Business development in 2008

The weak world economy and the international financial market crisis had a significant impact on the automotive industry in 2008. Global unit sales of cars decreased by approximately 5 percent, the biggest drop in nearly 30 years. A sharp drop in demand in the volume markets of North America, Western Europe, and Japan was partially offset by growth in the emerging markets. Demand for commercial vehicles also declined in the NAFTA region, Western Europe, and Japan. Although demand rose in some of the emerging markets despite weakening towards the end of the year, worldwide unit sales of commercial vehicles decreased slightly.

Despite extremely difficult market conditions, especially in the second half of the year, Daimler sold a total of 2.1 million vehicles in 2008, thus nearly equaling the prioryear level. Daimler’s total revenue amounted to €95.9 billion in 2008, compared with €99.4 billion in the prior year; adjusted for exchange-rate effects and changes in the consolidated group, there was a decrease of 1 percent. EBIT from ongoing operations excluding special items, particularly due to Chrysler, reached €6.2 billion, which was more than the level we had announced in our reporting on the third quarter.

The Mercedes-Benz Cars division sold 1,273,000 vehicles (2007: 1,293,200). We therefore defended our worldwide market position in the premium-car segment. However, the development of business was impacted by the rapid deterioration in economic conditions during 2008, leading to massive drops in unit sales in major markets in the second half of the year. Unit sales of the Mercedes-Benz brand fell to 1,125,900 cars (2007: 1,180,100). The smart brand increased its unit sales significantly to 139,000 cars in the year under review (2007: 103,100 cars). This was partially due to the great success of the smart fortwo in the United States, where 27,600 cars were shipped in the first year of sales. Mercedes-Benz seeks to inspire its customers with economical and environmentally compatible premium automobiles that sacrifice nothing in the way of the typical brand attributes of safety, comfort, and superior driving pleasure. Our “Road to the Future” program launched in September 2007 demonstrates how we intend to achieve that goal. An important step in this respect was taken during the year under review with the introduction of numerous BlueEFFICIENCY models. BlueEFFICIENCY comprises a package of fuel-economy enhancement measures that are being applied in all Mercedes-Benz model series. In December 2008, Mercedes-Benz then launched the first-ever luxury-segment BlueEFFICIENCY model in the form of the S 320 CDI. This sedan consumes 7.6 liters of fuel per 100 km — better than any other model in its segment. The new C 250 CDI BlueEFFICIENCY, which was launched in the fall of 2008 and is equipped with a new four-cylinder diesel engine, combines driving pleasure with outstanding efficiency. With fuel consumption of only 5.2 liters of diesel per 100 kilometers and carbon- dioxide emissions of 138 grams per kilometer, the model offers the performance of a conventional sixcylinder engine but with much lower fuel consumption. Our S 400 HYBRID, which we unveiled in September 2008, will be the world’s most fuel-efficient gasoline- powered luxury sedan when it is launched in mid- 2009.

Daimler Trucks sold a total of 472,100 heavy, medium and light-duty trucks in 2008, surpassing prior-year sales of 467,700 vehicles. We also succeeded in defending our leading position in the market for trucks above 6 tons. Trucks Europe/Latin America increased its sales once again by 6 percent to 170,100 units, thus setting a new record. We achieved strong growth in Brazil (+23 percent) and the Middle East (+90 percent). Unit sales fell, however, in the NAFTA region and in Japan. The market recovery originally expected for the United States and Canada in the second half of 2008 did not occur due to the weak economic developments. The Trucks NAFTA unit was therefore unable to increase its sales as planned; instead there was a decrease to 104,300 units (2007: 119,000 units). Trucks Asia reached a record level and surpassed its prior-year unit sales by 5 percent, selling 197,700 vehicles. A particular highlight for Daimler Trucks in 2008 was the unveiling of the third-generation Mercedes-Benz Actros, which is the world’s first truck for long-distance haulage to be fitted with automated transmission as standard. A few weeks after its premiere in March 2008, the market-leading truck was already entered in the Guinness Book of World Records as the world’s most fuelefficient series-produced truck and world champion for low CO₂ emissions following a test drive in Nardo, southern Italy.

Daimler Financial Services’ business development was generally positive in the year under review. Its global contract volume of € 63.4 billion at the end of the year 2008 was 7 percent higher than the prior-year level. Several companies were consolidated for the first time during 2008, most of them in Asia and Eastern Europe. Without this effect and adjusted for exchangerate effects, contract volume increased by 5 percent. New business increased by 7 percent to €29.5 billion, or by 6 percent when adjusted for the aforementioned effects. Once again last year, Daimler Financial Services was awarded leading positions in various independent studies of dealer and customer satisfaction, for example in Germany, the United States and the United Kingdom.

Mercedes-Benz Vans increased its market share in the segment of medium-sized and large vans and further extended its leading position. In terms of unit sales, the number of 287,200 vans sold in 2008 did not quite match the record prior-year figure (289,100) due to the difficult market conditions in the second half of last year. The Sprinter was again selected CEP Van of the Year in its class of vehicles weighing up to 3.5 tons. A jury composed of 30 experts from the CEP (courier, express, and parcel delivery) segment based its decision on criteria such as economy, functionality and vehicle handling. In the same competition, the Mercedes-Benz Vito was the third-time winner in the class of vans weighing up to 2.8 tons. The Mercedes-Benz Sprinter also took first place in the competition for Commercial Vehicle of the Year, underscoring its tremendous popularity with customers.

Daimler Buses also achieved record unit sales in the year 2008, selling 40,600 buses and chassis worldwide (2007: 39,000), and successfully defended its leading market position in the segment of buses above 8 tons. At the 62nd International Motor Show (IAA) for Commercial Vehicles the Mercedes-Benz Citaro G BlueTec Hybrid was presented; Daimler Buses is working hard to launch this vehicle on the market in the near future. With the Orion brand, we are the world market leader in the field of hybrid buses. To date, we have sold more than 1,700 hybrid buses and have received orders for more than 1,000 additional buses.

Daimler anticipates a significant decrease in business volume in 2009. From the starting point of the currently projected unit sales, revenue is likely to be lower than in 2008 in all of the vehicle divisions. We anticipate further substantial burdens on the earnings of the Daimler Group and its divisions. A more detailed statement on earnings will only be possible later in the year, when the development of the world economy and the automotive markets can be better assessed. With the help of our intensified efficiency-improving actions and the market success of our new products, we should be able to increase our earnings again in 2010.