Mercedes Benz

OFFICIAL PRESS RELEASE

Stuttgart, Germany, Apr 28, 2009

- Net loss of €1,286 million (Q1 2008: net profit of €1,332 million)

- Revenue significantly below prior-year level at €18.7 billion

- Decreases in unit sales and revenue expected for full-year 2009

- Implementation of measures with the aim of saving €4 billion in 2009

- Gradual improvement in operating profitability expected during 2009, but renewed significant operating loss in second quarter

Mercedes-Benz Cars expects positive earnings again in second half of this year
The global financial and economic crisis and the resulting difficult automotive markets placed a significant burden on the earnings of the Daimler Group (stock-exchange abbreviation DAI) in the first quarter of 2009.

Daimler posted EBIT of minus €1,426 million for the first quarter of 2009 (Q1 2008: plus €1,976 million).


The significant decline in earnings primarily reflects the sharp drops in unit sales at Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz Vans in the first quarter of 2009. The measures already taken mitigated the decline in earnings, but were far from sufficient to compensate for the effect of the decrease in Group revenue related to lower unit sales. Increased cost of risk at Daimler Financial Services led to a fall in that division’s operating results.

Earnings in the first quarter of 2008 were positively affected by gains realized on the sale of real estate properties at Potsdamer Platz (€449 million) and gains connected with the transfer of EADS shares (€102 million). There was an opposing effect from charges relating to Daimler’s equity interest in Chrysler (€491 million). Special items are shown in the table on page 10.

The Group posted a net loss for the period of €1,286 million (Q1 2008: net profit of €1,332 million); earnings per share amounted to minus €1.40 (Q1 2008: plus €1.29).

Unit sales down by 34% in the first quarter

In the first quarter of 2009, Daimler sold 332,300 cars and commercial vehicles worldwide, which was 34% lower than in the same period of last year.

The Daimler Group’s first-quarter revenue decreased significantly from €24.0 billion to €18.7 billion in 2009. Adjusted for exchange-rate effects, revenue fell by 25%.
At the end of the first quarter of 2009, Daimler employed 263,819 people worldwide (end of Q1 2008: 273,902). Of that total, 164,983 people were employed in Germany (end of Q1 2008: 166,661).

The free cash flow of the industrial business was negative and fell significantly by €2.2 billion to minus €1.1 billion.

The main reason for the decrease in the free cash flow was the development of the divisions’ earnings. In addition, the free cash flow of the prior-year period included proceeds from the sale of real estate at Potsdamer Platz and from the transfer of EADS shares totaling €1.4 billion. However, there were positive effects on the free cash flow of the industrial business from the development of inventories.

Details of the divisions in the first quarter of 2009

Due to the ongoing contraction of worldwide automobile markets and the model changeover of the high-volume E-Class, Mercedes-Benz Cars sold 231,200 vehicles in the first quarter of 2009 (Q1 2008: 318,300). First-quarter revenue decreased by 27% to €9.1 billion.

The division posted EBIT of minus €1,123 million in the first quarter, which was significantly below the result of the prior-year quarter (plus €1,152 million).
The decline in earnings is mainly a result of the significant decrease in demand for automobiles and the resulting drop in unit sales. The lifecycle-related replacement of the E-Class also had a negative impact on sales. Earnings were additionally reduced by a shift in demand towards smaller models and ongoing price pressure in automobile markets. The decline in earnings was partially offset by the timely initiation of cost-adjusting actions such as the introduction of short-time work at plants in Germany.

Daimler Trucks sold 65,400 vehicles worldwide in the first quarter of 2009 (Q1 2008: 107,700). The significant decrease was caused by the worldwide recession. Revenue decreased from €6.3 billion to €4.9 billion.

Due to the significant decline in unit sales, the division recorded EBIT of minus €142 million, which was significantly below the EBIT of plus €403 million posted in the prior-year quarter. There was an additional negative impact on EBIT in Q1 2009 of €45 million from the measures initiated in 2008 for the repositioning of Daimler Trucks North America. Positive effects resulted from cost adjustments and further efficiency improvements.

The Trucks Europe/Latin America unit (Mercedes-Benz) sold 23,100 vehicles in the first quarter (Q1 2008: 33,800), a decrease compared with the prior-year quarter, as expected. Sales of 17,200 units by Trucks NAFTA (Freightliner, Sterling, Western Star and Thomas Built Buses) were also lower than in the prior-year period(Q1 2008: 27,500). Trucks Asia (Mitsubishi Fuso) sold 25,100 vehicles in the first quarter (Q1 2008: 46,500).

The Daimler Group adjusted its segment reporting at the beginning of 2009. The business activities of Mercedes-Benz Vans and Daimler Buses, which were previously reported under Vans, Buses, Other, are now presented separately.

Due to a severe market slump, Mercedes-Benz Vans’ unit sales decreased to 28,800 vehicles in the first quarter (Q1 2008: 68,600). Revenue of €1.3 billion was also well below the figure for the prior-year period.

The Mercedes-Benz Vans division posted EBIT of minus €91 million (Q1 2008: plus €186 million). Positive effects resulted from efficiency increases and the development of some currencies.

