Corporate Profile. C.01 Consolidated revenue by division. Business model

Size: px

Start display at page:

Download "Corporate Profile. C.01 Consolidated revenue by division. Business model"

Arnold Black
6 years ago
Views:

1 Corporate Profile. Business model Daimler can look back on a tradition covering more than 125 years, a tradition that extends 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 unparalleled range of premium automobiles, trucks, vans and buses. The product portfolio is completed with a range of tailored financial services and mobility services. Daimler AG is the parent company of the Daimler Group and is domiciled in Stuttgart (Mercedesstraße 137, 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. C.01 Consolidated revenue by division Mercedes-Benz Cars 52% Daimler Trucks 25% Mercedes-Benz Vans 8% Daimler Buses 3% Daimler Financial Services 12% With 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 approximately 8,000 sales centers worldwide. The global networking of research and development activities and of production and sales locations gives Daimler considerable advantages in international competition, additional growth opportunities and further potential to enhance efficiency. In addition, we can apply our innovative drive and safety technologies in a broad portfolio of vehicles while utilizing experience and expertise from all parts of the Group. In the year 2013, Daimler increased its revenue by 3% to billion. The individual divisions contributed to this total as follows: Mercedes-Benz Cars 52%, Daimler Trucks 25%, Mecedes-Benz Vans 8%, Daimler Buses 3% and Daimler Financial Services 12%. At the end of 2013, Daimler employed a total workforce of approximately 275,000 people worldwide. The products supplied by the Mercedes-Benz Cars division comprise a broad spectrum of premium vehicles of the Mercedes- Benz brand, ranging from the compact models of the A- and B-Class to various sport utility vehicles, road sters, coupes and convertibles and to the S-Class luxury sedans. Additional products are the high-quality small cars and innovative e-bikes of the smart brand. The main country of manufacture is Germany, but the division also has production facilities in the United States, China, France, Hungary, South Africa, India, Vietnam and Indonesia, and since August 2013, the A-Class has also been produced for us by Valvet Automotive in Finland. Worldwide, Mercedes-Benz Cars has 17 production sites at present. In the medium term, we anticipate significant growth in worldwide demand for automobiles and above-average growth in the premium car segment. To ensure that we can participate in this development, we are creating additional production capacities, especially in China, the United States and India. In 2013, we also decided to expand our global production network with a new plant in Brazil. We plan to produce the next generation of the C-Class as well as the GLA compact SUV there for the local market starting in The most important markets for Mercedes-Benz Cars in 2013 were Germany with 18% of unit sales, the other markets of Western Europe (23%), the United States (20%) and China (15%). 76

2 C Combined Management Report Corporate Profile As the biggest globally active 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 Bharat- Benz. The division s 27 production facilities are in the NAFTA region (14, thereof 11 in the United States and 3 in Mexico), Europe (7), Asia (3), South America (2) and Africa (1). In our new truck plant in Chennai, India, trucks of the new BharatBenz brand have been rolling off the production lines since June In 2014, we will launch additional new models. We intend to use the production site also to develop new export markets in Asia and Africa. 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 since July Daimler Trucks product range includes light-, medium- and heavy-duty trucks for local and long-distance deliveries and construction sites, as well as special vehicles for municipal applications. Due to close links in terms of production technology, the division s product range also includes the buses of the Thomas Built Buses and FUSO brands. Daimler Trucks most important sales markets in 2013 were Asia with 34% of unit sales, the NAFTA region (28%), Western Europe (14%) and Latin America excluding Mexico (12%). Daimler Trucks area of responsibility also includes our investment in Tognum (since January 9, 2014, Rolls-Royce Power Systems AG), a globally leading supplier of complete systems in the field of industrial engines. This company is controlled by Rolls-Royce Power Systems Holding GmbH, in which Daimler and Rolls-Royce Holdings plc each holds a 50% interest. The product range of the Mercedes-Benz Vans division in the segment of medium-sized and large vans comprises the Sprinter, Vito and Viano series. In 2012, we expanded our portfolio with the addition of a city van, the Mercedes Benz Citan, making us a full-range supplier in the vans business. The division has production facilities at a total of seven locations: in Germany, Spain, the United States, Argentina, China in the context of the joint venture Fujian Benz Automotive Co., Ltd, and France in the context of the strategic alliance with Renault-Nissan; since the second half of 2013, the Mercedes- Benz Sprinter has been produced under license also by our partner GAZ in Russia. The most important markets for vans are in Western Europe, which accounts for 63% of unit sales. As part of the Vans goes global business strategy, we are also increasingly developing the growth markets of South America and Asia as well as the Russian van market through appropriate distribution and production activities in those regions. We intend to continue our growth also in the North American van market, where the Sprinter is sold not only as a Mercedes-Benz vehicle but also under the Freightliner brand. The Daimler Buses division with its brands Mercedes-Benz and Setra continues to be the world s leading manufacturer in its core markets in the segment of buses above 8 tons. The product range supplied by Daimler Buses comprises city and intercity buses, coaches and bus chassis. The most important of the 13 production sites are in Germany, France, Spain, Turkey, Argentina, Brazil and Mexico. In 2013, 49% of Daimler Buses revenue was generated in Western Europe and 26% in Latin America (excluding Mexico). While we mainly sell complete buses in Europe, our business in Latin America, Mexico, Africa and Asia is focused on the production and distribution of bus chassis. C.02 Daimler Group structure 2013 Mercedes-Benz Cars Daimler Trucks Mercedes-Benz Vans Daimler Buses Daimler Financial Services Revenue 64.3 billion 31.5 billion 9.4 billion 4.1 billion 14.5 billion Employees 96,895 79,020 14,838 16,603 8,107 Brands 77

