Overall Assessment of the Economic Situation

In the opinion of the Board of Management, the Daimler Group’s economic situation is very satisfactory at the time of publication of this Annual Report. In recent years, we have implemented our strategy effectively and with great determination. That is now beginning to pay off and is reflected by the results of our operations in 2014.

We continued and accelerated along our growth path in the year under review. We are on schedule with the implementation of our efficiency programs and our new products are extremely well received in their markets. As a result, we were able to achieve most of the targets we had set for the year 2014.

We significantly increased our unit sales by 8% to 2.5 million passenger cars and commercial vehicles despite difficult conditions in some major markets. Thanks to numerous new and successful products, Mercedes-Benz Cars and Mercedes-Benz Vans set new records for unit sales. Daimler Trucks achieved a small increase. Only Daimler Buses did not quite match its unit sales of the previous year due to the market weakness in Latin America. Driven by the generally very positive development of the automotive business, the Daimler Financial Services division also expanded significantly in the reporting period. The Group’s revenue therefore also grew significantly: – by 10% to €129.9 billion; adjusted for exchange-rate effects, there was actually an increase of 12%.

As we had expected, operating profit (EBIT) from the ongoing business of €10.1 billion was significantly higher than in the previous year (€8.0 billion). Key positive factors were the favorable product mix at Mercedes-Benz Cars and the increasing impact of the measures taken to increase efficiency, which we have implemented in all divisions.

With “Fit for Leadership” at Mercedes-Benz Cars, “Daimler Trucks #1” at Daimler Trucks, “Performance Vans” at Mercedes-Benz Vans and “GLOBE 2013” at Daimler Buses, we achieved total contributions to earnings of approximately €4 billion by the end of 2014. The programs included measures taken for sustained improvements in cost structures as well as additional business activities. The full impact of these programs will be reflected in 2015.

As a result of the positive development of earnings, we once again achieved a very good return on net assets of 18.8% (2013: 22.6%). We therefore earned significantly more than our cost of capital also in 2014. This is reflected by our value added, which remained at the high level of €4.4 billion (2013: €5.9 billion) due to the positive development of our business operations. The sole reason for the decrease compared with the previous year is that the positive special effect from the sale of our EADS shares in 2013 was significantly higher than the effects from the sales of our shares in Rolls-Royce Power Systems Holding GmbH (RRSPH) and Tesla in 2014.

In line with the ongoing high level of earnings, we continue to have very sound key financial metrics. At year-end, the Group’s overall equity ratio was 22.1% (2013: 24.3%) and the equity ratio of the industrial business was 40.8% (2013: 43.4%). The equity ratios decreased because the balance sheet total increased at a much higher rate (+13%) than equity (+3%). Our net liquidity of the industrial business increased to the very high level of €17.0 billion (2013: €13.8 billion). The free cash flow of the industrial business – the parameter we use to measure financial strength – reached the high level of €5.2 billion after adjusting for special items (2013: €3.2 billion), and is thus significantly higher than the proposed dividend distribution.

We want our shareholders to participate appropriately in the earnings achieved by Daimler in 2014. At the Annual Shareholders’ Meeting on April 1, 2015, the Board of Management and the Supervisory Board will therefore propose an increase in the dividend to €2.45 per share (prior year: €2.25). With this decision, we are also expressing our confidence about the ongoing course of business.

A core element of our profitable growth strategy is the wide-ranging product offensive at all divisions, with which we are winning new customers and developing additional markets. Mercedes-Benz Cars currently has the youngest and most attractive product portfolio of all time, which we upgraded in 2014 with the new C-Class, the new compact sport-utility vehicle GLA and the new S-Class Coupe. In addition, the smart brand started a new era with the launch of the two all-new models fortwo and forfour. Furthermore, we had the premiere in November 2014 of our new sub-brand Mercedes-Maybach and the first automobile of this new and especially exclusive brand. At Daimler Trucks and Daimler Buses, we have almost completely renewed our product range and engines in recent years. The most important new models in 2014 included the Actros and Arocs heavy-duty trucks, the new FUSO Super Great V and the new Western Star 5700XE at the truck division, as well as the large articulated bus Mercedes-Benz CapaCity L at the bus division. The Mercedes-Benz Vans division also continued with its product offensive; its important new models were the Vito goods van and the V-Class multipurpose vehicle.

Mercedes-Benz TV: World Premiere of the new V-Class.

We once again demonstrated our technological leadership in 2014 in terms of the fuel efficiency, safety and connectivity of our vehicles. With innovative drive systems and highly economical model versions, we were once again able to significantly reduce the average CO2 emissions of the cars we sell in the European Union from 134 grams per kilometer to 129 g/km.

The new research vehicle F 015 stands in equal measures for clean, safe and connected, and thus for the future of the automobile. We have achieved a competitive advantage above all in the field of autonomous driving with the Mercedes-Benz S 500 INTELLIGENT DRIVE and the Future Truck 2025. These research vehicles show that fully autonomous driving can soon become reality on our roads in the foreseeable future. (See Mercedes-Benz Vans and The future has begun)

Mercedes-Benz F 015 Luxury in Motion | World Premiere

We effectively expanded our worldwide network of production sites and research facilities in 2014, placing our future growth on a broad regional basis. We will expand our production capacities above all in China, India and the United States. In parallel, substantial investment in our plants in Germany demonstrates that they continue to play a key role as competence centers for our international network.

From a sound financial basis, we invest more than €10 billion each year in property, plant and equipment as well as in research and development – in new products, in new technologies and in our sites. And for the coming years, we have actually planned even higher amounts.

We are on the right track with our growth strategies, the efficiency programs and the high levels of investment in the future of the Group. We therefore look to the coming years with great confidence and continue to aim for further profitable growth.

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