Benz
and Setra oﬀer a full range of city buses, intercity buses and
touring coaches, as well as bus chassis. Due to the continued
high demand for our complete buses, unit sales in this region
amounted to 8,700, remaining roughly at the high level of the
prior year (2016: 8,800 units). Daimler Buses maintained its
leading market position in the EU30 region with a market share
of 28.4% (2016: 29.6%). At 3,100 units, sales in Germany were
at the same level as in the previous year. Sales of 400 units in
Turkey were signiﬁcantly lower than in the prior year (2016:
600) due to the country’s economic situation, which remains
diﬃcult. The market situation in Latin America (excluding
Mexico) improved considerably on account of the gradually
recovering market in Brazil. The bus market volume in Brazil
grew by 10% in the year under review a(cid:5)er having bottomed
out in 2016. Sales of Mercedes-Benz bus chassis in Brazil
rose by 46% to 7,200 units. We were able to maintain our lead-
ing market position in Brazil with a market share of 52.5%
(2016: 58.4%). In India, we continued along our growth path and
increased our sales to 900 units (2016: 500). At 3,400 units,
sales in Mexico were signiﬁcantly lower than in the previous
year (2016: 3,800).

C | THE DIVISIONS | DAIMLER BUSES 193

Economic, safe, comfortable and functional: the new Mercedes-Benz Tourismo RHD high-decker coach.

The Setra S 531 DT double-decker is the biggest and most comfortable coach from Daimler Buses.

194 C | THE DIVISIONS | DAIMLER BUSES

The benchmark: the new Mercedes-Benz Citaro hybrid
In the year under review, Daimler Buses continued its model
oﬀensive with the Mercedes-Benz Citaro hybrid and other
models. Hybrid drive is available for many model variants of
the best-selling Citaro city bus, including the natural-gas-
powered Citaro NGT. Hybrid drive, together with the new elec-
tro-hydraulic steering system, further reduces the fuel
consumption of the conventional Citaro, which is already highly
eﬃcient, depending on the vehicle’s application and speci-
ﬁcations. The further reduced fuel consumption quickly pays
oﬀ for transport companies, and society and the environment
beneﬁt from the decrease in emissions.

Outstanding new touring coaches: the Mercedes-Benz
Tourismo and the Setra double-decker S 531 DT
Another focus area of the product oﬀensive was the new
version of the successful Mercedes-Benz Tourismo touring
coach. New assistance and safety systems such as Active
Brake Assist 4 (ABA4) with pedestrian detection make the new
Tourismo even safer. Fuel consumption continues to fall,
thanks to its optimized aerodynamics and the further improve-
ment of its chassis compared with the predecessor model.
With four model variants, the new Mercedes-Benz Tourismo
addresses the wide range of customer needs in the coach
segment. The product oﬀensive is also paying oﬀ in the grow-
ing intercity-bus business.

The new Setra S 531 DT double-decker bus continues our
coach oﬀensive. Thanks to improved aerodynamics, it consumes
signiﬁcantly less fuel than its predecessor. In addition, it is
equipped as standard with an emergency braking system with
obstacle and pedestrian recognition, and Sideguard Assist
for taking the blind spot into account is oﬀered as an optional
extra.

The countdown for our electric city bus has begun
By the end of 2018, Daimler Buses plans to begin series pro-
duction of a city bus with fully electric drive based on the
Mercedes-Benz Citaro. The battery-electric Citaro has already
undergone an extensive cycle of testing and test drives. Its
prototypes have successfully completed a winter test cycle
under below-zero conditions at the Arctic Circle and a summer
test cycle under very high temperatures. The cycles are being
followed by endurance testing and detailed ﬁne tuning. The
bus has reached such a degree of maturity that the brand is
already participating in invitations to tender. The ﬁrst state-
ment of intent for the purchase of this electric city bus was
already signed at the end of 2017. As a result, we plan to
deliver the ﬁrst buses starting in late 2018 and to put them into
operation in a customer-oriented vehicle testing program.

Furthermore, Daimler Buses is conducting the “eMobility
Consulting” initiative to advise its customers on issues related
to electric mobility. In this context, we work together with our
customers to analyze each speciﬁc starting situation and use it
as a basis for developing a holistic system with the highest
possible proportion of electric mobility. In the process, we con-
sider not only the vehicles themselves but also the charging
infrastructure, the operating plan and the service concepts.

New bus models for the African market
Daimler Buses is launching two new bus models on the market
in Kenya. Both bus models will be manufactured for the local
market in cooperation with the division’s local sales partner
DT Dobie Kenya in Nairobi. The Mercedes-Benz 917 city bus
was designed for city, school and shuttle operation, and the
Mercedes-Benz 1730 is ideal for long-distance routes.

The new umbrella brand Omniplus On for all digital
services
Starting in 2018, we plan to consolidate our digital services for
buses under the umbrella brand Omniplus On in a single portal.
For example, the Uptime feature continuously monitors and
analyzes the vehicle systems and indicates when maintenance
or repair is needed. The Driver’s App supports the communi-
cation of drivers and companies and helps them carry out the
required pre-departure checks. The Remote Bus feature pro-
vides essential data. Thanks to these features, our customers
have a wide variety of information available to them for sup-
porting the eﬃcient deployment of their ﬂeets.

Daimler Buses receives many major orders
In the year under review, Daimler Buses received a large number
of major orders. The local transportation authority in Riyadh,
Saudi Arabia, ordered more than 600 Mercedes-Benz Citaro
buses – the biggest single order for Mercedes-Benz Citaro
city buses in the history of Daimler Buses. Two major orders
were concluded in Poland: 80 Mercedes-Benz Conecto buses
for Warsaw and 60 Mercedes-Benz Citaro buses for the local
transport operator in Wrocław. In addition, EMT Madrid
ordered an additional 300 vehicles. A framework agreement
was signed with the Italian transport operator AGI for 300
buses, and another contract with BusItalia covered a total of
950 vehicles.

A future package to enhance efficiency in production and
the implementation of CASE
As part of a new target vision, Daimler Buses is making its
production network in Europe ﬁt for the future. Within this con-
text, in the years ahead, we aim to invest approximately €340
million in optimized structures and more eﬃcient processes in
the manufacturing network, as well as in the implementation
of the CASE strategy at Daimler Buses.

Strategic cooperation with CleverShuttle for mobility on
demand
Daimler Buses has become a strategic investor in the Berlin-
based mobility service CleverShuttle. Through a minority hold-
ing, the division is entering into a strategic cooperation for
mobility on demand – in other words, mobility services that are
designed to ﬂexibly meet customer demand.

Award-winning products from Daimler Buses
At the Busworld international buses trade fair in Kortrijk,
Belgium, Daimler Buses was honored with ﬁve awards. The
panel of experts granting the Busworld Awards honored the
Mercedes-Benz Tourismo M and Citaro hybrid bus models with
two awards each. And the Setra S 516 HD touring coach in
the ComfortClass received the Sustainable Bus Award for 2018
from the international panel of judges.

C | THE DIVISIONS | DAIMLER FINANCIAL SERVICES 195

Daimler Financial Services

The number of cars and commercial vehicles ﬁnanced or leased by Daimler Financial Services
reached a new all-time high of more than 4.8 million at the end of ﬁnancial year 2017. Record ﬁgures
were also posted for new business and contract volume, and EBIT set a new benchmark as well.
The combination of sales ﬁnancing with brokered automotive insurance policies continued to gain
importance. The division’s range of innovative mobility services was further expanded. Today,
services such as car2go, moovel and mytaxi are used by 17.8 million customers all over the world.
In 2017, the digitization of ﬁnancial services was also successfully expanded with the Mercedes Pay
electronic payment system and the AutoGravity ﬁnancing app.

Half of all Daimler vehicles delivered to customers are
financed or leased
Daimler Financial Services concluded 1.9 million new ﬁnancing
and leasing contracts worth a total of €70.7 billion in 2017.
The total value of all new contracts rose by 14% compared with
the prior year. About half of all new-vehicle sales by our auto-
motive divisions in 2017 were supported by sales ﬁnancing from
Daimler Financial Services. A total of more than 4.8 million
ﬁnanced or leased vehicles were on the books at the end of
2017 with a total contract volume of €139.9 billion; this repre-
sents a 6% increase compared with the end of 2016. Adjusted
for exchange-rate eﬀects, contract volume increased by 12%.
EBIT rose to a new high of €1,970 million (2016: €1,739 million).
(cid:202) C.09

Significant increase in new business in Europe
During the year under review, Daimler Financial Services
concluded 967,600 new ﬁnancing and leasing contracts worth
€31.1 billion in the Europe region (+15%). Especially high
rates of growth were recorded in Russia (+51%), Italy (+29%)
and Spain (+28%). In Germany, Mercedes-Benz Bank’s new
business increased by 9% to €12.9 billion. Daimler Financial
Services’ total contract volume in Europe rose by 12% to
€59.7 billion.

The Americas: new business at prior-year level
Daimler Financial Services brokered 444,600 new ﬁnancing
and leasing contracts worth €21.8 billion in the Americas
region in 2017 (+1%). The volume of new business developed
very well in Brazil (+28%) and Canada (+8%). Contract volume
in the Americas region of €50.7 billion at December 31, 2017
was lower than at the end of 2016 (-6%). Adjusted for exchange-
rate eﬀects, contract volume increased by 6%.

Strong growth in Africa & Asia-Pacific region and China
New business in the Africa & Asia-Paciﬁc region (excluding China)
increased sharply once again compared with the prior year,
by 16% to €8.4 billion. Business growth was especially strong in
South Korea (+30%) and Japan (+19%). At the end of 2017,
contract volume in the Africa & Asia-Paciﬁc region (excluding
China) totaled €17.2 billion, representing a 7% increase over
the previous year. New business also increased signiﬁcantly in
China: 300,300 new leasing and ﬁnancing contracts worth
€9.5 billion were concluded in 2017 (+56%). At the end of 2017,
contract volume in China amounted to €12.2 billion – an
increase of 39% compared with the end of 2016.

Further growth in the insurance business
Daimler Financial Services brokered approximately 2.1 million
insurance policies in 2017 – an increase of 20% compared
with the prior year. A new telematics-based insurance rate was
developed in 2017 and successfully launched in France,
Belgium and Germany. Since it started operations in 2016, the
warranty insurer Mercedes-Benz Versicherung AG, has
established itself in the German market very successfully
and continued to grow in ﬁnancial year 2017.

C.09
Daimler Financial Services

€ amounts in millions

% change

2017

2016

17/16

Revenue

EBIT

New business

Contract volume

Investment in property,
plant and equipment

23,775

1,970

70,721

20,660

1,739

61,810

139,907

132,565

Employees (December 31)

13,012

12,062

+15

+13

+14

+16

196 C | THE DIVISIONS | DAIMLER FINANCIAL SERVICES

True to the motto “Mobility at your ﬁngertips,” Daimler Financial Services is a leading provider of digital mobility services.

Mobility services on the right track
Daimler Financial Services once again expanded its range of
innovative mobility services in 2017. The number of registered
users of the car2go car-sharing service increased to more
than 3.0 million, enabling car2go to maintain its position as the
world’s leading ﬂexible car-sharing company.

In 2017, car2go upgraded its worldwide ﬂeets with new vehicle
models. In Europe and North America, it added more Mercedes-
Benz vehicles to its ﬂeets; in Stuttgart, the ﬂeet was supple-
mented with B-Class electric drive vehicles; and in Italy, the
ﬂeets were augmented for the ﬁrst time with smart forfour
cars. At the same time, the car2go services were technically
reﬁned and simpliﬁed for the customers. Thanks to the intro-
duction of online validation of driver’s licenses, customers in
all markets can now register online from start to ﬁnish and
use car2go services immediately. In addition, with the option of
hourly packages, car2go is oﬀering its customers aﬀordable
and stress-free long-term rental conditions.

The moovel app also underwent further development in 2017.
moovel enables customers in Germany to compare various
mobility and transport-system options and then choose the
best way to get from point A to point B. The app can also be
used to book and directly pay for services provided by compa-
nies such as car2go, mytaxi and Deutsche Bahn. With the
introduction of the moovel transit product portfolio, the moovel
Group is oﬀering “white label” solutions for transportation

companies all over the world. In the United States, mobile
ticketing applications from moovel are now used by 16 trans-
portation companies. That makes moovel North America the
leading provider of mobile ticketing technology for US local
public transportation apps. In May 2017, moovel teamed up with
the public transportation provider in Karlsruhe (KVV) to launch
the joint mobility app “KVV.mobil powered by moovel.” KVV
tickets can be booked and paid for directly via the app. In
addition, the app shows users available rental bicycles and
vehicles from the car-sharing company Stadtmobil. The number
of registered app users in Germany and the United States
had risen to 3.7 million by the end of 2017 (2016: 2.2 million). In
August 2017, moovel also acquired the Hamburg-based com-
pany Familonet GmbH, the provider of the location-messenger
app Familonet. The acquisition of this startup, which has
received numerous awards, enables moovel to apply the com-
pany’s expertise in the areas of geofencing and localization.

In 2017, mytaxi further expanded and consolidated its position
as Europe’s biggest taxi app through its successful merger with
Hailo and its acquisition of Taxibeat and Clever Taxi. mytaxi’s
geographic coverage was expanded to the United Kingdom, Ire-
land, Greece and Romania, which means that it now operates
in 11 European countries. It has also entered two rapidly grow-
ing markets in South America (Peru and Chile). mytaxi now
has 120,000 registered taxi drivers in 70 cities. The number of
registered mytaxi users increased compared with the end of
2016 by 85% to 11.1 million.

C | THE DIVISIONS | DAIMLER FINANCIAL SERVICES 197

A total of 17.8 million customers are registered for Daimler
mobility services, which are oﬀered in more than 100 cities in
Europe, China and the Americas. In addition to car2go, moovel
and mytaxi, Daimler Mobility Services also has holdings in inno-
vative mobility services companies all over the world, including
Blacklane and Flixbus. In 2017, Daimler Mobility Services acquired
an interest in Turo, which is the US market leader in peer-to-
peer car sharing, and in the ride-sharing service Via, as well as
in Careem, a ride-sharing service based in Dubai. It also
completely took over ﬂinc, the ﬁrst ride-sharing platform for
short trips, which was founded in Darmstadt.

Growth of fleet business in Europe
In 2017, Daimler Financial Services was active in the ﬂeet-
management business with Daimler Fleet Management and
Athlon. In Europe, a total of 383,300 contracts with ﬂeet
customers were on the books at the end of 2017, representing
an increase of 6% compared with a year earlier. Contract
volume amounted to €6.4 billion. Mercedes-Benz Connectivity
Services GmbH has been oﬀering ﬂeets and business cus-
tomers connectivity services for telematics-based ﬂeet
management under the brand “connect business” since
April 2017.

Focus on customer and employee satisfaction
Customer and employee satisfaction is a top priority at Daimler
Financial Services. In 2017, independent surveys once again
showed that we are a leader in numerous countries around the

world with regard to customers’ and dealers’ assessments
of our service quality. In the United States, Mercedes-Benz
Financial Services once again ﬁnished at the top of three
categories in a J.D. Power study of dealer satisfaction. The foun-
dation of these and many other successes is formed by our
highly motivated employees. In the independent worldwide Great
Place to Work Institute survey to determine the world’s best
employers, Daimler Financial Services was listed – in 2016 for
example – among the top ranks in many countries.

Toll4Europe collects truck tolls all over Europe
The Toll Collect automatic system for truck-toll collection on
German autobahns and selected federal highways continued
to operate smoothly and reliably in 2017. The system recorded a
total of 33.6 billion kilometers driven in the year under review.
Daimler Financial Services holds a 45% interest in the Toll Col-
lect consortium. The Federal Republic of Germany has collected
a total of more than €53 billion in tolls since Toll Collect went
into operation at the beginning of 2005. Toll Collect is also
preparing to extend toll collection to all federal highways, which,
as planned by the German government, is to start on July 1,
2018. In addition, Daimler has held a 30% share in the European
Electronic Toll Service (EETS) since April 2017 and has founded
the joint venture Toll4Europe together with T-Systems (55%) and
DKV (15%). The new service is scheduled to begin in the sec-
ond half of 2018. The objective is to oﬀer a one-stop shop for
truck-toll payment, with tolls charged by means of an onboard
unit and Europe-wide invoicing.

Daimler Financial Services customers can conveniently ﬁnd out about ﬁnancing and leasing oﬀers on all channels – online or in a direct discussion.

WE ACT
RESPONSIBLY AND
SUSTAINABLY!

The Board of Management and the Supervisory Board of Daimler AG
are committed to the principles of good corporate governance.
Our actions take place within the framework of responsible, transparent
and sustainable corporate governance.

D | CORPORATE GOVERNANCE | CONTENTS 199

D | Corporate Governance

Report of the Audit Committee

200 – 202

– Responsibilities and composition
– Meetings and participants
– Topics dealt with

Declaration on Corporate Governance,
Corporate Governance Report

203 – 213

– Declaration of compliance with the German

Corporate Governance Code

D & O insurance deductible for the Supervisory Board

– Corporate government in practice

German Corporate Governance Code
Principles of our actions
Guidelines for behaving with integrity
What we expect of our business partners
Risk management at the Group
Accounting principles

– Composition and mode of operation of the

Board of Management

Board of Management
CASE Steering Committee
Diversity

– Composition and mode of operation of the
Supervisory Board and its Committees

Supervisory Board
Presidential Committee
Nomination Committee
Audit Committee
Mediation Committee

– Law for the equal participation of women and men

in executive positions

– Overall requirements for the composition of the Board of

Management and Supervisory Board

Board of Management
Supervisory Board

– Shareholders and the Shareholders’ Meeting

200 D | CORPORATE GOVERNANCE | REPORT OF THE AUDIT COMMITTEE

Report of the Audit Committee

Dear Shareholders,

As Chairman of the Audit Committee, I am very pleased to
report to you on the tasks and activities performed by that
body in ﬁnancial year 2017.

Responsibility
On the basis of applicable law, the German Corporate Gover-
nance Code and the Rules of Procedure of the Supervisory
Board and its committees, the Audit Committee deals primarily
with questions of accounting, ﬁnancial reporting and non-
ﬁnancial reporting. In addition, it deals with the annual audit
and reviews the qualiﬁcations and independence of the exter-
nal auditors. Furthermore, it discusses the eﬀectiveness and
functional capabilities of the risk management system, the
internal control system, the internal auditing system and the
compliance management system. A(cid:5)er the external auditors
are elected by the Annual Shareholders’ Meeting, the Audit
Committee engages the external auditors to conduct the annual
audit and the auditors’ review of interim ﬁnancial statements,
determines the important audit issues and negotiates the audit
fees with the external auditors.

Equal representation
Audit Committee Chairman Dr. Clemens Börsig and Joe Kaeser
served as the shareholder representatives on the Audit Com-
mittee in ﬁnancial year 2017. Both are independent and have
expertise in the ﬁeld of ﬁnancial reporting, as well as special
knowledge of and experience in the auditing of ﬁnancial state-
ments and the application of methods of internal control. Dur-
ing ﬁnancial year 2017, the employees were represented on the
Audit Committee by Michael Brecht as the Deputy Chairman
of the Committee and by Ergun Lümali.

Meetings and participants
The Audit Committee met six times in ﬁnancial year 2017. All of
these meetings were also attended by the Chairman of the
Supervisory Board, Dr. Manfred Bischoﬀ, as a permanent guest.
The other permanent participants in the meetings were the
Chairman of the Board of Management, the members of the
Board of Management responsible for Finance and Controlling
and for Integrity and Legal Aﬀairs, and the external auditors.
The heads of specialist departments such as Accounting, Inter-
nal Auditing, Group Compliance and Legal were also present to
report on individual items of the agenda.

In addition, the Chairman of the Audit Committee held regular
individual discussions, for example with the external auditors,
the members of the Board of Management responsible for
Finance and Controlling and for Integrity and Legal Aﬀairs, the
head of Internal Auditing and, if required, further heads of the
relevant specialist departments. Such individual discussions
were mainly held to prepare for the next committee meetings.

Reporting to the Supervisory Board
The Chairman of the Audit Committee informed the Supervisory
Board about the activities of the Committee and about the
contents of its meetings and discussions in the following Super-
visory Board meetings.

Topics in 2017
In the meeting held on February 1, 2017, the Audit Committee
dealt with the preliminary ﬁgures of the annual ﬁnancial state-
ments and the annual consolidated ﬁnancial statements for the
year 2016, as well as with the proposal on the appropriation
of proﬁts made by the Board of Management. Following an in-
depth review, the Audit Committee took positive note of the
presented ﬁgures and determined that no objections were to
be made to their proposed publication. The Committee further
recommended that the Supervisory Board, which met immedi-
ately therea(cid:5)er, adopt the same view. The preliminary key
ﬁgures and the proposal on the appropriation of proﬁts were
announced at the Annual Press Conference on February 2, 2017.

In another meeting held on February 10, 2017, the Audit Com-
mittee dealt with the annual ﬁnancial statements, the consoli-
dated ﬁnancial statements and the combined management
report for Daimler AG and the Daimler Group for the ﬁnancial
year 2016, each of which had been issued with an unqualiﬁed
auditor’s opinion by the external auditors, as well as with the
proposal on the appropriation of proﬁts. At the meeting, the
external auditors reported on the results of their audit and were
available to answer supplementary questions and to provide
additional information. The audit reports on the annual company
and consolidated ﬁnancial statements and on the internal
control system (ICS), the report on the risk management system
(RMS) for the year 2016, Annual Report 2016 and important
issues related to accounting were discussed with the external
auditors. Following an in-depth review and discussion, the
Audit Committee recommended that the Supervisory Board
approve the ﬁnancial statements, the combined management

D | CORPORATE GOVERNANCE | REPORT OF THE AUDIT COMMITTEE 201

Dr. Clemens Börsig, Chairman of the Audit Committee

report and the recommendation of the Board of Management
to pay a dividend of €3.25 per share entitled to a dividend.
Furthermore, the Audit Committee approved the Report of the
Audit Committee for the ﬁnancial year 2016.

the issue of diesel exhaust emissions. In addition, the Audit
Committee dealt with notiﬁcations concerning possible viola-
tions of rules submitted by employees and third parties to
the Group’s own whistleblower system BPO (Business Prac-
tices Oﬃce).

Also in this meeting, the Audit Committee discussed the report
on the total fees paid to the external auditors in the ﬁnancial year
2016 for auditing and non-auditing services. The Audit Com-
mittee also decided to recommend to the Supervisory Board,
and subsequently to the Annual Shareholders’ Meeting, that
KPMG be engaged to conduct the annual external audit and the
external auditors’ review of interim ﬁnancial reports for the
ﬁnancial year 2017 and also to conduct the external auditors’
review of interim ﬁnancial reports for the ﬁnancial year 2018
in the period leading up to the Annual Shareholders’ Meeting in
2018. The Audit Committee based this recommendation on the
quality of the annual audit and the results of the independence
review, for which no indications of partiality or a threat to inde-
pendence were found. Subject to the election of the proposed
external auditors by the Annual Shareholders’ Meeting, the Audit
Committee also discussed the proposal to be made regarding
the fees to be agreed upon with the external auditors for the
ﬁnancial year 2017. Finally, within the framework of its respon-
sibility, the Audit Committee dealt with the dra(cid:5) agenda for the
2017 Annual Shareholders’ Meeting and the annual audit plan
for 2017 of the Internal Auditing department.

In the meetings during 2017 related to the quarterly results, the
Audit Committee discussed the interim ﬁnancial reports before
their publication with the Board of Management and with the
external auditors engaged to carry out the auditors’ review of
interim ﬁnancial statements. In addition, the Committee received
reports from the Internal Auditing, Group Compliance and Legal
departments. In this connection, the Board of Management
reported regularly to the Audit Committee, on the current status
of the main legal proceedings, in particular also on the requests,
inquiries, investigations and proceedings in connection with

In April 2017, the Audit Committee approved the fees agreed
upon with the external auditors for the ﬁnancial year 2017 a(cid:5)er
the Annual Shareholders’ Meeting made its decision on March
29, 2017 regarding the election of the proposed external audi-
tors for the annual ﬁnancial statements and the consolidated
ﬁnancial statements.

In its meeting in June 2017, the Audit Committee was informed
of a recent development regarding searches of Daimler AG
premises conducted by the Stuttgart State Attorney’s Oﬃce
within the framework of its investigation of known and unknown
employees of Daimler AG. The Audit Committee then dis-
cussed the Group’s risk management system and dealt in par-
ticular with its changes and further development. It also dis-
cussed the methods and processes of, and possible changes
to, the internal control system, which along with accounting
also encompasses the internal auditing function and the com-
pliance management system. In addition, the Audit Committee
was informed about the Group Legal System and Group Legal
Risk Reporting. Furthermore, the Committee received a report
on the non-auditing services provided by the external auditors.
In this meeting, the Committee also deﬁned key audit issues
for the external audit of the ﬁnancial year 2017, including new
requirements for the audit opinion as well as planning measures
for the external audit for 2017 and the framework of approval
for engaging the external auditors to provide non-audit services.
In addition, the Committee extensively addressed the status of
implementation of the EU Audit Reform at Daimler. In this con-
nection, the Committee congruently aligned the period for the
approval framework for engaging the external auditors to pro-
vide non-audit services with the ﬁnancial year, thus enhancing

202 D | CORPORATE GOVERNANCE | REPORT OF THE AUDIT COMMITTEE

the legally required transparency at the Group. This meeting
was also used to discuss the results of the internal quality
analysis of the external audit for the ﬁnancial year 2016.

Also in the meeting in June 2017, the Audit Committee dealt
in depth with the impact that implementation of the EU CSR
Directive will have on reporting at Daimler and on the disclo-
sure of non-ﬁnancial information. Furthermore, the Committee
was informed of new developments in accounting and ﬁnancial
reporting, such as the new ﬁnancial accounting standards IFRS
9 (Financial Instruments) and IFRS 15 (Revenue Recognition),
and other audit-relevant areas such as tax law. The Committee
also received detailed information on the audit from the Finan-
cial Reporting Enforcement Panel (Deutsche Prüfstelle für Rech-
nungslegung), which did not result in any objections. Finally,
the Audit Committee took note of a report on pension manage-
ment and of another on current tax issues, and also discussed
with the Board of Management the annual report produced by
the Group’s Data Protection Oﬃcer.

In the meeting held in July 2017, the Audit Committee dealt
mainly with the second-quarter results and the risk report. Along
with production and technology risks, the Committee members
also discussed the possible eﬀects of so(cid:5)ware retroﬁtting of
Mercedes-Benz diesel vehicles in Europe, the comprehensive
plan for diesel engines approved by the Board of Management
in July 2017, and the risks stemming from current legal issues.

In the meeting held in October 2017, the Audit Committee dealt
with the interim ﬁnancial report for the third quarter of 2017
and the quarterly reports from the Internal Auditing, Group
Compliance and Legal departments. The Committee also once
again discussed the eﬀects of the EU CSR Directive on non-
ﬁnancial reporting at Daimler.

Company and consolidated financial statements 2017
In the meeting held on January 31, 2018, the Audit Committee
dealt with the preliminary ﬁgures of the annual ﬁnancial state-
ments and the annual consolidated ﬁnancial statements for the
year 2017, as well as with the proposal on the appropriation of
proﬁts made by the Board of Management. Following an in-depth
review, the Audit Committee took positive note of the presented
ﬁgures and determined that no objections were to be made to
their proposed publication. The Committee further recommended
that the Supervisory Board, which met immediately therea(cid:5)er,
adopt the same view. The preliminary key ﬁgures and the proposal
on the appropriation of proﬁts were announced at the Annual
Press Conference on February 1, 2018.

In another meeting held on February 9, 2018, the Audit Com-
mittee reviewed and discussed in detail the annual ﬁnancial
statements, the consolidated ﬁnancial statements and the
combined management report for Daimler AG and the Daimler
Group for the ﬁnancial year 2017, each of which had been
issued with an unqualiﬁed auditor’s opinion by the external
auditors, as well as the proposal on the appropriation of proﬁts
and the non-ﬁnancial report. At the meeting, the external audi-
tors reported on the results of their audit and the voluntary
audit of the non-ﬁnancial report within the framework of a lim-
ited assurance engagement and were also available to answer
supplementary questions and to provide additional information.
The audit reports on the annual ﬁnancial statements and con-
solidated ﬁnancial statements (including the particularly impor-
tant audit issues in the audit opinions) and on the internal con-
trol system (ICS), the report on the risk management system
(RMS) for the year 2017, the Annual Report 2017, and impor-
tant issues related to ﬁnancial reporting were discussed with
the external auditors. Following an in-depth review and discus-
sion, the Audit Committee recommended that the Supervisory
Board approve the ﬁnancial statements, the combined manage-
ment report, the declaration on corporate governance included
in the corporate governance report, the non-ﬁnancial report,
and the recommendation of the Board of Management to pay a
dividend of €3.65 per share entitled to a dividend. Further-
more, the Audit Committee approved the Report of the Audit
Committee for the ﬁnancial year 2017.

Efficiency review
As in previous years, the Audit Committee once again conducted
a self-evaluation of its own activities in 2017 on the basis of an
extensive company-speciﬁc questionnaire. The results of this
eﬃciency review were once again very positive and were pre-
sented and discussed in the meeting on February 9, 2018. This
did not result in any need for action with regard to the Commit-
tee’s tasks, or with regard to the content, frequency or proce-
dure of its meetings.

Stuttgart, February 2018

The Audit Committee

Dr. Clemens Börsig
Chairman

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 203

Declaration on Corporate Governance,
Corporate Governance Report

The declaration on corporate governance pursuant to Section 289 f and Section 315 d of the Ger-
man Commercial Code (HGB) has been combined for Daimler AG and the Daimler Group as well
as with the Corporate Governance Report. The following statements thus apply to Daimler AG and
the Daimler Group insofar as not otherwise stated. The declaration on corporate governance,
which is combined with the corporate governance report, can also be viewed on the Internet at
w daimler.com/dai/gcgc. Pursuant to Section 317 Subsection 2 Sentence 6 of the German Com-
mercial Code (HGB), the purpose of the audit of the contents of the statements pursuant to Sec-
tion 289 f Subsections 2 and 5 and Section 315 d of the HGB is limited to determining whether such
statements have actually been provided.

The deviation from Clause 5.4.1 Paragraph 2, declared as pre-
cautionary measure in the compliance declaration dated Decem-
ber 2016, namely the speciﬁc objectives for the composition
of the Supervisory Board has ceased to apply from December
2017. The Supervisory Board has set a target objective for its
composition regarding the number of independent members of
the Supervisory Board and in consideration of potential con-
ﬂicts of interest no longer to the appointments for the share-
holders’ side only, but in the light of the German Co-Determi-
nation Act also for the entire Supervisory Board.

Stuttgart, December 2017

For the Supervisory Board

Dr. Manfred Bischoﬀ
Chairman

For the Board of
Management
Dr. Dieter Zetsche
Chairman

This declaration and previous, no longer applicable, declara-
tions of compliance from the past ﬁve years are also available
at our website at w daimler.com/dai/gcgc.

Declaration by the Board of Management and
Supervisory Board of Daimler AG pursuant to
Section 161 of the German Stock Corporation
Act (AktG) regarding the German Corporate
Governance Code

Daimler AG satisﬁes the recommendations of the German
Corporate Governance Code published in the oﬃcial section
of the German Federal Gazette on April 24, 2017 in the Code
version dated February 7, 2017, with the exception of Clause
3.8 Paragraph 3 (D & O insurance deductible for the Supervi-
sory Board) and will continue to observe the recommendations
with the aforesaid deviation. Since the issuance of the last
compliance declaration in December 2016, Daimler AG has
observed the recommendations of the German Corporate
Governance Code in the version dated May 5, 2015, published
on June 12, 2015, with the aforementioned exception as well
as with a deviation from Clause 5.4.1 Paragraph 2 (Speciﬁc
objectives for the composition of the Supervisory Board) de-
clared as a precautionary measure.

D&O insurance deductible for the Supervisory Board
(Clause 3.8, Paragraph 3)
As in previous years, the Directors’ & Oﬃcers’ liability insurance
(D&O insurance) also contains a provision for a deductible for
the members of the Supervisory Board, which is appropriate in
the view of Daimler AG. However, this deductible does not cor-
respond to the legally required deductible for members of the
Board of Management in the amount of at least 10% of the dam-
age up to at least one and a half of the ﬁxed annual remu-
neration. Since the remuneration structure of the Supervisory
Board is limited to function-related ﬁxed remuneration without
performance bonus components, setting a deductible for Su-
pervisory Board members in the amount of 1.5 times the ﬁxed
annual remuneration would have a disproportionate economic
impact when compared with the members of the Board of
Management, whose compensation consists of ﬁxed and per-
formance bonus components.

204 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

The main principles applied in our corporate
governance

German Corporate Governance Code
Beyond the legal requirements of German securities, codeter-
mination and capital market legislation, Daimler AG has
followed and continues to follow the recommendations of the
German Corporate Covernance Code (“Code”) with the excep-
tions disclosed and justiﬁed in the declaration of compliance.
Daimler AG has also followed and continues to follow the sug-
gestions of the Code with just one exception: Deviating from the
suggestion in Clause 2.3.3, which stipulates that companies
should enable shareholders to view the Shareholders’ Meeting
with modern communications media such as the Internet, the
Shareholders’ Meeting is not transmitted in its entirety on the
Internet, but only until the end of the report by the Board of
Management, in order to protect the character of the Share-
holders’ Meeting as a meeting attended by our shareholders in
person. An additional factor is that continuing the broadcast
a(cid:5)er that point, in particular broadcasting comments made by
individual shareholders, could impair the discussion between
shareholders and management.

The principles guiding our conduct
Our business conduct is based on Group-wide standards that go
beyond the requirements of relevant legislation and the Ger-
man Corporate Governance Code. These standards are based
on the four corporate values integrity, respect, passion and
discipline. In order to achieve viable and thus sustainable busi-
ness success on this basis, our goal is to ensure that our activi-
ties are in harmony with the environment and society. This is
due to the fact that we as one of the world’s leading automak-
ers also strive to be a leader in sustainability. We have deﬁned
the most important principles in our Integrity Code, which
serves as a frame of reference for compliant and ethical con-
duct in everyday activities for all employees at Daimler AG and
the Group.

Integrity Code
Our Integrity Code is based on a shared understanding of val-
ues, which we developed together with our employees. The
Code deﬁnes our principles of behavior in daily business. This
applies to interpersonal conduct within the company as well
as conduct toward customers and business partners. The key
principles here include fairness and responsibility on the basis
of compliance with applicable laws. In addition to general prin-
ciples of behavior, the Code includes requirements and regu-
lations concerning respect for and the protection of human
rights and the handling of conﬂicts of interest. It also prohibits
all forms of corruption. The Integrity Code applies to all em-
ployees at Daimler AG and the Group. The Integrity Code is
available on the Internet at w daimler.com/dai/caag.

We have also reached agreement on “Principles of Social Re-
sponsibility” with the World Employee Committee. These princi-
ples apply throughout Daimler AG and the entire Group. In the
Principles of Social Responsibility, Daimler commits itself to the
principles of the UN Global Compact and thus to internation-
ally recognized human and workers’ rights, the proscription of
child labor and forced labor, freedom of association and sus-
tainable protection of the environment. Daimler also commits
itself to guaranteeing equal opportunities and adhering to the
principle of “equal pay for equal work.”

Expectations for our business partners
We also require our business partners to adhere to compliance
stipulations because we regard our business partners’ integrity
and behavior in conformity with regulations as an indispens-
able prerequisite for trusting cooperation. When selecting our
direct business partners, we therefore pay close attention that
they comply with the law, follow ethical principles and do the
same themselves towards other partners in the supply chain.
For the expectations we place on our business partners, see
also w daimler.com/sus/obr.

Risk management at the Group
Daimler has a risk management system commensurate with
its size and position as a company with global operations,
E pages 155 ﬀ of the Annual Report 2017. The risk manage-
ment system is one component of the overall planning, control-
ling and reporting process. Its goal is to enable the company’s
management to recognize signiﬁcant risks at an early stage
and to initiate appropriate countermeasures in a timely man-
ner. At least once a year, the Audit Committee discusses the
eﬀectiveness and functionality of the risk management system
with the Board of Management. The Chairman of the Audit
Committee reports to the Supervisory Board on the commit-
tee’s work at the latest in the meeting of the Supervisory
Board following each committee meeting. The Supervisory
Board also deals with the risk management system on the
occasion of the approval of the operational planning and the
audit of the annual company and consolidated ﬁnancial state-
ments. In addition, the Board of Management regularly informs
the Audit Committee and the Supervisory Board of the most
important risks facing the company and the Group as a whole.
The Chairman of the Supervisory Board has regular contacts
between Supervisory Board meetings with the Board of Man-
agement, and in particular with the Chairman of the Board of
Management, to discuss not only the Group’s strategy and
business development but also the issue of risk management.
The Internal Auditing department monitors adherence to the
legal framework and to Group standards by means of targeted
audits and initiates appropriate actions as required.

