Performance Measures

The Group’s management tools. The management and control

tools used at the DaimlerChrysler Group provide for the transfer of responsibility to the division and business unit levels while enhancing cross-divisional transparency. The management and control system also promotes capital-market-oriented investment analysis and control within the DaimlerChrysler Group.

For controlling purposes, DaimlerChrysler differentiates between the Group level and the operating level of the divisions and business units. Economic value added is one element of the control system on both levels. At Group level, economic value added is calculated by subtracting the weighted average cost of capital from net operating income, an after-tax figure oriented towards the capital markets. In the calculation of return on net assets (RONA) as the corporate profitability ratio, net operating income is divided by the capital employed within the Group. This ratio determines the extent to which the DaimlerChrysler Group as a whole generates or exceeds the rate of return required by its investors and creditors.

The required rate of return and the weighted average cost of capital for the Group are derived from the minimum returns that investors and creditors expect on equity and capital provided by outside sources. The cost of equity is determined according to the capital asset pricing model, using the interest rate for long-term, risk-free securities (e.g. government bonds, fixed-interest bonds) plus a risk premium for an investment in shares. The cost of capital from outside sources is derived from the required rate of return for obligations entered into by the company with outside sources supplying the capital. Due to capital markets’ lower levels of interest rates compared with the prior year, the weighted average cost of capital could have been reduced. Assuming that interest rates will again return to long-term averages in the foreseeable future, for reasons of continuity in controlling the operating units, the Group’s weighted average cost of capital of 8% after taxes has been retained, although this results in a correspondingly low economic value added.

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Financial Reporting| Overview | Analysis of the Financial Situation| Statement by the Board of Management | Independent Auditors’ Report | Financial Statements At the level of the industrial divisions and business units, operating

profit is used as a measure of earnings before interest and taxes. This measure reflects the area of responsibility of management more accurately than an after-tax figure. The capital basis is net assets, i.e. assets less non-interest-bearing liabilities. The minimum required rate of return for the industrial companies was 13% before taxes, as in the prior year. Return on equity (ROE) is applied as a benchmark for the financial services activities, with an unchanged minimum required rate of return of 14% (before taxes).

As the aforementioned rates of return are minimum require- ments, the divisions and business units are expected to significantly exceed these hurdles. Goals are derived from benchmarks with the best comparable companies.

Development of return on net assets. Net operating income, which is derived from Group net income, amounted to €1.5 billion (2002: €5.7 billion). In connection with the decrease of net assets of €5.4 billion to €60.0 billion (annual average), this resulted in a return on net assets of 2.4% after taxes (2002: 8.8%) for the DaimlerChrysler Group. The Mercedes Car Group segment considerably exceeded the hurdle rate of return of 13% before taxes. Primarily due to the intense competitive pressure in the North American market, the Chrysler Group did not achieve the minimum required rate of return. The RONA amounted to - 4.4% (2002: 3.1%). Due to progress made with the successful implemen- tation of efficiency improvement programs in 2003 and due to prior-year restructuring charges, the Commercial Vehicles segment realized an improvement compared with 2002. However, with a return on net assets of 10.6% (2002: - 4.0%), the hurdle rate was not achieved in 2003. The significant improvement of earnings at Financial Services resulted in a considerable rise in return on equity. The ROE of 17.7% (2002: 6,5%) exceeded the hurdle rate.

Reduced net operating income led, despite decreasing average net assets, to a decline of the RONA on a group level compared with 2002. The return on net assets amounted to 2,4% in 2003 (2002: 8,8%). Economic value added of - €3.3 billion (2002: €0.5 billion) was negative (calculated on the basis of a cost of capital rate of 8% after taxes).

Net assets are derived from the consolidated balance sheet, as illustrated by the following table.

2002 2002

%

1 Due to the disposal of the investments in T-Systems ITS to Deutsche Telekom, the investment was included only through March 31, 2002. Because of the sale in 2002, the figures of 2003 are not comparable with the prior year.

2 The figures are not comparable to the prior year, due to the disposal of the business unit MTU Aero Engines (as of Dec. 31, 2003) as well as the disposition of the investment in Conti Temic microelectronic which was included at equity until it was completely sold on April 1, 2002. 3 Before taxes.

In millions Net Assets 1

of the DaimlerChrysler Group

2003 2002 31,913 470 11,779 13,416 57,578 33,655 432 12,372 15,864 62,323 Stockholders’ equity 2 Minority interests

Financial liabilities of the industrial segment Pension provisions of the industrial segment Net assets

1 Represents the value at year-end; the average for the year was €60.0 billion (2002: €65.4 billion). 2 Adjusted for the effects from the application of SFAS 133.

In millions

Reconciliation to Net Operating Income

2003 2002 448 35 377 607 1,467 4,718 15 469 534 5,736 Net income (loss)

Minority interests

Interest expense related to industrial activities, after taxes

Interest cost of pensions related to industrial activities, after taxes

Net operating income

€ €

€ €

Net Assets and Return on Net Assets

(annual average, in billions of€) Net Assets

2003

% Return on Net Assets

65.4 2.4 8.8 2003 60.0 DaimlerChrysler Group, (after taxes) 46.9 12.1 19.5 8.5 1.1 5.7 11.1 24.3 (4.4) 10.6 - 26.2 13.3 25.0 3.1 (4.0) 226.3 18.8 37.8 12.8 11.6 8.1 - 5.3 9.3 17.7 6.5 8.4 Return on Equity 3 Financial Services Stockholders’ Equity Industrial business,

(before interest and taxes) Mercedes Car Group Chrysler Group Commercial Vehicles Services 1

Other Industrial Activities 2