Speech of the Chairman of the Board of Management Dr. Dieter Zetsche Press Conference regarding the new structure of DaimlerChrysler

Transcription

1 Speech of the Chairman of the Board of Management Dr. Dieter Zetsche Press Conference regarding the new structure of DaimlerChrysler Stuttgart May 14, 2007 Check against delivery

2 Introduction Good afternoon to all of you. At our Annual Press Conference on February 14th in Auburn Hills, we announced that we would explore all options concerning the future of Chrysler. We made the decision to do so following a broad strategic review of our four divisions and of our company as a whole. In the past weeks, and in the course of exploring our options, we determined that DaimlerChrysler, as currently structured, would not provide the best framework for the longterm competitiveness of Chrysler. We also concluded that we ve realized the possible synergies between Mercedes and Chrysler, and that additional opportunities for cooperation between two businesses that operate in distinctly different market segments are limited. In addition, the extreme volatility and price pressure in Chrysler s core U.S. market limits DaimlerChrysler s overall profitability and the value of our shares. The need to look for a solution had become absolutely clear. From an objective business perspective, this was the right thing to do. At the same time, given my experience with and commitment to Chrysler, this was a difficult task for me personally. Our decision-making process was defined by clear criteria, namely to: - Improve DaimlerChrysler s financial strength and profitability in a sustainable way and increase the value of the enterprise; - provide the framework for a clear strategic direction; - improve the long-term competitiveness and profitability of the Chrysler Group; and identify the best alternative for our employees. 2

3 Structure of the transaction Today, exactly three months after opening up all options, we re here to announce the results of that effort which meet all of those criteria. We re confident that we ve found the solution that will create the greatest overall value both for Daimler and Chrysler. This solution is subject to approval by our Supervisory Board. And I m happy to say that it has the full support of Ron Gettelfinger, President of the United Auto Workers. I would like to explain the structure of the transaction to you: Cerberus will receive an 80.1% equity interest in the new company, Chrysler Holding LLC, in return for a capital contribution of 7.4 billion US dollars or 5.5 billion euros; we will hold a 19.9% equity interest. Chrysler Holding LLC will hold 100% of the future Chrysler Corporation, which produces and sells Chrysler, Dodge and Jeep brand vehicles, and the future Chrysler Financial Services, which provides financial services for these vehicles in the NAFTA region. The following points of the transaction are specially important to us: On the one hand, the fact that Chrysler Corporation and Chrysler Financial Services have a sound financial basis. This is guaranteed, because 3.7 billion euros will flow into the industrial business and 0.8 billion euros will flow into the financial services business. The industrial business will be transferred completely debt free upon closing of the transaction. This will give the Chrysler Group a good starting position. On the other hand, it was crucial for us that the Chrysler Group s financial liabilities for pensions and healthcare costs will be retained by the Chrysler companies. The pension plans are significantly over-funded at present. 3

4 The transaction will result in a net cash outflow for DaimlerChrysler of 0.5 billion euro. Net profit according to IFRS in 2007 is likely to be reduced by between 3 and 4 billion euros. We anticipate an increase in the equity ratio of the industrial business to more than 40% by the beginning of With this transaction, we have created the right conditions for a new start for Chrysler and Daimler. Given our very intense, open and constructive discussions with Cerberus, we expect to formally close this deal in the third quarter. Review on Chrysler Ladies and Gentlemen, in the nearly ten years since we formed DaimlerChrysler, we ve done a lot to move the business forward. We suffered setbacks. And at Chrysler those were magnified by external factors, most notably: - the marked shift away from light-trucks and sport-utilities vehicles as gas prices climbed; - escalating raw material prices; - and rising healthcare costs in the U.S.; 4

5 Still, Chrysler has made important strides forward in recent years. - Productivity increased dramatically: Hours per vehicle have dropped from over 48 before 2001 to just over 30 today. Chrysler plants now rank among the most efficient and flexible in the world. - Quality has improved more than 40% over the past six years. - Material and fixed costs have come down significantly. - At the same time, competitive investments in new production facilities and technologies since 2002 total more than $10 billion. - And with 34 new vehicles launched since 2001, Chrysler has one of the youngest product lines in the industry. As a result, Chrysler today is structurally more sound than its North American based competitors. And now, with a strong partner in Cerberus, Chrysler will have the best opportunity to realize its full potential. Chrysler will be more agile and flexible. Chrysler will have the resources and ability to sharply focus on the continued implementation of its Recovery and Transformation Plan. And we have every confidence that Chrysler will succeed and return to profitability as a result. And now I d like to invite Mr. John Snow of Cerberus, to add his comments to today s announcement. 5