Accounting and the external audit
Daimler prepares its consolidated ﬁnancial statements and
interim ﬁnancial reports in accordance with the International
Financial Reporting Standards (IFRS), as adopted by the Euro-
pean Union. The annual ﬁnancial statements of Daimler AG are
prepared in accordance with the accounting standards of the
German Commercial Code (HGB). Daimler prepares both half-
yearly and quarterly ﬁnancial reports. The annual ﬁnancial
statements and consolidated ﬁnancial statements of Daimler
AG are audited by the external auditor; interim ﬁnancial reports
are also reviewed by an external auditor. The consolidated ﬁ-
nancial statements and the Group management report shall be
made publicly accessible via the Company’s website within 90
days from the end of the reporting year; the interim ﬁnancial
reports shall be made publicly accessible in the same manner
within 45 days from the end of the reporting period.

Based on the recommendation of the Audit Committee, the
Supervisory Board submits a decision proposal to the Share-
holders’ Meeting for the election of the external auditors for
the annual ﬁnancial statements, the external auditors for the
consolidated ﬁnancial statements and the auditors for the
external auditors’ review of interim ﬁnancial reports. At the
Shareholders’ Meeting on March 29, 2017, KPMG AG
Wirtscha(cid:5)sprüfungsgesellscha(cid:5), Berlin was elected to conduct

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 205

Information on the areas of responsibility and the curricula vi-
tae of the Board of Management members are posted on the
Daimler AG website at w daimler.com/dai/bom. The members
of the Board of Management and their areas of responsibility
are also listed on E pages 62 f of the Annual Report 2017.

D.01
Governance structure

Annual Shareholders’ Meeting

ratifies
the actions of

elects members
representing the
shareholders,
ratifies the
actions of

reports

Supervisory Board
20 members

appoints,
advises and
monitors

reports

Board of Management
8 members

the audit of the annual ﬁnancial statements and the consoli-
dated ﬁnancial statements, and the external auditors’ review of
interim ﬁnancial reports, for the ﬁnancial year 2017, as well as
the external auditors’ review of interim ﬁnancial reports for the
ﬁnancial year 2018 in the period leading up to the Sharehold-
ers’ Meeting in 2018. Since 2014, the responsible auditor com-
missioned to carry out the external audit has been Dr. Axel
Thümler. KPMG AG Wirtscha(cid:5)sprüfungsgesellscha(cid:5) has been
conducting the audit of the annual ﬁnancial statements and
the annual consolidated ﬁnancial statements of Daimler AG
since the 1998 ﬁnancial year.

Prior to issuing its recommendation to the Shareholders’ Meet-
ing, the Audit Committee of the Supervisory Board obtained a
declaration from the external auditor under consideration. The
external auditor was requested to state whether any business,
ﬁnancial, personal or other relationships existed between the
external auditor and its bodies and audit managers on the one
hand, and the Company and the members of its bodies on the
other, which could justify concerns regarding a conﬂict of in-
terest. Further, the external auditor was asked to describe the
nature of any such relationships that may have in fact existed.
This statement also described the extent to which other services
were performed for the Daimler Group in the previous year
or had been contractually agreed upon for the following year.

The Audit Committee instructed the external auditor to imme-
diately inform the Committee Chairman of any indications of
partiality or grounds for exclusion uncovered during the audit
or the auditors’ review of interim ﬁnancial statements, and of
all key ﬁndings and events relevant to the tasks of the Supervi-
sory Board, particularly ﬁndings or events related to suspected
irregularities in accounting. The Audit Committee also reached
an agreement with the external auditor stipulating that the ex-
ternal auditor would inform the Audit Committee, and make a
note in the audit report, of any facts uncovered during the an-
nual audit that would reveal inaccuracies in the Board of Man-
agement’s and the Supervisory Board’s declaration of compli-
ance with the German Corporate Governance Code.

Composition and mode of operation of the
Board of Management (cid:202) D.01

Daimler AG is obliged by the German Stock Corporation Act
(AktG) to apply a dual management system featuring strict per-
sonal and functional separation between the Board of Manage-
ment and the Supervisory Board (two-tier board). Accordingly,
the Board of Management manages the company while the Su-
pervisory Board monitors and advises the Board of Management.

Board of Management
In accordance with the Articles of Incorporation of Daimler AG,
the Board of Management has at least two members. The pre-
cise number of Board of Management members is determined
by the Supervisory Board. The Board of Management had eight
members on December 31, 2017. In accordance with the Ger-
man law requiring equal participation of women and men in ex-
ecutive positions, the Supervisory Board has deﬁned a target
for the proportion of women on the Board of Management and
a deadline for achieving this target. The details are described
in a separate section: E page 209. With regard to the compo-
sition of the Board of Management, the Supervisory Board has
also adopted a diversity concept that is embedded in an overall
requirements proﬁle. The details of this concept are also de-
scribed in a separate section: E page 210.

206 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

The Board of Management manages Daimler AG and the Daimler
Group. With the consent of the Supervisory Board, the Board
of Management determines the Group’s strategic focus, deﬁnes
the corporate goals, and makes decisions concerning opera-
tional planning issues. The members of the Board of Manage-
ment are bound to the interests of the Company and share
responsibility for managing the Group’s entire business.

Irrespective of this overall responsibility, the individual mem-
bers of the Board of Management manage their allocated areas
on their own responsibility and within the framework of the in-
structions approved by the entire Board of Management. Spe-
ciﬁc issues deﬁned by the Board of Management as a whole
are dealt with by the Board as a whole, which must approve all
related decisions. The Chairman of the Board of Management
coordinates the work of the Board of Management.

The Board of Management prepares the consolidated interim
reports, the annual company ﬁnancial statements of Daimler
AG, the annual consolidated ﬁnancial statements, and the
combined management report of the Company and the Group,
as well as the separate combined non-ﬁnancial report pro-
duced for Daimler AG and the Group. It ensures that the provi-
sions of applicable law, oﬃcial regulations and the Group’s
internal guidelines are adhered to, and works to make sure that
the companies of the Group comply with those rules and regu-
lations. The Board of Management has also established an ade-
quate compliance management system that takes into account
the Company’s risk situation. The main features of this system
are described on E pages 229 ﬀ of the Annual Report 2017.
Such features include the Company’s whistleblower system, the
BPO (Business Practices Oﬃce), which enables Daimler em-
ployees and external whistleblowers to report misconduct any-
where in the world. The tasks of the Board of Management
also include establishing and monitoring an appropriate and eﬃ-
cient risk management system.

For certain types of transactions of fundamental importance
as deﬁned by the Supervisory Board, the Board of Manage-
ment requires the prior consent of the Supervisory Board. At
regular intervals, the Board of Management reports to the
Supervisory Board on corporate strategy, corporate planning,
proﬁtability, business development and the situation of the
Group, as well as on the internal control system, the risk man-
agement system and the compliance management system. The
Supervisory Board has speciﬁed the information and reporting
duties of the Board of Management.

The Board of Management has also given itself a set of
rules of procedure, which can be seen on our website at
w daimler.com/dai/rop. Those rules describe, for example,
the procedure to be observed when passing resolutions and
ways to avoid conﬂicts of interest.

CASE Steering Committee
The Board of Management has formed a Steering Committee
consisting of Board of Management members to address the
future-oriented CASE topics of connectivity (Connected), driv-
erless driving (Autonomous), ﬂexible use and services (Shared
& Services) and electric drive systems (Electric). The responsi-
bilities of the Board of Management as a whole, in particular
those regarding the catalog of issues that require its approval,
as well as the areas of responsibility of individual Board mem-
bers, remain unchanged despite the creation of the
Committee.

The Steering Committee consists of the Chairman of the Board
of Management, who is also responsible for Mercedes-Benz
Cars, as well as the members of the Board of Management re-
sponsible for Finance & Controlling/Daimler Financial Services,
Mercedes-Benz Cars Marketing & Sales and Group Research &
Mercedes-Benz Cars Development. The Chairman of the Board
of Management is also the Chairman of the Steering Commit-
tee. In line with the Committee’s structure as described above,
the members of the Steering Committee on December 31,
2017, were Dr. Dieter Zetsche (Chairman), Bodo Uebber, Britta
Seeger and Ola Källenius.

Within the framework of the strategic approach adopted by the
Board of Management, the Steering Committee deﬁnes the
management model and the strategic guidelines for CASE. The
Board of Management has deﬁned rules of procedure for the
Steering Committee. The Committee can make changes to
these rules on its own authority, provided such changes do not
aﬀect the steering model.

Along with the composition of the Steering Committee, the
responsibilities of its Chairman, the responsibility for the rules
of procedure and the options available for establishing other
CASE bodies below the Steering Committee, the rules of pro-
cedure of the Steering Committee also deﬁne the structure
and format of Committee meetings and the adoption of resolu-
tions, as well as the rules on reporting to the Board of Manage-
ment of Daimler AG.

Diversity
Diversity management has been part of the corporate strategy
of Daimler since 2005. We rely on the diversity of our employees
and the diﬀerences between them because such diﬀerences
form the foundation of an eﬀective and successful company.
The aim of our activities is to bring together the right people
to tackle our challenges, create a work culture that promotes
the performance, motivation and satisfaction of our employees
and managers, and help attract new target groups to our prod-
ucts and services. Our activities for shaping diversity at Daimler
focus on three areas: best mix, work culture and customer in-
teraction. With our measures, activities and initiatives for every-
thing from training formats for employees and managers to
workshops, conferences, guidelines and target group-speciﬁc
communication and awareness-raising measures, our diversity
management system makes a major contribution to the further
development of our corporate culture.

Targeted support for women on the basis of the best-mix prin-
ciple was a central component of our diversity management
activities even before the legislation on the equal participation
of women and men in management positions went into eﬀect.
Such support has also included and continues to include ﬂexi-
ble working-time arrangements, company nurseries and spe-
cial mentoring programs for women. To meet the new legal re-
quirements, the Board of Management has deﬁned targets for
the proportion of women at the two management levels below
the Board of Management and a deadline for achieving those
targets. The details are described in a separate section. Inde-
pendently of the legal requirements, Daimler continues to af-
ﬁrm the goal it already set itself in 2006 of increasing the pro-
portion of women in executive positions at the Group to 20%
by 2020. At the end of 2017, this proportion amounted to 17.6%
(2016: 16.7%).

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 207

Composition and mode of operation of the
Supervisory Board and its committees

Supervisory Board
In accordance with the German Codetermination Act (MitbestG),
the Supervisory Board of Daimler AG comprises 20 members.
Half of them are elected by the shareholders at the Sharehold-
ers’ Meeting. The other half comprises members who are
elected by the Group’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.

Information on major functions and curricula vitae of the mem-
bers of the Supervisory Board aside from their positions on
the Supervisory Board of Daimler AG are posted on our web-
site at w daimler.com/dai/sb and can also be found on
E pages 70 f of the Annual Report 2017.

The Supervisory Board is to be composed so that its members
together are knowledgeable about the business sector in which
the Company operates and also dispose of the knowledge,
skills and specialist experience that are required for the proper
execution of their tasks. According to the law on the equal par-
ticipation of women and men in management positions, at least
30% of the members of the Supervisory Board of Daimler AG
must be women and at least 30% must be men. The details are
described in a separate section: E page 209. With regard to
its composition on the basis of the further development of the
existing catalog of criteria for selecting Supervisory Board can-
didates, and with consideration of the targets that have already
been deﬁned for the Supervisory Board’s composition, the
Supervisory Board has also created an overall requirements
proﬁle combining a skills proﬁle and a diversity concept for the
entire Supervisory Board. The details of the overall requirements
proﬁle are also described in a separate section: E pages 211
ﬀ. Proposals by the Supervisory Board of candidates for elec-
tion by the Shareholders’ Meeting as members representing the
shareholders of Daimler AG, for which the Nomination Commit-
tee makes recommendations, aim at fulﬁlling the overall
requirements proﬁle of the Supervisory Board as a whole.

The members of the Supervisory Board attend on their own re-
sponsibility courses of training and further training that might
be necessary for the performance of their tasks and are sup-
ported by the Company in doing so. Such courses may address
corporate governance, changes brought about by new legisla-
tion, or the launch of new products and pioneering technolo-
gies, for example. New members of the Supervisory Board are
oﬀered an “Onboarding” program that gives them the opportu-
nity to exchange views with members of the Board of Manage-
ment and other executives on current issues related to the var-
ious areas of responsibility of the Board of Management, and
thus obtain an overview of important topics at the Company.

The Supervisory Board monitors and advises the Board of Man-
agement with regard to its management of the Company. At
regular intervals, the Board of Management reports to the Su-
pervisory Board on corporate strategy, corporate planning,
revenue development, proﬁtability, business development and
the situation of the Group, as well as on the internal control
system, the risk management system and the compliance man-
agement system. The Supervisory Board has retained the right
of approval for transactions of fundamental importance. Fur-
thermore, the Supervisory Board has speciﬁed the information

and reporting duties of the Board of Management to the Super-
visory Board, to the Audit Committee and — between the meet-
ings of the Supervisory Board — to the Chairman of the Super-
visory Board.

The Supervisory Board’s duties include appointing and recalling
the members of the Board of Management. Initial appointments
are usually made for a period of three years. In accordance with
the German law requiring equal participation of women and
men in executive positions, the Supervisory Board has deﬁned
a target for the proportion of women on the Board of Manage-
ment and a deadline for achieving this target. The details are
described in a separate section: E page 209. With regard to
the composition of the Board of Management, the Supervisory
Board has also adopted a diversity concept that is embedded i
n an overall requirements proﬁle. The details of this concept are
also described in a separate section: E page 210

The Supervisory Board decides on the system of remuneration
for the Board of Management, reviews it regularly and deter-
mines the total individual remuneration of each member of the
Board of Management with consideration of the ratio of Board
of Management remuneration to the remuneration of the se-
nior executives and the workforce as a whole, also with regard
to development over time. For this comparison, the Supervi-
sory Board has deﬁned the senior executives by applying Daim-
ler’s internal terminology for the hierarchical levels and has de-
ﬁned the workforce of Daimler AG in Germany as the relevant
workforce. Variable components of remuneration are generally
based on an assessment period that lasts several years and is
essentially future-oriented. Multi-year variable remuneration
components are not paid out until they come due. The Supervi-
sory Board has set upper limits for the individual Board of Man-
agement remuneration in total and with regard to its variable
components. Further information on Board of Management re-
muneration can be found in the Remuneration Report on
E pages 136 ﬀ of the Annual Report 2017.

The Supervisory Board reviews the annual ﬁnancial state-
ments, the annual consolidated ﬁnancial statements and the
combined management report of the Company and the Group,
as well as the proposal for the appropriation of distributable
proﬁts. Following discussions with the external auditors and
taking into consideration the audit reports of the external audi-
tors and the results of the review by the Audit Committee, the
Supervisory Board states whether, a(cid:5)er the ﬁnal results of its
own review, any objections are to be raised. If that is not the
case, the Supervisory Board approves the ﬁnancial statements
and the combined management report. Upon being approved,
the annual ﬁnancial statements are adopted. The Supervisory
Board reports to the Shareholders’ Meeting on the results of
its own review and on the manner and scope of its supervision
of the Board of Management during the previous ﬁnancial year.
The Report of the Supervisory Board for the year 2017 is avail-
able on E pages 64 ﬀ of the Annual Report 2017 and on the
Internet at w daimler.com/dai/sb.

For ﬁnancial year 2017, Daimler AG produced for the ﬁrst time
a separate combined non-ﬁnancial report for the Company and
the Group in accordance with the requirements of legislation
for implementing an EU CSR directive in Germany. The Supervi-
sory Board commissioned an external audit of this non-ﬁnancial
report within the framework of a limited assurance engagement
and then approved the report a(cid:5)er consulting with the external
auditor and examining the report itself.

208 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

The Supervisory Board has given itself a set of rules of proce-
dure, which regulate not only its duties and responsibilities
and the personal requirements placed upon its members, but
above all the convening and preparation of its meetings and
the procedure of passing resolutions. The rules of procedure of
the Supervisory Board can be viewed on our website at
w daimler.com/dai/rop

Meetings of the Supervisory Board are regularly prepared in
separate discussions of the members representing the employ-
ees and of the members representing the shareholders with
the members of the Board of Management. Each Supervisory
Board meeting included a so-called executive session for dis-
cussions of the Supervisory Board in the absence of the mem-
bers of the Board of Management. The Supervisory Board
members can also take part in the meetings by means of con-
ference calls or video conferences. However, this is generally
not the case.

The Supervisory Board has formed four committees, which
perform to the extent legally permissible the tasks assigned to
them in the name of and on behalf of the entire Supervisory
Board. The committee chairpersons report to the entire Super-
visory Board on the committees’ work at the latest in the meet-
ing of the Supervisory Board following each committee meet-
ing. The Supervisory Board has issued rules of procedure for
each of its committees. Those rules of procedure can be viewed
on our website at w daimler.com/dai/rop. Information on the
current composition of these committees can be viewed at
w daimler.com/dai/sbc and is also available on E page 71
of the Annual Report 2017.

Presidential Committee
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, whereby it takes into account the over-
all requirements proﬁle it has deﬁned, including the diversity
concept, for the position to be ﬁlled, as well as the Supervisory
Board’s target for the proportion of women on the Board of
Management. It submits proposals to the Supervisory Board
on the design of the remuneration system for the Board of
Management and on the appropriate total individual remunera-
tion of its members. In this context, it follows the relevant
recommendations of the German Corporate Governance Code.
The Presidential Committee is also responsible for the Board
of Management members’ contractual aﬀairs. In addition, it
decides on the granting of approval for sideline activities of the
members of the Board of Management, reports to the Supervi-
sory Board regularly and without delay on consents it has is-
sued, and once a year submits to the Supervisory Board for its
approval a complete list of the sideline activities of each mem-
ber of the Board of Management.

In addition, the Presidential Committee decides on questions
of corporate governance, on which it also makes recommenda-
tions to the Supervisory Board. It supports and advises the
Chairman of the Supervisory Board and his Deputy and pre-
pares the meetings of the Supervisory Board within the limits
of its responsibilities.

Nomination Committee
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 share-
holders. It is the only Supervisory Board Committee consisting
solely of members representing the shareholders and makes
recommendations to the Supervisory Board concerning per-
sons to be proposed for election as members of the Supervisory
Board representing the shareholders at the Shareholders’
Meeting. In doing so, the Nomination Committee takes into
consideration the requirements of the German law regulating
equal participation of women and men in executive positions,
the recommendations of the German Corporate Governance
Code and the speciﬁc goals that the Supervisory Board has set
for its own composition. The recommendations made by the
Nomination Committee aim at fulﬁlling the overall requirements
proﬁle — including the skills proﬁle for the entire Supervisory
Board.

Audit Committee
The Audit Committee is composed of four members, who are
elected by a majority of the votes cast on the relevant resolu-
tion of the Supervisory Board. The Chairman of the Supervi-
sory Board is not simultaneously the Chairman or a member of
the Audit Committee. The Chairman of the Supervisory Board
attends the meetings of the Audit Committee as a guest.

Both the Chairman of the Audit Committee, Dr. Clemens Börsig,
and the other shareholder representative on the Audit Commit-
tee, Joe Kaeser, fulﬁll the criteria for independence and have
expertise in the ﬁeld of accounting, as well as special knowl-
edge and experience with regard to auditing and methods of
internal control. Due to his work at Robert Bosch GmbH and
his long-standing membership of the Supervisory Board of
Daimler AG, Dr. Clemens Börsig is furthermore very familiar
with the automotive industry.

The Audit Committee deals with the supervision of the account-
ing and its process as well as with the annual external audit.
At least once a year, it discusses with the Board of Management
the eﬀectiveness and functionality of the risk management
system, the internal control and auditing system and the com-
pliance management system. 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 Com-
mittee receives a report from the whistleblower system BPO
(Business Practices Oﬃce) on complaints and information
about any breaches of regulations or guidelines by high-level
executives, as well as violations by other employees of the
regulations in a deﬁned catalog of legal provisions. It regularly
receives information about the handling of these complaints
and notiﬁcations.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 209

The Audit Committee discusses with the Board of Management
the interim reports before they are published. On the basis of
the report of the external auditors, the Audit Committee re-
views the annual company ﬁnancial statements and the annual
consolidated ﬁnancial statements, as well as the management
report of the Company and the Group, and discusses them
with the external auditors. The Audit Committee makes a pro-
posal to the Supervisory Board on the adoption of the annual
company ﬁnancial statements of Daimler AG, on the approval
of the annual consolidated ﬁnancial statements, and on the ap-
propriation of proﬁts. The Committee also makes recommen-
dations for the Supervisor Board’s proposal on the election of
external auditors, assesses those auditors’ suitability, qualiﬁ-
cations and independence, and, a(cid:5)er the external auditors are
elected by the Shareholders’ Meeting, it engages them to con-
duct the audit of the annual company and consolidated ﬁnan-
cial statements and to review the interim reports, negotiates
an audit fee, and determines the focus of the annual audit. The
external auditors report to the Audit Committee on all account-
ing matters that might be regarded as critical and on any mate-
rial weaknesses of the internal control and risk management
system with regard to accounting that might be discovered
during the audit.

Finally, the Audit Committee approves permitted services that
are not directly related to the annual audit and which are pro-
vided by the ﬁrm of external auditors or its aﬃliates to Daimler
AG or to companies of the Daimler Group.

Mediation Committee
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 elected with the majority of the votes cast of the Su-
pervisory Board members representing the shareholders. 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. As in
previous years, the Mediation Committee did not have to take
any action in 2017.

Germany’s law on the equal participation of
women and men in executive positions

In accordance with the German law requiring equal participa-
tion of women and men in executive positions in both the pri-
vate and the public sector, the supervisory boards of listed
companies or companies subject to Germany’s system of co-
determination have to set a target for the proportion of women
on the board of management. The board of management of
such a company has to set a target for the proportion of women
at the two management levels below that of the board of man-
agement. If the proportions of women at the time when these
targets are set by the Board of Management and the Supervi-
sory Board are below 30%, the targets may not be lower than
the proportions already reached. At the same time that the
targets are set, the boards have to set periods for their achieve-
ment, which may not be longer than ﬁve years.

On December 8, 2016, the Supervisory Board passed a resolu-
tion stipulating that the target ﬁgure for the proportion of women
on the Board of Management of Daimler AG would be 12.5%,
while the deadline would be December 31, 2020. As of Decem-
ber 31, 2017, the eight-member Board of Management in-
cluded two women, Renata Jungo Brüngger and Britta Seeger.
This means that women account for 25% of the Board of Man-
agement members.

On November 8, 2016, the Board of Management passed a
resolution stipulating a target of 15% women for both the ﬁrst
and second management levels below the Board of Manage-
ment, with a deadline of December 31, 2020. At the time of the
resolution, the proportion of women in the ﬁrst and second
management levels below the Board of Management was 8.0%
and 12.4% respectively. As of December 31, 2017, the propor-
tion of women at the ﬁrst management level below the Board
of Management was 8.7%, at the second level it was 11.9%.

Since 2016, listed companies that have supervisory boards in
which shareholders and employees are equally represented
are required to have a proportion of at least 30% women and
30% men. This requirement has to be fulﬁlled by the Supervi-
sory Board as a whole. If the side of the Supervisory Board
representing the shareholders or the side representing the em-
ployees objects to the Chairman of the Supervisory Board
about the application of the ratio to the entire Supervisory
Board before the election, the minimum ratio is to apply sepa-
rately to the shareholders’ side and to the employees’ side for
that election.

On December 31, 2017, 30% of the shareholder representa-
tives in the Supervisory Board of Daimler AG were women (Sari
Baldauf, Andrea Jung and Petraea Heynike), while 70% were
men. On that date, 20% of the employee representatives on the
Supervisory Board were women (Elke Tönjes-Werner and Sib-
ylle Wankel), while 80% were men. In its meeting on December
7, 2017, the Supervisory Board considered its nominations for
the election at the Shareholders’ Meeting 2018 and came to the
conclusion that the shareholders and employee representa-
tives should achieve the legally required share of women board
members separately. Before this background the shareholder
representatives declared that they object to the Supervisory
Board’s joint fulﬁllment of the legally required gender ratio.
Therea(cid:5)er, based on the recommendation of the Nomination
Committee, the Supervisory Board decided to nominate Sari
Baldauf as well as Dr. Jürgen Hambrecht again and Marie Wieck
for the ﬁrst time for election to the Supervisory Board by the
Shareholders’ Meeting in 2018. The legally required gender ra-
tio will be met on the shareholder representatives’ side if these
persons are elected to the Supervisory Board, provided that no
other changes occur. The next election of employee represen-
tatives to the Supervisory Board will also take place in 2018.

Along with Daimler AG itself, there are other Group companies
subject to codetermination law. These companies have deﬁned
their own targets for the proportion of women on their supervi-
sory boards, executive management bodies and the two levels
below the board or executive management level, and have also
set deadlines for target achievement. Relevant information
here has been published in accordance with applicable law.

210 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

Overall requirements proﬁles for the
composition of the Board of Management
and the Supervisory Board

In terms of the composition of the Board of Management and
the Supervisory Board, Daimler AG utilizes diversity concepts
that focus on aspects such as age, gender, education and pro-
fessional background. For this reason, the Company was re-
quired to describe these concepts in its declaration on corpo-
rate governance for the ﬁrst time for ﬁnancial year 2017, and
to also explain the aims of the diversity concepts, the manner
in which they are implemented and the results achieved with
them in the ﬁnancial year. The Supervisory Board has combined
the diversity concepts with the requirements of the German
law regulating equal participation of women and men in execu-
tive positions and the speciﬁc targets for the composition of
executive management bodies as deﬁned by the recommenda-
tions of the German Corporate Governance Code. These com-
bined requirements are presented in the overall requirements
proﬁles for the composition of the Board of Management and
the Supervisory Board described below. The requirements pro-
ﬁles also serve as the basis for long-term succession planning.

Board of Management
The requirements proﬁle for the Board of Management of Daimler
AG aims at a Board of Management as diverse, mutually sup-
portive and eﬀective as possible. The Board of Management as
a whole should possess the knowledge, skills and experience
required for the proper execution of its tasks and be composed
of members whose varied personal backgrounds and experi-
ences embody the desired management philosophy. Decisions
regarding appointments to the Board of Management are al-
ways governed by the Company’s interests under consideration
of all circumstances in each individual case.

The requirements proﬁle for the Board of Management includes
in particular the following aspects, which are to be taken into
account as far as possible when making decisions on appoint-
ments to the Board of Management:

– The members of the Board of Management should have dif-

ferent educational and professional backgrounds, whereby
at least two members should have a technical background.
With Dr. Dieter Zetsche and Wilfried Porth, the Board of Man-
agement currently has two members who are engineers.
Bodo Uebber is an industrial engineer. Since taking over as
Head of Group Research & Mercedes-Benz Cars Develop-
ment on January 1, 2017, Ola Källenius has sustainably dis-
played the expertise he acquired in various technical man-
agement positions throughout the Company.

– In order to meet the requirements of the German law requir-
ing equal participation of women and men in executive posi-
tions, the Supervisory Board deﬁned on December 8, 2016,
a target of 12.5% for the proportion of women on the Board
of Management, with a deadline of December 31, 2020. This
means that of the eight current members of the Board of
Management, at least one member must be a woman. The
Board of Management currently has two female members,
Renata Jungo Brüngger and Britta Seeger. This means the
proportion of women on the Board of Management is cur-
rently 25%.

– In accordance with the recommendations of the German Cor-
porate Governance Code, the Supervisory Board has set
an age limit for members of the Board of Management. As a
rule, 62 years of age serves as orientation for age-related
discharge. When it set this age limit, the Supervisory Board
deliberately decided in favor of a ﬂexible rule allowing the
required scope for the appropriate assessment of the circum-
stances of each individual case. Seven of the eight Board of
Management members are younger than the age limit. Dr. Di-
eter Zetsche was older than the age limit when he began his
current term of oﬃce in January 2017. The Supervisory Board
nevertheless reappointed Dr. Zetsche as Chairman of the
Board of Management in recognition of his being primarily re-
sponsible for the Company’s successful strategy and its im-
plementation. This decision was taken in the best interest of
the Company in that it enables the continuation of leadership
at the top executive level that is needed to ensure the sus-
tained success of the Company.

– In addition, a suﬃcient generational mix among Board of

Management members is to be taken into account in appoint-
ment decisions in the future, whereby if possible at least
three members of the Board of Management should be 57
years of age or younger at the beginning of their respective
term of oﬃce. Five members of the Board of Management —
Renata Jungo Brüngger, Ola Källenius, Britta Seeger, Huber-
tus Troska and Bodo Uebber — currently meet this
requirement.

– The composition of the Board of Management should also

take into account internationality in the sense of varied cul-
tural backgrounds or international experience through as-
signments abroad lasting several years, whereby if possible
at least one member of the Board of Management should
come from a country other than Germany. Irrespective of the
many years of international experience of a large majority of
members of the Board of Management, this target is cur-
rently overachieved due to the international origins of Renata
Jungo Brüngger and Ola Källenius.

– The rules of procedure of the Board of Management stipulate
that no member of the Board of Management is a member of
more than three supervisory boards of listed companies out-
side the Daimler Group or of similar boards or committees at
companies outside the Daimler Group that have comparable
requirements. This stipulation has been met. The only listed
company in which Hubertus Troska is a member of a supervi-
sory board or similar board outside the Daimler Group is
BAIC Motor Corporation Ltd. His other board memberships
are at joint ventures that fall within his areas of
responsibility.

The aspects described above are to be taken into consideration
when making Board of Management appointments. On the basis
of a target proﬁle that takes into account speciﬁc qualiﬁcation
requirements and the above-mentioned criteria, the Presiden-
tial Committee creates a shortlist of available candidates whom
it interviews. It then recommends a candidate to the Super-
visory Board for its approval and includes an explanation of its
recommendation. Decisions regarding appointments to the
Board of Management are always governed by the Company’s
interests under consideration of all circumstances in each indi-
vidual case.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 211

Supervisory Board
In accordance with applicable law, the Supervisory Board is
to be composed so that its members together are familiar with
the business sector in which the Company operates.

The requirements proﬁle for the Supervisory Board of Daimler
AG aims at a Supervisory Board as diverse and mutually sup-
portive as possible. The Supervisory Board as a whole must
understand the Company’s business model and also possess
the knowledge, skills and experience needed to properly exe-
cute its task of supervising and advising the Board of Manage-
ment, in particular specialized knowledge in the areas of ﬁ-
nance, accounting, annual audits, risk management, methods
of internal control and compliance. The members of the Super-
visory Board should complement one another with regard to
their specialist knowledge and professional experience in such
a manner as to ensure that the Supervisory Board can utilize
the most broadly based wealth of experience and speciﬁc ex-
pertise possible when making decisions. The Supervisory
Board also views the diversity of its members in terms of age,
gender, internationality and other personal attributes as an im-
portant foundation for eﬀective cooperation. The foundation
for Supervisory Board decisions regarding election proposals
to the Shareholders’ Meeting is always the Company’s inter-
ests under consideration of all circumstances in each individ-
ual case.

On the basis of the further development of the existing catalog
of criteria for selecting Supervisory Board candidates, and with
consideration of the targets that have already been deﬁned for
the Supervisory Board’s composition, the requirements proﬁle
for the Supervisory Board includes the following aspects in
particular:

– The members of the Supervisory Board should have diﬀerent
educational and professional backgrounds. At least ﬁve
members should have completed a vocational technical train-
ing or education program or possess speciﬁc technological
knowledge in ﬁelds such as information technology (including
digitization), chemistry, mechanical engineering or electrical
engineering. Decisions related to the composition of the Super-
visory Board should also take into account the fact that it
may be necessary to obtain new skills and knowledge in order
to be able to address product and market developments.
Irrespective of the speciﬁc knowledge acquired by many mem-
bers of the Supervisory Board in the above-mentioned areas,
Dr. Jürgen Hambrecht, Dr. Bernd Pischets rieder and Dr. Frank
Weber (two shareholder representatives and one employee
representative) have related university degrees, while another
ﬁve employee representatives have completed vocational
training in the above-mentioned ﬁelds or similar areas.

– The gender composition of the Supervisory Board meets the
requirements of Germany’s law on the equal participation of
women and men in executive positions, which stipulates that
at least 30% of the members of the Supervisory Board must
be women and at least 30% must be men. This quota has
been binding for all new appointments since January 1, 2016.
The Supervisory Board currently has three women who rep-
resent shareholders and two women who represent employ-
ees. The proportion of women is thus 30% among the share-
holder representatives and 20% among the employee
representatives. The next election of employee representa-
tives to the Supervisory Board will take place in 2018.

– The rules of procedure of the Supervisory Board stipulate

that candidates for election who are to hold the position for a
full term of oﬃce should generally not be over the age of 72
at the time of the election. In specifying this age limit, the
Supervisory Board has intentionally refrained from stipulat-
ing a strict upper age limit and instead decided in favor of a
ﬂexible general limit that leaves the scope to appropriately
assess each individual case, keeps the range of potential
Supervisory Board candidates suﬃciently broad and allows
reelection. In deciding to propose Dr. Manfred Bischoﬀ for
reelection as a shareholder representative on the Supervi-
sory Board to the Shareholders’ Meeting in 2016, it used this
scope a(cid:5)er careful consideration and proper assessment. All
other members of the Supervisory Board and the candidates
Sari Baldauf, Dr. Jürgen Hambrecht and Marie Wieck to be
proposed for election at the 2018 Shareholders’ Meeting had
not or will have not reached the age limit at the time of their
election.

– A suﬃcient generational mix among Supervisory Board mem-
bers is now also to be taken into account in appointment
decisions. In the future, at least eight members of the Super-
visory Board should be 62 years of age or younger at the
time of their election or reelection. Among the current mem-
bers of the Supervisory Board, all except Petrae Heynicke,
Dr. Manfred Bischoﬀ, Dr. Clemens Börsig, Dr. Jürgen Ham-
brecht and Dr. Bernd Pischetsrieder (i.e. 15 members) were 62
or younger at the time they were elected to their current term.

– In order to ensure suﬃcient internationality, for example by
means of many years of international experience, the Super-
visory Board has set a target of a proportion of at least 30%
of international members representing the shareholders, and
the resulting proportion of at least 15% of the entire Supervi-
sory Board. Irrespective of the many years of international
experience of a large majority of the shareholder representa-
tives on the Supervisory Board, this target is currently signiﬁ-
cantly overachieved with 30% for the entire Supervisory
Board due to the international origins of Bader Al Saad, Sari
Baldauf, Petraea Heynike, Andrea Jung and Dr. Paul Achleitner
on the shareholders’ side (50%) and Valter Sanches on the
employees’ side.

– At least half of the members of the Supervisory Board repre-

senting the shareholders should have
· neither an advisory nor a board function for a customer,

supplier, creditor, or other third party,

· nor a business or personal relationship to the company or

its boards

whose speciﬁc design could cause a conﬂict of interests.

Under the premise that the performance of Supervisory Board
duties as an employee representative does not by itself
constitute a potential conﬂict of interest as deﬁned by the
German Corporate Governance Code, the requirements de-
scribed here shall also be met by at least 15 members of the
Supervisory Board in the future.

212 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

As described in the report of the Supervisory Board on
E pages 64 ﬀ of the Annual Report 2017, there were indi-
vidual cases concerning three Supervisory Board members
in particular situations during the reporting period where
there might have been the appearance of a potential conﬂict
of interest at the time a Board of Management report was
submitted to the Supervisory Board. The Supervisory Board
members in question in these cases refrained from being
present during the presentation of a Board of Management
report regarding the issue that might have been aﬀected by
a potential conﬂict of interest.

As a result, in the case of at least half of the shareholder rep-
resentatives on the Supervisory Board and at least 15 mem-
bers of the entire Supervisory Board, there were no indications
of a potential conﬂict of interest during the reporting period
based on the premise described above. No actual instances
of conﬂicts of interest were reported during ﬁnancial year
2017.

does not contain a conclusive deﬁnition of independence but
instead presents examples of circumstances that would call
the independence of a Supervisory Board member into ques-
tion. Within the meaning of the German Corporate Governance
Code, a Supervisory Board member is to be considered non-
independent if he or she has a personal or business relation-
ship with the Company, its governing bodies, a controlling
shareholder or a company aﬃliated with a controlling share-
holder that may cause a substantial and not merely tempo-
rary conﬂict of interest. It is the responsibility of the Supervi-
sory Board to evaluate the independence of its members on
the basis of such criteria. The Kuwait Investment Authority is
not a controlling shareholder of Daimler AG that could attain
an eﬀective majority at an Shareholders’ Meeting. No other
discernible circumstances exist that might call into question
the independence of Bader Al Saad.