3 The Daimler Financial Services division supports the sales of the Daimler Group s automotive brands in 40 countries. Its product portfolio primarily comprises tailored financing and leasing packages for customers and dealers, but it also provides services such as insurance, fleet management, investment products and credit cards, as well as various mobility services such as the flexible car2go concept. The main areas of the division s activities are in Western Europe and North America, and increasingly also in Asia. In 2013, more than 40% of the vehicles sold by the Daimler Group were financed or leased by Daimler Financial Services. Its contract volume of 83.5 billion covers nearly 3.1 million vehicles. Daimler Financial Services also holds a 45% interest in the Toll Collect consortium, which operates an electronic road-charging system for trucks above 12 metric tons on highways in Germany. Daimler still held a 7.4% equity interest in the European Aeronautic Defence and Space Company (EADS), a leading company in the aerospace and defense industries, at the end of Those shares were sold on April 17, Through a broad network of holdings, joint ventures and cooperations, Daimler is active in the global automotive industry and related sectors. The statement of investments of Daimler AG in accordance with Section 313 of the German Commercial Code (HGB) can be found in the Notes to the Consolidated Financial Statements. E see Note 39 Portfolio changes and strategic cooperations By means of targeted investments and future-oriented partnerships, we strengthened our core business, pushed forward with new technologies and utilized additional growth potential in At the same time, we focused on the continuous further development of our existing business portfolio. Daimler AG acquires 12% stake in BAIC Motor. In November 2013, we acquired a 12% equity interest in our longstanding partner BAIC Motor, thus taking an important step within the framework of our China strategy. This makes Daimler the first non-chinese automobile manufacturer to acquire a stake in a Chinese carmaker. BAIC Motor is the car subsidiary of the Beijing Automotive Group (BAIC Group), which is one of the leading automotive companies in China. In the past ten years, the partners Daimler and BAIC have built up a long-term strategic partnership, benefiting both companies as well as the Chinese automotive industry. These shared activities include the joint venture BBAC, which has been producing Mercedes-Benz cars since 2006 and, as the first Mercedes-Benz plant for car engines outside Germany, four- and six-cylinder engines since In addition, jointly produced medium- and heavyduty trucks of the Auman brand have been rolling off the assembly lines at Beijing Foton Daimler Automotive Co., Ltd. (BFDA) since mid Another important component of the partnership is Beijing Mercedes-Benz Sales Service Corporation (BMBS), which started operations in March BMBS is responsible for all sales activities for imported and locally produced Mercedes-Benz cars. The joint venture is a major pillar for the sustained growth of Mercedes-Benz in China. Progress with the cooperation between Daimler and Renault-Nissan. The cooperation between Daimler and Renault- Nissan developed very positively in The partnership, which started in April 2010 with three projects, has meanwhile grown to ten major projects and now also includes initiatives in North America and Asia. A good example of how the partners profit from the cooperation is the joint production of Mercedes-Benz four-cylinder gasoline engines in Decherd (Tennessee, USA). Just one and a half years after ground breaking in 2012, the plant building has now been completed. Start of production is planned for mid The engines produced in Decherd are to be used in the new Mercedes-Benz C-Class, which will be produced at the Daimler plant in Tuscaloosa (Alabama, USA), and in new products from Infiniti. The development work for a shared family of new three- and four-cylinder engines with turbocharging and direct fuel injection is also making good progress. These engines will include the latest technologies, allowing significantly reduced fuel consumption. Cooperation in the commercial-vehicle business is also being intensified. It is planned that Mitsubishi Fuso Truck and Bus Corporation (MFTBC), which is part of Daimler Trucks Asia, will be supplied with the Nissan van, NV350 Urvan. That vehicle will be sold by Mitsubishi Fuso in selected export markets. This form of strategic supply has been successfully implemented since early 2013 also for light-duty trucks the FUSO Canter Guts (payload of 2.0 tons) and the NT450 Atlas (payload of 1.5 tons) in order to expand the respective product portfolio to new segments. The smart/twingo project is also progressing as planned. Production preparations are now in full swing for the new twoseater smart at the smart plant in Hambach (France) and for the four-seater smart and the Renault Twingo successor at the Renault plant in Novo Mesto (Slovenia). Market launch of the car variants is planned for the second half of The new generation of the smart and the Renault Twingo are being developed on the basis of a shared architecture but will continue to be independent products with unmistakable brand features. Agreement on the commercialization of fuel cells. Automotive Fuel Cell Cooperation (AFCC) was already founded as a joint venture by Daimler (50.1%), Ford (30%) and Ballard (19.9%) in In January 2013, Daimler AG, Ford Motor Company and our strategic cooperation partner Nissan Motor Co., Ltd. reached an agreement to continue with the commercialization of fuel cells. The aim of this venture is to jointly develop a fuel-cell system and thus to reduce development costs. All three partners will make equal investments in the project. 78