6 Ongoing collaboration Thank you. We share your confidence that we ve found a sound and sustainable solution for Chrysler. Of course, we ll do our part to ensure its successful implementation. And we very much look forward to our continued cooperation as business partners, as we want to continue to reap the mutual benefits of working together. That s one of the reasons why we re retaining a 19.9%. equity position in Chrysler. Our joint programs will continue. Those include: - conventional and alternative powertrain development, - procurement activities and regional cooperation, - cooperation in sales and with financial services outside of North America, - shared logistics systems, and more. To coordinate our common projects, we ll establish a Joint Automotive Council, where representatives from Daimler and Chrysler will coordinate ongoing projects and evaluate the potential of new ones. This Council will be led by board-level members from each company. Following the close of the deal, we ll formally rename our company. We ll call an Extraordinary Shareholders Meeting later this year and propose that the company operate under the name Daimler AG. We ll scale down our Board of Management from nine to six members. Tom LaSorda, Eric Ridenour and Tom Sidlik will leave the Board of Management after closing of the transaction with our sincere thanks. 6

7 We ll eliminate the separate board position for procurement. Bodo Uebber will take over board responsibility for this activity. In the future, we ll coordinate all procurement activities directly between our divisions. The leadership teams of the Mercedes Car Group, Truck Group and Financial Services will remain in place, as will our teams in our Vans and Buses business. All of these are core businesses which will continue as integral parts of our company. New Daimler AG The new Daimler will stand on a very solid foundation. We ve grown steadily over recent years at a rate between 5 and 6%. And we re well-positioned for future profitable growth. We have above average financial power. We ll be less dependent on the volatility and margin pressure in the volume segments. With our New Management Model we ve created one common corporate structure, accelerated internal processes and achieved significant synergies that contribute to the success of all of our businesses. In sum, we ve done our homework in our corporate functions and in all of our divisions. As a result of our strategic review, we have a well-defined roadmap to lead us into a good future. At the Mercedes Car Group, we ll generate a return on sales of at least 7% in the current business year. We ll increase this return in the coming years. With our S- and E-Class, we ve affirmed our global market leadership in the premium and luxury segment. We ve just introduced the new C-Class to our dealers and their feedback has been outstanding. Through CORE, we ve enhanced our efficiency, reduced costs, improved quality and increased revenues. As the third and final year of CORE comes to a close, we have a clear vision of how we ll continue our progress as we move forward. 7

8 Our Truck Group is the global market leader. With our Global Excellence Program we have a clear and effective strategy. We ve made substantial progress in managing market cycles, in achieving operational excellence, and in targeting growth with our new generations of products. Our Truck Dedication program is significantly improving the breadth and quality of services we provide along the value chain. We aim to achieve an average return on sales of 7% beginning in 2008 at the Truck Group, with a corresponding Return on Net Assets of about 30%. We re Number 1 in the global bus market and set the industry benchmark for profitability. Our Van business is also performing well. The new Sprinter, introduced last year, is writing follow-on chapters in the success story begun by its predecessor. Our Financial Services mission remains unchanged. We ll continue to focus on achieving an optimal balance between earnings objectives and supporting sales at our vehicle divisions. We aim to earn a return on equity of more than 14%. And we will also strive to further increase efficiency and customer and dealer satisfaction. Growth perspectives Daimler s future prospects are promising. Moving forward, we strive for substantial profitable growth: First: We ll further grow our core business in our traditional market segments that are both the most profitable and have the highest growth rates. In addition, we ll exploit new market opportunities on a regional basis thereby expanding our customer base, which is the envy of the industry. Second: We ll further develop our innovative, customer-oriented and tailor-made services and other activities, pursuing opportunities both up and down the value chain. 8

9 Third: We ll strengthen our leadership in areas such as sustainable, environmentally friendly and related technologies. This is much as we ve long done in areas such as safety and diesel engine technologies. By focusing on these areas we ll exploit the full potential of Daimler. We ll fuel profitable and enduring growth, and increase our company s value. And we ll do this on our own, while continuing to benefit from opportunities of scale with Chrysler. In sum, we have clearly defined our goals for Daimler. - We will be the leading manufacturer of premium vehicles and a provider of premium services in every market segment we serve worldwide. - And we will pursue our commitment to excellence based on a common culture, a great heritage of innovation and pioneering achievements and with Mercedes- Benz the strongest automotive brand in the world. This will provide for premium profits on an ongoing basis. The achievement of these goals will be the focus of our energy and our innovative spirit and the key to our long-term success. Which is exactly what we wish for Cerberus, our new partner in Chrysler, as well. Thank you. We look forward to your questions. 9