The Chairman of the Supervisory Board, Dr. Manfred
Bischoﬀ, is a former member of the Board of Management.

– In order to ensure the independent advice to, and supervi-

sion of, the Board of Management by the Supervisory Board,
the rules of procedure of the Supervisory Board stipulate
that more than half of the members of the Supervisory Board
representing the shareholders are to be independent as de-
ﬁned by the German Corporate Governance Code and 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 the Daimler Group.

Under the premise that the performance of Supervisory Board
duties as an employee representative does not by itself call
into question the independence of such an employee repre-
sentative as deﬁned by the German Corporate Governance
Code, at least 15 members of the Supervisory Board are also
to be independent in the future. In addition, the Supervisory
Board may not include more than two former members of the
Board of Management of Daimler AG or anyone who is a
member of a board of, or advises, a signiﬁcant competitor of
the Daimler Group.

Under the premise described above, there are, in the view of
the Supervisory Board, at present no indications for any of
the members of the Supervisory Board that relevant relation-
ships or circumstances exist, in particular with the Company,
members of the Board of Management or other Supervisory
Board members, that could be construed as a substantial
and permanent conﬂict of interest that would compromise
their independence. No member of the Supervisory Board is
a member of a board of, or advises, a signiﬁcant competitor.
With regard to Supervisory Board member Bader Al Saad,
the Supervisory Board takes the view that his function as a
member of the Executive Committee of the Board of Direc-
tors of Kuwait Investment Authority does not compromise his
independence within the meaning of the German Corporate
Governance Code. The German Corporate Governance Code

– The rules of procedure of the Supervisory Board also deﬁne a
general time limit for Supervisory Board membership. As a
result, only candidates who have not yet been members of the
Supervisory Board for three full terms of oﬃce at the time of
their election should generally be nominated for membership
of the Supervisory Board for a full term of oﬃce. This general
length of service on the Supervisory Board has not been ex-
ceeded by any current member, and the candidates Sari
Baldauf, Dr. Jürgen Hambrecht and Marie Wieck nominated
for election at the Shareholders’ Meeting in 2018 also meet
this requirement.

– Candidates for membership of the Supervisory Board and

members of the Supervisory Board must have suﬃcient time
available to perform their duties. They must also be willing
and able to dedicate themselves to their tasks and participate
in all courses of training and further training that might be
necessary for the performance of their tasks. Prior to issuing
its recommendations, the Supervisory Board determines
whether the candidate in question will have suﬃcient time
available to perform his or her duties on the Supervisory
Board.

– In order to ensure compliance with the associated recommen-
dation in the German Corporate Governance Code, the rules
of procedure already stipulate that no member of the Super-
visory Board who is also a member of the board of manage-
ment of a listed company may hold more than three member-
ships on supervisory boards of listed companies (including
his or her membership of the Supervisory Board of Daimler AG)
or on bodies of other companies with similar requirements
outside of the group of his Board of Management member-
ship. One member of the Supervisory Board is a member of
the board of management of a listed company, but has not
exceeded the maximum number of memberships.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 213

In the case of Supervisory Board members who are not also
members of the board of management of a listed company,
the legal limit of membership of ten statutorily constituted
supervisory boards applies, whereby chairmanship of a super-
visory board counts double. In order to ensure that members
of the Supervisory Board have suﬃcient time to fulﬁll their
mandate, Supervisory Board members who are not also mem-
bers of the board of management of a listed company shall in
the future generally be permitted membership of a maximum
of eight supervisory boards (including that of Daimler AG),
whereby chairmanship of a supervisory board counts double.
This maximum number was not exceeded by any member of
the Supervisory Board during the reporting year.

Proposals by the Supervisory Board of candidates for election
by the Shareholders’ Meeting as Supervisory Board members
representing the shareholders of Daimler AG, for which the
Nomination Committee makes recommendations, shall in the
future take into consideration not only the requirements of
applicable law, the Articles of Incorporation and the German
Corporate Governance Code, but also the aspects described
above and aim at fulﬁlling the overall requirements proﬁle for
the Supervisory Board as a whole. On the basis of a target pro-
ﬁle that takes into account speciﬁc qualiﬁcation requirements
and the above-mentioned criteria, the Nomination Committee
creates a shortlist of available candidates with whom it conducts
structured discussions in which it also determines whether the
candidate in question will have suﬃcient time available to per-
form his or her duties on the Supervisory Board with due care.
The Nomination Committee then recommends a candidate to
the Supervisory Board for its approval and includes an explana-
tion of its recommendation. The foundation for Supervisory
Board decisions regarding election proposals to the Sharehold-
ers’ Meeting is always the Company’s interests under consid-
eration of all circumstances in each individual case.

Shareholders and the Shareholders’ Meeting

The shareholders exercise their membership rights, in particular
their information and voting rights, at the Shareholders’ Meet-
ing. Each share in Daimler AG entitles its owner to one vote.
There are no multiple voting rights, preferred voting rights, or
maximum voting rights at Daimler AG. Documents and informa-
tion related to the Shareholders’ Meeting can be found on our
website at w daimler.com/ir/am. The Shareholders’ Meeting
is generally held within four months of the end of a ﬁnancial year.
The Company facilitates the personal exercise of the share-
holders’ rights and proxy voting in a variety of ways, such as by
appointing Company proxies who are strictly bound by the
shareholders’ voting instructions and who are available during
the Shareholders’ Meeting. Absentee voting is also possible. It
is possible to authorize the Daimler-appointed proxies and give
them voting instructions or to cast absentee votes by using the
e-service for shareholders.

We maintain close contacts with our shareholders in the context
of our comprehensive investor relations and public relations
activities. We regularly and comprehensively inform our share-
holders, ﬁnancial analysts, shareholder associations, the media
and the interested public about the situation of the Group and
inform them without delay about any signiﬁcant changes in its
business. Within reasonable limits, the Chairman of the Supervi-
sory Board is also prepared to talk to investors about speciﬁc
Supervisory Board issues.

In addition to other methods of communication, we also make
extensive use of the Company’s website for our investor rela-
tions activities. All of the important information disclosed in 2017,
including annual and interim reports, press releases, voting
rights notiﬁcations from major shareholders, presentations, and
audio recordings of analyst and investor events and confer-
ence calls, as well as the ﬁnancial calendar, can be found at
w daimler.com/investors. All the dates of important disclo-
sures such as annual reports and interim reports and the dates
of the Shareholders’ Meeting, the annual press conference and
the analyst conferences are announced in advance in the ﬁ-
nancial calendar. The ﬁnancial calendar can also be found inside
the rear cover of this Annual Report.

NON-FINANCIAL FACTORS ARE
BECOMING INCREASINGLY IMPORTANT
FOR THE GROUP’S SUCCESS!

On the following pages, we publish for the ﬁrst time a non-ﬁnancial report in
accordance with Sections 289b – 289e, 315b and c of the German Commercial
Code (HGB). This report applies to Daimler AG and to the Daimler Group. It contains
the main information on the aspects of environmental, employee and social matters,
combating corruption and bribery, and respect for human rights.

E | Non-Financial Report

E | NON-FINANCIAL REPORT | CONTENTS 215

Sustainability at Daimler

Our Sustainability Strategy 2030
Sustainable corporate governance
Sustainability in our supply chain

Environmental issues

Climate protection
Clean air
Conservation of resources
Environmental protection in production
Mobility services

Employee issues

216

216
217
217

218

218
219
221
221
221

222

223
Partnership with the employees
223
High attractiveness as an employer
224
A competitive workforce
Health management and safety at work 226

Social issues

Stakeholder dialogue
Political dialogue and representation of interests

Compliance

Our Compliance Management System
Anticorruption compliance
Antitrust compliance
Technical compliance
Human rights compliance
Other compliance issues

Statement on the review of the
Non-Financial Report

227

227
228

229

229
231
231
232
232
233

234

The information provided in this report is presented in conformity with the GRI Stan-
dards of the Global Reporting Initiative, insofar as this complies with applicable law.
Some aspects are presented in accordance with internal guidelines and deﬁnitions.

Information on our business model E page 90 ﬀ of the Annual Report 2017 and on
non-ﬁnancial risks connected with the aspects presented in this report (Risk and
Opportunity Report E pages 167, 168 of the Annual Report 2017) is provided in the
Combined Management Report in the Annual Report 2017.

Further information on our sustainability activities can be found online at w daimler.
com/sustainability and in our annual Sustainability Report, which can be downloaded
there as a PDF data ﬁle.

216 E | NON-FINANCIAL REPORT | SUSTAINABILITY AT DAIMLER

Sustainability at Daimler

For Daimler, acting in line with the principles of sustainability means striving to achieve long-term
business success. Sustainability is a basic principle of our corporate strategy as well as a metric
for our success as a company. We aim to make our activities compatible with the interests of the
environment and society. One of our core tasks is to oﬀer safe, fuel-eﬃcient and low-emission
vehicles.

Our Sustainability Strategy 2030
We believe that a long-term sustainability strategy and eﬀec-
tive sustainability management are the preconditions for
ensuring that we remain one of the world’s leading automobile
manufacturers in the future. As part of our Group-wide sus-
tainability strategy, we set targets and deﬁne target indicators.
Taken together, all of these targets form our comprehensive
target program for the medium and long terms.

In the year under review we involved the relevant stakeholders
in the restructuring of our sustainability strategy and reorga-
nized our priorities with the help of a multistage materiality
analysis. We have focused on the areas that are signiﬁcantly
inﬂuenced by our business model and our value chain — areas
where we can actually bring about change. Our Sustainability
Strategy 2030 concentrates on four focal topics:
1. Vehicles
2. Digitalization
3. Mobility services
4. Responsible conduct

Through our Sustainability Strategy 2030, we would like to
explicitly help to achieve the Sustainable Development Goals
(SDGs) that were approved by the United Nations in Septem-
ber 2015. Our four prioritized focal topics and the sustainabil-
ity-related activities that underlie them support the following
Sustainable Development Goals (SDGs) in particular:

– SDG 8 — Decent Work and Economic Growth

By developing and implementing a risk-based management
approach to respecting and upholding human rights in our
own units and our supply chain, we support the implementa-
tion of decent work as deﬁned by SDG 8.

– SDG 9 — Industry, Innovation and Infrastructure

Through the advanced development of automated and auton-
omous driving and the expected beneﬁts for safety and cli-
mate protection, we demonstrate the long-term potential of
digital innovations.

– SDG 11 — Sustainable Cities and Communities

As the global leader for ﬂexible car sharing (car2go), we sup-
port the creation of sustainable urban spaces for traﬃc and
community life.

– SDG 12 — Responsible Consumption and Production

By signiﬁcantly reducing and reinforcing the material cycles
of primary raw materials that are needed for our e-drive sys-
tem, we are setting the course for sustainable production
models in line with this SDG.

– SDG 13 — Climate Change

By setting ambitious targets for reducing the emissions of
our ﬂeets, we are helping to protect the planet from the
eﬀects of climate change.

The Daimler Sustainability Strategy 2030 determines the
structure of our sustainability management activities and our
annual sustainability reporting. In addition, when we identiﬁed
the key aspects to be addressed by this non-ﬁnancial report,
we took the focal topics of our sustainability strategy as our
starting point. However, in some cases we emphasize diﬀerent
aspects because of the divergent requirements set by the
standards and laws that are relevant to this report.

E | NON-FINANCIAL REPORT | SUSTAINABILITY AT DAIMLER 217

Sustainable corporate governance
Our sustainability objectives and their management are part of
our corporate governance system and are also incorporated
into the targets of our executives.

In the case of suppliers selected on a risk basis, our employees
ask speciﬁc questions during their on-site assessments con-
cerning compliance with sustainability standards. We also con-
duct a more thorough assessment whenever this is necessary.

We have established a complaint-management process that
enables individuals to draw attention to possible human rights
violations at suppliers. In this context, we work together closely
with the world employee committee. We bring together all the
available information and take action only if the reports are
well-founded. The suppliers are requested to respond to the
accusations; a(cid:5)er that, the responsible management commit-
tees assess the facts of the case and take the necessary mea-
sures. This can lead up to the termination of a business rela-
tionship. In addition to the complaint-management process,
information on misconduct can always be submitted to the
whistleblower system BPO established by Daimler.
E page 229

In the year under review, reports were received concerning
suspected violations by suppliers of rules concerning working
conditions and the treatment of employees, which we are sys-
tematically investigating.

The Corporate Sustainability Board (CSB) is our central man-
agement body for all sustainability issues. The CSB is headed
by Renata Jungo Brüngger (the Board of Management member
responsible for Integrity and Legal Aﬀairs) and Ola Källenius
(the Board of Management member responsible for Group
Research & Mercedes-Benz Cars Development). The opera-
tional work is done by the Corporate Sustainability Oﬃce
(CSO), which consists of representatives from the specialist
units and the business divisions.

Integrity, compliance and legal responsibility are the corner-
stones of our sustainable corporate governance and serve as
the basis of all our actions. Our Integrity Code deﬁnes the
guidelines for our daily business conduct, oﬀers our employees
orientation and helps them make the right decisions even in
diﬃcult business situations. The Integrity Code is supplemented
by other in-house principles and guidelines.

The ten principles of the UN Global Compact provide a funda-
mental guideline for our business operations. As a founding
member and part of the LEAD group, we are strongly commit-
ted to the Global Compact. Our internal principles and guide-
lines are founded on this international frame of reference and
other international principles, including the Core Labor Stan-
dards of the International Labor Association (ILO) and the OECD
Guidelines for Multinational Enterprises.

Sustainability in our supply chain
Our commitment to sustainable corporate management does
not end at the factory gates. We also urgently require our
direct suppliers all over the world to comply with our sustain-
ability standards. Moreover, we expect them to behave with
integrity and in conformity with all the applicable rules and
regulations. Our direct suppliers are subject to our Supplier
Sustainability Standards, which require, among other things,
compliance with wide-ranging environmental regulations and
respect for human rights. Our direct suppliers commit them-
selves to observing our sustainability standards, communicat-
ing them to their employees and passing them along to their
own supplier companies. We support them in these activities
by regularly providing them with information as well as training
and qualiﬁcation measures.

To ensure that our direct suppliers comply with the sustainabil-
ity standards, we regularly conduct a risk analysis of our sup-
pliers according to country and product group. We use regular
database research to discover any violations of our sustainabil-
ity and compliance rules by our current suppliers. We system-
atically follow up all reports of violations. With the help of an
online survey, we also question our main suppliers about their
sustainability management and their communication of these
requirements to their upstream value chains. On the basis of the
results, we reach agreements with our suppliers on improving
their sustainability performance.

218 E | NON-FINANCIAL REPORT | ENVIRONMENTAL ISSUES

Environmental Issues

Protecting the environment is a primary corporate objective of our Group. Environmental protection
is not separate from other objectives at Daimler; instead, it is an integral component of a corpo-
rate strategy aimed at long-term value creation. The environmental and energy-related guidelines
approved by the Board of Management deﬁne the environmental and energy-related policy of the
Daimler Group. They also express our commitment to integrated environmental protection that
addresses the underlying factors with an impact on the environment, assesses the environmental
eﬀects of production processes and products in advance, and takes these ﬁndings into account in
corporate decision making.

Climate protection

Product development
A vehicle’s environmental impact is largely decided during the
ﬁrst stages of its development. The earlier we integrate envi-
ronmentally responsible product development (Design for Envi-
ronment, DfE) into the development process, the more eﬃ-
ciently we can minimize the impact on the environment.

For every vehicle model and every engine variant, we have cat-
alogues of speciﬁcations that deﬁne the characteristics and
target values that must be achieved. These speciﬁcations
include requirements concerning fuel consumption and emis-
sions limit values for CO2 and nitrogen oxides. During the
development process we regularly monitor compliance with
these speciﬁcations.

In a committee situated directly below the Board of Manage-
ment level, the managers responsible for each vehicle model
series evaluate the results of this monitoring process and
decide on any necessary corrective measures. If corrections
are needed, the responsible member of the Board of Manage-
ment is included in the decision-making. If the situation con-
tinues to escalate, the managing body of the respective division
is also included.

The CO2 process in vehicle development
All of the divisions integrate all vehicle-related goals, including
those that are relevant to the environment, into their vehicle
development process according to a similar pattern. The chart
(cid:202) E.01 shows the Mercedes-Benz Development System (MDS)
as an example.

In many markets there are ﬂeet targets for the fuel consump-
tion and CO2 emissions of cars and light commercial vehicles —
in other words, overall targets for all the vehicles sold in a
given market. The corresponding controlling process for reach-
ing the CO2 ﬂeet consumption target for Cars Europe (EU 28)
is shown as an example.

The key factors for determining the target values for fuel
consumption and CO2 emissions are the technological possi-
bilities, the legal requirements including the ﬂeet targets for
fuel consumption, and customer wishes. The body responsible
for complying with these goals is the CO2 steering committee,
which is headed by the Board of Management member responsi-
ble for Group Research and Mercedes-Benz Cars Development.

The ﬂeet values for CO2 emissions are calculated on the basis
of the fuel economy ﬁgures of the vehicles available on the
market and the fuel economy speciﬁcations and prognoses for
vehicles that are still in the development phase. These values
are combined with the sales forecasts to arrive at the projected
ﬂeet consumption values for CO2 emissions.

The actual values may deviate from the projected target values
because of various external factors such as alterations in the
sales structure, changes in the political framework conditions
or changes in the fuel consumption target values of the vehi-
cles that are still in the development phase. In case of a devia-
tion, the CO2 steering committee organizes an assessment
of various options and then decides on the measures to be
initiated. If the need for adjustment is especially urgent, the
process is escalated to the responsible managing body. From
a strategic standpoint, this process takes place over a period
of approximately ten years.

CO2 emissions per car: 125 g/km
We are working hard to reduce the fuel consumption of our
vehicles. As early as 2015, we were able to reduce the CO2
emissions of newly registered vehicles from Mercedes-Benz
Cars in the EU to an average of 123 grams per kilometer.
This means we achieved our 2016 target of 125 g/km ahead
of schedule. In 2017, emissions rose slightly to 125 g/km
because of the shi(cid:5) in sales toward vehicles equipped with
higher-quality appointments.

The new WLTP test cycle
Since September 2017, all of our new car models in Europe
have been certiﬁed according to the Worldwide Harmonized
Light Vehicles Test Procedure (WLTP). This test procedure
includes numerous changes compared to the previous New
European Driving Cycle (NEDC). The changes include higher
average and maximum speeds, more dynamic handling, gliding
inertial masses instead of inertia classes, a smaller standstill

E | NON-FINANCIAL REPORT | ENVIRONMENTAL ISSUES 219

E.01
Vehicle product creation process for individual vehicles

Architecture
decision

Project
start

Concept
specifica-
tions
I

Initial
specifica-
tions
H

Approval of
specifications

Launch of
body-in-white
production
C

Launch of
production
test
B

Job No. 1

Basic development of the overall
vehicle, validation modules

Vehicle-specific integration and validation

Principle suitability

Concept suitability

Series production
suitability

Functionality

Testworthiness

Series
support
measures

Customer appeal

= Quality gate

Clean air

New RDE emission legislation
In order to more accurately correlate exhaust gas emissions
from real-life driving operation with the threshold values of the
test cycle, a new mandatory testing process has been intro-
duced in Europe. Since the introduction of the Real Driving
Emissions (RDE) test procedure in September 2017, vehicles
must, among other things, have the number of particulates and
the concentration of nitrogen oxides determined with the help
of a mobile emission measurement system. The new testing
process supplements the mandatory exhaust gas tests that are
still conducted on test rigs.

The RDE threshold values have applied since September 2017
to newly registered vehicle models. Starting in September
2019, they will apply to all new vehicles. During the first stage,
the Euro 6 threshold value for certification may be exceeded
by a factor of 2.1. During the second stage, which will start in
September 2020 or 2021, the Euro 6 threshold value may be
exceeded by a factor of 1.5.

share of total fuel consumption, and consideration of optional
extras and the quiescent current requirement. Overall, these
changes are leading to more realistic, but also higher, fuel
economy values.

In order to obtain data that is comparable, the fleet emissions
of the individual automakers are now being calculated back
from the certification values of the WLTP test cycle to the CO2
fleet values of the New European Driving Cycle (NEDC). The
transition to WLTP basically means for all manufacturers that
the requirements regarding a fleet’s fuel consumption, and
thus its CO2 emissions, have become much more stringent.
However, this transition did not yet have significant effects in
2017. By means of extensive investment in innovative drive
technologies and a comprehensive expansion of the product
range with more than 50 electrified models, Daimler/Mercedes-
Benz Cars is preparing to achieve the more stringent EU tar-
gets. At the same time, strong customer demand for SUVs is
leading to a shift of the structural mix towards mid-sized and
large automobiles, which presents us with a significant chal-
lenge to meet the targets of the European Union in 2021.

We continue to work hard to meet all statutory CO2 require-
ments, including the very challenging EU limits for 2021. As
we often emphasize, the fulfillment of these challenging fleet
targets depends not only on offering appealing and highly
efficient products with electric drive systems, but also on our
customers’ actual decisions to buy those models. In order to
optimally position ourselves in this respect, we are systemati-
cally changing over our product range to the latest engine
generations, and are also systematically electrifying our port-
folio with plug-in hybrids and all-electric vehicles.
E pages 124 ff of the Annual Report 2017

220 E | NON-FINANCIAL REPORT | ENVIRONMENTAL ISSUES

E.02
Methodology for assessing environmental risks

Feedback to plant management and divisional
management

Environmental management

Emissions into the atmosphere

Discharge into bodies of water

Waste management
Emissions into the atmosphere

s
a
e
r
a
c
i
p
o
T

Soil/groundwater contamination
Emissions into the atmosphere

Dealing with hazardous materials

Inspection of

documents

Interviews

Tours

Implementing
measures at the
plants

High tech against pollutants
Our goal is to fulﬁll emission requirements as far in advance as
possible and to reduce potential risks for humans and environ-
ment. In order to comply with the tougher requirements of the
RDE regulations, we have had to make, and are still making,
extensive changes, at considerable expense, to the drivetrains
of our vehicles. Especially signiﬁcant in this regard is the
exhaust gas a(cid:5)ertreatment near the engine. In the past, for
most of the vehicle models of many manufacturers, catalytic
converters and diesel particulate ﬁlter (DPF) systems were
mounted on the underbody of the vehicle, relatively far from
the engine. In the new Mercedes-Benz diesel engines, we
have successfully managed to position the entire exhaust gas
a(cid:5)ertreatment system extremely close to the engine. As a
result, the system is heated up very rapidly and doesn’t quickly
cool oﬀ. As a result, the working temperature needed by the
system is reached considerably faster. This enables more eﬀec-
tive exhaust gas a(cid:5)ertreatment and signiﬁcantly reduces the
NOx emissions in stationary testing situations and also in the
RDE testing procedure in real-life driving operation.

Plan for the future of diesel vehicles
We are convinced that diesel engines will continue to be an
integral part of the drive-system mix, not least due to their low
CO2 emissions. For this reason, the Daimler Board of Manage-
ment approved a comprehensive plan for the future of diesel
engines in July 2017. The plan calls for a massive expansion
of the previously introduced voluntary service measures for
vehicles already in customers’ hands, as well as the rapid
market launch of a completely new diesel engine family. As early
as March 2017, Mercedes-Benz began oﬀering its compact-
class customers an improvement in NOX emissions for one
engine variant. The company is also carrying out voluntary ser-
vice measures for V-Class customers. In order to eﬀectively
lower the emissions of other model series, we decided in July
2017 to extend the service measures, which are free of charge
for our customers, to encompass more than three million
Mercedes-Benz vehicles at a cost of approximately €285 million.
The measures are being carried out for most Euro 5 and Euro 6
vehicles in Europe and other markets in close cooperation with
vehicle registration authorities.

As early as 2016, Mercedes-Benz began oﬀering diesel vehi-
cles that were able to meet the Real Driving Emissions (RDE)
limit values long before they went into eﬀect in the EU in 2017.
This achievement was made possible by an all-new modular
family of eﬃcient and low-emission diesel engines. In the future,
this modular engine family will be utilized across the entire
product range of Mercedes-Benz Cars and also at Mercedes-
Benz Vans. The ﬁrst engines of this family — the four-cylinder
OM654 and the six-cylinder OM656 — are already on the
road. The new engines’ exemplary emission values have also
been validated by measurements conducted at independent
institutes.

Additional measures were added to this initiative for better air
quality following a summit meeting between the government
and the automotive industry in Berlin in August 2017. In order
to modernize the ﬂeet of vehicles on the road eﬀectively, we
are oﬀering owners of Euro 1 to Euro 4 diesel cars an “environ-
ment bonus” of €2,000 if they trade in their vehicles for a new
Euro 6 diesel-powered car or a plug-in hybrid from Mercedes-
Benz. We are also supporting the introduction of vehicles that
meet the stricter emission limits of the RDE testing procedure.

Daimler is participating in the mobility fund that has been jointly
launched by the German government and German industry, in
line with our company’s market share. This fund will primarily be
used to ﬁnance measures that improve traﬃc ﬂows in inner cities.

Conservation of resources

Consistently high recyclability
To make our vehicles more environmentally friendly, we are
working to continuously reduce the resources our automobiles
consume over their entire life cycles.

During the development process of a vehicle, we prepare a recy-
cling concept for each vehicle model in which all of its compo-
nents and materials are examined with a view to their suitability
for the various stages of the recycling process. As a result, all
Mercedes-Benz car models are up to 85% recyclable and up to
95% recoverable.

The key aspects of our activities in the area of recycling are:
– the resale of tested and certiﬁed used parts through the

Mercedes-Benz Used Parts Center (GTC),

– the remanufacturing of used parts, and
– the workshop waste disposal system MeRSy (Mercedes-Benz

Recycling System).

Production-related environmental protection

Our commitment to the environment is an integral component
of our corporate strategy, which focuses on increasing the
value of the company over the long term. For this reason, we
have established environmental management systems at our
manufacturing locations with the goal of ensuring that we can
produce our vehicles safely, eﬃciently and at a high level of
quality in an environmentally friendly manner that complies with
all legal stipulations. We also carry out environmental risk
assessments at all production locations in which the Group has
a majority interest in the ownership structure.

We have achieved a high level of air quality control, climate
protection and resource conservation (in terms of water con-
sumption, waste management and soil conservation). We
intend to maintain this high level with the help of the Daimler
Group standards. The environmental and energy-related
guidelines approved by the Board of Management deﬁne the
environmental and energy-related policy of the Daimler Group.
The guidelines also express our commitment to integrated
environmental protection. That begins with the assessment of
the causes of environment problems and takes into account
the environmental eﬀects of production processes and products
as early as the planning and development phases.

Environmental protection measures at our production locations
are coordinated across business units by three regional com-
mittees (Germany/Europe, North and South America, and Asia)
that are centrally managed. These measures are regulated
in line with a Group guideline and organizational and technical
standards.

E | NON-FINANCIAL REPORT | ENVIRONMENTAL ISSUES 221

The environmental measures are monitored by external audi-
tors (ISO 14001 certiﬁcation, EMAS validation) and by internal
environmental risk assessments (the due diligence process).

We conduct training sessions through the respective local
organizations. The important content of our training sessions
includes water pollution control, wastewater treatment,
emergency management in case of environmentally relevant
malfunctions, and the planning of plants and workplaces in
accordance with environmental protection principles.

Minimizing environmental risks
In 1999 we developed a methodology for assessing environmen-
tal risks (environmental due diligence) as a tool for preventing
risks to the environment and complying with statutory require-
ments. We have applied this methodology throughout the
Group since 2000, both internally and also externally in connec-
tion with our acquisition plans. During this period we have
conducted three complete risk assessments at the Daimler
production plants of Mercedes-Benz Cars, Mercedes-Benz
Vans, Daimler Trucks and Daimler Buses. The results of these
assessments were reported to the management of the loca-
tions, and summaries were provided to the management of the
respective divisions. The fourth round of environmental risk
assessments began in 2014. A number of new risk aspects have
been integrated into the topic areas. Nonetheless, we have
not changed the methods or the tools, because we want these
results to be comparable with the results of the assessments
that have already been carried out. (cid:202) E.02

In this way, all the production locations are being visited and
assessed in ﬁve-year cycles according to well-established and
standardized procedures. The results are reported to the plant
and divisional managements, and the Group annually assesses
the implementation of the recommendations for minimizing
risks at the locations. In this way, we are striving to enforce the
high environmental standards to which we have committed
ourselves at all of our production locations around the world.

In 2017 we were also able to audit all the locations of the
Daimler Buses division. The most important results were in the
areas of rainwater pollution and rainwater drainage, as well as
the proper storage of hazardous substances.

Mobility services

In addition to our products’ high level of environmental com-
patibility and our environmentally friendly and eﬃcient produc-
tion processes, we also strive to provide innovative mobility
services on the road to emission-free driving. That’s why we
have developed a range of pioneering mobility concepts and
are forging ahead with innovative approaches — from the car-
sharing provider car2go and the mobility platform moovel to
the taxi app mytaxi and our participation in the coach company
FlixBus and the Bus Rapid Transit (BRT) system. Recent addi-
tions to this list were the service portal Blacklane and Croove,
a car rental service operated by and for private individuals.

222 E | NON-FINANCIAL REPORT | EMPLOYEE ISSUES

Employee Issues

The success of Daimler AG and its subsidiaries is largely dependent on the skills and commitment of
our employees. More than 289,000 people promote our company’s success worldwide by contributing
their concepts and ideas to their respective tasks and work processes and by helping to make
improvements and create innovations. Trusting relationships with employees are therefore more than
just an ethical and legal requirement for us — without them we would not be able to conduct our
business successfully.

General figures regarding the development of our workforce
numbers can be found in the Employees section of the Man
agement Report. E page 129 f of the Annual Report 2017

In order to recruit, develop and retain highly qualified staff, we
are continuously striving to further improve our attractiveness
as an employer. Because our managers should motivate their
employees to achieve top performance, it is crucial that we
equip our managers with outstanding leadership skills. In addi
tion, we want to take on social responsibility and let diversity
flourish in our global company.

A professional HR organization and efficient operating processes
form the basis for the implementation of these overarching
goals, from which we have derived key areas of action that are
linked to clearly defined objectives.

The main control tool we use is our HR Scorecard, which uses
key performance indicators concerning demographic develop
ment, diversity and sick rates to provide information about the
sustainability of human resources measures and processes in
the individual areas of action.

E.03
HR Strategy 2025

Daimler – best Team

We provide innovative & efficient HR solutions to…

Competitive Workforce

Excellent leadership

Employer of choice

Profitability

…attract, develop and retain
the right people

…enable our management to shape
the framework of the future

…foster a diverse, empowering
& inspiring culture

…ensure continuous
competiveness

1
0
11
00
01
10
011
110
100
0100

100
0101
10100
01111
00011
1000001
001111001

0
10
111
010
101

0
1
0
001

0
0
110
011
1001
0010
1100

1
10
01
101
1101
0010

Digitalization

0
11
10
00
011
01010

01
11
1011
10100

Operational Excellence in HR

and we act as one team

0
1
11
01
00
11
010
101
1010
1101

0001
10110
001001
111110
110100
101000101
0101111010

Vision

Mission

Strategic
Pillar

Mission

Basic

E | NON-FINANCIAL REPORT | EMPLOYEE ISSUES 223

Partnership with the employees

High attractiveness as an employer

We want to work together with our employees as partners,
respect their interests and get them involved in the company
by continuously providing them with information and enabling
them to participate in decision-making processes. To achieve
these goals, we are guided not only by the International Labor
Organization’s (ILO) work and social standards but also by our
“Principles of Social Responsibility.” In these principles, we
commit ourselves, among other things, to respect key employee
rights, ranging from the provision of equal opportunities to the
right to receive equal pay for equal work. Violations of these
principles can be reported to the whistleblower system BPO,
which adresses further investigations to the pertinent units.

Our employees have the right to organize themselves in labor
unions. We also ensure this right in countries in which freedom
of association is not legally protected. We work together con-
structively with the employee representatives and the trade
unions. Important partners here include the local works coun-
cils, the European Works Council and the World Employee
Committee (WEC). We have signed collective bargaining agree-
ments for all of the employees at Daimler AG, and this also
applies to the majority of our employees throughout the Group.
In a variety of committees, we regularly inform the employee
representatives about the economic situation and all of the key
changes at Daimler AG and the Group. We conclude agree-
ments with the respective workers’ representative bodies con-
cerning the eﬀects of our decisions on the employees. In Ger-
many, comprehensive regulations to this eﬀect are contained
in the Works Council Constitution Act. We notify our employ-
ees about far-reaching changes early on.

One result of the ongoing dialogue between the corporate
management and the employees’ association was the renewal
of the company-wide “Safeguarding the Future of Daimler”
agreement in 2015. This accord, which is valid until 2020,
enables the company to respond to the “future plan” agree-
ments that have been reached at many of the locations of
Daimler AG with concrete investment commitments, ﬂexible
personnel assignment models and the possibility of selectively
increasing staﬃng requirements. As a result, we can make
use of market opportunities and better absorb ﬂuctuations in
demand. The company-wide agreement essentially protects
all of the employees of Daimler AG in Germany from being laid
oﬀ until the end of 2020. The expansion of this Safeguarding
the Future agreement is also an integral part of the “Project
Future” and is being implemented in close cooperation with
the employee representatives. If “Project Future” is imple-
mented, Daimler AG’s Safeguarding the Future agreement will
be extended until 2029, thus in principle excluding terminations
for operational reasons until December 31, 2029. Another key
point of this reconciliation of interests for the employees is the
nearly full funding of the pension obligations. With regard to
the latter, Daimler contributed €3 billion to Daimler AG’s German
pension assets in the fourth quarter of the year under review.

Our activities and measures for enhancing our attractiveness as
an employer are designed to enable us to recruit and retain a
suﬃcient number of specialized employees and qualiﬁed man-
agers in the competition for talented staﬀ. Our primary objec-
tives here are to ensure attractive and fair compensation and
to establish and maintain a work culture that enables outstand-
ing performance and a high level of motivation and satisfaction
among our employees and managers.

Attractive and fair remuneration
We remunerate work in accordance with the same principles at
all our aﬃliates around the world. Our Corporate Compensa-
tion Policy, which is valid for all groups of employees, estab-
lishes the framework conditions and minimum requirements
for the design of the remuneration systems. Internal audits are
conducted on a random basis to make sure these conditions
and requirements are met. In our desire to oﬀer salaries and
beneﬁts that are customary in the industry and the respective
markets, we also give consideration to local market conditions
within the speciﬁed framework. The salaries are determined on
the basis of the employees’ tasks and performance, and in
line with their qualiﬁcations and experience. In setting the remu-
neration of the employees we are not guided by gender or place
of origin, but exclusively by the employee’s job and responsibility.

The general remuneration level is signiﬁcantly above the legal
minimum wages that apply to many locations. In cases where
Daimler AG and its Group companies have signed collective
bargaining agreements, they o(cid:5)en also oﬀer voluntary beneﬁts
that are agreed upon with the respective employees’ associa-
tions. These beneﬁts primarily consist of employer-funded retire-
ment contributions as well as proﬁt-sharing agreements for
the respective company. For example, the eligible employees
of Daimler AG will receive a proﬁt-sharing payout of €5,700
(2016: € 5,400) for 2017. In addition, our employees can avail
themselves of a wide variety of sports facilities and social ame-
nities, ranging from daycare centers to the counseling service
for people in extreme situations.

In 2017, the Group spent €18.2 billion (thereof Daimler AG:
€11.5 billion) on wages and salaries, €3.3 billion (thereof Daimler
AG: €1.8 billion) on social welfare services, and €0.7 billion
(thereof Daimler AG: €0.6 billion) on retirement beneﬁts for a
workforce numbering 289,530 on average (thereof Daimler AG:
151,091).

Modern working conditions
Working conditions are being increasingly inﬂuenced by work-
ing hours, workplaces, the work environment, the level of
employee empowerment and a state-of-the-art management
culture. The length of our employees’ workweek is generally
regulated by the company or by a collective bargaining agree-
ment. In Germany, overtime is only performed within the
framework of a requirements planning forecast and has to be
approved by the employee representatives. In general, we
allocate working times in such a way that remuneration remains
stable even if the amount of work sometimes ﬂuctuates. This
is made possible by a time-account system.

224 E | NON-FINANCIAL REPORT | EMPLOYEE ISSUES

Flexible working arrangements
Today’s living and working conditions require working times to
be ﬂexibly organized in accordance with individual needs. Our
approach is therefore to challenge our employees to achieve top
performance and support their eﬀorts to do so, rather than
focusing on their mere presence at work. For this reason, we also
seek to improve performance by helping employees and manag-
ers reconcile their professional and personal responsibilities.

