Daimlerchrysler Annual Report 2003

Business Review
Group operating profit €5.7 billion | Worldwide unit sales of 4.3 million vehicles (2002: 4.5 million) |
Mercedes Car Group exceeded high level of earnings of previous year | Burden on earnings at
Chrysler Group | Significantly higher earnings at Commercial Vehicles and Services | Net income
of €0.4 billion (2002: €4.7 billion) affected by impairment of investment in EADS | Proposed
dividend of €1.50 per share (2002: €1.50)
Earnings trend affected by difficult market situation. In 2003,
DaimlerChrysler achieved an operating profit of €5.7 billion in a
difficult market environment (2002: €6.9 billion). This result
included restructuring expenditures related to the turnaround plan
at Chrysler Group totaling €469 million. Group operating profit in
2003 also included a positive special effect of €1.0 billion from
the sale of the MTU Aero Engines business unit. In 2002, operating
profit included special effects in a net positive amount of €1.0
billion.
After adjusting to exclude the aforementioned effects, Daimler-
Chrysler achieved its goal for 2003 of generating earnings of some
€5 billion. The decrease in the Group’s operating profit from its
ongoing businesses was primarily due to Chrysler Group’s slightly
negative result and the negative contribution from our investment
in Mitsubishi Motors Corporation.
With an operating profit of €3.1 billion, Mercedes Car Group
improved on its strong result of the prior year (€3.0 billion), despite
high expenditures for its second model offensive.
The Chrysler Group incurred an operating loss of €506 million
(2002: operating profit of €0.6 billion) in 2003. The result included
restructuring expenditures of €469 million (2002: €0.7 billion).
The Chrysler Group thus nearly attained its goal of breaking even
with its ongoing business. The main reasons for the lower
profitability from its ongoing business were the lower unit sales and
significantly higher customer incentives due to the difficult market
in the United States.
Commercial Vehicles achieved an operating profit of €855 million
in 2003 (2002: operating loss of €0.3 billion including special
expenditures of €0.5 billion). This strong improvement, despite the
fact that markets remained challenging, was primarily due to the
consistent realization of efficiency-boosting programs at all of the
division’s business units.
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The Services division once again improved its operating profit from
its ongoing business, helped by higher interest-rate margins and
favorable refinancing conditions. However, charges of €241 million
resulted from the delayed introduction of the electronic toll system
for trucks on German highways (Toll Collect). Operating profit
amounted to €1.2 billion (2002: €3.1 billion). The operating profit of
the prior year included a gain of €2.5 billion from the sale of the
49.9% share in T-Systems ITS and other special expenses totaling
€0.4 billion.
In 2003, the Other Activities segment’s contribution to earnings
increased to €1.3 billion (2002: €0.9 billion). This figure included
income of €1.0 billion from the sale of the MTU Aero Engines
business unit at the end of 2003. The operating profit of the prior
year included a gain of €0.2 billion from the sale of our 40%
interest in Conti Temic microelectronic. Due to the difficult situation
in North America and rising expenditures for credit risks and
residual-value risks in the financial services business, the contribution
to earnings from Mitsubishi Motors Corporation (MMC) was
negative, whereas EADS and MTU Aero Engines once again achieved
positive contributions to the Group’s operating profit.
Net income amounted to €0.4 billion (2002: €4.7 billion). The
primary causes for the decrease were the lower operating profit and
the impairment charge of €2.0 billion related to our holding in
EADS, which was recognized at the end of the third quarter 2003
according to the requirements of US GAAP and the US Securities
and Exchange Commission (SEC). The sale of MTU Aero Engines
resulted in a gain, which increased net income by €0.9 billion in
2003. Earnings for the prior year included positive special effects
totaling €1.4 billion, due to various special expenses and income,
particularly from the sale of the Group’s 49.9% share in T-Systems
ITS. Earnings per share amounted to €0.44 (2002: €4.68).