Business development in 2007

The 2007 business year was characterized by the comprehensive restructuring of our company. The sale of the majority of Chrysler Holding LLC and the renaming of DaimlerChrysler as Daimler opened up a new chapter in our company’s history. The new Daimler AG was launched as a strong and financially healthy company. With Mercedes-Benz Cars, Daimler Trucks, Mercedes- Benz Vans, Daimler Buses, and Daimler Financial Services, we are focusing on successful business areas with well-defined strategies and good prospects.

The Daimler Group sold a total of 2.1 million vehicles in 2007, or 1 percent more than in the prior year. Revenues of € 99.4 billion were at the prior year’s level. When adjusted for exchange-rate effects, revenues rose by 3 percent. For the year as a whole, the company’s business development was very positive in 2007, with earnings before interest and taxes (EBIT) totaling € 8.7 billion. This result surpassed the year’s earnings target of at least € 8.5 billion.

The Mercedes-Benz Cars division posted a new sales record in 2007, when its sales of passenger cars increased by 3 percent to 1,293,200 units. Sales of Mercedes-Benz brand cars also rose by 3 percent, to 1,180,100 units, mainly due to the extraordinary success of the new C - Class. Sales of the smart brand, amounting to 103,100 units, matched the previous year’s figure even though the product range was reduced from three production series to one with an exclusive focus on the smart fortwo. The new fortwo model has met with a high level of customer acceptance since it first became available in April 2007. For this reason, sales of the smart fortwo increased by 50 percent to 102,100 units overall.

At the International Motor Show (IAA) in Frankfurt in September 2007, we demonstrated that comfort requirements and environmental consciousness are not mutually exclusive. Under the motto “Fascination and Responsibility,” Mercedes-Benz presented a wide range of new models that are extremely clean and fuelefficient. Besides the F 700 research vehicles with DIESOTTO and hybrid drives, the so-called “Road to the Future” featured 19 future models, including seven hybrids from five model series and the B-Class F-Cell equipped with a zero-emission fuel cell drive. We will continue to offer our customers luxurious, safe, and environmentally compatible automobiles in the future.

In 2007, Daimler Trucks sold a total of 467,700 (2006: 516,100) heavy, medium and light-duty vehicles. The primary reason for this expected drop in sales was the lower demand for trucks in the U.S., Canada, and Japan, where tighter emissions standards caused many companies to purchase vehicles earlier than planned in 2006. Another factor impacting the truck business was the general downturn of the U.S. market. As a result of these developments, sales of the Trucks NAFTA unit dropped by 36 percent to 119,000 vehicles. Trucks Europe/Latin America, on the other hand, posted an increase of 13 percent to 159,900 vehicles. At Trucks Asia, the Mitsubishi Fuso brand sold 188,700 vehicles and thereby performed more or less on a par with the prior year.

In 2007, Daimler Trucks continued to focus on reducing the fuel consumption and exhaust emissions of commercial vehicles. In November 2007, as part of the “Shaping Future Transportation” initiative, we presented vehicles from the Mercedes-Benz, Freightliner, Mitsubishi Fuso, Orion, and Thomas Built Buses brands that are equipped with alternative drive systems and operate with alternative fuels. Daimler is the global market leader when it comes to commercial vehicles with hybrid drives.

Daimler Financial Services experienced generally stable development in 2007. The business year was impacted by the separation of Chrysler’s financial services business in North America, which had become necessary due to the transfer of a majority interest in Chrysler. Global contract volume rose by 4 percent to € 59.1 billion; adjusted for exchange-rate effects, it increased by 9 percent. At the end of 2007, the division’s portfolio included 2.3 million leased and financed vehicles. New business totaling € 27.6 billion was at roughly the same high level as in the prior year. When adjusted for exchange rate effects, new business actually increased by 3 percent.

In 2007, Daimler Financial Services also launched a range of new products in various markets in response to customer demands for package solutions. Besides financing or leasing, these mobility packages also include insurance, maintenance, and other vehicle-related services that are charged at a single monthly rate.

The Mercedes-Benz Vans unit posted a new sales record by selling 289,100 vehicles (+13 percent) in the year under review. The new Sprinter was particularly successful, boosting sales by 17 percent to 184,300 units. The Vito/Viano also performed well, with sales increasing by 6 percent to 104,600 vehicles.

The Daimler Buses unit exceeded the prior year’s high sales level by 8 percent. The unit successfully defended its leading market position by selling a total of 39,000 complete buses and chassis of the Mercedes- Benz, Setra, and Orion brands.

We expect a moderate increase in business volume in 2008, to which all operations will probably contribute. The focus of expansion is likely to be mainly in the growth markets of Asia and Eastern Europe. Our medium- term goal is to exploit additional sales and revenue potential in all of our vehicle segments. To this end, we defined and published clear targets for all divisions. Our goal at Mercedes-Benz Cars is to achieve an average return on sales of 10 percent by 2010 at the latest. At 8 percent over the entire business cycle, the target for Daimler Trucks is somewhat lower. Finally, Daimler Financial Services plans to continue to achieve a return on equity of at least 14 percent in the future.

On the basis of the divisions’ confirmed projections, in 2008 we expect the Daimler Group to post EBIT from ongoing operations of well above the prior-year level. Effects related to Chrysler are not included therein. In the year 2007, earnings included positive contributions in particular from the transfer of shares in EADS and negative contributions from Chrysler and related to the New Management Model. In our automotive business we aim to achieve an average return on sales of 9 percent across all market and product cycles.