We also boost employees’ ﬂexibility and self-determination by
giving them the opportunity for mobile working. An associated
company agreement has been in force at Daimler AG since
December 2016. The agreement gives employees the right to
mobile working if the task permits.

We also promote job sharing, in which two employees share
the same task/position and work together up to 60 hours per
week. This provides managers in particular with a means of
reconciling the needs of work and family.

Furthermore, company agreements at Daimler AG enable
employees to suspend their careers for several years for a qual-
iﬁcation program or a sabbatical or to provide home care —
with the promise that they can return to Daimler AG a(cid:5)erwards.

We encourage all employees who take parental leave to subse-
quently return to their jobs at the company because we value
their knowledge and experience. In Germany, we oﬀer 710 places
in daycare centers in close proximity to our company locations
as well as more than 180 reserved places at cooperating facili-
ties. In addition, we cooperate with a third party that assists
employees in ﬁnding childcare providers.

In 2017, around 3,950 employees at Daimler AG availed them-
selves of the opportunity to take parental leave. Moreover,
around 500 employees took advantage of the opportunity to
take oﬀ work for a prolonged period. In mid-2017, more than
160 employees were working in job-sharing positions at the team
and department levels.

Leadership 2020 — further development of the
management culture
Our business is changing at a rapid pace. In order to remain
successful in the future, we are changing our management cul-
ture and the way we cooperate. This is why we launched the
Leadership 2020 initiative in 2016. Employees from more than
40 countries and all levels of management are currently work-
ing on Daimler’s future management culture. Guidance is pro-
vided by new management principles that, among other things,
make the company faster and more ﬂexible and boost its inno-
vative potential. Procedures, processes and structures are
being called into question and changed in eight “game chang-
ers.” In its meetings, the Board of Management of Daimler AG
regularly discusses the initiative’s progress and decides which
measures need to be taken.

Successful employee survey
Our Group-wide employee survey is a key indicator of where
we currently stand from the point of view of our employees,
and what we need to do to improve the company in the future.
In September 2016, nearly 263,000 employees in more than
40 countries were invited to participate in the survey and
express their opinions to us. The outstanding participation rate

of 76% underscores our employees’ interest and their willing-
ness to actively help shape the further development of the
company. Overall, the results of the survey were much better
than those from previous years. Some of the production
facilities in certain countries identiﬁed areas of action for the
reconciliation of the needs of work and family, communication,
individual development opportunities and working conditions.
These topics are now being addressed during the follow-up
process. In 2018, we will reorganize the employee survey in
order to measure and promote the company’s continued cul-
tural development.

Our employees’ great loyalty to the company is also expressed
by the amount of time they have worked for Daimler. During
the year under review the average number of years our employ-
ees have worked for Daimler decreased slightly to 16.1 years
(2016: 16.3 years). In Germany, employees had worked for the
Group for an average of 19.5 years at the end of 2017 (2016:
19.5 years). The comparative ﬁgure for Daimler AG was 20.3
years (2016: 20.1 years). Daimler employees outside Germany
had worked for the Group for an average of 11.0 years (2016:
11.3 years). In 2017, our labor turnover amounted to 5.1% world-
wide (2016: 6.7%).

A competitive workforce

We can only be successful if we have a skilled and high-per-
forming workforce. We therefore aim to continuously develop
our employees and make sure they stay competitive. We are
pursuing this goal by implementing measures in four overarch-
ing areas of action: diversity management, the securing of
young talent, qualiﬁcation, and health management and occu-
pational safety.

Diversity management
Daimler promotes the diversity and heterogeneity of its
employees, because they serve as the basis of a high-perform-
ing company. As a result, diversity management is included in
our corporate strategy. The various skills and talents of our
workforce enable us as a global company to eﬀectively reﬂect
the diversity of our customers, suppliers and investors around
the world.

Daimler’s more than 289,000 employees from over 160 countries
provide the Group with a vibrant mixture of cultures and ways
of life. We utilize this diversity to put together optimized teams.
Most of our managers abroad come from the respective
regions. We promote the cultural diversity of our employees
with worldwide staﬀ assignments, mentoring, intercultural
skills training and targeted recruiting measures. International
candidates account for more than one third of the people
recruited through our CAReer trainee program.

Our aim is to increase the share of women in management posi-
tions to 20% by the year 2020. More than 17% of our execu-
tives in middle and upper management currently are women.
For Daimler AG, we signed a company-wide agreement for
the advancement of women. It stipulates a target corridor for
the proportion of women in the total workforce, in vocational
training and in Level 4 and 5 management positions. In order to
achieve our goals, we have installed an ongoing internal report-
ing and planning system.

E | NON-FINANCIAL REPORT | EMPLOYEE ISSUES 225

E.04
Share of women

In percent

Share of women (worldwide)

Share of women (Daimler AG)

Share of women in Level 4 management
positions (Daimler AG)

Women in senior management positions
Levels 1–3 (worldwide)

Share of women at the second
management level below that of the
Board of Management
(Daimler AG)

Share of women at the first management
level below that of the Board of Manage-
ment (Daimler AG)

Share of women on the Board of Manage-
ment

Share of women on the Supervisory Board

2017

2016

18.5

16.1

18.0

17.6

17.7

15.5

17.2

16.7

11.9

12.4

8.7

25.0

8.1

12.5

25.0

E.05
Accident figures1

Incidence of accidents

Number of accidents (worldwide)

2,766

3,444

2017

2016

Incidence of accidents (worldwide, number
of work-related accidents that resulted in
at least one lost day per 1 million hour of
attendance)

Accident downtime
(worldwide, number of lost days
per 1 million hours of attendance)

Number of deaths as a result of work-
related accidents

Number of employee deaths as a result of
work-related accidents

Number of deaths of third-party employees
as a result of work-related accidents2

Rate

7.5

9.4

106

123

1 Coverage rate of Daimler production locations (Mercedes-Benz

Cars, Daimler Trucks, Daimler Buses, Mercedes-Benz Vans) world-
wide: >98%.

2 Unfortunately, a third-party employee suffered a fatal work-related

accidents in the United States in 2017.

The age differences at the company will rise in the future due to
the increase in the retirement age and the extension of peo-
ple’s working lives. The average age of our global workforce in
2017 was 42.8 years (2016: 42.7). Our employees at Daimler
AG were 44.7 years old on average (2016: 44.5). Demographic
development will cause the average age to continue to rise in
the years ahead. However, the proportion of older employees
will decrease again over the long term because many baby
boomers will retire from the company. We consider this trans-
formation to be an opportunity, and we are adjusting the
framework conditions accordingly. Our generation management
system focuses on measures for maintaining the performance
and health of younger and older employees as well as for pro-
moting cooperation between people of different ages.

Once every quarter, the Board of Management discusses our
diversity management activities and the associated results.
We also hold discussions with external stakeholders as part of
our involvement in the Diversity Charter, of which we are a
founding member.

Securing young talent
Daimler takes a holistic approach to securing young talent.
Our “Genius” initiative gives children and teenagers valuable
insights into future technologies and information about jobs in
the automotive industry. Along with technical and commercial
apprenticeships and courses of study at the Cooperative Uni-
versity, we also conduct various activities that address young
talents. We offer extensive possibilities to personally interact
with the company via social media, hackathons, competitions
and internships. After completing their college degrees, gradu-
ates can directly join our company or launch their careers at
Daimler by taking part in our global CAReer training program.

In 2017 we hired 97 trainees through our CAReer program.
About 47% of the trainees were women and more than one third
were international participants.

We recruit most of the young talent we need through our
industrial-technical and commercial apprenticeships and the
courses of study at the Cooperative University, which had
194 students in 2017.

At the end of 2017, we had 8,097 trainees throughout the Group
(2016: 7,960), 4,409 (2016: 4,824) of them at Daimler AG.
During the year under review, 1,278 (2016: 1,662) young people
began an apprenticeship at Daimler AG; 1,197 (2016: 1,448)
were hired after completing their apprenticeships. The costs
for vocational training for Daimler AG totaled €114 million in
2017 (2016: €110 million).

Programs such as “Facharbeiter im Fokus” and the new team
leader development program ensure that employees are exten-
sively qualified according to uniform standards. The participants
are given the opportunity to obtain good career prospects and
plan concrete development goals. Our company’s sustained
success is closely linked to the high quality of our managers.

226 E | NON-FINANCIAL REPORT | EMPLOYEE ISSUES

That’s why we focus especially on the development of talented
young managers. We validate young employees’ leadership
potential in our PV44 in-house assessment center, which uses
a uniform standard for all of our locations.

The Board of Management member responsible for human
resources regularly receives reports about the measures and
results of our training activities and the development paths of
the people who enter the company via our CAReer program.

Qualification
We provide our staﬀ with training and continuing education
opportunities for their professional and personal development
throughout their careers. At least once a year, employees
discuss qualiﬁcation topics with their managers and agree on
appropriate measures. The company agreement on qualiﬁca-
tion regulates continuing education at Daimler AG. This agree-
ment also stipulates that employees can leave the company
for up to ﬁve years in order to learn additional skills and are
guaranteed that they can return. In 2017, around 370 employ-
ees availed themselves of this opportunity.

Our production locations are responsible for the qualiﬁcation
of managers and specialized employees in manufacturing. The
Global Training unit safeguards and increases the skills of our
employees at the Mercedes-Benz sales organization by having
700 trainers instruct about 200,000 participants each year at
100 training locations in 80 countries around the world. A total
of 1.2 million training courses are held each year. The Daimler
Corporate Academy program helps the Group develop a new
management culture and world of work. In 2017, the Corporate
Academy enabled a total of 63,000 specialized employees and
managers from more than 50 locations to develop themselves
further personally and professionally. At Daimler AG, we spent
€121 million on the training and qualiﬁcation of our employees
in the year under review (2016: €122 million). On average,
every employee spent three days on qualiﬁcation courses in
2017 (2016: three days).

Health management and safety at the
workplace

We want to maintain our employees’ health and physical well-
being for the long term. To this end, the Daimler Group has
uniform preventive healthcare standards in place worldwide.

As part of Daimler AG’s health management approach, we
develop and implement anticipatory solutions that range from
the job-related “Daimler GesundheitsCheck” and the ergo-
nomic design of workstations to the IT system that makes it
easier to permanently reintegrate employees suﬀering from
limitations imposed by their health.

Our Health & Safety unit is responsible for occupational health
and safety, company health-promotion eﬀorts, ergonomics,
counseling service and integration management. Health man-
agement and work safety are also governed by our risk man-
agement systems.

Company health promotion is aimed at motivating employees to
develop healthy lifestyles and reinforcing their sense of per-
sonal responsibility regarding health issues. This objective is
promoted worldwide with the help of campaigns, counseling
and qualiﬁcation oﬀerings, as well as therapeutic and rehabili-
tation measures. All of our plants in Germany have health cen-
ters on their premises or cooperate with health centers located
near the plants.

Occupational safety is ﬁrmly embedded at all levels of Daimler
and is addressed by an extensive portfolio of measures for
the prevention of work accidents, work-related illnesses and
occupational diseases. Our Center of Competence Safety cre-
ates the associated Group-wide guidelines. We have standard-
ized key occupational health and safety processes in order to
enable the creation and advancement of integrated processes
and systems. Every manager at Daimler is responsible for
ensuring that all internal guidelines and legal requirements for
occupational health and safety are complied with.

Every organizational unit within the Daimler Group has to
approve and pursue occupational safety objectives on a regu-
lar basis in accordance with our globally valid occupational
health and safety guidelines and occupational safety strategy
and the results of internal audits and reviews. The content
and criteria of our internal occupational safety management
system correspond to the standards of BS OHSAS 18001 and
are regularly updated.

The Board of Management receives a Health & Safety report at
regular intervals and is, among other things, given monthly
updates about the frequency of accidents. A Group crisis unit,
in which the Board of Management is also involved, enables
Daimler to respond quickly to various incidents such as serious
accidents and pandemics.

E | NON-FINANCIAL REPORT | SOCIAL ISSUES 227

Social Issues

As a global automotive company, we operate in an environment that is subject to a variety of societal,
social and political inﬂuencing factors. In order to ensure we can continue operating eﬀectively in
the future, we need to make our company’s interests understandable to governments and society,
and also address the concerns of social groups. We therefore regularly share information with our
stakeholders and communicate our interests in an open and fair dialogue with governments and
political representatives.

Stakeholder dialogue

We seek to engage with all stakeholders in order to share views
and experiences and discuss controversial issues in a con-
structive manner. Our goal here in every situation is to achieve
a fruitful dialogue that beneﬁts all parties.

We deﬁne stakeholders as individuals and organizations that
have legal, ﬁnancial, ethical or ecological expectations regard-
ing Daimler. One of the criteria for identifying and weighting
stakeholders is the extent to which a person or group is aﬀected
by our company’s decisions or, conversely, can inﬂuence such
decisions. Our primary stakeholders are our employees, custom-
ers, creditors and shareholders, as well as our suppliers.
However, we also communicate regularly with civil groups such
as NGOs, as well as with analysts, professional associations,
trade unions, the media, scientists, politicians, municipalities and
residents and neighbors in the communities where we operate.

Dialogue at the Group level
In order to maintain eﬀective relationships with our stakehold-
ers, we have deﬁned areas of responsibility, communication
channels and dialogue formats that are valid throughout the
Daimler Group. Our Corporate Responsibility Management
department is responsible for establishing an institutionalized
and proactive dialogue with our stakeholders. This dialogue
is then coordinated by our Corporate Sustainability Board and
the Corporate Sustainability Oﬃce. The central format for
our stakeholder dialogue is the Daimler Sustainability Dialogue,
which has been held annually in Stuttgart since 2008 and
brings various stakeholder groups together with representa-
tives of our Board of Management and executive management.
Each Sustainability Dialogue event focuses on sharing ideas
in a variety of themed workshops. The Daimler representatives
obtain feedback from the external participants and work
together with the stakeholders to achieve agreed-upon targets
throughout the course of the year. They then report at the
event in the following year on the progress made in the interim.
We held our tenth Daimler Sustainability Dialogue in Stuttgart
during the year under review.

In order to discuss local challenges and promote the implemen-
tation of sustainability standards around the world, we organize
Daimler Sustainability Dialogue events in other countries as
well. Such dialogue events have been held in China, Japan, the
United States and Argentina. During the year under review,
external experts and stakeholders also attended the ﬁ(cid:5)h Daimler
Sustainability Dialogue in Beijing, where they spoke to Daimler
representatives about environmental protection, economics,
human resources, and integrity and legal aﬀairs.

The Advisory Board for Integrity and Corporate Responsi-
bility has been an important source of input for Daimler since
2012. The board’s independent members from the ﬁelds of sci-
ence and business, as well as from civic organizations, utilize
an external point of view to oﬀer critical and constructive sup-
port for the integrity and corporate responsibility process at
Daimler. Board members have extensive experience with issues
related to ethical conduct and transportation and environmen-
tal policy and contribute their diﬀerent points of view to discus-
sions. The board holds regular meetings with members of the
Board of Management and other Daimler executives. During the
year under review, the Advisory Board also held a joint meet-
ing with the Board of Management and the Supervisory Board.
Meetings of the Advisory Board during the reporting year
focused on current topics and challenges, including ethical
aspects in connection with autonomous driving, methods
for measuring progress with regard to integrity, the current
debate on emissions, Daimler’s approach to respecting human
rights, and the development of a management culture for the
digital age.

We also utilize online and print media, discussions with experts,
workshops, local and regional dialogue events and stakeholder
surveys for our dialogue with stakeholders. For example, as
part of the process for validating our new Sustainability Strat-
egy 2030, we once again conducted an extensive online survey
of our stakeholders in 2017. This survey basically conﬁrmed
the prioritization of focus topics carried out within the frame-
work of our strategy process. Representatives from various
specialist units at Daimler participate in associations, commit-
tees and sustainability initiatives such as the UN Global Com-
pact and econsense — Forum for Sustainable Development of
German Business. We also stage interdisciplinary conferences
as a way to conduct an active dialogue with stakeholders. One
example is the second specialist conference on ethics and the
legal situation with regard to autonomous driving, which was
held in October 2017.

We regularly receive inquiries from stakeholders concerning var-
ious sustainability-related topics. These inquiries are addressed
directly by speciﬁc specialist departments and units in a decen-
tralized manner. This approach brings our stakeholders closer
to our business operations and enables specialized knowledge
to be directly incorporated into the dialogue. Reports on stake-
holder inquiries are also presented in the meetings of our Sus-
tainability Board and Sustainability Oﬃce. These reports are
used to formulate key strategic policies for sustainability man-
agement. The Sustainability Board and the Sustainability Oﬃce
also serve as coordination centers for dialogue with our stake-
holders on interdisciplinary issues.

228 E | NON-FINANCIAL REPORT | SOCIAL ISSUES

Dialogue on the local and regional levels
We also engage in a dialogue with the stakeholders at our loca-
tions. One example here is our planned Testing and Technology
Center in Immendingen on the Danube. We sought to engage in
a dialogue with the people in the region and address their con-
cerns from the very beginning. Our Daimler Forum Immendingen
also makes it possible for local residents to obtain information
on the status of the project at any given time.

In connection with speciﬁc occasions and projects, we address
questions, concerns, criticism and suggestions made by stake-
holders at our locations and conduct an open-ended dialogue
with them. We also stage proactive dialogue and information
events on current topics. The results of all of our dialogue mea-
sures are incorporated into decision-making and decision-
implementation processes at the company.

as vehicle safety, emission regulations, new mobility concepts
and electric mobility. Other important issues include trade policy,
location-speciﬁc matters, education and human resources policy.

The management guideline on Lobbying and Political Donations
governs, among other things, the use of lobbying instruments
and other methods for making our interests known in the political
realm. We represent the company’s interests through dialogue
with decision-makers, including elected oﬃcials or politicians
who have been nominated for oﬃce, government oﬃcials, and
representatives of political interest groups, trade organizations,
business associations and government agencies. Participation
in specialized government committees and product sales to
ministries, government agencies and diplomatic missions are
part of our business operations and therefore not considered a
component of lobbying.

Political dialogue and representation of interests

As a company with global operations, we have to deal with a
wide range of political changes and decisions that impact our
business activities. In order to safeguard the future of the
Daimler Group, it is therefore important that we represent the
interests of our company in an open dialogue with govern-
ments, associations, organizations and various groups in society.
Conversely, such a dialogue also allows us to hear their con-
cerns and consider their interests.

Our principles for political dialogue and communicating our
interests form the basis of responsible lobbying in compliance
with all laws and regulations. This also includes the idea of
maintaining neutrality when dealing with political parties and
representatives of interest groups.

The aim of our discussions with political decision-makers is
to achieve greater planning security and contribute our ideas
to processes of social change. We focus here on issues such

Our central coordinating body for political dialogue at the
national and international levels is the External Aﬀairs and Public
Policy department, which falls under the responsibility of the
Chairman of the Board of Management. This department oper-
ates a global network with oﬃces in Berlin, Brussels, Beijing,
Singapore, Stuttgart and Washington and also has corporate
representations in other key markets. In order to ensure that
political lobbying activities are coordinated, and also to avoid
political target groups being addressed in an uncoordinated
manner, employees in the External Aﬀairs and Public Policy
department must be registered.

The Group-wide Lobbyists Register ensures that political lob-
bying is carried out in accordance with applicable regulations
and ethical standards. The register also helps us meet the reg-
istration requirements of public institutions.

As in previous years, Daimler AG made donations totaling
€320,000 to political parties in 2017. Of this total, the CDU
and SPD each received €100,000, and the FDP, CSU and
Bündnis 90/the Green Party €40,000 each. All donations to
political parties require a Board of Management resolution.

E.06
Sample stakeholder dialogue instruments

Information

Dialogue

Participation

– Annual Daimler Sustainability Report and

regional sustainability reports

(e.g. Daimler China Sustainability Report)
– Blogs and social media
– Intranet and internal communication
– Press and public relations work
– Plant tours, receptions,
Mercedes-Benz Museum

– Sustainability newsletter and magazines
– Environmental statements of the plants

– Stakeholder survey and materiality analysis
– Advisory Board for Integrity and Corporate

Responsibility

– Peer review within the framework of sustain-
ability initiatives such as the UN Global Com-
pact

– Consultation of stakeholders in thematic

working groups (environment, human rights
etc.)

– Annual Daimler Sustainability Dialogue
(Germany/regions)
– Group-wide internal integrity dialogue
– Conferences on social issues; debates
– Daimler Supplier Portal
– Membership in sustainability initiatives and

networks

– Local dialogue with residents and communi-

ties

– Dialogue concerning speciﬁc occasions and

projects

– Board of Management involvement in the

Ethics Commission on Automated and Con-
nected Driving (German Ministry of Transport
and Digital Infrastructure)

– New dialogue formats for future-oriented is-
sues: think tanks, hackathons, idea competi-
tions

E | NON-FINANCIAL REPORT | COMPLIANCE 229

Compliance

Compliance is an indispensable part of the culture of integrity at Daimler. For us, compliance means
acting in conformance with laws and regulations. Our objective here is to ensure that all Daimler
employees worldwide are always able to carry out their work in a manner that is in conformance
with applicable laws, regulations, voluntary commitments and our basic values, as set out in
binding form in our Integrity Code. Our activities focus on compliance with all applicable anti-corrup-
tion regulations, the maintenance and promotion of fair competition, adherence to legal and regu-
latory stipulations related to product development, respect for and preservation of human rights,
compliance with data protection laws, compliance with sanctions lists and the prevention of
money laundering.

Our Compliance Management System

Our Compliance Management System (CMS) consists of basic
principles and measures intended to ensure rule-based behavior
throughout the company. The CMS is based on national and
international standards and is applied on a global scale at all
Daimler AG units and majority holdings. The CMS consists of
seven elements that build on one another. (cid:202)(cid:3)E.07

Our compliance values and goals
Our Compliance Management System (CMS) is designed to
help Daimler and its employees avoid inappropriate or illegal
behavior. The measures needed for this are deﬁned by Group
Compliance and the Legal department in a process that also
takes the company’s business requirements into account.

Our compliance organization
Group Compliance and the Legal department play a major role
in ensuring that applicable regulations are adhered to through-
out the Group. Our compliance organization is structured in a
divisional and regional manner, while our Legal department is
organized regionally and along the value chain. These structures
enable us to provide optimal support and advice to our divisions.
A contact person is made available to each function, division
and region. In addition, a global network of local contact persons
make sure that our standards are met throughout the Group
and also help local management at selected Daimler facilities
and sales companies implement our compliance program.

Compliance risks
We systematically pursue the goal of minimizing compliance
risks, and we analyze and assess the compliance risks of all
our business units every year. These analyses are based on
centrally compiled information on all business units and take
into account speciﬁc additional details in line with the given
risk assessment. The results of the analyses form the basis of
our risk management.

Compliance program
Our compliance program comprises all the principles and mea-
sures designed to reduce compliance risks and prevent violations
of regulations and laws. The individual measures, which are
based on the knowledge gained through our systematic com-
pliance analyses, focus on the following aspects:

The whistleblower system BPO (Business Practices Office)
enables Daimler employees and external whistleblowers to
report misconduct anywhere in the world. The BPO is available
around the clock to receive information that is sent by e-mail
or normal mail. Such information can also be provided to the
BPO by calling an external toll-free hotline or by ﬁlling out a
special form. Reports can be submitted anonymously if local
laws permit this. In Germany, reports to the BPO can also be
submitted via a neutral intermediary, who in this case is an inde-
pendent external attorney. The information provided to the
BPO enables us to learn about potential risks and speciﬁc vio-
lations and thus prevent damage to the company and its repu-
tation. A globally valid corporate policy aims to ensure a fair
and transparent approach that takes into account the principle
of proportionality for the aﬀected parties, while also giving
protection to whistleblowers. In an eﬀort to increase trust in
our whistleblower system and make it even better known
within the Group, we have established a continuous communi-
cation process that includes the periodic provision of informa-
tion to employees about the type and number of reported vio-
lations, as well as the staging of informational and dialogue
events at our locations.

A total of 95 new BPO cases were opened in 2017. During the
year under review, 96 cases were closed, 61 of them “with
merit,” which means the initial suspicion was conﬁrmed. Three
of these cases were categorized as “corruption.”

E.07
Daimler Compliance Management System (CMS)

I. Compliance values

VII. Monitoring &
improvement

II. Compliance goals

VI. Communication &
training

III. Compliance
organization

V. Compliance
program

IV. Compliance risks

230 E | NON-FINANCIAL REPORT | COMPLIANCE

With regard to those cases that are closed “with merit,” appro-
priate response measures are decided in line with the princi-
ples of proportionality and fairness. Such measures are only
taken if the investigation of the case in question leaves no
doubt of misconduct on the part of the accused individual(s).
Measures taken in 2017 included the issuing of verbal and writ-
ten warnings and ﬁnal warnings, as well as seperation agree-
ments and extraordinary terminations. In some cases, there
were claims for damages, while in others those guilty of viola-
tions stepped down voluntarily.

Compliance on the part of our business partners. We also
require our business partners to adhere to clear compliance
requirements because we regard our business partners’ integ-
rity and behavior in conformity with regulations as an indis-
pensable precondition for trusting cooperation. In the selec-
tion of our direct business partners, we therefore ensure that
they comply with the law and observe ethical principles. In
ﬁnancial year 2017, we began reviewing our standardized pro-
cess for examining all of our business partners (Business Part-
ner Due Diligence Process) and implementing ongoing monitor-
ing measures to increase process eﬀectiveness and eﬃciency.
Back in 2016, we published a “Compliance Awareness Module”
that can be made available to our business partners on request
and is designed to increase their awareness of the latest com-
pliance requirements. We also reserve the right to terminate
cooperation with business partners who fail to comply with our
standards. For the expectations we place on our business part-
ners, see also w daimler.com/nh/ugb.

Communication and training
Our extensive training courses are based on our Integrity Code.
The integrated training program is deﬁned on the basis of an
annual planning cycle that includes everything from a needs
analysis to the implementation of the program and a monitor-
ing process. Among other things, the program covers the top-
ics of integrity, compliance (including corruption prevention
and technical compliance), data protection and antitrust law.
Depending on the risk and the target group, we use classroom
training or digital learning techniques such as web-based train-
ing courses.

Every employee with e-mail access who works at a Daimler-
controlled company can participate in a web-based and target
group-focused training program consisting of several modules
— a basic module, a management module (for managers) and
expert modules on antitrust law, data protection, procurement,
sales, and non-cash rewards for employees etc. This program
is being continuously expanded in line with the requirements of
speciﬁc target groups.

With the exception of industrial employees, employees are
automatically assigned mandatory modules relevant to their
role and function. This ensures that each employee is given
exactly the modules needed for his or her line of work. These
training modules are assigned when an employee is hired, pro-
moted, or transferred to a position that involves a heightened
risk. This approach ensures that all personnel changes are
properly addressed. In general, the program must be repeated
every three years.

A new mandatory version of the training program was rolled
out at the end of the year under review. The web-based train-
ing courses are supplemented by classroom training sessions
that are conducted by central or local trainers. We provide our
internal trainer network with modular training documents and
materials for the methodical implementation of the courses.
Such materials include a guideline for trainers and explanatory
videos that can be used in a target group-speciﬁc manner in
accordance with the risks associated with the functions of the
participants. A total of approximately 96,300 employees from
various hierarchy levels attended a classroom training course
or participated in web-based training courses in 2017.

Our integrated training program also includes target group-spe-
ciﬁc qualiﬁcation measures that help staﬀ at Group Compli-
ance and the Legal department address changes to regulations
and the legal framework. In addition, all new employees at both
departments attend a special practical seminar that oﬀers a
comprehensive introduction to this topic.

All of these training measures contribute to the permanent
establishment of ethical and compliant behavior at the company
and also help our employees deal with speciﬁc issues that can
occur at work. The same is true of the new Daimler app for
integrity, compliance and legal aﬀairs. The app can be down-
loaded and used by all employees with an iOS company owned
device. Among other things, the app enables mobile access to
information on corruption prevention and antitrust law.

We have also further expanded our qualiﬁcation and consulting
program for individuals who perform supervisory and manage-
ment functions. New members of executive bodies at companies
in which Daimler is the majority shareholder are given a com-
pact overview of key aspects of corporate governance via the
Corporate Governance Navigator, which is a target group-
focused program that supports them in their new role by pro-
viding information on their tasks and responsibilities, contact
partners, and units that deal with central issues addressed by
the Integrity and Legal Aﬀairs division and adjacent units.

In addition to our internal training measures, our training pro-
gram also includes special courses on integrity and compli-
ance (including corruption prevention) that are oﬀered to our
business partners in line with their speciﬁc risks. The courses
are oﬀered as web-based training or classroom training ses-
sions. Daimler informs its business partners about the courses
and invites them to participate.

Monitoring and improvements
Every year, we review the eﬀectiveness and eﬃciency of our
Compliance Management System and adapt it to global devel-
opments, changed risks and new legal requirements. We also
monitor important core processes during the year on the basis
of key performance indicators (KPIs) that include process dura-
tion and quality. To determine these indicators, we check, among
other things, whether formal requirements are met and all
information is complete. In addition, we analyze the knowledge
gained through independent internal and external assessments
and participate in selected benchmark studies. These activities
are used to deﬁne any required improvement measures, which
are implemented by the responsible units and departments and
then monitored on a regular basis. The relevant management
bodies continuously receive reports on these monitoring
activities.

E | NON-FINANCIAL REPORT | COMPLIANCE 231

Antitrust compliance

Our Group-wide Antitrust Compliance Program is oriented to
national and international standards. The program establishes
a binding, globally valid Daimler standard that deﬁnes how
matters of competition law are to be assessed. The Daimler
standard is based on the standards of the European antitrust
authorities and courts. The objective of the Daimler standard is
a uniform level of compliance and advice in all countries and
thus compliance with all local and international antitrust laws.

By means of an advisory hotline set up by our Legal depart-
ment, as well as guidelines and practical support, we help our
employees around the world recognize situations that might
be critical from an antitrust perspective, and also act in com-
pliance with regulations in their daily work, especially when
dealing with competitors, cooperating with dealers and general
agencies around the world, and participating in business asso-
ciation committees. In addition to Daimler’s Legal department
and its specialist advisers, the Group’s global units and their
employees can turn to legal advisers in local at-risk units, who
also ensure that our standards are consistently upheld. We
also utilize a variety of communication measures to make our
employees aware of the importance of competition and anti-
trust laws and issues.

The results of our annual compliance risk analysis serve as the
basis for the formulation of measures that address antitrust
risks. The responsibility for designing, implementing and moni-
toring measures lies with each company’s management. Man-
agers in turn cooperate closely with Integrity and Legal Aﬀairs,
which also provides information on how to implement the mea-
sures eﬀectively. The at-risk units in particular must regularly
systematically assess the adequacy and eﬀectiveness of locally
implemented antitrust compliance measures. In addition, our
Legal and Corporate Audit departments conduct additional mon-
itoring activities at our company’s units, as well as random
audits of at-risk units on the basis of a predeﬁned audit plan
in order to ensure that antitrust laws are complied with and
internal processes are carried out properly. This helps us con-
tinuously improve the eﬀectiveness of our Antitrust Compli-
ance Program and adapt it to global developments and new legal
requirements. The associated methods and processes are
being constantly reﬁned and improved.

In order to ensure an independent external assessment of our
Antitrust Compliance Program, KPMG AG Wirtscha(cid:5)sprü-
fungsgesellscha(cid:5) audited the Compliance Management System
for antitrust law in accordance with the 980 standard of the
Institute of Public Auditors in Germany. This audit, which was
based on the principles of appropriateness and eﬀective imple-
mentation, was successfully completed at the end of 2016.

Involvement of company management
Our divisional and regional compliance managers report to
the Chief Compliance Oﬃcer. This guarantees the compliance
managers’ independence from the business divisions. The
Chief Compliance Oﬃcer and Group General Counsel report
directly to the Member of the Board of Management for Integ rity
and Legal Aﬀairs and to the Audit Committee of the Supervi-
sory Board. They also report four times each year to the Board
of Management of Daimler AG on matters such as the status of
the Compliance Management System and its further develop-
ment, the status of the whistleblower system and, if necessary,
on other topics. In addition, the Group General Counsel regu-
larly reports to the Antitrust Steering Committee and the
Group Risk Management Committee, to which the Chief Com-
pliance Oﬃcer also reports.

Important non-financial reporting topics
Eliminating corruption, preventing cartel arrangements and
ensuring compliance with technical regulations — we introduced
our Compliance Management System in order to address
exactly these issues, which are extremely important to us. Our
Group-wide approach to respecting and upholding human
rights is also based on the Daimler CMS.

Anti-corruption compliance

Daimler has committed itself to ﬁghting corruption in its own
business activities. Along with complying with all applicable
laws, this also involves adhering to the rules of the OECD Con-
vention on Combating Bribery of Foreign Public Oﬃcials in
International Business Transactions (1997) and the United
Nations Convention against Corruption (2003). As a founding
member of the UN Global Compact and a part of its LEAD
Group, Daimler also seeks to ensure that not only the company
itself but also its business partners and customers act in
accordance with the principles of the UN Global Compact. The
most important goals here are to ﬁght corruption around the
world in order to enable fair competition, eliminate the damage
corruption does to society and thus improve conditions for
everyone.

Our anti-corruption compliance program is based on our com-
prehensive Compliance Management System. The program
is globally valid and primarily consists of the following compo-
nents: integrated risk assessment, risk-based measures for
avoiding corruption in all business activities (e.g. reviews of
business partners and transactions), and special care in con-
tacts with authorities and public oﬃcials. Our risk-minimization
measures focus in particular on sales companies in high-risk
countries and business relationships with wholesalers and gen-
eral agencies worldwide.

The responsibility for implementing and monitoring measures
lies with each company’s management, which cooperates
closely with the specialist units within Integrity and Legal Aﬀairs.

Daimler places the same strict requirements on all of its activi-
ties around the world. In addition, we continuously improve our
methods and processes and use a variety of communication
measures to make our employees aware of the importance of
ﬁghting corruption. Among other things, we released a ﬁlm and
set up a separate website to address this issue during the year
under review. Further information on communication and train-
ing: E page 230

232 E | NON-FINANCIAL REPORT | COMPLIANCE

Technical compliance

Human rights compliance

As part of our eﬀorts to continuously improve our products,
technologies and organization, we repeatedly examine new
development possibilities and also optimize our processes.
This includes adjusting and improving our existing Compliance
Management System — for example in terms of compliance
with technical regulations.

In order to address the speciﬁc risks associated with the prod-
uct development process, we combined all existing systems
and additional measures and processes at Mercedes-Benz Cars
into a technical Compliance Management System (tCMS) dur-
ing the reporting year. This system includes fundamental princi-
ples and elements intended to ensure ethical conduct and
work processes throughout the Group and compliance with
applicable laws. Measures are currently under way to intro-
duce the tCMS at Mercedes-Benz Vans, Daimler Trucks and
Daimler Buses.

Our technical Compliance Management System helps create
clarity with regard to compliance with technical regulations
and also oﬀers guidance with regard to these regulations, which
can be very complicated. These questions are jointly examined
and answered in an interdisciplinary process that takes into
account legal and technical criteria. The tCMS addresses both
the complexity of regulatory requirements and ongoing devel-
opments in the automotive industry.

Employees at Group Research and Development are supported
here by a network of disseminators — direct contact partners
for questions concerning technical compliance in their areas of
responsibility. This network of disseminators is being expanded
throughout the Group. We also employ various communication
measures to raise awareness among selected target groups.
Such measures include special dialogue events and guidelines
on integrity, compliance and legal considerations in the prod-
uct development process. For example, some 3,600 employees
at Mercedes-Benz Cars Development had taken part in class-
room training courses on technical compliance by the end of
2017.

Technical compliance is managed Group-wide by an internal
team consisting of employees with expertise in various ﬁelds,
such as development, legal aﬀairs, integrity and compliance.
The Board of Management members responsible for Integrity
and Legal Aﬀairs and Group Research and Development
receive regular reports on the status of the technical Compli-
ance Management System.

Daimler has been working on a company-speciﬁc approach to
human rights since 2008. In 2011 we began developing a sys-
tematic due diligence approach for our company, initially on
the basis of the Human Rights Compliance Assessments of the
Danish Institute for Human Rights. Since 2015, we have been
working with the Daimler Human Rights Respect System (HRRS),
which we developed ourselves with the specifsic requirements
of the company in mind.

