Daimler Achieves EBIT of Euro 648 Million in Third Quarter of 2008


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STUTTGART, Germany, October 23, 2008: The worsening banking crisis, its effects on the real economy, and the resulting global consumer uncertainty had a negative impact on the business development of Daimler AG (stock-exchange abbreviation DAI) in the third quarter of this year.

Daimler achieved EBIT of euro 648 million in the third quarter of 2008 (Q3 2007: euro 1,891 million).

The decline in EBIT is primarily the result of lower earnings at the Mercedes-Benz Cars division. In addition, special items reduced earnings by a total of euro 765 million (see table following the text).

There were positive effects, however, from improved earnings at the Daimler Trucks division as well as at the Mercedes-Benz Vans and Daimler Buses units. The profit contribution from Daimler Financial Services was also above the prior-year level.

Net profit amounted to euro 213 million (Q3 2007: net loss of euro 1,533 million), equivalent to earnings per share of euro 0.21 (Q3 2007: loss per share of euro 1.47). The net loss of the prior-year quarter included special effects from the Chrysler transaction.

Daimler will temporarily suspend the further execution of its share buyback program. Due to the suspension Daimler might not reach its initial target to buy back 10% of the outstanding shares.

Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars: "We recognize that the situation is very challenging indeed. We press ahead consequently with our cost efficiency programs in all our businesses. We'll also continue to execute our aggressive R&D and product plans. The substance of our company is very solid - and that makes me confident - that Daimler can and will emerge strong."

Group unit sales down by 3%

In the third quarter of 2008, Daimler sold 522,500 passenger cars and commercial vehicles worldwide (Q3 2007: 537,000).

Daimler's third-quarter revenue decreased from euro 25.7 billion to euro 23.8 billion. Adjusted for exchange-rate effects and changes in the consolidated group, the revenue decrease amounted to 5%.

At the end of the third quarter of 2008, Daimler employed 275,535 people worldwide (end of Q3 2007: 271,961). Of that total, 168,667 were employed in Germany (end of Q3 2007: 166,971).

Details of the divisions in the third quarter of 2008

Mercedes-Benz Cars sold 315,800 vehicles in the third quarter (-6%). 282,100 Mercedes-Benz brand vehicles were sold (-8%), while sales of the smart brand rose by 20% to 32,300 units. Revenue amounted to euro 11.6 billion (Q3 2007: euro 14.1 billion).

The division's third-quarter EBIT of euro 112 million was significantly lower than the result for the prior-year period (euro 1,331 million), despite further efficiency improvements.

The decrease in earnings was primarily due to the abrupt decline in sales in the NAFTA region as well as in the major European markets. In this context, the Group also recorded charges of euro 449 million resulting from the reassessment of residual values of leased vehicles. Other factors with a negative impact on earnings were an unfavorable model mix, exchange-rate effects and higher raw-material prices.

Daimler Trucks increased its unit sales in the third quarter by 4% to 122,700 vehicles. Revenue increased from euro 7.0 billion to euro 7.3 billion.

The division achieved EBIT of euro 510 million in the third quarter, which was higher than the prior-year result despite difficult market conditions in the United States and Japan.

The division's earnings benefited from strong sales of trucks in Brazil and Europe, especially in Germany. A favorable model mix and good product positioning also contributed to the earnings development. Expenditure in connection with new and enhanced product development had a negative impact on the EBIT of Daimler Trucks.

Trucks Europe/Latin America (Mercedes-Benz) posted repeated growth in unit sales of 12% in the third quarter, selling 47,300 vehicles. Trucks NAFTA (Freightliner, Sterling, Western Star, Thomas Built Buses) sold 25,800 vehicles; this was 7% more than in the prior-year quarter, although that period had been impacted by very weak sales in the US market. Despite its stable business outside Japan (+1%), Trucks Asia (Mitsubishi Fuso) was not able to compensate for the ongoing weak demand for trucks in the Japanese market.

Daimler Financial Services division expanded its worldwide contract volume by 11% to euro 63.9 billion in the third quarter. Compared with the prior year, 15 additional companies were consolidated for the first time, most of them in Eastern Europe and Asia. Without this effect and adjusted for exchange-rate effects, the increase was 9%. Compared with the prior-year period, new business increased by 19% to euro 7.7 billion; adjusted growth amounted to 18%.

Third-quarter EBIT of euro 173 million reported by Daimler Financial Services was higher than the figure of euro 87 million posted in 2007. The result for the prior-year period had been significantly impacted by the expense of setting up an independent financial services organization in the NAFTA region following the transfer of a majority interest in the Chrysler business. The other main reason for the earnings improvement was the expanded contract volume. A further increase in cost of risk had a negative effect on the division's earnings.