4 C Combined Management Report Corporate Profile Establishment of Daimler Trucks and Buses China Ltd. (DTBC). DTBC was established as a legally separate company for the Group s business with trucks and buses in China in April 2013; it is the ideal framework to further develop the existing truck business and to continually expand the product portfolio in China in the area of buses for example. Due to its structural independence, DTBC can now focus even more closely on the specific requirements of commercialvehicle customers. At the same time, the integration of the bus business facilitates expansion in additional areas of sales. With the new company, Daimler is consistently continuing the structural reorganization of its China business. Establishment of Daimler Mobility Services. Daimler Financial Services is pursuing the goal of significantly expanding its business with mobility services. For this purpose, in January 2013, Daimler Financial Services brought together all of its activities in the field of innovative mobility services such as car2go und moovel in a new company, Daimler Mobility Services GmbH with headquarters in Ulm. In order to further strengthen this business, Daimler acquired equity interests in various companies during the course of the year. Those companies include the long-distance bus operator Flixbus and the chauffeur-service portal Blacklane GmbH. Daimler sells remaining equity interest in EADS. On March 27, 2013, the extraordinary shareholders meeting of EADS approved a new management and shareholder structure. Subsequently, on April 2, 2013, the shareholders pact concluded in the year 2000 was dissolved and replaced with a new shareholders pact without the participation of Daimler. At the same time, those EADS shares which had previously been held by Daimler but of which a consortium of international investors had beneficial ownership were transferred to those so-called Dedalus investors. With the dissolution of the previous shareholders pact, Daimler lost its significant influence on EADS. On April 17, 2013, Daimler disposed of its remaining EADS shares constituting a stake of approximately 7.4% by way of an accelerated placement procedure. In the second quarter of 2013, the remeasurement and sale of EADS shares led to a gain recognized in Group EBIT totaling 3.2 billion, of which 1.7 billion is allocable to the Dedalus investors. The sale resulted in a cash inflow for Daimler of 2.2 billion. Since the conclusion of the transaction, Daimler no longer holds any shares in EADS. In addition, the Group concluded cash-settled contracts which allowed Daimler to participate to a limited extent in an increase in the EADS share price until the end of This agreement resulted in an additional gain for the Daimler Group of 44 million. Performance measurement system Financial performance measures. The financial performance measures used at Daimler are oriented towards our investors interests and expectations and provide the foundation for our 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 level. It is calculated as the difference between the operating result and the cost of capital of the average net assets. Alternatively, the value added of the industrial divisions can be determined by using the main value drivers: return on sales (quotient of EBIT and revenue) and net assets productivity (quotient of revenue and net assets). C.03 During the year 2013, value added increased to 5.9 billion (2012: 4.3 billion). The quantitative development of value added and the other financial performance measures is explained in the Profitability chapter. E see pages 90 f Using the combination of return on sales and net assets productivity within the context of a strategy of profitable revenue growth provides the basis for a positive development of value added. Value added shows to which extent the Group and its divisions achieve or exceed the minimum return requirements of the shareholders and creditors, thus creating additional value. Profit measure. The measure of operating profit at divisional level is EBIT, which is calculated before interest and income taxes. EBIT hence reflects the divisions profit and loss responsibility. The operating profit measure used at Group level is net operating profit. It comprises the EBIT of the divisions as well as profit and loss effects for which the divisions are not held responsible, including income taxes and other reconciliation items. C.12 on page 86 C.03 Calculation of value added Value added = Profit measure Cost of Net assets x capital (%) Cost of capital Value added Return on Net assets Cost of = x x sales productivity capital (%) Net assets 79