Despite the difficult market situation, Mercedes-Benz Vans continued to defend its market leadership for medium-sized and large vans in Western Europe, taking a market share of 16.7% (Q1 2008: 16.3%).

Daimler Busessold 6,800 buses and chassis worldwide in the first quarter of this year (Q1 2008: 9,200). As the decline in unit sales is almost solely accounted for by lower volumes of chassis in Latin America, revenue decreased at the much lower rate of 2% to €904 million. The division achieved EBIT of €65 million (Q1 2008: €75 million).

At Daimler Financial Services, new business decreased by 12% compared with the prior-year quarter to €5.9 billion. Contract volume amounted to €62.0 billion at the end of the first quarter, which was 2% lower than at the end of 2008.

The division posted first-quarter EBIT of minus €167 million (Q1 2008: plus €168 million). The decline in earnings was primarily due to charges resulting from further increases in risk provisions. An additional factor is that the EBIT for the period includes losses from the sale of parts of the non-automotive leasing portfolio. Furthermore, expansion of Mercedes-Benz Bank’s direct banking business entailed expenses, which had a negative impact on first-quarter earnings.

The other business activities – in particular the equity holdings in Chrysler, EADS and Tognum, which were previously allocated to Vans, Buses, Other – have been included in “Reconciliation” since the beginning of 2009.

In the first quarter of 2009, Daimler’s share in the net profit of EADS amounted to €83 million (Q1 2008: €22 million). The equity-method inclusion of the 19.9% equity interest in Chrysler did not lead to any further charges on earnings. In connection with the legal transfer of Chrysler’s international sales activities to Chrysler LLC and due to the valuation of Chrysler-related assets, the Group recorded a total gain of €40 million in the first quarter of 2009.

Outlook

Based on the divisions’ planning, Daimler expects its total unit sales to decrease significantly in the year 2009 (2008: 2.1 million vehicles).

Mercedes-Benz Cars has an up-to-date and competitive product range. Sales impetus will be provided by the GLK, a compact SUV that has been available since the end of 2008, and the new E-Class sedan, which was launched in March 2009. The station-wagon version of the E-Class will follow this autumn. The new E-Class coupe will also be launched this year, followed by the convertible. The division intends to further enhance the attractiveness of its product range with new generations of the S-Class and the GL. With the S 400 HYBRID and additional BlueEFFICIENCY models, the entire model range will be supplemented with particularly environmentally friendly and fuel-efficient drive systems. For the smart fortwo, new sales potential will be utilized this year with launches in the growth markets of China and Brazil. However, Mercedes-Benz Cars will not be able to avoid the expected weakness of major sales markets and in particular of its main market segments. Overall, unit sales in 2009 will therefore be lower than in the prior year. Lower volumes are anticipated above all in the markets of the United States, Western Europe and Japan, which have been particularly hard hit by the economic and financial crisis. Unit sales should be partially stabilized by growth in the emerging markets, however.

Mercedes-Benz Cars assumes it will at least maintain its market shares and that the bottom of the EBIT curve was reached in the first quarter. Due in particular to the cost-reducing measures and the launch of the new E-Class in Europe and the US launch planned for June 2009, there should be a gradual improvement in profitability over the next three quarters and positive earnings in the second half of the year.

As a result of the global economic crisis, Daimler Trucks assumes that unit sales will fall significantly in all its major markets in full-year 2009. The division expects to maintain its shares of core markets, however. The full impact of the significant drop in demand in all markets since the beginning of this year will be felt as of the second quarter. Further burdens on earnings are therefore anticipated, especially in the second quarter. The repositioning of Daimler Trucks North America Expenses will give rise to expenses of €150 million, of which €45 million was already recognized in the first quarter.

Due to stagnating demand and the ongoing recession in major economies, Mercedes-Benz Vans does not expect an improvement in unit sales in the coming months. In line with the significant fall in demand in all markets, further burdens on earnings are anticipated, particularly in the second quarter.

Daimler Buses anticipates lower unit sales in 2009 than in the record year 2008. Nonetheless, the unit expects to achieve positive earnings, though substantially lower than in 2008.

Daimler Financial Services anticipates rising credit defaults and higher refinancing expenses in full-year 2009. The lowest point for earnings should have been reached in the first quarter, however. Contract volume is expected to decrease compared with 2008.

The Daimler Group’s total revenue is likely to decrease significantly in full-year 2009 (2008: €95.9 billion).

In order to alleviate the impact of the significant decline in unit sales and revenue caused by the global financial and economic crisis, at short notice Daimler has initiated measures designed to adjust costs and avoid expenditure across all divisions and at the Group’s headquarters. As well as actions to reduce labor costs, this includes the reduction of fixed costs and administrative expenses and further streamlining of the Group’s organizational structures. In addition, projects are being postponed if they are not directly relevant to competitiveness.

The measures initiated supplement the existing efficiency-enhancing programs and will be implemented at the Group in the coming months. As a result, Daimler expects to achieve cost reductions or to avoid cost increases in a total amount of €4 billion. Based on these measures, which will have their full impact in the second half of the year, and due to the launch of the new E-Class, the Daimler Group anticipates a gradual improvement in operating profitability as the year progresses. Earnings in the second quarter are expected to be significantly negative once again, however.

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