The Vans, Buses, Other segment posted EBIT of minus euro 100 million in the third quarter (Q3 2007: euro 319 million). The Mercedes-Benz Vans and Daimler Buses units profited from the positive development of unit sales and both achieved higher earnings: Mercedes-Benz Vans reported EBIT of euro 212 million and Daimler Buses reported EBIT of euro 92 million.

Despite difficult market conditions, Mercedes-Benz Vans increased its third-quarter unit sales by 1% to 73,200 vehicles.

Daimler Buses sold 10,800 buses and chassis in the third quarter, surpassing the very high level of the prior-year period by 15%. A strong contribution to this result came from sales in Europe, where 2,300 buses of the Mercedes-Benz and Setra brands were sold (+31%). Unit sales also developed very positively in Mexico (+44%) and South America (+3%).

Daimler's share of the earnings of EADS amounted to minus euro 8 million (Q3 2007: minus euro 20 million). Daimler's equity interest in Chrysler negatively affected EBIT in the third quarter of 2008 by a total of euro 351 million; this includes charges of euro 248 million relating to the restructuring program and the reassessment of residual values. The results in connection with the equity interests in EADS and Chrysler are not cash effective.

Outlook

In light of the worsened financial market crisis and the resulting impact on future economic developments, forecasts are connected with a high degree of uncertainty in the current environment. In addition, it is not yet possible to reliably assess how quickly the action plans announced by various governments will contribute to the stabilization of markets for financial services and goods.

Mercedes-Benz Cars expects unit sales to be similar to the prior-year level, despite of the negative market development and adjustments to its production program. There will be positive impetus from the full availability of the new C-Class sedan and station wagon and the new smart fortwo, as well as from the A- and B-Class, the CLS, SLK, SL and the CLC, which were all newly launched or refreshed during the year 2008. The launch of the refreshed M-Class and especially the new GLK will provide additional sales momentum also in the following year. However, for lifecycle reasons we anticipate lower unit sales of the E-Class, which is in its last full model year.

Against the backdrop of massive turmoil on financial markets and the resulting effects on economic developments in the industrialized countries, including falls in unit sales in major markets (in some cases of double-digit percentages) and requiring reassessments of vehicles' residual values, the previous earnings forecasts for 2008 can no longer be achieved. Daimler now assumes that the division will achieve EBIT in the magnitude of euro 2.5 billion and a return on sales of approximately 5% in 2008; charges of euro 449 million from the reassessment of leased vehicles' residual values are included therein.

Daimler Trucks anticipates higher unit sales in 2008 than in the prior year. This growth is primarily based on the positive development of unit sales in some important markets such as Brazil, Indonesia and the Middle East. Growth in unit sales is also indicated for Eastern Europe, but is expected to return to a moderate level by the end of 2008. This means that after six above-average years, the European market for commercial vehicles is normalizing once again. For the US and Japanese markets, unit sales are expected to be once again below the volumes of the prior year.

Growth in unit sales will be partially offset by higher raw-material costs and the weak US economy. On this basis, the division expects to post EBIT of approximately euro 1.7 billion in the full year. This includes charges of approximately euro 230 million related to the repositioning of Daimler Trucks North America.

Daimler Financial Services assumes that it will achieve a return on equity of approximately 14% in full-year 2008. A moderate increase in contract volume is expected compared with the end of 2007.

Mercedes-Benz Vans assumes, despite the difficult economic environment, that its unit sales will surpass the level of 2007.

Daimler Buses expects to post record unit sales once again this year.

The Daimler Group's anticipates a slight decrease in total revenue in full-year 2008 (2007: euro 99.4 billion).

On the basis of the divisions' projections, the Daimler Group expects to post EBIT from ongoing operations of more than euro 6 billion in 2008. This does not include special items from the reassessment of leased vehicles' residual values at Mercedes-Benz Cars (minus euro 449 million), the sale of real estate at Potsdamer Platz (plus euro 449 million), the transfer of EADS shares (plus 130 million), the restructuring of Daimler Trucks North America (minus euro 230 million) and the new management model (minus euro 169 million), as well as effects relating to Chrysler. Previously, Daimler had assumed that EBIT from ongoing operations would exceed euro 7 billion.

However, in view of the current turmoil of financial and automotive markets, Daimler's forecasts are connected with a high degree of uncertainty.

Despite the ongoing financial market crisis, the Group has a solid financial position, which should also remain stable throughout the rest of the year.

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