The protection of human rights is also a key component of our
Group-wide sustainability strategy. We are committed to
proving to the greatest extent possible that these elementary
rights are respected and upheld throughout our organization,
our partners and by our suppliers as well. The UN Guiding Prin-
ciples on Business and Human Rights and Germany’s National
Action Plan on Business and Human Rights deﬁne the associ-
ated principles and due diligence obligations. It is our aim to
fulﬁll these obligations and we are therefore gradually expand-
ing our Human Rights Respect System (HRRS) as our Due Dili-
gence Framework, including regular consultations with exter-
nal stakeholders. As a proactive risk management system
for human rights, the HRRS is designed with the aim to identify
and avoid systemic risks and potential negative impacts of
our business activities on human rights early on. The HRRS
thus primarily protects third parties and is aimed at exerting
its eﬀect along at our supply chain as well. Along with rele-
vant legislation, we also focus on multinational initiatives and
frameworks, in particular the UN Guiding Principles on Busi-
ness and Human Rights and the principles of the UN Global
Compact. In line with the expectations regarding a human rights
policy expressed in these documents, we have clearly deﬁned
what we expect from all of our employees and business partners.
These expectations are formulated in our Integrity Code, our
Supplier Sustainability Standards and our supplier agreements.
The responsibility for human rights issues lies with the Integrity
and Legal Aﬀairs division. The HRRS, which orientates itself
on our Group-wide Compliance Management System (CMS),
utilizes a risk-based approach in its focus on Daimler majority
holdings (including production locations) and our supply chain.
Also part of the HRRS is the consultation and exchange with rights
holders, for example our employees and their representatives.

We continue to develop the HRRS and implement it step by
step. In the last two years, for example, we conducted two
HRRS pilot projects for Daimler majority-owned companies at
our international locations and, where necessary, initiated
improvements and also identiﬁed best practices for other loca-
tions. We were also able to further improve the system we
use to classify all Daimler majority holdings in terms of human
rights risks. We are working to ﬁrmly establish the HRRS for
Daimler majority-owned companies by 2020 at all our loca-
tions thereby supplementing the already existing decentralized
measures with a dedicatd system.

E | NON-FINANCIAL REPORT | COMPLIANCE 233

Other compliance issues

It is very important to Daimler to minimize all legal and economic
risks. Along with the issues described above, our Compliance
Management System therefore also addresses other issues, such
as compliance with our data protection policy and data protec-
tion legislation, the prevention of money laundering and com-
pliance with sanctions lists.

Data protection compliance
The Corporate Data Protection department provides worldwide
support to all Group companies and helps ensure compliance
with data protection requirements. The Chief Oﬃcer Corporate
Data Protection is independent and reports directly to the Board
of Management member for Integrity and Legal Aﬀairs. The
annual data protection report is submitted to the Supervisory
Board. Our Corporate Data Protection Policy creates Group-
wide standards for handling the data of employees, customers
and business partners, and also meets the requirements of
current European data protection laws. Preparations are now
under way for implementation of the new European data pro-
tection regulation that will go into eﬀect in May 2018. The Cor-
porate Data Protection department is the point of contact for
data protection complaints. It also carries out checks and audits,
raises employees’ awareness of data protection and advises
the relevant specialist departments. Product-related advice
focuses on data protection for connected vehicles and auto-
mated driving functions, as well as mobility services.

Anti-money laundering compliance
Our Anti-Money Laundering Policy is designed to prevent money
laundering and the ﬁnancing of terrorism in the trade with
goods and in activities carried out by Daimler Financial Services.
It is meant to proving that legislation in various countries is
complied with throughout the Group, and that internal regula-
tions that go beyond such legislation are complied with as well.
The Chief Compliance Oﬃcer serves as the anti-money laun-
dering oﬃcer of Daimler AG as a distributor of goods. An Anti-
Money Laundering Policy of competence supports the Chief
Compliance Oﬃcer in the management and coordination of
money laundering prevention measures. The Divisional Compli-
ance Oﬃce Financial Services coordinates and supports the
implementation of the Anti-Money Laundering Policy at Daimler
Financial Services.

Sanctions compliance
We have introduced a risk-focused, system-based process at
relevant specialist departments and Daimler AG-controlled
holdings that ensures compliance with EU and US sanctions
and internal regulations. The Center of Competence CSL
(Checks against Sanctions Lists/Sanctions Compliance) pro-
vides implementation support to the relevant specialist depart-
ments and the Daimler AG-controlled holdings.

Due diligence with the Human Rights Respect System
The HRRS is designed to identify and avoid systemic risks and
possible negative eﬀects of our business activities on human
rights early on. It consists of four steps that are to be applied
to Daimler majority-owned companies and the supply chain:
1. Identiﬁcation of potential human rights risks (risk assess-

ment)

2. Deﬁnition, implementation and management of preventive
measures and countermeasures (program implementation)
3. Monitoring of the eﬀectiveness of the measures, in particu-
lar at high-risk units and in supply chains that are at a high
risk of human rights violations (monitoring)

4. Periodic internal reporting on relevant issues, compliance

with external reporting requirements (reporting)

Identification of human rights risks at Daimler majority
holdings
The risk assessment is a two-step process. The ﬁrst step
involves a categorization of the majority holdings on the basis
of predeﬁned criteria, such as the risk situation in speciﬁc
countries and risks associated with speciﬁc business opera-
tions. In the second step, units that display a heightened
human rights risk are subject to an on-site assessment. To this
end, a modular approach was developed that makes it possible
to take into account fundamental human rights standards such
as those deﬁned in the Universal Declaration of Human Rights
and the Core Labor Standards of the International Labor Orga-
nization (ILO).

In 2017 we used the experience gained with the pilot projects
to make adjustments to our previous two-step risk assessment
process. We also had external stakeholders verify the HRRS
in general and our risk assessment methodology in particular.
During this veriﬁcation process, we were given valuable sug-
gestions for further adapting and expanding the system. We
are also currently developing an eﬀective approach to program
implementation, monitoring and reporting.

Identification of human rights risks in our
supply chain
Since 2008 we have deﬁned our expectations towards our
suppliers regarding sustainability in our Supplier Sustainability
Standards. Stipulations concerning working conditions and
human rights are key components of these. In order to ensure
that we can meet our human-rights due-diligence obligations
even more systematically, we are gradually introducing the HRRS
in our supply chain as well. To this end, clear risk classiﬁca-
tions for Daimler supply chains were developed in line with
speciﬁc product areas (e.g. production materials or services)
in 2017. This also includes minerals commonly associated with
conﬂicts. We are utilizing our risk-based approach in order to
determine which supplier products and at which stages of our
extensive supply chain we should take targeted and appropri-
ate measures beyond our direct suppliers.

Involvement at the executive level
The member of the Board of Management responsible for Integ-
rity and Legal Aﬀairs is regularly informed on human rights
activities at regular intervals. This is supplemented by regular
reports submitted to the Board of Management and the Corpo-
rate Sustainability Board (CSB), as well as to the Procurement
Council (PC) within the framework of our sustainability strategy.

234 E | NON-FINANCIAL REPORT | INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report
Concerning a Limited Assurance Engagement
on the Non-Financial Group Reporting

To the Supervisory Board of Daimler AG,
Stuttgart

We have performed an independent limited assurance engage-
ment on the separate combined Non-Financial Report of
Daimler AG and the Group as well as the by reference qualiﬁed
parts “Business model”, “Legal risks” and “Non-Financial
risks” according to §§ 315b and 315c in conjunction with 289b
to 289e (further “Report“) of Daimler AG, Stuttgart (further
“Daimler”) for the business year from January 1 to December
31, 2017.

Management’s Responsibility
The legal representatives of Daimler are responsible for the
preparation of the Report in accordance with §§ 315b and 315c
in conjunction with 289b to 289e HGB.

This responsibility of the legal representatives includes the selec-
tion and application of appropriate methods to prepare the
Non-Financial Report and the use of assumptions and estimates
for individual sustainability disclosures which are reasonable
under the given circumstances. Furthermore, the responsibility
includes designing, implementing and maintaining systems
and processes relevant for the preparation of the Non-Financial
Report in a way that is free of – intended or unintended –
material misstatements.

Independence and quality assurance on the part of the
auditing firm
We are independent from the company in accordance with the
requirements of independence and quality assurance set out
in legal provisions and professional pronouncements and have
fulﬁlled our additional professional obligations in accordance
with these requirements.

Our audit ﬁrm applies the legal provisions and professional
pronouncements for quality assurance, in particular the pro-
fessional code for German Public Auditors and Chartered
Accountants (in Germany) and the quality assurance standard
of the German Institute of Public Auditors (Institut der
Wirtscha(cid:5)sprüfer, IDW) regarding quality assurance require-
ments in audit practice (IDW QS 1).

Practitioner’s Responsibility
Our responsibility is to express a conclusion based on our
work performed of the Report within a limited assurance
engagement.

We conducted our work in accordance with the International
Standard on Assurance En-gagements (ISAE) 3000 (Revised):
“Assurance Engagements other than Audits or Reviews of His-
torical Financial Information” published by IAASB. This Stan-
dard requires that we plan and perform the assurance engage-
ment to obtain limited assurance whether any matters have
come to our attention that cause us to believe that the Report

E | NON-FINANCIAL REPORT | INDEPENDENT AUDITOR’S REPORT 235

for the period from January 1 2017 to December 31, 2017, has
not been prepared, in all material respects in accordance with
§§ 315b and 315c in conjunction with 289b to 289e HGB. We
do not, however, issue a separate conclusion for each sustain-
ability disclosure. In a limited assurance engagement the evi-
dence gathering procedures are more limited than in a reason-
able assurance engagement and therefore less assurance
is obtained than in a reasonable assurance engagement. The
choice of audit procedures is subject to the auditor’s own
judgement.

Within the scope of our engagement, we performed amongst
others the following procedures:
– Interviews with employees on group level who are responsi-

ble for the materiality analysis to get an understanding of the
process for identifying material topics and respective report
boundaries for Daimler

– A risk assessment, including a media research, of relevant

information about the sustainability performance of Daimler
in the reporting period

Limited liability
This report is issued for purposes of the Supervisory Board of
Daimler AG, Stuttgart, only. We assume no responsibility with
regard to any third parties.

Our assignment for the Supervisory Board of Daimler AG,
Stuttgart, and professional liability is governed by the General
Conditions of Assignment for Wirtscha(cid:5)sprüfer and
Wirtscha(cid:5)sprüfungsgesellscha(cid:5)en (Allgemeine Au(cid:5)ragsbedin-
gungen für Wirtscha(cid:5)sprüfer und Wirtscha(cid:5)sprüfungsgesell-
scha(cid:5)en) in the version dated January 1, 2017 w https://
kpmg.de/bescheinigungen/lib/aab_englisch.pdf. By reading
and using the information contained in this report, each recipi-
ent conﬁrms notice of provisions of the General Conditions of
Assignment (including the limitation of our liability for negli-
gence to EUR 4 Mio as stipulated in No. 9) and accepts the
validity of the attached General Conditions of Assignment with
respect to us.

– Assessment of the design and implementation of systems

Stuttgart, February 9, 2018

and processes for the collection, processing and monitoring
of information on environmental, employee and social mat-
ters, human rights, corruption and bribery, including data
consolidation

– Interviews with employees on group level who are responsi-
ble for the collection of the information to concepts, due dili-
gence processes, results and risks, the conduction of internal
controls and the information consolidation

KPMG AG
Wirtscha(cid:5)sprüfungsgesellscha(cid:5)

– Evaluation of selected internal and external documents
– Analytical evaluation of data and trends of quantitative infor-

Dr. Thümler
Auditor

Mokler
Auditor

mation which are reported by all sites on group level

– Assessment of local data collection and reporting processes
and reliability of reported data via a sampling survey in Stutt-
gart and Mannheim (both Germany).

– Assessment of the overall presentation of the information

Conclusion
Based on the procedures performed and the evidence received
to obtain assurance, nothing has come to our attention that
causes us to believe that the Report of Daimler for the business
year from January 1 to December 31, 2017 is not prepared, in
all material respects, in accordance with §§ 315b and 315c in
conjunction with 289b to 289e HGB.

WE HAVE A SOUND
FINANCIAL BASIS!

The Consolidated Financial Statements presented as follows have
been prepared in accordance with the International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU).
They also comply with additional requirements set forth in
Section 315e (paragraph 1) of the German Commercial Code (HGB).

F | CONSOLIDATED FINANCIAL STATEMENTS | CONTENTS 237

F | Consolidated Financial Statements

Consolidated Statement of Income
Consolidated Statement of
of Comprehensive Income/Loss
Consolidated Statement of
Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of
Changes in Equity

Notes to the Consolidated Financial
Statements

238

239

240

241

242

244

1. Signiﬁcant accounting policies
244
2. Accounting estimates and management judgments 255
256
3. Consolidated Group
258
4. Revenue
258
5. Functional costs
260
6. Other operating income and expense
260
7. Other ﬁnancial income/expense, net
260
8. Interest income and interest expense
261
9. Income taxes
264
10. Intangible assets
265
11. Property, plant and equipment
266
12. Equipment on operating leases
267
13. Equity-method investments
270
14. Receivables from ﬁnancial services
271
15. Marketable debt securities
271
16. Other ﬁnancial assets
272
17. Other assets
272
18. Inventories
272
19. Trade receivables
273
20. Equity
275
21. Share-based payment

22. Pensions and similar obligations
23. Provisions for other risks
24. Financing liabilities
25. Other ﬁnancial liabilities
26. Deferred income
27. Other liabilities
28. Consolidated statement of cash ﬂows
29. Legal proceedings
30. Financial guarantees, contingent liabilities

and other ﬁnancial obligations

31. Financial instruments
32. Management of ﬁnancial risks
33. Segment reporting
34. Capital management
35. Earnings per share
36. Related party relationships
37. Remuneration of the members of the

Board of Management and the
Supervisory Board

38. Principal accountant fees
39. Additional information

276
282
283
284
284
284
285
286

287
290
298
305
309
309
310

311
312
312

238 F | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF INCOME

Consolidated Statement of Income

F.01

In millions of euros

Revenue

Cost of sales

Gross proﬁt

Selling expenses

General administrative expenses

Research and non-capitalized development costs

Other operating income

Other operating expense

Proﬁt/loss on equity-method investments, net

Other ﬁnancial income/expense, net

Interest income

Interest expense
Proﬁt before income taxes1

Income taxes

Net proﬁt

thereof proﬁt attributable to non-controlling interests

thereof proﬁt attributable to shareholders of Daimler AG

Earnings per share (in euros)
for proﬁt attributable to shareholders of Daimler AG

Basic

Diluted
1 The reconciliation of Group EBIT to proﬁt before income taxes is presented in Note 33.

Note

2017

2016

164,330

-129,999

34,331

-12,965

153,261

-121,298

31,963

-12,226

-3,809

-5,938

2,824

-1,042

1,498

-230

214

-582

14,301

-3,437

10,864

339

10,525

-3,419

-5,257

2,350

-1,298

502

275

230

-546

12,574

-3,790

8,784

258

8,526

9.84

7.97

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

F | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/LOSS 239

Consolidated Statement of Comprehensive
Income/Loss1

F.02

In millions of euros

Net proﬁt

Currency translation adjustments

Financial assets available-for-sale

Unrealized gains/losses (pre-tax)

Reclassiﬁcations to proﬁt and loss (pre-tax)

Taxes on unrealized gains/losses
and on reclassiﬁcations

Financial assets available-for-sale (a(cid:5)er tax)

Derivative ﬁnancial instruments

Unrealized gains/losses (pre-tax)

Reclassiﬁcations to proﬁt and loss (pre-tax)

Taxes on unrealized gains/losses
and on reclassiﬁcations

Derivative ﬁnancial instruments (a(cid:5)er tax)

Equity-method investments

Unrealized gains/losses (pre-tax)

Equity-method investments (a(cid:5)er tax)

Items that may be reclassiﬁed to proﬁt/loss

Actuarial gains/losses from pensions and
similar obligations (pre-tax)

Taxes on actuarial gains/losses from pensions
and similar obligations

Actuarial gains/losses from pensions and
similar obligations (a(cid:5)er tax)

Items that will not be reclassiﬁed to proﬁt/loss

Other comprehensive income/loss, net of taxes

Total comprehensive income

Daimler
Group

Shareholders
of Daimler AG

Non-
controlling
interests

Daimler
Group

Shareholders
of Daimler AG

Non-
controlling
interests

2017

2016

10,864

-2,664

10,525

-2,596

339

-68

-1

-3

2,519

-36

-741

1,742

-883

-108

-19

-127

-1,010

9,854

-1

-3

2,523

-36

-742

1,745

-813

-106

-19

-125

-938

9,587

-4

-3

-70

-2

-72

267

8,784

696

-448

-621

-1,068

123

1,512

-495

1,140

-12

756

8,526

697

-448

-621

-1,068

126

1,512

-496

1,142

-12

759

-1,994

748

-1,246

-490

8,294

-1,246

-487

8,039

258

-1

–

-3

–

-2

–

-3

–

-3

255

1 See Note 20 for other information on comprehensive income/loss.

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

240 F | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Consolidated Statement of Financial Position

F.03

In millions of euros

Assets

Intangible assets

Property, plant and equipment

Equipment on operating leases

Equity-method investments

Receivables from ﬁnancial services

Marketable debt securities

Other ﬁnancial assets

Deferred tax assets

Other assets

Total non-current assets

Inventories

Trade receivables

Receivables from ﬁnancial services

Cash and cash equivalents

Marketable debt securities

Other ﬁnancial assets

Other assets

Total current assets

Total assets

Equity and liabilities

Share capital

Capital reserves

Retained earnings

Other reserves

Treasury shares

Equity attributable to shareholders of Daimler AG

Non-controlling interests

Total equity

Provisions for pensions and similar obligations

Provisions for income taxes

Provisions for other risks

Financing liabilities

Other ﬁnancial liabilities

Deferred tax liabilities

Deferred income

Other liabilities

Total non-current liabilities

Trade payables

Provisions for income taxes

Provisions for other risks

Financing liabilities

Other ﬁnancial liabilities

Deferred income

Other liabilities

Total current liabilities

Total equity and liabilities

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

Note

At December 31,
2016

2017

13,735

27,981

47,714

4,818

46,413

990

3,221

2,853

1,145

12,098

26,381

46,942

4,098

42,881

1,100

2,899

3,870

667

148,870

140,936

25,686

11,990

39,374

12,072

9,073

3,580

4,960

25,384

10,614

37,626

10,981

9,648

2,837

4,962

106,735

255,605

102,052

242,988

3,070

11,742

47,682

1,529

–

64,023

1,291

65,314

5,767

1,046

7,192

3,070

11,744

40,794

2,342

–

57,950

1,183

59,133

9,034

966

6,632

78,378

70,398

2,589

2,402

5,802

103,186

12,474

560

10,052

48,746

8,933

3,668

2,672

87,105

255,605

3,327

3,467

5,559

99,398

11,567

751

9,427

47,288

9,542

3,444

2,438

84,457

242,988

F | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CASH FLOWS 241

Consolidated Statement of Cash Flows1

2017

2016

14,301

5,676

-1,507

-453

-1,455

-1,592

1,288

-11,145

-3,681

-48

843

-3,879

-1,652

-6,744

-3,414

812

-1,146

418

-6,729

7,266

-22

-9,518

751

63,116

-47,073

-3,477

-250

114

-42

-10

13,129

-868

1,091

10,981

12,072

12,574

5,478

-1,064

-46

-1,272

-962

757

-6,848

-4,209

2,150

103

-2,950

3,711

-5,889

-2,944

366

-3,650

-334

-7,724

5,394

-14,666

503

50,723

-35,463

-3,477

-201

-38

-103

12,009

-9

1,045

9,936

10,981

F.04

In millions of euros

Proﬁt before income taxes

Depreciation and amortization/impairments

Other non-cash expense and income

Gains (-)/losses (+) on disposals of assets

Change in operating assets and liabilities

Inventories

Trade receivables

Trade payables

Receivables from ﬁnancial services

Vehicles on operating leases

Other operating assets and liabilities

Dividends received from equity-method investments

Income taxes paid

Cash used for/provided by operating activities

Additions to property, plant and equipment

Additions to intangible assets

Proceeds from disposals of property, plant and equipment and intangible assets

Acquisition of Athlon Car Lease International B.V.

Investments in shareholdings

Proceeds from disposals of shareholdings

Acquisition of marketable debt securities

Proceeds from sales of marketable debt securities

Other

Cash used for investing activities

Change in short-term ﬁnancing liabilities

Additions to long-term ﬁnancing liabilities

Repayment of long-term ﬁnancing liabilities

Dividend paid to shareholders of Daimler AG

Dividends paid to non-controlling interests

Proceeds from the issue of share capital

Acquisition of treasury shares

Acquisition of non-controlling interests in subsidiaries

Cash provided by ﬁnancing activities

Eﬀect of foreign exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

1 See note 28 for other information on consolidated statements of cash ﬂows.

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

242 F | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated Statement of Changes in Equity1

F.05

In millions of euros

Share
capital

Capital
reserves

Retained
earnings2

Currency
translation

Balance at January 1, 2016

3,070

11,917

Net proﬁt

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

Total comprehensive income/loss

Dividends

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

Changes in ownership interests in subsidiaries

Other

–

Balance at December 31, 2016

3,070

–

-170

-3

11,744

Balance at January 1, 2017

3,070

11,744

Net proﬁt

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

Total comprehensive income/loss

Dividends

Changes in the consolidated group

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

Changes in ownership interests in subsidiaries

Other

–

-7

36,991

8,526

-1,994

748

7,280

-3,477

–

40,794

10,525

-106

-19

10,400

-3,477

-35

–

2,145

–

697

–

697

–

2,842

–

-2,596

–

-2,596

–

Financial
assets
available
for sale

1,121

–

-1,069

-1,068

–

-3

–

Balance at December 31, 2017

3,070

11,742

47,682

246

1 See Note 20 for other information on changes in equity.
2 Retained earnings also include items that will not be reclassiﬁed to the consolidated income statement.

Actuarial losses from pensions and similar obligations amount to €7,562 million net of tax in 2017 (2016: €7,437 million net of tax).

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

F | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 243

Other reserves
items that
may be reclassiﬁed
in proﬁt/loss

Share of
investments
accounted
for using the
equity method

Derivative
ﬁnancial
instruments

-1,679

–

1,638

-496

1,142

–

-537

–

2,487

-742

1,745

–

1,208

-4

–

-12

–

-12

–

-16

–

Equity
attributable to
shareholders
of Daimler AG

Treasury
share

Non-
controlling
interests

Total
equity

In millions of euros

–

-38

–

-42

–

53,561

8,526

-740

253

8,039

-3,477

–

-38

-170

-3

1,063

258

-4

255

-201

–

-4

54,624

Balance at January 1, 2016

8,784

Net proﬁt

-744

254

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

8,294

Total comprehensive income/loss

-3,678

Dividends

-38

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

-135

Changes in ownership interests in subsidiaries

-7

Other

57,950

1,183

59,133

Balance at December 31, 2016

57,950

10,525

-174

-764

9,587

-3,477

-35

–

-42

-7

1,183

59,133

Balance at January 1, 2017

339

-73

267

-250

–

10,864

Net proﬁt

-247

-763

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

9,854

Total comprehensive income/loss

-3,727

Dividends

-35

-42

Changes in the consolidated group

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

Changes in ownership interests in subsidiaries

Other

64,023

1,291

65,314

Balance at December 31, 2017

244 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

1. Signiﬁcant accounting policies

General information

The consolidated ﬁnancial statements of Daimler AG and
its subsidiaries (“Daimler” or “the Group”) have been prepared
in accordance with Section 315e of the German Commercial
Code (HGB) and comply with the International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU).

Daimler AG is a stock corporation organized under the laws
of the Federal Republic of Germany. The Company is entered
in the Commercial Register of the Stuttgart District Court
under No. HRB 19360 and its registered oﬃce is located at
Mercedesstraße 137, 70327 Stuttgart, Germany.

The consolidated ﬁnancial statements of Daimler AG are
presented in euros (€). Unless otherwise stated, all amounts
are stated in millions of euros. All ﬁgures shown are rounded
in accordance with standard business rounding principles.

The Board of Management authorized the consolidated
ﬁnancial statements for publication on February 9, 2018.

Basis of preparation

Applied IFRSs
The accounting policies applied in the consolidated ﬁnancial
statements comply with the IFRSs required to be applied in the
EU as of December 31, 2017.

IFRSs issued, EU endorsed and initially adopted
in the reporting period
IFRSs with mandatory initial application in the EU as of
January 1, 2017 had no signiﬁcant impact on the consolidated
ﬁnancial statements.

IFRSs issued, EU endorsed and not yet adopted
In May 2014, the IASB published IFRS 15 Revenue from
Contracts with Customers. It replaces existing guidance
for revenue recognition, including IAS 18 Revenue, IAS 11
Construction Contracts and IFRIC 13 Customer Loyalty Pro-
grammes. The new standard lays down a comprehensive
framework for determining in which amount and at which date
revenue is recognized. The new standard speciﬁes a uniform,
ﬁve-step model for revenue recognition, which is generally
to be applied to all contracts with customers. As a result
of IFRS 15, new items are introduced in the statement of ﬁnancial
position: “Contract assets” and “Contract liabilities.” These
items can arise through advance payment or advance delivery
at the contract level. In addition, disclosure requirements
are extended.

Application of IFRS 15 is mandatory at the latest for reporting
periods beginning on or a(cid:5)er January 1, 2018. Early adoption
is permitted. Daimler will apply IFRS 15 for the ﬁrst time for the
ﬁnancial year beginning on January 1, 2018. Daimler plans for
retrospective ﬁrst-time application so that the comparative
period is presented according to IFRS 15.

Eﬀects on Daimler may occur in particular with regard to the
date of recognition of sales incentives and also with regard to
the sale of vehicles for which the Group enters into a repurchase
obligation or grants a residual-value guarantee. The latter are
currently reported as operating leases. Under IFRS 15, such
vehicle sales can necessitate the reporting of a sale with the
right of return. Additionally, the accounting of contract manu-
facturing may lead to eﬀects. Under a contract manufacturing
agreement Daimler sells assets to a third-party manufacturer
from which Daimler buys back the manufactured products
a(cid:5)er completion of the commissioned work. If the sale of the
assets is not accompanied by the transfer of control to the
third-party manufacturer no revenue will be recognized under
IFRS 15.

The statement of ﬁnancial position will be aﬀected in particular
by the separate presentation of “Contract liabilities.”

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 245

Group-wide investigation of the eﬀects on the consolidated
ﬁnancial statements of adopting IFRS 15 has been completed.
The application of IFRS 15 is not expected to have any major
impact on the Group’s proﬁtability, liquidity and capital resources
or ﬁnancial position. The preliminary opening balance for
January 1, 2017 will show an increase in equity of approximately
€0.1 billion compared to the ﬁgure disclosed as of December 31,
2016. The option that contracts concluded before January 1, 2017
need not be reassessed under IFRS 15 has been made use of.
However, the determination of the eﬀects for the comparative
period 2017 has not yet been ﬁnalized at the time of publication
of the consolidated ﬁnancial statements.

The IASB published Amendments to IFRS 15 in April 2016.
These changes allow for transitional arrangements for modiﬁed
and fulﬁlled contracts, and clarify the identiﬁcation of
performance obligations, principal-agent relationships, and
licenses. The application of these amendments is also not
expected to have any major impact on the Group’s proﬁtability,
liquidity and capital resources or ﬁnancial position.

In July 2014, the IASB published IFRS 9 Financial Instruments,
which replaces IAS 39. IFRS 9 includes a uniform model for
classiﬁcation and measurement methods (including impairments)
for ﬁnancial instruments. It also includes regulations for
general hedge accounting. IFRS 9 requires additional notes
disclosure, resulting from the amendment to IFRS 7 Financial
Instruments – Disclosures.

Eﬀects result above all from the fact that the new regulations for
recognizing impairments also include expected future losses,
whereas IAS 39 only requires the recognition of impairments that
have already occurred. Especially receivables from ﬁnancial
services in the Daimler Financial Services segment are aﬀected.

All equity instruments are to be measured at fair value, either
through proﬁt or loss or at fair value through other comprehensive
income. If changes in carrying amounts are recognized in
other comprehensive income, they are no longer to be reclassiﬁed
to proﬁt or loss when these instruments are sold. In addition,
some debt instruments will be measured at fair value through
proﬁt or loss due to the new classiﬁcation requirements of
IFRS 9. Possible eﬀects can be in higher ﬂuctuations in carrying
amounts and ﬂuctuations in the income statement and/or
the statement of other comprehensive income.

Additional eﬀects will result from the possibility to exclude
certain components of derivatives from designation to a hedge
relationship and to defer the changes in these components’
fair value in other comprehensive income. This change applies
for example to the fair value of options whose changes in
carrying amounts are regularly remeasured through proﬁt and
loss during the term of the options according to IAS 39. The
newly introduced possibility to designate risk components of
non-ﬁnancial hedged items will facilitate hedge accounting
for commodities.

Application of IFRS 9 is mandatory at the latest for reporting
periods beginning on or a(cid:5)er January 1, 2018. Early adoption is
permitted. Daimler will apply IFRS 9 for the ﬁrst time for the
ﬁnancial year beginning on January 1, 2018. In compliance with
the transitional regulations, Daimler will not adjust the
prior-year ﬁgures and will present the accumulated transitional
eﬀects in retained earnings. One exception to this is the

recognition through other comprehensive income of certain
undesignated components of derivatives, which is to be
applied retrospectively to the comparative ﬁgures. Examination
of the eﬀects on the consolidated ﬁnancial statements of
applying IFRS 9 with regard to classiﬁcation and measurement,
impairment and hedge accounting indicates that no material
impact on the Group’s proﬁtability, liquidity and capital resources
or ﬁnancial position is to be expected from the transition
to IFRS 9.

In January 2016, the IASB published IFRS 16 Leases, replacing
IAS 17 and IFRIC 4 and other interpretations. IFRS 16 abolishes
for lessees the previous classiﬁcation of leasing agreements
as either operating or ﬁnance leases. Instead, IFRS 16 intro-
duces a single lessee accounting model, requiring lessees to
recognize assets for the right to use as well as leasing
liabilities for leases with a term of more than twelve months.
This means that leases that were previously not reported
in the statement of ﬁnancial position will have to be reported
in the future – very similar to the current accounting of
ﬁnance leases. Lease accounting for lessors has been taken
over almost identically from IAS 17 into IFRS 16.

IFRS 16 is to be applied to annual reporting periods beginning
on or a(cid:5)er January 1, 2019; early adoption is permitted if
IFRS 15 is already applied.

The eﬀects on the consolidated ﬁnancial statements of the
application of IFRS 16 are currently being examined. Daimler will
probably apply IFRS 16 for the ﬁrst time for the ﬁnancial year
beginning on January 1, 2019. Daimler currently plans, in com-
pliance with the transition regulations, not to adjust the prior-
year ﬁgures and to present the accumulated transitional eﬀects
in retained earnings.

IFRSs issued but neither EU endorsed nor yet adopted
In May 2017, the IASB issued IFRS 17 Insurance Contracts.
IFRS 17 replaces the currently applicable IFRS 4. It establishes
more transparency and comparability with regard to the
recognition, measurement, presentation and disclosure of
insurance contracts with the insurer. The application of
IFRS 17 is mandatory for reporting periods beginning on or
a(cid:5)er January 1, 2021. Early adoption is permitted. Daimler
currently does not expect any material impacts on the Group’s
proﬁtability, liquidity and capital resources or ﬁnancial
position due to the application of IFRS 17. Early adoption is not
currently planned.

In addition, further standards and interpretations have been
approved which are not expected to have a material impact on
the consolidated ﬁnancial statements.

Presentation
Presentation in the consolidated statement of ﬁnancial position
diﬀerentiates between current and non-current assets and
liabilities. Assets and liabilities are classiﬁed as current if they
are expected to be realized or settled within one year or
within a longer and normal operating cycle. Deferred tax assets
and liabilities as well as assets and provisions for pensions
and similar obligations are generally presented as non-current
items.

The consolidated statement of income is presented using the
cost-of-sales method.

246 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Measurement
The consolidated ﬁnancial statements have been prepared on
the historical-cost basis with the exception of certain items
such as available-for-sale ﬁnancial assets, derivative ﬁnancial
instruments, hedged items, and pensions and similar obliga-
tions. The measurement models applied to those exceptions
are described below.

Principles of consolidation
The consolidated ﬁnancial statements include the ﬁnancial
statements of Daimler AG and the ﬁnancial statements of all
subsidiaries, including structured entities which are directly
or indirectly controlled by Daimler AG. Control exists if the parent
company has the power of decision over a subsidiary based
on voting rights or other rights, if it participates in positive and
negative variable returns from a subsidiary, and if it can aﬀect
these returns by its power of decision.

Structured entities which are controlled also have to be consoli-
dated. Accordingly, the assets and liabilities remain in the
consolidated statement of ﬁnancial position. Structured entities
are entities which have been designed so that voting or similar
rights are not relevant in deciding who controls the entity. This
is the case for example if voting rights relate to administrative
tasks only and the relevant activities are directed by means of
contractual arrangements.

The ﬁnancial statements of consolidated subsidiaries which are
included in the consolidated ﬁnancial statements are generally
prepared as of the reporting date of the consolidated ﬁnancial
statements. The ﬁnancial statements of Daimler AG and its
subsidiaries included in the consolidated ﬁnancial statements
are prepared using uniform recognition and measurement
principles. All intercompany assets and liabilities, equity, income
and expenses as well as cash ﬂows from transactions
between consolidated entities are entirely eliminated in the
course of the consolidation process.

Business combinations are accounted for using the purchase
method.

Changes in equity interests in Group subsidiaries that reduce
or increase Daimler’s percentage ownership without loss of
control are accounted for as an equity transaction between
owners.

Investments in associated companies, joint ventures or
joint operations
An associated company is an entity over which the Group has
signiﬁcant inﬂuence. Signiﬁcant inﬂuence is the power to
participate in the ﬁnancial and operating policy decisions of the
investee. Associated companies are generally accounted for
using the equity method.

For entities over which Daimler has joint control together with
a partner (joint arrangements), it is necessary to diﬀerentiate
whether a joint operation or a joint venture exists. In a joint ven-
ture, the parties that have joint control of the arrangement
have rights to the net assets of the arrangement. For joint ven-
tures, the equity method has to be applied. A joint operation
exists when the jointly controlling parties have direct rights to
the assets and obligations for the liabilities. In this case,
the prorated assets and liabilities and the prorated income and
expenses are generally to be recognized (proportionate
consolidation). Joint operations that have no signiﬁcant impact
on the consolidated ﬁnancial statements are generally
accounted for using the equity method.

In the special event that the ﬁnancial statements of associated
companies, joint ventures or joint operations should not be
available in good time, the Group’s proportionate share of the
results of operations is included in Daimler’s consolidated
ﬁnancial statements with a one to three-month time lag.
Signiﬁcant events or transactions are accounted for without
a time lag, however (see also Note 13).

Subsidiaries measured at amortized cost
Subsidiaries, associated companies, joint ventures and joint
operations whose business is non-active or of low volume and
that individually and in sum are not material for the Group
and the fair presentation of ﬁnancial position, liquidity and
capital resources, and proﬁtability are generally measured
at amortized cost in the consolidated ﬁnancial statements.

Foreign currency translation
Transactions in foreign currency are translated at the relevant
foreign exchange rates prevailing at the transaction date.
In subsequent periods, assets and liabilities denominated in
foreign currency are translated using period-end exchange
rates; gains and losses from this measurement are recognized
in proﬁt and loss (except for gains and losses resulting from
the translation of available-for-sale equity instruments, which
are recognized in other comprehensive income/loss).

Assets and liabilities of foreign companies for which the functional
currency is not the euro are translated into euros using
period-end exchange rates. The translation adjustments are
presented in other comprehensive income/loss. The
components of equity are translated using historical rates.
The statements of income and cash ﬂows are translated
into euros using average exchange rates during the respective
periods.

The exchange rates of the US dollar, the British pound, the
Japanese yen, the Chinese renminbi and the Russian ruble –
the most signiﬁcant foreign currencies for Daimler – were as
shown in table (cid:202) F.06.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 247

Accounting policies

Revenue recognition
Revenue from sales of vehicles, service parts and other related
products is recognized when the risks and rewards of owner-
ship of the goods are transferred to the customer, the amount
of revenue can be estimated reliably and collectability is rea-
sonably assured. Revenue is recognized net of sales reductions
such as cash discounts and sales incentives granted.

Daimler uses a variety of sales promotion programs dependent
on various market conditions in individual countries as well
as the respective product life cycles and product-related factors
(such as amounts of discounts oﬀered by competitors, excess
industry production capacity, the intensity of market competition
and consumer demand for the products). These programs
comprise cash oﬀers to dealers and customers as well as lease
subsidies or loans at reduced interest rates.

Revenue also includes revenue from the rental and leasing
business as well as interest from the ﬁnancial services business
at Daimler Financial Services. The revenue from the rental
and leasing business results from operating leases and is recog-
nized on a straight-line basis over the periods of the contracts.
In addition, sales revenue is generated at the end of lease
contracts from the subsequent sale of the vehicles. Revenue
from receivables from ﬁnancial services is recognized using
the eﬀective interest method. When loans are issued below
market rates, related receivables are recognized at present
value and revenue is reduced for the interest incentive granted.
If subsidized leasing fees are agreed upon in connection with
ﬁnance leases, revenue from the sale of a vehicle is reduced by
the amount of the interest incentive granted.