5 Net assets. Net assets represent the basis for the investors required return. The industrial divisions are accountable for the net operating assets; all assets, liabilities and provisions which they are responsible for in day-to-day operations are therefore allocated to them. Performance measurement at Daimler Financial Services is on an equity basis, in line with the usual practice in the banking business. Net assets at Group level include the net 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 from average quarterly net assets. E see page 91 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 investors expect on their invested capital. The cost of capital of the Group and the industrial divisions comprises the cost of equity as well as the costs of debt and pension obligations of the industrial business; the expected returns on liquidity and plan assets of the pension funds 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. While the cost of debt is derived from the required rate of return for obligations entered into by the Group with external lenders, the cost of capital for 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; in the reporting period, the cost of capital amounted to 8% after 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. C.04 C.04 Cost of capital In percent Group, after taxes 8 8 Industrial business, before taxes Daimler Financial Services, before taxes 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 return on sales and net assets productivity results in return on net assets (RONA). If RONA exceeds the cost of capital, value is created for our shareholders. The profitability measure for Daimler Financial Services is not return on sales, but return on equity, in line with the usual practice in the banking business. Key performance indicators. Key financial indicators for measuring our operating financial performance, in addition to EBIT and revenue, are the free cash flow of the industrial business, investment, and research and development expenditure. As well as the indicators of financial performance, we also use various non-financial indicators for the Group s management. Of particular importance in this respect are the unit sales of our automotive divisions, which we use as the basis for our capacity and human resources planning, and employee numbers. Furthermore, within the context of our sustainability management, we use other non-financial indicators such as the CO 2 emissions of our vehicle fleet or the energy and water consumption of our production sites. Details of the development of non-financial performance indicators can be found in the chapters Economic Conditions and Business Development and Sustainability. E see pages 81 ff and 105 ff Daimler strengthens customer focus In order to implement the growth strategies in all divisions and to sharpen the focus on customers and markets, the Board of Management of Daimler AG decided in September 2013 to strengthen the organization of the divisions. Responsibility for the main sales functions and the important sales markets has been directly anchored in each division. At the same time, we have streamlined the cross-divisional functions at the country level. The functional Board of Management areas have been focused more on the requirements of the divisions. Following the successful start of product offensives for cars and commercial vehicles, the further development of our structures is now the next strategic step for the achievement of our growth targets. This is not primarily a matter of cost advantages, but of more direct customer relations and increased unit sales. Due to increasingly diverse customer needs, more and more importance is now placed on the ability to precisely meet customers needs in each individual market. With the new structure, Daimler is creating ideal conditions to do that. Corporate governance statement The corporate governance statement to be issued pursuant to Section 289a of the German Commercial Code (HGB) can be seen on the Internet at w daimler.com/corpgov/en. Pursuant to Section 317 Subsection 2 Sentence 3 of the HGB, the contents of the statement pursuant to Section 289a of the HGB are not included in the audit carried out by the external auditors. 80

Corporate Profile. B.01 Consolidated revenue by division. Business model

Corporate Profile. B.01 Consolidated revenue by division. Business model Corporate Profile. Business model Daimler can look back on a tradition covering more than 125 years a tradition that extends back to Gottlieb Daimler and Carl Benz, the inventors of the automobile, and