The Group oﬀers extended, separately priced extended
warranties for certain products. Revenue from these contracts
is deferred and recognized over the contract period in pro-
portion to the costs expected to be incurred based on historical
information. In circumstances in which there is insuﬃcient
historical information, income from extended warranty contracts
is recognized on a straight-line basis. A loss on these
contracts is recognized in the current period if the sum of the
expected costs for services under the contract exceeds
unearned revenue.

For multiple-element arrangements, such as when vehicles are
sold with free or reduced-in-price maintenance programs or
with free online services, the Group allocates revenue to the
various elements based on their estimated fair values.

Research and non-capitalized development costs
Expenditure for research and development that does not meet
the conditions for capitalization according to IAS 38 Intangible
Assets is expensed as incurred.

Borrowing costs
Borrowing costs are expensed as incurred unless they
are directly attributable to the acquisition, construction
or production of a qualifying asset and are therefore
part of the cost of that asset. Depreciation of the capitalized
borrowing costs is presented within cost of sales.

Government grants
Government grants related to assets are deducted from
the carrying amount of the asset and are recognized in
earnings over the life of a depreciable asset as a reduced
depreciation expense. Government grants which compensate
the Group for expenses are recognized as other operating
income in the same period as the expenses themselves.

F.06
Exchange rates

Average exchange
rate on December 31

Average exchange rates
during the respective period

USD

1 € =

GBP

1 € =

JPY

1 € =

CNY

1 € =

2017

RUB

1 € =

USD

1 € =

GBP

1 € =

JPY

1 € =

CNY

1 € =

2016

RUB

1 € =

1.1993

0.8872 135.0100

7.8044

69.3920

1.0541

0.8562

123.4000

7.3202

64.3000

First quarter

Second quarter

Third quarter

Fourth quarter

1.0648

1.1021

1.1746

1.1776

0.8601 121.0100

7.3353

62.5218

0.8611 122.5800

7.5597

63.1033

0.8978 130.3500

7.8340

69.2851

0.8875 132.9100

7.7899

68.8150

1.1020

1.1292

1.1166

1.0789

0.7704

127.0000

7.2101

82.4506

0.7868

121.9500

7.3788

74.3348

0.8497

114.2900

7.4431

72.1154

0.8691

117.9200

7.3691

67.9975

248 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Proﬁt/loss from equity-method investments
This item includes all income and expenses in connection with
investments accounted for using the equity method. In addition
to the prorated proﬁts and losses from ﬁnancial investments,
it also includes proﬁts and losses resulting from the sale of equity
interests or the remeasurement of equity interests following
a loss of signiﬁcant inﬂuence. Daimler’s share of dilution gains
and losses occurring if the Group or other owners do not
participate in capital increases of companies in which shares
are held and accounted for using the equity method are
also included in proﬁt/loss from equity-method investments.
This item also includes losses on the impairment of an
investment’s carrying amount and/or gains on the reversal
of such impairments.

Other ﬁnancial income/expense, net
Other ﬁnancial income/expense, net includes all income
and expense from ﬁnancial transactions which are not included
in interest income and/or interest expense, and for Daimler
Financial Services are not included in revenue and/or cost of
sales. For example, expense from the compounding of interest
on provisions for other risks is recorded in this line item.

Furthermore, income and expenses from equity interests are
included in other ﬁnancial income/expense, net, if such
income or expenses are not presented under equity-method
investments.

Interest income and interest expense
Interest income and interest expense include interest income
from investments in securities, cash and cash equivalents as
well as interest expense from liabilities. Furthermore, interest
and changes in fair values related to interest rate hedging
activities as well as income and expense resulting from the
allocation of premiums and discounts are included. The inter-
est components of deﬁned beneﬁt pension obligations and
other similar obligations as well as of the plan assets available
to cover these obligations are also presented in this line item.

For the segment Daimler Financial Services interest income
and expense and gains or losses from derivative ﬁnancial
instruments from ﬁnancial services business are disclosed
under revenue and cost of sales respectively.

Income taxes
Income taxes are comprised of current income taxes and
deferred taxes.

Current income taxes are calculated based on the respective
local taxable income and local tax rules for the period.
In addition, current income taxes presented for the period
include adjustments for uncertain tax payments or tax
refunds for periods not yet ﬁnally assessed, including interest
expense and penalties on the underpayment of taxes.
For the case that amounts declared as expenses in the tax
returns might not be recognized (uncertain tax positions),
a provision for income taxes is recognized. The amount is based
on the best possible assessment of the expected tax payment.
Tax refund claims from uncertain tax positions are recognized
when it is predominantly likely and thus reasonably expected
that they can be realized. Only in the case of tax loss carry-
forwards or unused tax credits, no provision for taxes or tax claim
is recognized for these uncertain tax positions. Instead, the
deferred tax assets for the unused tax loss carryforwards or tax
credits are to be adjusted.

Changes in deferred tax assets and liabilities are generally
recognized through proﬁt and loss in deferred taxes in the
consolidated statement of income, except for changes recognized
in other comprehensive income/loss or directly in equity.

Deferred tax assets or liabilities are calculated on the basis
of temporary diﬀerences between the tax basis and the
ﬁnancial reporting of assets and liabilities including diﬀerences
from consolidation, on unused tax loss carryforwards and
unused tax credits. Measurement is based on the tax rates
expected to be eﬀective in the period in which an asset is
recognized or a liability is settled. For this purpose, the tax
rates and tax rules are used which have been enacted at the
reporting date or are soon to be enacted. Daimler recognizes
a valuation allowance for deferred tax assets when it is unlikely
that a corresponding amount of future taxable proﬁt will be
available against which the deductible temporary diﬀerences,
tax loss carryforwards and tax credits can be utilized. Deferred
tax liabilities for taxable temporary diﬀerences in connection
with investments in subsidiaries, branches, associates and
interests in joint arrangements are not recognized if the Group
is able to control the timing of the reversal of the temporary
diﬀerence and it is probable that the temporary diﬀerence will
not reverse in the foreseeable future.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 249

Earnings per share
Basic earnings per share are calculated by dividing proﬁt
attributable to shareholders of Daimler AG by the weighted
average number of shares outstanding. As nothing occurred
in the years 2017 and 2016 that resulted in any dilution, diluted
earnings per share were the same as basic earnings per share
in those years.

Intangible assets
Intangible assets are measured at acquisition or manufacturing
cost less accumulated amortization. If necessary, accumulated
impairment losses are recognized.

Intangible assets with indeﬁnite useful lives are reviewed annually
to determine whether indeﬁnite-life assessment continues to
be appropriate. If not, the change in the useful-life assessment
from indeﬁnite to ﬁnite is made on a prospective basis.

Intangible assets other than development costs with ﬁnite useful
lives are generally amortized on a straight-line basis over
their useful lives (three to ten years). The amortization period
for intangible assets with ﬁnite useful lives is reviewed at
least at each year-end. Changes in expected useful lives are
treated as changes in accounting estimates. The amortization
expense on intangible assets with ﬁnite useful lives is recorded
in functional costs.

Development costs for vehicles and components are recognized
if the conditions for capitalization according to IAS 38 are
met. Subsequent to initial recognition, the asset is carried at
cost less accumulated amortization and accumulated
impairment losses. Capitalized development costs include all
direct costs and allocable overheads and are amortized
on a straight-line basis over the expected product life cycle
(a maximum of ten years). Amortization of capitalized
development costs is an element of manufacturing costs and
is allocated to those vehicles and components by which
they were generated and is included in cost of sales when the
inventory (vehicles) is sold.

Goodwill
For acquisitions, goodwill represents the excess of the con-
sideration transferred over the fair values assigned to the iden-
tiﬁable assets proportionally acquired and liabilities assumed.
Goodwill is accounted for at the subsidiaries in the functional
currency of those subsidiaries.

In connection with obtaining control, non-controlling interest
in the acquiree is principally recognized at the proportionate
share of the acquiree’s identiﬁable assets, which are measured
at fair value.

Property, plant and equipment
Property, plant and equipment are measured at acquisition
or manufacturing costs less accumulated depreciation.
If necessary, accumulated impairment losses are recognized.

The costs of internally produced equipment and facilities
include all direct costs and allocable overheads. Acquisition
or manufacturing costs include the estimated costs, if any,
of dismantling and removing the item and restoring the site.

Property, plant and equipment are depreciated over the useful
lives as shown in table (cid:202) F.07.

Leasing
Leasing includes all arrangements that transfer the right to use
a speciﬁed asset for a stated period of time in return for a
payment, even if the right to use such asset is not explicitly
described in an arrangement. The Group is a lessee of
property, plant and equipment and a lessor of its products.
It is evaluated on the basis of the risks and rewards of a
leased asset whether the ownership of the leased asset is
attributed to the lessee (ﬁnance lease) or to the lessor
(operating lease).

Daimler as lessee
In the case of an operating lease, the lease payments or
rental payments are expensed on a straight-line basis in the
consolidated statement of income.

Assets carried as ﬁnance leases are measured at the beginning
of the (lease) contract at the lower of the present value of the
minimum lease payments and the fair value of the leased object,
and in the following periods less accumulated depreciation
and other accumulated impairment losses. Depreciation is on
a straight-line basis; residual values of the assets are given
due consideration. Payment obligations resulting from future
lease payments are discounted and disclosed under ﬁnancing
liabilities.

F.07

Useful lives of property, plant and equipment

Buildings and site improvements

Technical equipment and machinery

Other equipment, factory and oﬃce equipment

10 to 50 years

6 to 25 years

3 to 30 years

250 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Daimler reviews on each reporting date whether there is any
objective indication of impairments or impairment reversals
of equity-method investments. If such indications exist, the Group
determines the impairment loss or reversal to be recognized.
If the carrying amount exceeds the recoverable amount of an
investment, the carrying amount is written down to the
recoverable amount. The recoverable amount is the greater of
fair value less costs to sell and value in use. An impairment
reversal is carried out if there is objective evidence for an impair-
ment reversal. If such an assessment is made, the recoverable
amount is remeasured. The amount of an impairment reversal
is limited to the amount by which an asset has been impaired.

Gains or losses (to be eliminated) from transactions with com-
panies accounted for using the equity method are recognized
through proﬁt and loss with corresponding adjustments of the
investments’ carrying amounts.

Impairment of non-current non-ﬁnancial assets
Daimler assesses at each reporting date whether there is an
indication that an asset may be impaired or whether there is
an indication that a previously recognized impairment loss may
be reversed. If such indication exists, Daimler estimates the
recoverable amount of the asset. The recoverable amount is
determined for each individual asset unless the asset gener-
ates cash inﬂows that are not largely independent of those from
other assets or groups of assets (cash-generating units). In
addition, goodwill and other intangible assets with indeﬁnite
useful lives are tested annually for impairment; this takes
place at the level of the cash-generating units. If the carrying
amount of an asset or of a cash-generating unit exceeds the
recoverable amount, an impairment loss is recognized for the
diﬀerence.

The recoverable amount is the higher of fair value less costs of
disposal and value in use. For cash-generating units, Daimler
in a ﬁrst step determines the respective recoverable amount
as value in use and compares it with the respective carrying
amount (including goodwill). The cash-generating units are
generally deﬁned as the reporting segments. At Daimler
Financial Services, impairment tests are carried out below the
segment level. There is a diﬀerentiation between the two
cash-generating units Daimler Financial Services Classic
(typical ﬁnancial services business) and Daimler Financial
Services Mobility (innovative mobility services).

Sale and lease back
The same accounting principles apply to assets if Daimler sells
such assets and leases them back from the buyer.

Daimler as lessor
Operating leases relate to vehicles that the Group produces
itself and leases to third parties or to vehicles that the Group
sells and grants a buy-back or residual-value guarantee.
These vehicles are capitalized at (depreciated) cost of production
under leased equipment in the vehicle segments and are
depreciated over the contract term on a straight-line basis with
consideration of the expected residual values. Changes in
the expected residual values lead either to prospective adjust-
ments of the scheduled depreciation or to an impairment
loss if necessary.

Operating leases also relate to vehicles, primarily Group
products that Daimler Financial Services acquires from
non-Group dealers or other third parties and leases to end
customers. These vehicles are presented at (amortized)
cost of acquisition under leased equipment in the Daimler
Financial Services segment. If these vehicles are Group
products and are subsidized, the subsidies are deducted
from the cost of acquisition. A(cid:5)er revenue is received
from the sale to independent dealers, these Group products
generate revenue from lease payments and subsequent
resale on the basis of the separate leasing contracts. The
revenue received from the sale of Group products to the
dealers is estimated by the Group as being of the magnitude
of the respective addition to leased equipment at Daimler
Financial Services. In 2017, additions to leased equipment from
these vehicles at Daimler Financial Services amounted to
approximately €13 billion (2016: approximately €13 billion).

In the case of ﬁnance leases, the Group presents the receivables
under receivables from ﬁnancial services in an amount
corresponding to the net investment of the lease agreements.
The net investment of a lease agreement is the gross invest-
ment (future minimum lease payments and non-guaranteed
residual value) discounted at the rate upon which the lease
agreement is based.

Equity-method investments
On the date of acquisition, a positive diﬀerence between cost
of acquisition and Daimler’s share of the fair values of the
identiﬁable assets and liabilities of the associated company
or joint venture is determined and recognized as investor
level goodwill. The goodwill is included in the carrying amount
of the equity-method investment. With step acquisition of
an equity interest by which signiﬁcant inﬂuence or joint control
is achieved for the ﬁrst time, the investment is generally
accounted for on the basis of IFRS 3 Business Combinations.
This means that the previously held equity interest is
remeasured on the date of acquisition; any resulting gain or
loss is recognized through proﬁt and loss. If an equity
interest in an existing associated company is increased without
change in signiﬁcant inﬂuence, goodwill is determined only
for the additionally acquired interest; the previous investment
is not remeasured at fair value.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 251

Value in use is measured by discounting expected future cash
ﬂows from the continuing use of the cash-generating units
using a risk-adjusted interest rate. Future cash ﬂows are deter-
mined on the basis of the long-term planning, which is
approved by the Management and which is valid at the date
when the impairment test is conducted. This planning is
based on expectations regarding future market share, the
general development of respective markets as well as the
products’ proﬁtability. The multi-year planning comprises a
planning horizon until 2025 and therefore mainly covers
the product life cycles of our automotive business. The rounded
risk-adjusted interest rates used to discount cash ﬂows, which
are calculated for each cash-generating unit, are unchanged
from the previous year at 8% a(cid:5)er taxes for the cash-gener-
ating units of the automotive business. For the cash-generating
unit Daimler Financial Services Classic, a risk-adjusted interest
rate of 9% a(cid:5)er taxes is applied (unchanged from the previous
year); for Daimler Financial Services Mobility, the risk-adjusted
interest rate is 15% a(cid:5)er taxes (2016: 14%). Whereas the discount
rate for the cash-generating unit Daimler Financial Services
Classic represents the cost of equity, the risk-adjusted interest
rate for the other cash-generating units is based on the
weighted average cost of capital (WACC). These are calculated
based on the capital asset pricing model (CAPM) taking into
account current market expectations. In calculating the risk-
adjusted interest rate for impairment test purposes, speciﬁc
peer group information is used for beta factors, capital-structure
data and cost of debt. Periods not covered by the forecast are
taken into account by recognizing a residual value (terminal value),
which generally does not consider any growth rates. In addi-
tion, several sensitivity analyses are conducted. These show
that generally even in the case of more unfavorable premises
for main inﬂuencing factors with respect to the original planning,
no need for impairment exists. If value in use is lower than the
carrying amount, fair value less costs of disposal is additionally
calculated to determine the recoverable amount.

An assessment for assets other than goodwill is made at each
reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist
or may be reversed. If this is the case, Daimler records a
partial or entire reversal of the impairment; the carrying amount
is thereby increased to the recoverable amount. However,
the increased carrying amount may not exceed the carrying
amount that would have been determined (net of depreciation)
had no impairment loss been recognized in prior years.

Non-current assets held for sale and disposal groups
The Group classiﬁes non-current assets or disposal groups as
held for sale if the conditions of IFRS 5 Non-current assets
held for sale and discontinued operations are fulﬁlled. In this
case, the assets or disposal groups are no longer depreciated
but measured at the lower of carrying amount and fair value
less costs to sell. If fair value less costs to sell subsequently
increases, any impairment loss previously recognized is reversed.
This reversal is restricted to the impairment loss previously
recognized for the assets or disposal group concerned. The Group
generally discloses these assets or disposal groups separately
in the consolidated statement of ﬁnancial position.

Inventories
Inventories are measured at the lower of acquisition or manu-
facturing cost and net realizable value. The net realizable
value is the estimated selling price less estimated costs of
completion and estimated costs to sell. The acquisition or
manufacturing costs of inventories are generally based on the
speciﬁc identiﬁcation method and include costs incurred in
acquiring the inventories and bringing them to their existing
location and condition. Costs for large numbers of inventories
that are interchangeable are allocated under the average cost
formula. In the case of manufactured inventories and work in
progress, acquisition or manufacturing cost also includes
production overheads based on normal capacity.

Financial instruments
A ﬁnancial instrument is any contract that gives rise to a ﬁnancial
asset of one entity and a ﬁnancial liability or equity instrument
of another entity. Financial instruments in the form of ﬁnancial
assets and ﬁnancial liabilities are generally presented sepa-
rately. Financial instruments are recognized as soon as Daimler
becomes a party to the contractual provisions of the ﬁnancial
instrument. In the case of purchases or sales of ﬁnancial assets
through the regular market, Daimler uses the transaction date
as the date of initial recognition or derecognition.

Upon initial recognition, ﬁnancial instruments are measured
at fair value. For the purpose of subsequent measurement,
ﬁnancial instruments are allocated to one of the categories
mentioned in IAS 39 Financial Instruments: Recognition
and Measurement. Transaction costs directly attributable to
acquisition or issuance are considered by determining the
carrying amount if the ﬁnancial instruments are not measured
at fair value through proﬁt or loss.

252 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Financial assets
Financial assets primarily comprise receivables from ﬁnancial
services, trade receivables, receivables from banks, cash on
hand, derivative ﬁnancial assets and marketable securities and
ﬁnancial investments.

Financial assets at fair value through proﬁt or loss. Financial
assets at fair value through proﬁt or loss include those ﬁnan-
cial assets designated as held for trading.

Derivatives, including embedded derivatives separated from
the host contract, which are not classiﬁed as hedging instru-
ments in hedge accounting, as well as shares and marketable
debt securities acquired for the purpose of selling in the near
term are classiﬁed as held for trading. Gains or losses on
these ﬁnancial assets are recognized in proﬁt or loss.

Loans and receivables. Loans and receivables are non-derivative
ﬁnancial assets with ﬁxed or determinable payments that
are not quoted in an active market, such as receivables from
ﬁnancial services or trade receivables. A(cid:5)er initial recognition,
loans and receivables are subsequently carried at amortized
cost using the eﬀective interest method less any impairment
losses. Gains and losses are recognized in the statement of
income when the loans and receivables are impaired or derec-
ognized. Interest eﬀects on the application of the eﬀective
interest method are also recognized in proﬁt or loss.

Available-for-sale ﬁnancial assets. Available-for-sale ﬁnancial
assets are non-derivative ﬁnancial assets that are designated
as available for sale or that are not classiﬁed in any of the
preceding categories. This category includes equity instruments
and debt instruments such as government bonds, corporate
bonds and commercial paper.

A(cid:5)er initial measurement, available-for-sale ﬁnancial assets are
measured at fair value, with unrealized gains or losses being
recognized in other comprehensive income/loss. If objective
evidence of impairment exists or if changes occur in the fair
value of a debt instrument resulting from currency ﬂuctuations,
these changes are recognized in proﬁt or loss. Upon disposal
of ﬁnancial assets, the accumulated gains and losses recognized
in other comprehensive income/loss resulting from measure-
ment at fair value are recognized in proﬁt or loss. If a reliable
estimate cannot be made of the fair value of an unquoted
equity instrument, such as an investment in a German limited
liability company, this instrument is measured at cost (less
any impairment losses). Interest earned on available-for-sale
ﬁnancial assets is generally reported as interest income using
the eﬀective interest method. Dividends are recognized in proﬁt
or loss when the right of payment has been established.

Cash and cash equivalents. Cash and cash equivalents consist
primarily of cash on hand, checks and demand deposits at
banks, as well as debt instruments and certiﬁcates of deposits
with a remaining term when acquired of up to three months,
which are not subject to any material value ﬂuctuations. Cash
and cash equivalents correspond with the classiﬁcation in
the consolidated statement of cash ﬂows.

Impairment of ﬁnancial assets
At each reporting date, the carrying amounts of ﬁnancial
assets other than those to be measured at fair value through
proﬁt or loss are assessed to determine whether there is
objective evidence of impairment. Objective evidence may
exist for example if a debtor is facing serious ﬁnancial
diﬃculties or there is a substantial change in the debtor’s
technological, economic, legal or market environment. For
quoted equity instruments, a signiﬁcant or prolonged decline
in fair value is additional objective evidence of possible
impairment. Daimler has deﬁned criteria for the signiﬁcance
and duration of a decline in fair value. A decline in fair value
is deemed signiﬁcant if it exceeds 20% of the carrying amount
of the investment; a decline is deemed prolonged if the
carrying amount exceeds the fair value for a period longer
than nine months.

Loans and receivables. If there are objective indications that
the value of a loan or receivable has to be impaired, the
amount of the impairment loss is measured as the diﬀerence
between the carrying amount of the asset and the present
value of expected future cash ﬂows (excluding expected future
credit losses that have not yet been incurred), discounted at
the original eﬀective interest rate of the ﬁnancial asset. The
amount of the impairment loss is recognized in proﬁt or loss.

If, in a subsequent reporting period, the amount of the impairment
loss decreases and the decrease can be attributed objectively
to an event occurring a(cid:5)er the impairment was recognized, the
impairment loss recorded in prior periods is reversed and
recognized in proﬁt or loss.

In most cases, an impairment loss on loans and receivables
(e.g. receivables from ﬁnancial services including ﬁnance lease
receivables and trade receivables) is recorded using allowance
accounts. The decision to account for credit risks using an
allowance account or by directly reducing the receivable depends
on the estimated probability of the loss of receivables.

Available-for-sale ﬁnancial assets. If an available-for-sale ﬁnancial
asset is impaired, the diﬀerence between its cost (net of any
principal payment and amortization) and its current fair value
(less any impairment loss previously recognized in the
statement of income) is reclassiﬁed from other comprehensive
income/loss to the statement of income. Reversals with
respect to equity instruments classiﬁed as available for sale
are recognized in other comprehensive income/loss.
Reversals of impairment losses on debt instruments are recog-
nized through the statement of income if the increase in fair
value of the instrument can be objectively attributed to an event
occurring a(cid:5)er the impairment losses were recognized in the
consolidated statement of income.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 253

Oﬀsetting ﬁnancial instruments
Financial assets and ﬁnancial liabilities are oﬀset and the net
amount is presented in the consolidated statement of ﬁnancial
position provided that an enforceable right currently exists
to oﬀset the amounts involved, and there is an intention either
to carry out the oﬀsetting on a net basis or to settle a liability
when the related asset is sold.

Financial liabilities
Financial liabilities primarily include trade payables,
liabilities to banks, bonds, derivative ﬁnancial liabilities
and other liabilities.

Financial liabilities measured at amortized cost. A(cid:5)er initial
recognition, ﬁnancial liabilities are subsequently measured
at amortized cost using the eﬀective interest method.

Financial liabilities at fair value through proﬁt or loss. Financial
liabilities at fair value through proﬁt or loss include ﬁnancial
liabilities held for trading. Derivatives (including embedded
derivatives separated from the host contract) which are not
used as hedging instruments in hedge accounting, are classiﬁed
as held for trading. Gains or losses on liabilities held for
trading are recognized in proﬁt or loss.

Derivative ﬁnancial instruments and hedge accounting
The Group uses derivative ﬁnancial instruments exclusively for
hedging ﬁnancial risks that arise from its commercial business
or reﬁnancing activities. These are mainly interest rate risks,
currency risks and commodity price risks.

Embedded derivatives are separated from the host contract,
which is not measured at fair value through proﬁt or loss,
if an analysis shows that the economic characteristics and risks
of embedded derivatives are not closely related to those of
the host contract.

Derivative ﬁnancial instruments are measured at fair value upon
initial recognition and at each subsequent reporting date.
The fair value of listed derivatives is equal to their positive or
negative market value. If a market value is not available, fair
value is calculated using standard ﬁnancial valuation models
such as discounted cash ﬂow or option pricing models.
Derivatives are presented as assets if their fair value is positive
and as liabilities if the fair value is negative.

If the requirements for hedge accounting set out in IAS 39 are
met, Daimler designates and documents the hedge relationship
from the date a derivative contract is entered into as a fair
value hedge, a cash ﬂow hedge or a hedge of a net investment
in a foreign business operation. In a fair value hedge, the fair
value of a recognized asset or liability or an unrecognized ﬁrm
commitment is hedged. In a cash ﬂow hedge, the variability
of cash ﬂows to be received or paid from expected transactions
related to a recognized asset or liability or a highly probable
forecast transaction are hedged. The documentation of the
hedging relationship includes the objectives and strategy of
risk management, the type of hedging relationship, the nature
of the risk being hedged, the identiﬁcation of the hedging
instrument and the hedged item, as well as a description of
the method used to assess hedge eﬀectiveness. Hedging
transactions are expected to be highly eﬀective in achieving
oﬀsetting risks from changes in fair value or cash ﬂows and
are regularly assessed to determine that they have actually been
highly eﬀective throughout the ﬁnancial reporting periods for
which they are designated.

Changes in the fair value of derivative ﬁnancial instruments are
recognized periodically in either proﬁt or loss or other com-
prehensive income/loss, depending on whether the derivative
is designated as a hedge of changes in fair value or cash ﬂows.
For fair value hedges, changes in the fair value of the hedged item
and the derivative are recognized in proﬁt or loss. For cash
ﬂow hedges, fair value changes in the eﬀective portion of the
hedging instrument a(cid:5)er taxes are recognized in other
comprehensive income/loss. Amounts recognized in other
comprehensive income/loss are reclassiﬁed to the state-
ment of income when the hedged underlying transaction aﬀects
the statement of income. The ineﬀective portions of fair value
changes are recognized in proﬁt or loss.

If derivative ﬁnancial instruments do not or no longer qualify
for hedge accounting because the qualifying criteria for hedge
accounting are not or are no longer met, the derivative
ﬁnancial instruments are classiﬁed as held for trading and
are measured at fair value through proﬁt or loss.

254 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Pensions and similar obligations
The measurement of deﬁned beneﬁt plans for pensions and
other post-employment beneﬁt obligations (medical care)
in accordance with IAS 19 Employee Beneﬁts is based on the
projected unit credit method. Plan assets invested to cover
deﬁned beneﬁt pension obligations and other post-employment
beneﬁt obligations (medical care) are measured at fair value
and oﬀset against the corresponding obligations. For the valuation
of deﬁned beneﬁt plans, diﬀerences between actuarial
assumptions used and actual developments as well as changes
in actuarial assumptions result in actuarial gains and losses,
which have a direct impact on the consolidated statement of
ﬁnancial position or on the consolidated statement of com-
prehensive income/loss.

The balance of deﬁned beneﬁt plans for pensions and other
post-employment beneﬁt obligations and plan assets (net
pension obligation or net pension assets) accrues interest
at the discount rate used as a basis for the measurement
of the gross pension obligation. The resulting net interest
expense or income is recognized in proﬁt and loss under
interest expense or interest income in the consolidated state-
ment of income. The other expenses resulting from pension
obligations and other post-employment beneﬁt obligations
(medical care), which mainly result from entitlements acquired
during the year under review, are taken into consideration in
the functional costs in the consolidated statement of income.

The discount factors used to calculate the present values
of deﬁned beneﬁt pension obligations are to be determined
– with maturities and currencies matching the pension
payments – by reference to market yields at the end of the
reporting period on high-quality corporate bonds in the
respective markets. For very long maturities, there are no
high-quality corporate bonds available as a benchmark.
The respective discount factors are estimated by extrapolating
current market rates along the yield curve.

Gains or losses on the curtailment or settlement of a deﬁned
beneﬁt plan are recognized in proﬁt or loss when the curtail-
ment or settlement occurs.

Provisions for other risks
A provision is recognized when a liability to third parties
has been incurred, an outﬂow of resources is probable and
the amount of the obligation can be reasonably estimated.
The amount recognized as a provision represents the best
estimate of the obligation at the reporting date. Provisions
with an original maturity of more than one year are discounted
to the present value of the expenditures expected to settle
the obligation at the end of the reporting period. If the criteria
of the regulations on recognition and measurement of provi-
sions are not fulﬁlled and the possibility of a cash outﬂow upon
settlement is not unlikely, the item is to be presented as a
contingent liability, insofar as it is adequately measurable.
Provisions and contingent liabilities are regularly reviewed
and adjusted as further information becomes available or
circumstances change.

A provision for expected warranty costs is recognized when
a product is sold or when a new warranty program is initiated.
Estimates for accrued warranty costs are primarily based
on historical experience.

Restructuring provisions are set up in connection with programs
that materially change the scope of business performed by
a segment or business unit or the manner in which business is
conducted. In most cases, restructuring expenses include
termination beneﬁts and compensation payments due to the
termination of agreements with suppliers and dealers.
Restructuring provisions are recognized when the Group
has a detailed formal plan that has either commenced
implementation or been announced.

Share-based payment
Share-based payment comprises cash-settled liability awards.

Liability awards are measured at fair value at each balance
sheet date until settlement and are classiﬁed as provisions.
The proﬁt or loss of the period equals the addition to and/or
the reversal of the provision during the reporting period and
the dividend equivalent paid during the period, and is included
in the functional costs.

Presentation in the consolidated statement of cash ﬂows
Interest paid as well as interest and dividends received are
classiﬁed as cash provided by/used for operating activities.
The cash ﬂows from short-term marketable debt securities
with high turnover rates and signiﬁcant amounts are oﬀset and
presented within cash provided by/used for investing activities.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 255

2. Accounting estimates and management
judgements

In the consolidated ﬁnancial statements, to a certain degree,
estimates and management judgements have to be made
which can aﬀect the amounts and reporting of assets and
liabilities, the reporting of contingent assets and liabilities on
the balance sheet date, and the amounts of income and
expense reported for the period. The major items aﬀected
by such estimates and management judgements are described
as follows. Actual amounts may diﬀer from the estimates.
Changes in the estimates and management judgements can
have a material impact on the consolidated ﬁnancial statements.

events and conditions and the estimated fair values and adequacy
of collaterals. Changes in economic conditions can lead to
changes in our customers’ creditworthiness and to changes in
used-vehicle prices, which would have a direct eﬀect on the
market values of the vehicles assigned as collateral. Changes
to the estimation and assessment of these factors inﬂuence
the allowance for credit losses with a resulting impact on the
Group’s net proﬁt. See also Notes 14 and 32 for further
information.

Product warranties
The recognition and measurement of provisions for product
warranties is generally connected with estimates.

Recoverable amounts of cash-generating units and
equity-method investments
In the context of impairment tests for non-ﬁnancial assets,
estimates have to be made to determine the recoverable
amounts of cash-generating units. Assumptions have to be
made in particular with regard to future cash inﬂows and
outﬂows for the planning period and the following periods.
The estimates include assumptions regarding future market
share and the growth of the respective markets as well as
regarding the products’ proﬁtability. On the basis of the impair-
ment tests carried out in 2017, the recoverable amounts are
larger than the net assets of the Group’s cash-generating units,
in most cases substantially larger.

The Group provides various types of product warranties depend-
ing on the type of product and market conditions. Provisions
for product warranties are generally recognized when vehicles
are sold or when new warranty programs are initiated. Based
on historical warranty claim experience, assumptions have to
be made on the type and extent of future warranty claims
and customer goodwill, as well as on possible recall campaigns
for each model series. These assessments are based on
experience of the frequency and extent of vehicle faults and
defects in the past. In addition, the estimates also include
assumptions on the amounts of potential repair costs per
vehicle and the eﬀects of possible time or mileage limits. The
provisions are regularly adjusted to reﬂect new information.

When objective evidence of impairment or impairment reversal
is present, estimates and assessments also have to be made
to determine the recoverable amount of an equity method
ﬁnancial investment. The determination of the recoverable
amount is based on assumptions regarding future business
developments for the determination of the expected future
cash ﬂows of that ﬁnancial investment. See Note 13 for the
presentation of carrying amounts and fair values of equity-
method ﬁnancial investments in listed companies.

Recoverable amount of equipment on operating leases
Daimler regularly reviews the factors determining the values
of its leased vehicles. In particular, it is necessary to estimate
the residual values of vehicles at the end of their leases,
which constitute a substantial part of the expected future cash
ﬂows from leased assets. In this context, assumptions are
made regarding major inﬂuencing factors, such as the expected
number of returned vehicles, the latest remarketing results
and future vehicle model changes. Those assumptions are
determined either by qualiﬁed estimates or by publications
provided by expert third parties; qualiﬁed estimates are based,
as far as publicly available, on external data with consideration
of internally available additional information such as historical
experience of price developments and recent sale prices.
The residual values thus determined serve as a basis for depre-
ciation; changes in residual values lead either to prospective
adjustments of the depreciation or, in the case of a signiﬁcant
decline in expected residual values, to impairment. If deprecia-
tion is prospectively adjusted, changes in estimates of residual
values do not have a direct eﬀect but are equally distributed
over the remaining periods of the lease contracts.

Collectability of receivables from ﬁnancial services
The Group regularly estimates the risk of default on receivables
from ﬁnancial services. Many factors are taken into consider-
ation in this context, including historical loss experience, the
size and composition of certain portfolios, current economic

Further information on provisions for other risks is provided in
Note 23.

Legal proceedings
Various legal proceedings, claims and governmental investiga-
tions are pending against Daimler AG and its subsidiaries on
a wide range of topics. If the outcome of such legal proceedings
is detrimental to Daimler, the Group may be required to pay
substantial compensatory and punitive damages, to undertake
service actions or recall campaigns, to pay ﬁnes or to carry
out other costly actions. Litigation and governmental investiga-
tions o(cid:5)en involve complex legal issues and are connected
with a high degree of uncertainty. Accordingly, the assessment
of whether an obligation exists on the balance sheet date as
a result of an event in the past, and whether a future cash out-
ﬂow is likely and the obligation can be reliably estimated,
largely depends on estimations by the management. Daimler
regularly evaluates the current stage of legal proceedings, also
with the involvement of external legal counsel. It is therefore
possible that the amounts of provisions for pending or potential
litigation will have to be adjusted due to future developments.
Changes in estimates and premises can have a material eﬀect
on the Group’s future proﬁtability. It is also possible that
provisions accrued for some legal proceedings may turn out to
be insuﬃcient once such proceedings have ended. Daimler
may also become liable for payments in legal proceedings no
provisions were established for. Although the ﬁnal resolution
of any such proceedings could have a material eﬀect on Daimler’s
operating results and cash ﬂows for a particular reporting
period, Daimler believes that it should not materially aﬀect
the Group’s ﬁnancial position.

Further information on liability and litigation risks is provided
in Note 29.

256 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Pensions and similar obligations
The calculation of provisions for pensions and similar obligations
and the related pension cost are based on various actuarial
valuations. The calculations are subject to various assumptions
on matters such as current actuarially developed probabilities
(e.g. discount factors and cost-of-living increases), future
ﬂuctuations with regard to age and period of service, and
experience with the probability of occurrence of pension
payments, annuities or lump sums. As a result of changed
market or economic conditions, the probabilities on which
the inﬂuencing factors are based, may diﬀer from current
developments. The ﬁnancial eﬀects of deviations of the
main factors are calculated with the use of sensitivity analyses.
See Note 22 for further information.

Income taxes
The calculation of income taxes of Daimler AG and its subsid-
iaries is based on the legislation and regulations applicable
in the various countries. Due to their complexity, the tax items
presented in the ﬁnancial statements are possibly subject to
diﬀerent interpretation by taxpayers on the one hand and local
tax authorities on the other hand. For the calculation of
deferred tax assets, assumptions have to be made regarding
future taxable income and the time of realization of the
deferred tax assets. In this context, Daimler takes into consid-
eration, among other things, the projected earnings from
business operations, the eﬀects on earnings of the reversal of
taxable temporary diﬀerences, and realizable tax strategies.
As future business developments are uncertain and are some-
times beyond Daimler’s control, the assumptions to be made
in connection with accounting for deferred tax assets are
connected with a substantial degree of uncertainty. On each
balance sheet date, Daimler carries out impairment tests on
deferred tax assets on the basis of the planned taxable income
in future ﬁnancial years; if Daimler assesses that the proba-
bility of future tax advantages being partially or fully unrealized
is more than 50%, the deferred tax assets are impaired.
Further information is provided in Note 9.

3. Consolidated Group

Composition of the Group
Table (cid:202) F.08 shows the composition of the Group.

The aggregate balance sheet totals of the subsidiaries, associ-
ated companies, joint ventures and joint operations accounted
for at amortized cost whose business is non-active or of low
volume and which are not material for the Group and the fair
presentation of its proﬁtability, liquidity and capital resources
and ﬁnancial position would amount to approximately 1% of the
Group’s balance sheet total; the aggregate revenues and the
aggregate net proﬁt would amount to approximately 1% of the
Group’s revenue and net proﬁt.

A detailed list of the companies included in the consolidated
ﬁnancial statements and of the equity investments of Daimler
Group pursuant to Section 313 of the German Commercial
Code (HGB) is provided in the statement of investments. Fur-
ther information is provided in Note 39.

Structured entities
The structured entities of the Group are rental companies, asset-
backed-securities (ABS) companies and special funds. The
purpose of the rental companies primarily is the acquisition,
renting and management of assets. The ABS companies
are primarily used for the Group’s reﬁnancing. The assets
transferred to structured entities usually result from the
Group’s leasing and sales ﬁnancing business. Those entities
reﬁnance the purchase price by issuing securities. The
special funds are set up in particular in order to diversify the
capital investment strategy.

At the reporting date, the Group has business relationships
with 24 (2016: 20) controlled structured entities, of which 22
(2016: 18) are fully consolidated. In addition, the Group has
relationships with 6 (2016: 5) non-controlled structured entities.
The unconsolidated structured entities are not material for
the Group’s proﬁtability, liquidity and capital resources and
ﬁnancial position.

Consolidated subsidiaries
On June 30, 2016, Daimler signed the agreements for the acquisi-
tion of 100% of the shares of Athlon Car Lease International
B.V. (Athlon), a subsidiary of the Dutch Rabobank Group. Athlon
is one of the leading providers of mobility solutions in Europe,
especially of leasing and ﬂeet management for commercial
customers. The transaction was closed on December 1, 2016.
Upon closing, the purchase price of €1.1 billion was paid and
ﬁnancial liabilities of the Athlon companies in an amount of
approximately €2.7 billion were settled. In 2017, Daimler
received total purchase price refunds of €41 million. Purchase-
price allocation was ﬁnalized in the fourth quarter of 2017.
In the context of allocated purchase-price diﬀerence of €637,
€402 million was allocated to goodwill, €311 million to
intangible assets and €6 million to other assets. €82 million
was accounted for by deferred tax liabilities.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 257

Eﬀective as of June 30, 2016, Daimler placed its 3.1% interest
in each of Renault S.A. (Renault) and Nissan Motor Company
Ltd. (Nissan) at the amount of the fair value (€1,800 million)
into the Daimler Pension Trust e.V. for the purpose of strength-
ening the German pension plan assets over the long term.
Before this transfer, the investments in Renault and Nissan
were presented under other ﬁnancial assets. The investments
were measured at fair value, whereby unrecognized gains
were shown under other comprehensive income. The contribution
of the shares led to other ﬁnancial income in an amount of
€605 million, which was shown in the reconciliation in 2016.

Joint operations accounted for using proportionate
consolidation
Daimler AG together with Nissan Motor Company Ltd. founded
the joint operation Cooperation Manufacturing Plant
Aguascalientes, S.A.P.I. de C.V. in Mexico in 2015. The company
has been producing cars for the Inﬁniti brand since November
2017. Production for the Mercedes-Benz brand will start in 2018.
Daimler and Nissan each hold a 50% interest in the company.
The joint operation has been accounted for using proportionate
consolidation since July 1, 2016. The company is allocated to
the Mercedes-Benz Cars segment.

Equity-method investments
In May 2017, Daimler acquired for a purchase price of €0.3 bil-
lion an interest of 15% in LSH Auto International Limited
(LSHAI), which is responsible for the Mercedes-Benz retail
business of Lei Shing Hong Group. LSHAI, a subsidiary of Lei
Shing Hong Group, is one of the biggest Mercedes-Benz deal-
ers worldwide. See Note 13 for further information.

In January 2017, There Holding B.V. sold an equity interest
of 15% in HERE International B.V to Intel Holdings B.V. and
recognized a gain of €183 million in connection with the sale.
See Note 13 for further information.

F.08
Composition of the Group

Consolidated subsidiaries

Germany

International

Unconsolidated subsidiaries

Germany

International

Joint operations accounted for
using proportionate consolidation

Germany

International

Joint operations accounted for
using the equity method

Germany

International

Joint ventures accounted for
using the equity method

Germany

International

Associated companies accounted
for using the equity method

Germany

International

Joint operations, joint ventures,
associated companies and substantial
other investments accounted
for at (amortized) cost

Germany

International

At December 31,
2016

2017

363

299

119

–

548

359

297

–

513

258 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

F.09
Revenue

In millions of euros

Revenue from sales of goods

Revenue from the rental and
leasing business

Interest from the ﬁnancial services
business at Daimler Financial Services

Revenue from sales of other services

F.10
Cost of sales

In millions of euros

Expense of goods sold

Depreciation of equipment
on operating leases

Reﬁnancing costs at
Daimler Financial Services

Impairment losses on receivables from
ﬁnancial services

Other cost of sales

F.11
Optimization programs

In millions of euros

Mercedes-Benz Cars

EBIT

Cash ﬂow
Provisions for optimization programs1

Daimler Trucks

EBIT

Cash ﬂow
Provisions for optimization programs1

Mercedes-Benz Vans

EBIT

Cash ﬂow
Provisions for optimization programs1

Daimler Buses

EBIT

Cash ﬂow
Provisions for optimization programs1

4. Revenue

2017

2016

140,272

132,577

Table (cid:202) F.09 shows the composition of revenue at Group level.

Revenue by segment (cid:202) F.81 and region (cid:202) F.83 is presented in
Note 33.

18,394

15,997

5. Functional costs

4,609

1,055

4,146

541

164,330

153,261

Cost of sales
Items included in cost of sales are shown in table (cid:202) F.10.

Amortization expense of capitalized development costs in the
amount of €1,310 million (2016: €1,268 million) is presented
in expense of goods sold.

Selling expenses
In 2017, selling expenses amounted to €12,965 million (2016:
€12,226 million). Selling expenses consist of direct selling
costs as well as selling overhead expenses and comprise per-
sonnel expenses, material costs and other selling costs.

General administrative expenses
General administrative expenses amounted to €3,809 million
in 2017 (2016: €3,419 million). They consist of expenses
which are not attributable to production, sales or research
and development functions, and comprise personnel
expenses, depreciation and amortization of ﬁxed and
intangible assets, and other administrative costs.

Research and non-capitalized development costs
Research and non-capitalized development costs were €5,938
million in 2017 (2016: €5,257 million) and primarily comprise
personnel expenses and material costs.

Optimization programs
Measures and programs with implementation costs that
materially impacted the EBIT of the segments are brieﬂy
described below.

In the course of the organizational focus on the divisions,
programs for restructuring the Group’s dealer network abroad
were initiated in 2015, involving the sale of selected Daimler-
owned dealerships. The restructuring was mainly completed in
2017. In the reporting period 2017, these measures resulted
in income of €133 million (2016: net expense of €58 million).

At December 31, 2016, the disposal group’s assets for those
dealerships abroad amounted to €240 million and its liabilities
amounted to €135 million. At December 31, 2017, only non-
signiﬁcant assets and liabilities of the disposal group exist. Due
to their minor impact on the Group’s ﬁnancial position, the
assets and liabilities held for sale are not presented separately
in the consolidated statement of ﬁnancial position.

2017

2016

- 114,054

- 107,925

- 7,978

- 6,652

- 2,187

- 1,789

- 500

- 5,280

- 499

- 4,433

- 129,999

- 121,298

2017

2016

105

203

- 160

- 17

–

- 33

253

- 105

- 68

- 49

–

- 9

- 3

–

1 Amounts of provisions for optimization programs

as of December 31.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 259

Table (cid:202) F.11 shows the eﬀects of the optimization programs
on the key ﬁgures of the segments.

F.13
Average number of employees

F.12
Income and expenses associated with optimization programs

In millions of euros

Cost of sales

Selling expenses

General administrative expenses

Research and non-capitalized
development costs

Other operating expenses

Other operating income

2017

2016

- 93

- 16

- 27

- 38

–

133

- 41

- 127

- 108

- 8

- 2

- 45

- 196

2017

2016

143,586

140,591

80,155

24,823

17,978

12,621

10,367

81,810

23,763

17,937

10,880

9,976

289,530

284,957

Mercedes-Benz Cars1

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Other

1 Including proportionally 1,203 employees from proportionately

consolidated companies in 2017 (2016: 337).

Daimler Trucks anticipates expenses in connection with the
optimization of ﬁxed costs, especially at the Mercedes-Benz
brand, of approximately €0.2 billion, of which €172 million were
recognized in 2017. Due to the employee-transfer opportunities
within the Daimler Group, the expenses were lower than originally
assumed.

In the year 2016, a workforce-reduction program was
implemented in Brazil. That program resulted in expenses
of €91 million in the Daimler Trucks segment in 2016.

In the year 2016, Mercedes-Benz Vans initiated a socially
acceptable voluntary severance program for the Düsseldorf
plant. In 2016, the program led to an expense of €38 million.
In the reporting period 2017, this resulted in only a small
amount of expenses.

Beside gains and/or losses from the sale of selected operations
of the Group’s current sales network, the EBIT eﬀects listed
in table (cid:202) F.11 primarily relate to personnel measures and are
included in the line items within the consolidated statement
of income as shown in table (cid:202) F.12.

Cash eﬀects resulting from the optimization programs are
expected in the years 2018 and 2019.

Personnel expenses and average number of employees
Personnel expenses included in the consolidated statement of
income amounted to €22,186 million in 2017 (2016: €21,141
million). The personnel expenses are composed of wages and
salaries in the amount of €18,188 million (2016: €17,150 million),
social contributions in the amount of €3,292 million (2016:
€3,242 million) and expenses from pension obligations in the
amount of €706 million (2016: €749 million). The average
numbers of people employed are shown in table (cid:202) F.13.

Information on the total remuneration of the current and
former members of the Board of Management and the current
members of the Supervisory Board is provided in Note 37.

260 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

F.14
Other operating income

In millions of euros

Income from costs recharged
to third parties

Government grants and subsidies

Gains on sales of property,
plant and equipment

Rental income not relating
to sales ﬁnancing

Income associated with optimization
programs

Other miscellaneous income

F.15
Other operating expense

In millions of euros

Losses on sales of property,
plant and equipment

Expenses associated with
optimization programs

Other miscellaneous expenses

F.16
Other ﬁnancial income/expense, net

In millions of euros

Income and expense from compounding
and eﬀects from changes in discount rates
of provisions for other risks

Miscellaneous other ﬁnancial
income/expense, net

F.17
Interest income and interest expense

In millions of euros

Interest income

Net interest income on the net assets
of deﬁned beneﬁt pension plans

Interest and similar income

Interest expense

Net interest expense on the net obligation
from deﬁned beneﬁt pension plans

Interest and similar expense

6. Other operating income and expense

2017

2016

The composition of other operating income is shown in table
(cid:202) F.14.

1,309

107

1,219

144

385

149

133

741

126

743

2,824

2,350

Income from costs recharged to third parties includes income
from licenses and patents, shipping costs and other costs
charged to third parties, with related expenses primarily within
the functional costs.

Government grants and subsidies mainly comprise reimburse-
ments relating to current part-time early retirement contracts
and subsidies for alternative drive systems.

Gains on sales of property, plant and equipment include gains
of €267 million from the sale of real estate by Mitsubishi Fuso
Truck and Bus Corporation at the Kawasaki site in Japan.

Further information on income and expenses associated with
optimization programs is provided in Note 5.

2017

2016

The composition of other operating expense is shown in table
(cid:202) F.15.

Other miscellaneous expense primarily comprises losses from
disposals of current assets and changes in other provisions.
In 2016, other operating expense included expenses of €400
million connected with a lawsuit.

7. Other ﬁnancial income/expense, net

Table (cid:202) F.16 shows the components of other ﬁnancial income/
expense, net.

In 2016, miscellaneous other ﬁnancial income included the
recognition of gains of €605 million from the contribution of
the shareholdings in Renault and Nissan to the German
pension plan assets at fair value. Those gains were presented
within other comprehensive income/loss until the transfer.

8. Interest income and interest expense

Table (cid:202) F.17 shows the components of interest income and
interest expense.

- 117

- 111

–

- 925

- 1,042

- 45

- 1,142

- 1,298

2017

2016

- 61

- 124

- 169

- 230

399

275

2017

2016

212

214

- 211

- 371

- 582

225

230

- 227

- 319

- 546

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 261

9. Income taxes

Proﬁt before income taxes is comprised as shown in table
(cid:202) F.18.

Proﬁt before income taxes in Germany includes proﬁt/loss
from equity-method investments if the equity interests in
those companies are held by German companies.

Table (cid:202) F.19 shows the components of income taxes.

The current tax expense includes tax expenses at German and
foreign companies of €268 million (2016: tax beneﬁts of €292
million) recognized for prior periods.

The deferred tax expense/beneﬁt is comprised of the
components shown in table (cid:202) F.20.

For German companies, in 2017 and 2016, deferred taxes were
calculated using a federal corporate income tax rate of 15%,
a solidarity tax surcharge of 5.5% on each year’s federal corpo-
rate income taxes, and a trade tax rate of 14%. In total, the
tax rate applied for the calculation of German deferred taxes
in both years amounted to 29.825%.

For non-German companies, the deferred taxes at period-end
were calculated using the tax rates of the respective countries.

Table (cid:202) F.21 shows a reconciliation of expected income tax
expense to actual income tax expense determined using
the unchanged applicable German combined statutory tax
rate of 29.825%.

F.18
Proﬁt before income taxes

In millions of euros

German companies

Non-German companies

F.19
Components of income taxes

In millions of euros

Current taxes

German companies

Non-German companies

Deferred taxes

German companies

Non-German companies

2017

2016

6,399

7,902

5,775

6,799

14,301

12,574

2017

2016

- 2,024

- 1,985

- 1,396

- 1,690

- 401

973

- 155

- 549

- 3,437

- 3,790

F.20
Components of deferred tax expense/beneﬁt

In millions of euros

Deferred taxes

due to temporary diﬀerences

due to tax loss carryforwards
and tax credits

2017

2016

572

972

- 400

- 704

- 44

- 660

F.21
Reconciliation of expected income tax expense
to actual income tax expense

In millions of euros

2017

2016

Expected income tax expense

- 4,265

- 3,750

Foreign tax rate diﬀerential

Trade tax rate diﬀerential

Tax law changes

Change of valuation allowance
on deferred tax assets

Tax-free income and non-deductible
expenses

Other

- 80

1,624

- 41

- 171

- 225

- 632

113

Actual income tax expense

- 3,437

- 3,790

262 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

F.22
Deferred tax assets and liabilities

In millions of euros

Deferred tax assets

Deferred tax liabilities

Deferred tax assets, net

At December 31,
2016

2017

2,853

- 2,402

451

3,870

- 3,467

403

F.23
Split of tax assets and liabilities before oﬀset

In millions of euros

Intangible assets

Property, plant and equipment

Equipment on operating leases

Inventories

Receivables from ﬁnancial services

Miscellaneous assets,
mainly other ﬁnancial assets

Tax loss carryforwards
and unused tax credits

Provisions for pensions
and similar obligations

Other provisions

Liabilities

Deferred income

Miscellaneous liabilities

Valuation allowances

thereof on temporary diﬀerences

thereof on tax loss carryforwards
and tax credits

Deferred tax assets, gross

Development costs

Other intangible assets

Property, plant and equipment

Equipment on operating leases

Inventories

Receivables from ﬁnancial services

Miscellaneous assets

Provisions for pensions and
similar obligations

Other provisions

Miscellaneous liabilities

At December 31,
2016

2017

134

2,319

977

392

340

1,798

1,129

328

6,423

6,019

1,813

2,256

671

1,861

931

1,332

16,903

- 1,291

- 194

- 1,097

15,612

- 3,060

- 127

- 1,574

- 5,211

- 55

- 1,302

- 377

891

2,348

1,518

1,702

18,382

- 1,248

- 235

- 1,013

17,134

- 2,625

- 274

- 1,654

- 7,919

- 68

- 1,124

- 620

- 3,082

- 2,098

- 147

- 226

- 139

- 210

Deferred tax liabilities, gross

- 15,161

- 16,731

Deferred tax assets, net

451

403

The law signed in 2017 by the President of the United States of
America for a comprehensive tax reform (“H.R. 1/Tax Cuts
and Jobs Act”), includes the reduction of the nationwide federal
corporate income tax rate for US-companies from 35% to 21%,
starting on January 1, 2018. At yearend 2017, the reduction of
the federal corporate income tax rate required the remea-
surement of the deferred tax liabilities and deferred tax assets
of the US-subsidiaries of Daimler. The resulting tax beneﬁt
of €1,668 million is included in the line item tax law changes.

In 2017 and 2016, the Group impaired deferred tax assets of
foreign subsidiaries. The resulting tax expenses are included in
the line item change of valuation allowance on deferred tax
assets.

Tax-free income and non-deductible expenses include all other
eﬀects at foreign and German companies relating to tax-free
income and non-deductible expenses, for instance tax-free gains
included in net periodic pension costs at the German com-
panies and tax-free results of our equity-method investments.
In 2016, tax-free gains recognized on the contribution of
our shares in Renault and Nissan into the German pension plan
assets are shown in this line item. Furthermore, in 2017, the
line item also includes tax expenses in connection with the
interpretation of tax laws. In 2016, tax beneﬁts relating to
tax assessments of prior years are included in this line item.

Deferred tax assets and deferred tax liabilities are oﬀset if the
deferred tax assets and liabilities relate to income taxes
levied by the same taxation authority and if there is the right
to set oﬀ current tax assets against current tax liabilities. In
the presentation of deferred tax assets and liabilities in the
consolidated statement of ﬁnancial position, no diﬀerence
is made between current and non-current. In the consolidated
statement of ﬁnancial position, deferred tax assets and lia-
bilities are presented as shown in table (cid:202) F.22.

In respect of each type of temporary diﬀerence and in respect
of each type of unutilized tax loss carryforwards and unutilized
tax credits, the deferred tax assets and liabilities before oﬀset
are summarized in table (cid:202) F.23.

The development of deferred tax assets, net, is shown in table
(cid:202) F.24.

Including the items recognized in other comprehensive income/
loss (including items from equity-method investments), the
expense for income taxes is comprised as shown in table (cid:202) F.25.

In the consolidated statement of ﬁnancial position, the valuation
allowances on deferred tax assets, which are mainly attribut-
able to foreign companies, increased by €43 million compared
to December 31, 2016. This is primarily a result of the addi-
tional valuation allowances of €171 million recognized in net
proﬁt. Furthermore, a decrease in the valuation allowance
was recognized in equity, mainly due to currency translation.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 263

F.24
Change of deferred tax assets, net

In millions of euros

Deferred tax assets, net as of January 1

Deferred tax expense/beneﬁt in the
ﬁnancial statement of income

Change in deferred tax expense/beneﬁt on
ﬁnancial assets available-for-sale included
in other comprehensive income/loss

Change in deferred tax expense/beneﬁt
on derivative ﬁnancial instruments included
in other comprehensive income/loss

Change in deferred tax expense/beneﬁt
on actuarial gains/losses from deﬁned
beneﬁt pension plans
Other changes1

Deferred tax assets, net
as of December 31

2017

2016

403

572

1,069

- 704

- 3

- 741

- 495

- 19

239

451

748

- 216

403

1 Additions to the scope of consolidation in the amount of

€-112 million are included in 2016. The other changes primarily
relate to eﬀects from currency translation.

F.25
Tax expense in equity

In millions of euros

Income tax expense in the consolidated
ﬁnancial statement of income

Income tax expense/beneﬁt
recorded in other reserves

2017

2016

- 3,437

- 3,790

- 763

- 4,200

254

- 3,536

At December 31, 2017, the valuation allowance on deferred tax
assets relates, among other things, to corporate income tax
loss carryforwards (€904 million). €12 million of the deferred
tax assets for corporate income tax loss carryforwards
adjusted by a valuation allowance relates to tax loss carry-
forwards which expire at various dates from 2018 through
2020, €258 million relates to tax loss carryforwards which
expire at various dates from 2021 through 2027, €17 million
relates to tax loss carryforwards which expire at various dates
from 2028 through 2037 and €617 million relates to tax loss
carryforwards which can be carried forward indeﬁnitely. Further-
more, the valuation allowance primarily relates to temporary
diﬀerences at non-German companies as well as net operating
losses for state and local taxes at the US-companies. Daimler
believes that it is more likely than not that those deferred tax
assets cannot be utilized. In 2017 and prior years, the Group
had tax losses at several subsidiaries in several countries. A(cid:5)er
oﬀsetting the deferred tax assets with deferred tax liabilities,
the deferred tax assets not subject to valuation allowances
amounted to €135 million for those subsidiaries. Daimler
believes it is more likely than not that future taxable income will
be suﬃcient to allow utilization of the deferred tax assets.
Daimler’s current estimate of the amount of deferred tax assets
that is considered realizable may change in the future, neces-
sitating higher or lower valuation allowances.

The retained earnings of non-German subsidiaries are largely
intended to be reinvested in those operations. The Group did
not recognize deferred tax liabilities on retained earnings of
non-German subsidiaries of €28,733 million (2016: €28,750
million) which are intended to be reinvested. If those earnings
were paid out as dividends, an amount of 5% would be taxed
under German taxation rules and, if applicable, with non-German
withholding tax. Additionally, income tax consequences might
arise if the dividends ﬁrst have to be distributed by a non-German
subsidiary to a non-German holding company. Normally, the
distribution would lead to an additional income tax expense. It is
not practicable to estimate the amount of taxable temporary
diﬀerences for these undistributed foreign earnings.

The Group has various unresolved issues concerning open
income tax years with the tax authorities in a number of
jurisdictions. Daimler believes that it has recognized adequate
provisions for any future income taxes that may be owed
for all open tax years.

As a result of future adjudications or changes in the opinions of
the ﬁscal authorities, it cannot be ruled out that Daimler might
receive tax refunds for previous years.

264 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. Intangible assets

Intangible assets developed as shown in table (cid:202) F.26.

At December 31, 2017, goodwill of €455 million (2016:
€480 million) relates to the Daimler Financial Services segment,
goodwill of €418 million (2016: €456 million) relates to the
Daimler Trucks segment and goodwill of €180 million (2016:
€185 million) relates to the Mercedes-Benz Cars segment.

Non-amortizable intangible assets primarily relate to goodwill
and development costs for projects which have not yet been
completed (carrying amount at December 31, 2017: €5,086
million; 2016: €3,780 million). In addition, other intangible
assets with a carrying amount of €255 million (2016: €266 million)
are not amortizable. Other non-amortizable intangible assets
are distribution rights in the vehicle segments with indeﬁnite
useful lives as well as trademarks in the Daimler Trucks seg-
ment with indeﬁnite useful lives. The Group plans to continue
to use these assets unchanged.

Table (cid:202) F.27 shows the line items of the consolidated statement
of income in which total amortization expense for intangible
assets is included.

F.26
Intangible assets

In millions of euros

Acquisition or manufacturing costs

Balance at January 1, 2016

Additions due to business combinations

Other additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2016

Additions due to business combinations

Other additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2017

Amortization/impairment

Balance at January 1, 2016

Additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2016

Additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2017

Carrying amount at December 31, 2016

Carrying amount at December 31, 2017

Development
costs
(internally
generated)2

Other intangible
assets
(acquired)

Goodwill
(acquired)

1,015

449

–

1,481

–

- 34

- 71

1,386

288

–

293

–

- 22

271

12,962

–

2,323

–

- 1,335

13,963

–

2,779

–

- 524

- 26

16,192

5,173

1,280

–

- 1,334

5,136

1,323

–

- 521

- 26

5,912

1,188

1,115

8,827

10,280

3,582

221

629

–

- 100

4,384

755

–

- 396

- 140

4,619

2,029

320

–

- 89

2,301

445

–

- 368

- 99

2,279

2,083

2,340

Total

17,559

670

2,952

–

- 1,435

19,828

3,535

–

- 954

- 237

22,197

7,490

1,600

–

- 1,423

7,730

1,768

–

- 889

- 147

8,462

12,098

13,735

1 Primarily changes from currency translation.
2 Including capitalized borrowing costs on development costs of €47 million (2016: €54 million).

Amortization amounted to €13 million (2016: €12 million).

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 265

11. Property, plant and equipment

Property, plant and equipment developed as shown
in table (cid:202) F.28.

In 2017, government grants of €50 million (2016: €151 million)
were deducted from property, plant and equipment.

Property, plant and equipment also include buildings, technical
equipment and other equipment under ﬁnance lease arrange-
ments and thus deemed to be owned by the Group with a carry-
ing amount at December 31, 2017 of €320 million (2016:
€178 million). In 2017, additions to and depreciation expense
on assets under ﬁnance lease arrangements amounted to
€204 million (2016: €7 million) and €34 million (2016: €40 million),
respectively.

F.27
Amortization expense for intangible assets
in the consolidated statement of income

In millions of euros

Cost of sales

Selling expenses

General administrative expenses

Research and non-capitalized
development costs

Other operating expense

2017

2016

1,585

1,443

1,768

1,600

F.28
Property, plant and equipment

In millions of euros

Acquisition or manufacturing costs

Balance at January 1, 2016

Additions due to business acquisitions

Other additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2016

Additions due to business acquisitions

Other additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2017

Depreciation/impairment

Balance at January 1, 2016

Additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2016

Additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2017

Carrying amount at December 31, 2016

Carrying amount at December 31, 2017

1 Primarily changes from currency translation.

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

Technical
equipment
and machinery

Other
equipment,
factory and
oﬃce
equipment

Advance
payments
relating to plant
and equipment
and construction
in progress

15,763

23,978

24,773

–

588

591

- 379

193

16,756

–

562

559

- 415

- 475

16,987

8,506

425

- 8

- 234

8,749

352

- 1

- 201

- 156

8,743

8,007

8,244

–

1,002

1,088

- 670

226

25,624

–

1,032

985

- 1,173

- 504

25,964

15,548

1,423

- 13

- 627

138

16,469

1,534

–

- 1,084

- 289

16,630

9,155

9,334

1,407

607

- 742

296

26,348

–

1,752

803

- 796

- 709

27,398

18,983

2,043

- 649

220

20,618

2,035

- 640

- 549

21,465

5,730

5,933

2,846

2,692

- 2,286

- 69

305

3,489

–

3,603

- 2,347

- 123

- 152

4,470

–

- 1

–

3,489

4,470

Total

67,360

5,689

–

- 1,860

1,020

72,217

–

6,949

–

- 2,507

- 1,840

74,819

43,038

3,891

–

- 1,510

417

45,836

3,921

–

- 1,925

- 994

46,838

26,381

27,981

266 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. Equipment on operating leases

The development of equipment on operating leases
is shown in table (cid:202) F.29.

At December 31, 2017, equipment on operating leases with
a carrying amount of €8,684 million were pledged as security
for liabilities from ABS transactions related to a securitization
transaction of future lease payments on leased vehicles
(December 31, 2016: €7,465 million) (see also Note 24).

Minimum lease payments
Non-cancelable future lease payments to Daimler
for equipment on operating leases are due as presented
in table (cid:202) F.30.

F.29
Equipment on operating leases

In millions of euros

Acquisition or manufacturing costs

Balance at January 1, 2016

Additions due to business acquisitions

Other additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2016

Additions due to business acquisitions

Other additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2017

Depreciation/impairment

Balance at January 1, 2016

Additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2016

Additions

Reclassiﬁcations

Disposals
Other changes1

Balance at December 31, 2017

Carrying amount at December 31, 2016

Carrying amount at December 31, 2017

1 Primarily changes from currency translation.

F.30
Maturity of minimum lease payments
for equipment on operating leases

In millions of euros

Maturity

within one year

between one and ﬁve years

later than ﬁve years

48,091

3,560

23,504

–

- 18,204

379

57,330

–

25,292

–

- 19,657

- 3,446

59,519

9,149

6,652

–

- 5,487

10,388

7,978

–

- 5,904

- 657

11,805

46,942

47,714

At December 31,
2016

2017

7,922

8,607

7,660

8,306

16,600

16,029

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 267

13. Equity-method investments

Table (cid:202) F.31 shows the carrying amounts and proﬁts/losses
from equity-method investments.

Table (cid:202) F.32 presents key ﬁgures on interests in associated
companies accounted for using the equity method in the
Group’s consolidated ﬁnancial statements.

F.31
Summarized carrying amounts and proﬁts/losses from equity-method investments

In millions of euros

At December 31, 2017
Equity investment1
Equity result1

At December 31, 2016
Equity investment1
Equity result1

1 Including investor-level adjustments.

Associated
companies

Joint
ventures

Joint
operations

4,282

1,541

3,582

485

500

- 42

468

- 1

Total

4,818

1,498

4,098

502

F.32
Key ﬁgures on interests in associated companies accounted for using the equity-method

BBAC

BAIC Motor3

THBV (HERE)

Others

Total

In millions of euros

At December 31, 2017

Equity interest (in %)
Stock market price1
Equity investment2
Equity result2
Dividend payment to Daimler4

At December 31, 2016

Equity interest (in %)
Stock market price1
Equity investment2
Equity result2

Dividend payment to Daimler

49.0

–

2,130

1,143

1,134

49.0

–

2,141

678

–

10.1

832

777

290

10.1

647

557

- 176

33.3

–

732

121

–

33.3

–

611

- 56

–

643

- 13

273

4,282

1,541

3,582

485

1 Proportionate stock market prices.
2 Including investor-level adjustments.
3 The proportionate share of earnings of BAIC Motor Corporation Ltd. (BAIC Motor) is included in Daimler’s consolidated ﬁnancial

statements with a three-month time lag.

4 The dividend from BBAC of €1,134 million was partly paid out in the year 2017 with an amount of €768 million.

268 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BBAC
Beijing Benz Automotive Co., Ltd. (BBAC) produces and
distributes Mercedes-Benz passenger cars and spare parts
in China. The investment and the proportionate share
in the results of BBAC are allocated to the Mercedes-Benz
Cars segment.

In the ﬁrst quarter of 2017, Beijing Benz Automotive Co., Ltd.
(BBAC) received a capital increase of €97 million from Daimler.
The capital increase took place through the contribution of
dividend receivables. Daimler plans to contribute equity of up to
€0.4 billion, in accordance with its shareholding ratio, to BBAC
in the coming years.

In the ﬁrst quarter of 2017, the shareholders of BBAC
approved the payout of a dividend. The amount of €401 million
attributable to Daimler was paid out in the second quarter
of 2017 and decreased the carrying amount of the investment
accordingly. In the second quarter of 2017, the shareholders
of BBAC approved the payout of another dividend. The amount
of €733 million attributable to Daimler decreased the carrying
amount of the investment accordingly. The ﬁrst half of that
dividend was paid out in August 2017. The second half will be
paid out in 2018.

BAIC Motor
BAIC Motor Corporation Ltd. (BAIC Motor) is the passenger car
division of BAIC Group, one of the leading automotive
companies in China. Directly or via subsidiaries, BAIC Motor
is engaged in the business of researching, developing,
manufacturing, selling, marketing and servicing automotive
vehicles and related parts and components and all related
services. Due to Daimler’s representation on the board of
directors of BAIC Motor and other contractual arrangements,
Daimler classiﬁes this investment as an investment in an
associate, to be accounted for using the equity-method; in the
segment reporting, the investment’s carrying amount and
its proportionate share of proﬁt or loss are presented in the
reconciliation of total segment’s assets to Group assets
and total segments’ EBIT to Group EBIT, respectively. In the
ﬁrst quarter of 2016, due to the lower stock-exchange
price, the Group recognized an impairment loss of €244 million
with respect to its investment in BAIC Motor. In the ﬁrst
quarter of 2017, the impairment was fully reversed due to the
increased share price. The eﬀect of the reversal amounts
to €240 million including minor currency eﬀects. Both, the gain
and the loss are included in the line item proﬁt/loss on equity-
method investments, net.

THBV (HERE)
There Holding B.V. (THBV) was founded in 2015. Daimler, Audi
and BMW each holds an interest in the company of 33.3%.
THBV holds an interest in HERE International B.V. (HERE).

Eﬀective December 4, 2015, HERE acquired the roadmap
service HERE from Nokia Corporation. HERE is one of the
biggest manufacturers of digital roadmaps for navigation
systems worldwide. Future expected high resolution maps will
be one of the fundamentals for future autonomous driving.
THBV is accounted for in the consolidated ﬁnancial statements
of Daimler AG as an associated company using the equity
method, and is allocated to the Mercedes-Benz Cars segment.
In 2015, Daimler’s proportionate share of its proﬁts and
losses was included with a one-month time lag, which was
cancelled as of December 31, 2016.

In December 2016, THBV signed agreements on the sale of
shares in its then 100% subsidiary, HERE. It was agreed to sell
a 15% shareholding to Intel Holdings B.V. (Intel) and a 10%
shareholding to a Chinese consortium consisting of NavInfo Co.
Ltd., Tencent Holdings Ltd. and GIC Private Ltd. However,
the transaction with the Chinese consortium was not com-
pleted. During a regulatory review process, the Chinese
consortium decided no longer to proceed with the transaction.

The transaction with Intel was concluded on January 31, 2017.
As a result, THBV now only has a signiﬁcant inﬂuence on
HERE. Therefore, as of February 1, 2017, HERE is no longer fully
consolidated in the ﬁnancial statements of THBV, but is
presented as an associated company using the equity method.
The change in the consolidation method led to the remea-
surement of the HERE shares at fair value in the ﬁrst quarter
of 2017. The income of €183 million from this transaction
that is attributable to Daimler is included in proﬁt/loss on
equity-method investments in the ﬁrst quarter of 2017.

In December 2017, Daimler, Audi and BMW signed agreements
on the sale of shares in THBV. It was agreed to sell interests
of 5.9% in THBV to each of Robert Bosch Investment Nederland
B.V. and Continental Automotive Holding Netherlands B.V.
Both sales of shares involve equal numbers of shares currently
owned by Daimler, Audi and BMW. Due to the remeasure-
ment that already occurred in 2017 Daimler does not anticipate
any signiﬁcant impact on earnings from these transactions.
Completion of the transactions is expected in the ﬁrst quarter
of 2018, a(cid:5)er receiving the approval of the relevant authorities.
Due to the minor importance for the Group’s assets and liabilities,
there is no separate presentation in the statement of ﬁnancial
position of non-current assets available for sale.

Table (cid:202) F.33 shows summarized IFRS ﬁnancial information
a(cid:5)er purchase price allocation for the signiﬁcant associated
companies which were the basis for equity-method accounting
in the Group’s consolidated ﬁnancial statements.

Other minor equity-method investments
In 2017, minor equity-method investments include LSH Auto
International Limited (LSHAI). In the second quarter of
2017, Daimler acquired an interest of 15% in LSHAI, which is
responsible for the Mercedes-Benz retail business of Lei Shing
Hong Group. LSHAI, a subsidiary of Lei Shing Hong Group,
is one of the biggest Mercedes-Benz dealers worldwide. The
transaction was concluded a(cid:5)er receiving the approval of
the relevant antitrust authorities on May 22, 2017. The purchase
price was €0.3 billion. Due to Daimler’s possibility to exercise
a signiﬁcant inﬂuence on the board of directors of LSHAI, as
well as other contractual agreements and signiﬁcant supply
relations, the Group classiﬁes this investment as an investment
in an associate, to be accounted for using the equity method;
in the segment reporting, the investment’s carrying amount and
its proportionate share of proﬁt or loss are presented in the
reconciliation of total segment’s assets to Group assets and total
segments’ EBIT to Group EBIT, respectively. Earnings of LSHAI
are included in Daimler’s consolidated ﬁnancial statements
with a three-month time lag.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 269

The equity-method result of joint ventures in 2017 includes
impairments of investments of €125 million.

Further information on equity-method investments is provided
in Notes 3 and 36.

Table (cid:202) F.34 shows summarized aggregated ﬁnancial
information for the other minor equity-method investments
a(cid:5)er purchase price allocation and on a pro rata basis.

F.33
Summarized IFRS ﬁnancial information on signiﬁcant associated companies
accounted for using the equity method

In millions of euros

Information on the statement of income

Revenue

Proﬁt/loss from continuing operations a(cid:5)er taxes

Proﬁt/loss from discontinued operations a(cid:5)er taxes

Other comprehensive income/loss

Total comprehensive income/loss

Information on the statement of ﬁnancial position
and reconciliation to equity-method carrying amounts

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Equity (including non-controlling interest)

Equity (excluding non-controlling interests)
attributable to the Group

Unrealized proﬁt (-)/loss (+) on sales to/purchases from

Equity-method goodwill

Other

2017

BBAC1
2016

BAIC Motor2
2016

2017

THBV3 (HERE)
2016

2017

15,373

2,350

–

11,673

1,449

–

- 21

18,510

1,649

–

103

15,117

1,285

–

2,373

1,428

1,752

1,285

4,558

7,058

741

6,335

4,540

4,354

6,520

694

5,623

4,557

13,089

10,140

3,077

10,954

9,198

13,280

10,005

2,333

11,584

9,368

-151

513

364

1,906

289

–

2,195

1,240

- 1

-166

- 4

- 171

2,802

592

1,044

518

1,832

2,224

2,233

- 93

–

- 1

- 91

–

- 1

712

- 9

777

720

–

- 237

557

732

611

–

732

611

Carrying amount of equity-method investment

2,130

2,141

1 BBAC:

Figures for the statement of income relate to the period of January 1 to December 31.
Figures for the statement of ﬁnancial position and the reconciliation to equity-method carrying amounts relate to the balance sheet date December 31.

2 BAIC Motor:

Daimler recognizes its proportionate share of the proﬁts or losses of BAIC Motor Corporation Ltd. (BAIC Motor) with a three-month time lag.
Figures for the statement of income relate to the period of October 1 to September 30.
Figures for the statement of ﬁnancial position and the reconciliation to equity-method carrying amounts relate to the balance sheet date of September 30.

3 THBV:

Figures for the 2016 statement of income relate to the period of December 5, 2015 to December 31, 2016.
According to IFRS 5.34 the statement of income for 2016 was adjusted retrospectively.
Figures for the statement of ﬁnancial position and the reconciliation to equity-method carrying amounts relate to the balance sheet date December 31.
Revenue at THBV relates to HERE; revenue for the year 2017 is solely for the month of January until the change in the consolidation of HERE at THBV.

F.34
Summarized aggregated ﬁnancial information on minor
equity-method investments

In millions of euros

Summarized aggregated ﬁnancial information (pro rata)

Proﬁt/loss from continuing operations a(cid:5)er taxes

Proﬁt/loss from discontinued operations a(cid:5)er taxes

Other comprehensive income/loss

Total comprehensive income/loss

Associated companies
2016

2017

Joint ventures
2016

2017

–

-1

–

- 1

- 28

–

- 28

–

- 28

270 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. Receivables from ﬁnancial services

Table (cid:202) F.35 shows the components of receivables from
ﬁnancial services.

Types of receivables
Receivables from sales ﬁnancing with customers include
receivables from credit ﬁnancing for customers who purchased
their vehicle either from a dealer or directly from Daimler.

Receivables from sales ﬁnancing with dealers represent loans
for ﬂoor ﬁnancing programs for vehicles sold by the Group’s
automotive businesses to dealers or loans for assets purchased
by dealers from third parties, primarily used vehicles traded
in by dealers’ customers or real estate such as dealers’ show-
rooms.

Receivables from ﬁnance-lease contracts consist of receiv-
ables from leasing contracts for which all substantial risks
and rewards incidental to the leasing objects are transferred
to the lessee.

At December 31, 2017, ﬁnance-lease contracts included
non-automotive assets from contracts of the ﬁnancial services
business with third parties (leveraged leases) in the amount
of €103 million (December 31, 2016: €165 million)

Maturities of the ﬁnance-lease contracts are shown
in table (cid:202) F.36.

All cash ﬂow eﬀects attributable to receivables from ﬁnancial
services are presented within cash provided by/used for
operating activities in the consolidated statement of cash ﬂows.

Allowances
Changes in the allowance account for receivables from ﬁnancial
services are shown in table (cid:202) F.37.

The total expense from the impairment of receivables
from ﬁnancial services amounted to €500 million in 2017
(2016: €499 million).

Credit risks
Table (cid:202) F.38 provides an overview of credit risks included
in receivables from ﬁnancial services.

Receivables not subject to an individual impairment
assessment are grouped and subject to collective impairment
allowances to cover credit losses.

Further information on ﬁnancial risks and nature of risks
is provided in Note 32.

At December 31, 2017, receivables from ﬁnancial services with
a carrying amount of €6,049 million (December 31, 2016:
€5,909 million) were pledged as collateral for liabilities from
ABS transactions (see also Note 24).

F.35
Receivables from ﬁnancial services

In millions of euros

Sales ﬁnancing with customers

Sales ﬁnancing with dealers

Finance-lease contracts

Gross carrying amount

Allowances for doubtful accounts

Net carrying amount

F.36
Maturities of the ﬁnance lease contracts

Current Non-current

At December 31, 2017
Total

Current Non-current

At December 31, 2016
Total

15,737

16,065

7,976

39,778

- 404

39,374

27,044

3,061

16,774

46,879

- 466

46,413

42,781

19,126

24,750

86,657

- 870

85,787

14,803

16,302

7,012

38,117

- 491

37,626

26,288

2,970

14,186

43,444

- 563

42,881

41,091

19,272

21,198

81,561

- 1,054

80,507

In millions of euros

Contractual future lease payments

Unguaranteed residual values

Gross investment

Unearned ﬁnance income

Gross carrying amount

Allowances for doubtful accounts

Net carrying amount

At December 31, 2017

At December 31, 2016

< 1 year

1 year up
to 5 years

> 5 years

Total

< 1 year

1 year up
to 5 years

> 5 years

Total

8,402

602

9,004

- 1,028

7,976

- 136

7,840

15,591

2,525

18,116

- 1,640

16,476

- 171

16,305

324

336

- 38

298

- 2

296

24,317

3,139

27,456

- 2,706

24,750

- 309

24,441

7,407

393

7,800

- 788

7,012

- 156

6,856

13,175

1,880

15,055

- 1,374

13,681

- 225

13,456

583

594

- 89

505

- 5

500

21,165

2,284

23,449

- 2,251

21,198

- 386

20,812

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 271

15. Marketable debt securities

The marketable debt securities with a carrying amount
of €10,063 million (2016: €10,748 million) are part of the
Group’s liquidity management and comprise debt instruments
classiﬁed as available-for-sale. When a short-term liquidity
requirement is covered with quoted securities, those securities
are presented as current assets.

Further information on marketable debt securities is provided
in Note 31.

16. Other ﬁnancial assets

The line item other ﬁnancial assets presented in the
consolidated statement of ﬁnancial position is comprised
as shown in table (cid:202) F.39.

Financial assets measured at fair value through proﬁt or loss
relate exclusively to derivative ﬁnancial instruments which are
not used in hedge accounting.

At December 31, 2017, receivables with a carrying amount of
€511 million (2016: €648 million) were pledged as collateral for
liabilities (see also Note 24).

Further information on other ﬁnancial assets is provided
in Note 31.

F.37
Changes in the allowance account
for receivables from ﬁnancial services

In millions of euros

Balance at January 1

Additions

Amounts written oﬀ

Reversals

Currency translation and other changes

Balance at December 31

F.38
Credit risks included in receivables
from ﬁnancial services

In millions of euros

Receivables, neither past due
nor impaired individually

Receivables past due,
not impaired individually

less than 30 days

30 to 59 days

60 to 89 days

90 to 119 days

120 days or more

Total

Receivables impaired individually

2017

2016

1,054

1,016

480

- 265

- 299

- 100

870

491

- 290

- 181

1,054

At December 31,
2016

2017

81,214

76,127

2,046

315

136

105

2,645

1,928

1,796

403

138

2,486

1,894

Net carrying amount

85,787

80,507

F.39
Other ﬁnancial assets

In millions of euros

Current

At December 31, 2017
Total

Non-current

Current

At December 31, 2016
Total

Non-current

Available-for-sale ﬁnancial assets

thereof equity instruments recognized at fair value

thereof equity instruments carried at cost

Derivative ﬁnancial instruments used in hedge accounting

Financial assets recognized at fair value through proﬁt or loss

Other receivables and ﬁnancial assets

–

1,235

2,291

3,580

1,173

171

1,002

1,144

876

3,221

1,173

171

1,002

2,379

3,167

6,801

–

653

2,103

2,837

811

166

645

1,077

986

2,899

811

166

645

1,730

106

3,089

5,736

272 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. Other assets

19. Trade receivables

Trade receivables are comprised as shown in table (cid:202) F.42.

At December 31, 2017, €38 million of the trade receivables
mature a(cid:5)er more than one year (2016: €49 million).

Allowances
Table (cid:202) F.43 shows changes in the allowance account for
trade receivables.

The total expense from the impairment of trade receivables
amounted to €131 million in 2017 (2016: €97 million).

Credit risks
Table (cid:202) F.44 provides an overview of credit risks included
in trade receivables.

Receivables not subject to an individual impairment
assessment are grouped and subject to collective impairment
allowances to cover credit losses.

Further information on ﬁnancial risk and types of risk
is provided in Note 32.

Non-ﬁnancial other assets are comprised as shown in table
(cid:202) F.40.

Other expected reimbursements predominantly relate to
recovery claims from our suppliers in connection with issued
product warranties.

18. Inventories

Inventories are comprised as shown in table (cid:202) F.41.

The amount of write-down of inventories to net realizable value
recognized as expense in cost of sales was €411 million in
2017 (2016: €842 million). Inventories that are expected to
be recovered or settled a(cid:5)er more than twelve months
amounted to €954 million at December 31, 2017 (December
31, 2016: €974 million) and are primarily spare parts.

As collateral for certain vested employee beneﬁts in Germany,
the value of company cars and demonstration cars at
Mercedes-Benz Cars and Mercedes-Benz Vans included in
inventories at Daimler AG were pledged as collateral to the
Daimler Pension Trust e.V. in an amount of €1,033 million at
December 31, 2017 (December 31, 2016: €1,008 million).

In addition, inventories with a carrying amount of €419 million
at December 31, 2017 (December 31, 2016: €296 million)
were pledged as collateral for liabilities from ABS transactions
(see also Note 24).

The carrying amount of inventories recognized during the period
by taking possession of collateral held as security amounted
to €112 million at December 31, 2017 (December 31, 2016:
€126 million). Those assets are utilized in the context of normal
business operations.

F.40
Other assets

In millions of euros

Current

At December 31, 2017
Total

Non-current

Current

At December 31, 2016
Total

Non-current

Reimbursements due to income tax refunds

Reimbursements due to other tax refunds

Reimbursements due to the Medicare Act (USA)

Other expected reimbursements

Prepaid expenses

Others

510

2,832

–

274

632

712

249

262

211

112

243

759

3,094

485

744

955

734

2,905

–

191

566

4,960

1,145

6,105

4,962

173

112

221

667

785

2,943

364

678

787

5,629

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 273

20. Equity

See also the consolidated statement of changes
in equity (cid:202) F.05.

Share capital
The share capital (authorized capital) is divided into no-par-
value shares. All shares are fully paid up. Each share confers
the right to one vote at the Annual Shareholders’ Meeting
of Daimler AG and, if applicable, with the exception of any new
shares potentially not entitled to dividends, to an equal portion
of the proﬁts as deﬁned by the dividend distribution decided
upon at the Annual Shareholders’ Meeting. Each share
represents a proportionate amount of approximately €2.87
of the share capital.

F.41
Inventories

In millions of euros

Raw materials and manufacturing supplies

Work in progress

Finished goods, parts and products
held for resale

Advance payments to suppliers

Since January 1, 2016, there has been no change in the number
of shares outstanding/issued. The number at December 31,
2017 is 1,070 million, unchanged from December 31, 2016.

F.42
Trade receivables

At December 31,
2016

2017

2,655

3,373

2,723

3,814

19,361

18,609

297

238

25,686

25,384

At December 31,
2016

2017

Approved capital
The Annual Shareholders’ Meeting held on April 9, 2014
authorized the Board of Management, with the consent of the
Supervisory Board, to increase the share capital of Daimler AG
in the period until April 8, 2019 by a total of €1.0 billion in
one lump sum or by separate partial amounts at diﬀerent times
by issuing new, registered no-par-value shares in exchange
for cash and/or non-cash contributions (Approved Capital 2014).
The new shares are generally to be oﬀered to the shareholders
for subscription (also by way of indirect subscription pursuant
to Section 186 Subsection 5 Sentence 1 of the German Stock
Corporation Act (AktG)). Among other things, the Board of
Management was authorized with the consent of the Supervisory
Board to exclude shareholders’ subscription rights under
certain conditions and within deﬁned limits.

Approved Capital 2014 has not yet been utilized.

In millions of euros

Gross carrying amount

Allowances for doubtful accounts

Net carrying amount

12,290

- 300

11,990

10,954

- 340

10,614

F.43
Changes in the allowance account for trade receivables

In millions of euros

Balance at January 1

Charged to costs and expenses

Amounts written oﬀ

Currency translation and other changes

Balance at December 31

F.44
Credit risks included in trade receivables

In millions of euros

Receivables, neither past due
nor impaired individually

Receivables past due,
not impaired individually

less than 30 days

30 to 59 days

60 to 89 days

90 to 119 days

120 days or more

Total

Receivables impaired individually

2017

2016

340

- 107

300

392

- 10

- 62

340

At December 31,
2016

2017

7,720

7,081

1,228

164

103

1,626

2,644

813

127

142

1,148

2,385

Net carrying amount

11,990

10,614

274 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Conditional capital
By resolution of the Annual Shareholders’ Meeting on April 1,
2015, the Board of Management is authorized, with the
consent of the Supervisory Board, until March 31, 2020 to
issue convertible and/or warrant bonds or a combination
of these instruments (“bonds”) with a total face value of up
to €10.0 billion and a maturity of no more than ten years.
The Board of Management is allowed to grant the holders of
these bonds conversion or warrant rights for new registered
no-par-value shares in Daimler AG with an allocable portion of
the share capital of up to €500 million in accordance with the
details deﬁned in the terms and conditions of the bonds. The
bonds can be oﬀered in exchange for cash and/or non-cash
contributions, in particular for shares in other companies. The
terms and conditions of the bonds can include warranty
obligations or conversion obligations. The bonds can be issued
once or several times, wholly or in installments, or simulta-
neously in various tranches as well by aﬃliates of the Company
within the meaning of Sections 15 et seq. of the German Stock
Corporation Act (AktG). Among other things, the Board of Man-
agement was authorized to exclude shareholders’ subscription
rights for the bonds under certain conditions and within deﬁned
constraints with the consent of the Supervisory Board.

This authorization to issue convertible and/or warrant bonds
has not yet been utilized.

In order to fulﬁll the conditions of the above-mentioned autho-
rization, the Annual Shareholders’ Meeting on April 1, 2015
also resolved to increase the share capital conditionally by an
amount of up to €500 million (Conditional Capital 2015).

Treasury shares
By resolution of the Annual Shareholders’ Meeting on April 1,
2015, the Company is authorized until March 31, 2020 to acquire
treasury shares in a volume up to 10% of the share capital issued
as of the day of the resolution to be used for all legal purposes.
The shares can be used, amongst other things excluding share-
holders’ subscription rights, for business combinations or to
acquire companies or to be sold to third parties for cash at a
price that is not signiﬁcantly lower than the stock-exchange price
of the Company’s shares. The acquired shares can also be used
to fulﬁll obligations from issued convertible bonds and/or bonds
with warrants and to be issued to employees of the Company
and employees and board members of the Company’s aﬃliates
pursuant to Sections 15 et seq. of the German Stock Corporation
Act (AktG). The treasury shares can also be canceled.

In a volume up to 5% of the share capital issued as of the day of
the resolution, the Company was authorized to acquire treasury
shares also by using derivatives (put options, call options, forward
purchases or a combination of these instruments), whereas
the term of a derivative must not exceed 18 months and must
not end later than March 31, 2020.

The Board of Management is further authorized, with the consent
of the Supervisory Board, to exclude shareholders’ subscription
rights.

The authorization to acquire treasury shares was not exercised
in the reporting period.

As was the case at December 31, 2016, no treasury shares
are held by Daimler AG at December 31, 2017.

Employee share purchase plan
In 2017, 0.6 million Daimler shares representing €1.7 million
or 0.06% of the share capital were purchased for a price of €42
million and reissued to employees (2016: 0.6 million Daimler
shares representing €1.7 million or 0.05% of the share capital
were purchased for a price of €38 million).

Capital reserves
Capital reserves primarily comprise premiums arising on the
issue of shares as well as expenses relating to the exercise
of the up to 2014 exercisable stock option plans and the issue
of employee shares, eﬀects from changes in ownership
interests in consolidated entities and directly attributable
related transaction costs.

Retained earnings
Retained earnings comprise the accumulated net proﬁts and
losses of all companies included in Daimler’s consolidated
ﬁnancial statements, less any proﬁts distributed. In addition,
the eﬀects of remeasuring deﬁned beneﬁt plans as well as the
related deferred taxes are presented within retained earnings.

Dividend
Under the German Stock Corporation Act (AktG), the dividend
is paid out of the distributable proﬁt reported in the annual
ﬁnancial statements of Daimler AG (parent company only) in
accordance with the German Commercial Code (HGB). For
the year ended December 31, 2017, the Daimler management
will propose to the shareholders at the Annual Shareholders’
Meeting to pay out €3,905 million of the distributable proﬁt of
Daimler AG as a dividend to the shareholders, equivalent to
€3.65 per no-par-value share entitled to a dividend (2016:
€3,477 million and €3.25 per no-par-value share entitled
to a dividend respectively).

Other reserves
Other reserves comprise accumulated unrealized gains/losses
from currency translation of the ﬁnancial statements of the
consolidated foreign companies and accumulated unrealized
gains/losses on the measurement of ﬁnancial assets available-
for-sale, derivative ﬁnancial instruments and equity-method
investments.

Table (cid:202) F.02 shows the details of changes in other reserves in
other comprehensive income/loss.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 275

21. Share-based payment

As of December 31, 2017, the Group has the 2014–2017
Performance Phantom Share Plans (PPSP) outstanding.
The PPSP are cash-settled share-based payment instruments
and are measured at their respective fair values at the balance
sheet date. The PPSP are paid out at the end of the stipulated
holding period; earlier, pro-rated payoﬀ is possible in the case
of beneﬁts leaving the Group only if certain deﬁned conditions
are met. PPSP 2013 was paid out as planned in the ﬁrst
quarter of 2017.

Moreover, 50% of the annual bonus of the members of the Board
of Management is paid out a(cid:5)er a waiting period of one year.
The actual payout is determined by the development of Daimler
shares compared to an automobile related index (Auto-STOXX).
The fair value of this medium-term annual bonus, which depends
on this development, is measured by using the intrinsic value
at the reporting date.

Table (cid:202) F.46 shows expenses in the consolidated statement of
income resulting from the rights of current members of the
Board of Management.

The details shown in table (cid:202) F.46 do not represent any paid or
committed remuneration, but refer to expenses calculated
according to IFRS. Details of the remuneration of the members
of the Board of Management in 2017 can be found in the
Remuneration Report. E Management Report from page 136

F.45
Eﬀects of share-based payment

Expense
2016

2017

Provision
At December 31,
2016
2017

In millions of euros

PPSP

- 98

- 62

191

284

The pre-tax eﬀects of share-based payment arrangements for
the executive managers of the Group and the members of
the Board of Management of Daimler AG on the consolidated
statement of income and consolidated statement of ﬁnancial
position are shown in table (cid:202) F.45.

Medium-term compo-
nent of annual bonus of
the members of the
Board of Management

- 7

- 105

- 5

- 67

204

298

F.46
Expenses in the consolidated statement of income resulting from
share-based payments of current members of the Board of Management

In millions of euros

PPSP

Medium-term component
of the annual bonus

In millions of euros

PPSP

Medium-term component
of the annual bonus

In millions of euros

PPSP

Medium-term component
of the annual bonus

In millions of euros

PPSP

Medium-term component
of the annual bonus

Dr. Dieter Zetsche
2016

2017

Dr. Wolfgang Bernhard1
2017
2016

2017

Martin Daum2
2016

- 3.9

- 1.8

- 3.8

- 1.4

- 0.2

–

- 1.6

- 0.6

- 0.8

- 0.7

–

Renata Jungo Brüngger
2016
2017

2017

Ola Källenius
2016

2017

Wilfried Porth
2016

- 0.8

- 0.7

- 0.5

- 0.6

- 1.2

- 0.7

- 0.5

- 1.6

- 0.7

- 1.6

- 0.5

2017

Britta Seeger3
2016

Hubertus Troska
2016

2017

Bodo Uebber
2016

- 0.4

- 0.8

–

- 1.6

- 0.7

- 1.5

- 0.5

- 1.9

- 0.9

- 1.8

- 0.6

Prof. Dr. Thomas Weber4
2017
2016

–

- 1.6

- 0.5

1 Appointment to the Board of Management ended on February 10, 2017. Amounts are included pro rata for 2017.
2 Appointed to the Board of Management as of March 1, 2017.
3 Appointed to the Board of Management as of January 1, 2017.
4 Appointment to the Board of Management ended on December 31, 2016.

276 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Performance Phantom Share Plans
In 2017, the Group adopted a Performance Phantom Share Plan
(PPSP), similar to those used in previous years, under which
eligible employees are granted phantom shares entitling them
to receive cash payments a(cid:5)er four years. During the four-
year period between the allocation of the preliminary phantom
shares and the payout of the plan at the end of the term,
the phantom shares earn a dividend equivalent in the amount
of the actual dividend paid on ordinary Daimler shares. The
amount of cash paid to eligible employees at the end of the
holding period is based on the number of vested phantom
shares (determined over a three-year performance period)
multiplied by the quoted price of Daimler’s ordinary shares
(calculated as an average price over a speciﬁed period at the
end of the four-year plan period). The vesting period is
therefore four years. For the existing plans, the quoted price
of Daimler’s ordinary shares to be used for the payout is
limited to 2.5 times the Daimler share price at the date of grant.
Furthermore, the payout for the members of the Board of
Management is also limited to 2.5 times the allotment value
used to determine the preliminary number of phantom
shares. The limitation of the payout for the members of the
Board of Management also includes the dividend equivalent.

Determination of the number of phantom shares that vest of the
paid-out PPSP 2013 is based on return on net assets derived
from internal targets and return on sales (RoS) compared with
benchmarks oriented towards competitors.

The number of phantom shares that vest of the PPSPs granted
in 2014 to 2017 will be based on the relative share performance,
which measures the development of the price of a share price
index based on a competitor group including Daimler, and the
RoS compared with benchmarks oriented towards competitors.
Special rules apply for the members of the Board of Management:
Daimler’s RoS must be not equal to but higher than that of
the competitors in order to achieve the same target achievement
as the other plan participants. For the PPSP granted in 2015
and until 2017, an additional limit on target achievement was
agreed upon for the reference parameter RoS for the members
of the Board of Management. In the case of target achievement
between 195% and 200%, an additional comparison is made on
the basis of the RoS achieved in absolute terms. If the actual
RoS for the automotive business is below the strategic target
(currently 9%) in the third year of the performance period,
target achievement is limited to 195%.

The Group recognizes a provision for awarding the PPSP in the
consolidated statement of ﬁnancial position. Since payment
per vested phantom share depends on the quoted price of
Daimler’s ordinary shares, that quoted price essentially
represents the fair value of each phantom share. The proportionate
remuneration expenses from the PPSP recognized in the
individual years are measured based on the price of Daimler
ordinary shares and the estimated target achievement.

22. Pensions and similar obligations

Table (cid:202) F.47 shows the composition of provisions for pension
beneﬁt plans and similar obligations.

At the Daimler Group, deﬁned beneﬁt pension obligations exist
as well as, to a smaller extent, deﬁned contribution pension
obligations, speciﬁc to the various countries. In addition,
healthcare beneﬁt obligations are recognized outside Germany.

Deﬁned beneﬁt pension plans

Provisions for pension obligations are made for deﬁned
commitments to active and former employees of the Daimler
Group and their survivors. The deﬁned beneﬁt pension plans
provided by Daimler generally vary according to the economic,
tax and legal circumstances of the country concerned. Most
of the deﬁned beneﬁt pension plans also provide beneﬁts in the
case of invalidity and death.

The Group’s main German and non-German pension plans
are described below.

German plans
Most employees in Germany have deﬁned beneﬁt pension
plans; most of the pension plans for the active workforce are
based on individual retirement beneﬁt accounts, to which
the Company makes annual contributions. The amount of the
contributions for employees paid according to wage-tariﬀ
agreements depends on the tariﬀ classiﬁcation in the respec-
tive year, and for executives it depends on their respective
income. For the commitments to retirement beneﬁts made
until 2011, the contributions continue to be converted into
capital components and credited to the individual pension
account with the application of ﬁxed factors related to each
employee’s age. The conversion factors include a ﬁxed value
increase. The pension plans were newly structured for new
entrants in 2011 to reduce the risks associated with deﬁned
beneﬁt plans. New entrants now beneﬁt from value increases
of the contributions through an investment fund with a special
lifecycle model. The Company guarantees at a minimum the
value of the contributions paid in. Pension payments are made
either as a life annuity, twelve annual installments, or a single
lump sum.

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 277

The fair value of plan assets is predominantly determined by
the situation on the capital markets. Unfavorable develop-
ments, especially of equity prices and ﬁxed-interest securities,
could reduce that fair value. The diversiﬁcation of fund assets,
the engagement of asset managers using quantitative and
qualitative analyses, and the continual monitoring of performance
and risk help to reduce associated investment risk. The Group
regularly makes additional contributions to the plan assets
in order to cover future obligations from deﬁned beneﬁt pension
plans. Furthermore, in 2017, the Group made an extraordi-
nary contribution of €3.0 billion into the German pension plan
assets, in order to sustainably strengthen them. In 2016,
shares in Renault and Nissan with a fair value of €1.8 billion
were contributed to the German plan assets.

As a general principle, it is the Group’s objective to design
new pension plans as deﬁned beneﬁt plans based on capital
components or on annual contributions, or as deﬁned
contribution plans.

F.47
Composition of provisions for pensions
and similar obligations

December 31,
2016

2017

In millions of euros

Provision for pension beneﬁts

4,625

7,847

Provision for other
post-employment beneﬁts

1,142

5,767

1,187

9,034

In addition, previously concluded deﬁned beneﬁt plans exist
which primarily depend on employees’ wage-tariﬀ classiﬁcation
upon transition into the beneﬁt phase and which foresee a life
annuity.

As well as the employer-ﬁnanced pension plans granted
by German companies, the employees of some companies
are also oﬀered various earnings-conversion models.

Most of the pension obligations in Germany relating to deﬁned
beneﬁt pension plans are funded by assets invested in long-
term outsourced funds. Contractual trust arrangements (CTA)
exist between Daimler AG as well as some subsidiaries
in Germany and the Daimler Pension Trust e.V. The Daimler
Pension Trust e.V. acts as a collateral trust fund.

In Germany, there are no statutory or regulatory minimum
funding requirements.

Non-German plans
Signiﬁcant plans exist primarily in the United States and Japan.
They comprise plans relating to ﬁnal salaries as well as plans
relating to salary based components. Most of the obligations
outside Germany from deﬁned beneﬁt pension plans are
funded by assets outplaced into long-term investment funds.

Risks from deﬁned beneﬁt pension plans
The general requirements with regard to retirement beneﬁt
models are laid down in the Pension Policy, which has Group-wide
validity. Accordingly, the committed beneﬁts are intended
to contribute to additional ﬁnancial security during retirement,
and in the case of death or invalidity to be capable of being
planned and fulﬁlled by the respective company of the Group
and to have a low-risk structure. In addition, a committee
exists that approves new pension plans and amendments to
existing pension plans as well as guidelines relating to com-
pany retirement beneﬁts.

The obligations from deﬁned beneﬁt pension plans and the
pension plan assets can be subject to ﬂuctuations over time.
This can cause the funded status to be negatively or positively
impacted. Fluctuations in the deﬁned beneﬁt pension obligations
result at the Daimler Group in particular from changes in
ﬁnancial assumptions such as discount rates and increases
in the cost of living, but also from changes in demographic
assumptions such as adjusted life expectancies. With most
of the German plans, expected long-term wage and salary
increases do not have an impact on the amount of the obligation.

278 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of the net obligation from
deﬁned beneﬁt pension plans
The development of the relevant factors is shown in table
(cid:202) F.48.

Market prices are available for equities and bonds due
to their listing in active markets. Most of the bonds
have investment grade ratings. They include government
bonds of very good creditworthiness.

Composition of plan assets
Plan assets and income from plan assets are used solely
to pay pension beneﬁts and to administer the plans.
The composition of the Group’s pension plan assets is
shown in table (cid:202) F.49.

The investment strategy is reviewed regularly and adjusted
if deemed necessary. The investment strategy is determined
by Investment Committees, which are generally composed
of representatives of the Finance and Human Resources depart-
ments. The pension plan assets are generally oriented towards
the structure of the pension obligations.

F.48
Present value of deﬁned beneﬁt pension obligations and fair value of plan assets

In millions of euros

Present value of the deﬁned beneﬁt obligation
at January 1

Current service cost

Interest cost

Contributions by plan participants

Actuarial gains (-)/losses from changes
in demographic assumptions

Actuarial gains (-)/losses from changes
in ﬁnancial assumptions

Actuarial gains (-)/losses from experience
adjustments

Actuarial gains (-)/losses

Past service cost, curtailments and settlements

Pension beneﬁts paid
Currency exchange-rate changes and other changes1

Present value of the deﬁned beneﬁt obligation
at December 31

December 31, 2017
Non-German
Plans

German
Plans

December 31, 2016
Non-German
Plans

German
Plans

Total

31,173

26,982

4,191

27,640

23,803

3,837

687

648

- 23

1,076

1,055

- 117

- 973

- 787

591

495

- 13

419

- 55

351

–

- 744

153

- 10

657

704

- 117

- 229

- 804

601

750

- 11

3,021

3,015

- 37

- 932

512

595

2,733

- 21

2,718

- 748

155

- 17

288

297

- 57

- 184

31,744

27,746

3,998

31,173

26,982

4,191

Fair value of plan assets at January 1

23,384

20,315

3,069

20,226

17,306

2,920

Interest income from plan assets

Actuarial gains/losses (-)

Actual return on plan assets

Contributions by the employer

Contributions by plan participants

Settlements

Pension beneﬁts paid
Currency exchange-rate changes and other changes1

489

996

1,485

3,692

–

- 910

- 494

377

541

918

3,596

–

- 702

Fair value of plan assets at December 31

27,215

24,197

Funded status

thereof recognized in other assets

thereof recognized in provisions for pensions
and similar obligations

1 Including reclassiﬁcations to provisions for other risks.

- 4,529

- 3,549

–

112

455

567

–

- 208

- 510

3,018

- 980

582

994

1,576

2,427

- 52

- 868

465

830

1,295

2,337

–

- 705

23,384

20,315

117

164

281

- 52

- 163

- 12

3,069

- 7,789

- 6,667

–

- 1,122

- 4,625

- 3,549

- 1,076

- 7,847

- 6,667

- 1,180

F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 279

Pension cost
The components of pension cost included in the consolidated
statement of income are shown in table (cid:202) F.50.

F.49
Composition of plan assets

In millions of euros

Energy, commodities and utilities

Financials

Healthcare
Industrials1

Consumer goods

Technology and telecommunication

Others

Equities

Government bonds

Corporate bonds

Securitized bonds

Bonds

Other exchange-traded instruments

Total exchange-traded instruments
Alternative investments2

Real estate

Other non-exchange-traded instruments

Cash and cash equivalents

Total non-exchange-traded instruments

Fair value of plan assets

thereof fair value of own transferable
ﬁnancial instruments

thereof fair value of self-used plan assets

At December 31, 2017
Non-German
Plans

German
Plans

Total

959

1,193

547

2,535

1,149

1,127

7,556

4,658

9,485

831

1,027

440

2,440

942

932

–

6,612

3,844

8,556

14,189

12,430

21,750

19,043

512

537

418

3,998

5,465

27,215

–

388

436

378

3,952

5,154

24,197

–

128

166

107

207

195

944

814

929

1,759

2,707

124

101

311

3,018

–

1 Including the shares in Renault and Nissan in the amount of €2,010 (in 2016: €2,178) million.
2 Alternative investments mainly comprise private equity.

F.50
Pension cost

In millions of euros

Current service cost

Past service cost, curtailments and settlements

Net interest expense

Net interest income

German
Plans

2017
Non-German
Plans

- 591

–

- 118

–

- 709

- 96

117

- 43

- 20

Total

- 687

117

- 161

- 729

At December 31, 2016
Non-German
Plans

German
Plans

907

1,147

559

2,783

1,146

981

–

7,523

3,397

7,547

10,949

18,475

480

450

853

1,840

20,315

–

141

219

105

110

228

186

1,032

1,041

665

1,758

2,792

120

277

3,069

–

German
Plans

2016
Non-German
Plans

- 512

- 20

- 130

–

- 662

- 89

- 43

- 122

Total

1,048

1,366

664

2,893

1,374

1,167

8,555

4,438

8,212

12,707

21,267

555

570

893

2,117

23,384

–

Total

- 601

- 15

- 173

- 784

280 F | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Measurement assumptions
The measurement date for the Group’s deﬁned beneﬁt pension
obligations and plan assets is generally December 31. The
measurement date for the Group’s net periodic pension cost
is generally January 1. The assumptions used to calculate
the deﬁned beneﬁt obligations vary according to the economic
conditions of the countries in which the pension plans
are situated.

Calculation of the deﬁned beneﬁt obligation uses life
expectancy for the German plans based on the 2005 G
mortality tables of K. Heubeck. For non-German plans,
comparable country-speciﬁc calculation methods are used.

Table (cid:202) F.51 shows the signiﬁcant weighted average measure-
ment factors used to calculate pension beneﬁt obligations.

Sensitivity analysis
An increase or decrease in the main actuarial assumptions
would aﬀect the present value of the deﬁned beneﬁt pension
obligations as shown in table (cid:202) F.52.

The calculations carried out by actuaries were done in isolation
for the evaluation parameters regarded as important. This
means that if there is a simultaneous change in several param-
eters, the individual results cannot be summed due to correla-
tion eﬀects. With a change in the parameters, the sensitivities
shown cannot be used to derive a linear development of the
deﬁned beneﬁt obligation.

For the calculation of the sensitivity of life expectancy, by
means of ﬁxed (non-age-dependent) factors for a reference
person, a life expectancy one year higher or one year lower
is achieved.

Eﬀect on future cash ﬂows
Daimler currently plans to make contributions of €0.7 billion to
its pension plans for the year 2018; the ﬁnal amount is
usually set in the fourth quarter of a ﬁnancial year. In addition,
the Group expects to make pension beneﬁt payments of
€1.0 billion in 2018.

Deﬁned contribution pension plans

Under deﬁned contribution pension plans, Daimler makes
deﬁned contributions to external insurance policies or invest-
ment funds. There are fundamentally no further contractual
obligations or risks for Daimler in excess of the deﬁned contri-
butions. The Group also pays contributions to governmental
pension schemes. In 2017, the total cost from deﬁned contri-
bution plans amounted to €1.6 billion (2016: €1.5 billion).
Of those payments €1.5 billion (2016: €1.4 billion) was related
to governmental pension plans.

Multi-employer plans
Daimler participates in some collectively bargained deﬁned
beneﬁt pension plans maintained by more than one employer.
The Group presents several of these plans in its consolidated
ﬁnancial statements as deﬁned contribution plans because the
information required to use deﬁned beneﬁt accounting is not
available in a timely manner or in suﬃcient detail. The Group
cannot exercise direct control over such plans and the plan
trustees have no legal obligation to share information directly
with participating employers. Higher contributions by the
Group to such a pension plan could be required in particular
when an underfunded status exceeds a speciﬁc level. Exit
from such a plan can lead to the companies involved having
to oﬀset the potential future shortfall relating to their share
of the plan. Furthermore, the possibility exists that Daimler
can be liable for other participants’ obligations.

The multi-employer pension plans previously included a pension
plan in the NAFTA region, for which the information required
to use beneﬁt accounting for deﬁned beneﬁt plans was available
for the ﬁrst time in 2017. The company withdrew from the
plan by the end of November 2017. The settlement of the plan
resulted in a gain for Daimler Trucks of €117 million. The EBIT
eﬀect is presented in cost of sales in the consolidated statement
of income. The present value of future ﬁnancial obligations is
presented in provisions for other risks as of December 31, 2017.

As a result, multi-employer plans at the Daimler Group are
classiﬁed as not material at December 31, 2017.

The weighted average duration of the deﬁned beneﬁt
obligations is shown in table (cid:202) F.53.