Company-specific risks and opportunities

The following section deals with the company-specific risks and opportunities of the Daimler Group. A quantification of these risks and opportunities is shown in table C.52.

C.52

Company-specific risks and opportunities
Risk category Probability
of occurrence
Impact Opportunity category Impact
         
Production and technology risks Low High Production and technology opportunities Low
Information technology risks Low Medium Information technology opportunities -
Personnel risks Low Medium Personnel opportunities -
Risks related to equity
interests and joint ventures
Low Medium Opportunities related to equity
interests and joint ventures
Low
 

Production and technology risks and opportunities. Key success factors for achieving the desired level of prices for the products of the Daimler Group and hence for the achievement of our corporate goals are the brand image, design and quality of our product - and thus their acceptance by customers - as well as technical features based on innovative research and development. Convincing solutions, which for example promote accident-free driving or further improve our vehicles’ fuel consumption and emissions such as with diesel-hybrid or electric vehicles, are of key importance for safe and sustainable mobility. Due to growing technical complexity, continually rising requirements in terms of emissions, fuel consumption and safety, and the Daimler Group’s goal of meeting and steadily raising its quality standards, product manufacturing in the various divisions is subject to production and technology risks.

The demanding combination of requirements, complexity and quality can lead to higher advance expenditure and thus also to an adverse impact on the Group’s profitability, as those three factors have the highest priority for the Daimler Group. One of the associated risks is that development expenditure cannot later flow directly into the end product if the solution is not ideally usable for the customer or proves not to be marketable. In addition, the launch of new products is generally connected with high investment. In order to achieve a very high level of quality, one of the key factors for a customer’s decision to buy a product of the Daimler Group, it is necessary to make investments in new products and technologies that sometimes exceed the originally planned volume. This cost overrun would then reduce the anticipated earnings from the launch of a new model series or product generation. This affects the segments that are currently launching new products or that are planning to do so. Due to the currently high number of product launches, production and technology risks are generally higher than in the previous year.

Furthermore, in the Mercedes-Benz Cars segment, there is a risk with a very low probability of occurrence that the operation of production plants could be interrupted. Spare parts are held available for those production plants as a precaution.

The Mercedes-Benz Cars division may be able to utilize additional production opportunities by increasing its production capacities. For this purpose, shift models and the worldwide production networks would be used, investment plans implemented and analyses conducted, for example with regard to enhancing the flexibility of production equipment.

Guarantee and goodwill claims are another issue affecting the automotive segments. These claims can arise when the quality of the manufactured products does not meet customers’ expectations, when a regulation is not fully complied with or when support is not provided in the required form in connection with problems and care of the products. The Daimler Group works continually and intensively to maintain product quality at a very high level along with growing product complexity, in order to avoid the danger of making corrections on end-products and to supply customers with the best possible products. Furthermore, processes are implemented at the Daimler Group to regularly obtain customers’ opinions on the support provided so that our service and customer satisfaction can be continuously improved.

In principle, there is also a danger that due to a failure of production equipment or a problem with a production plant, the level of production cannot be maintained as planned. In order to avoid bottleneck situations, priority is placed on the regular maintenance of production equipment and on avoiding capacity bottlenecks by means of foresighted planning. The possibility of a risk occurring in this context is low. Another factor is that the availability and quality of products is continuously monitored within the context of managing the entire value chain.

Information technology risks. Information technology plays a crucial role for the Daimler Group’s business processes. Storing and exchanging data in a timely, complete and correct manner and being able to utilize fully functioning IT applications are of key importance for a global group such as Daimler. Risks of occurrences which could result in the interruption of our business processes due to the failure of IT systems or which could cause the loss or corruption of data are therefore identified and evaluated over the entire lifecycles of applications and IT systems. Daimler has defined suitable actions for risk avoidance and limitation of damage, which are continually adapted to changing circumstances. These activities are embedded in a multi-stage IT risk management process. For example, the Group minimizes potential interruptions of operating routines in the data centers by means of mirrored data sets, decentralized data storage, outsourced archiving, high-availability computers and appropriate emergency plans. In order to meet the growing demands placed on the confidentiality, integrity and availability of data, Daimler operates its own risk management system for information security. Despite all the precautionary measures taken, Daimler cannot completely rule out the possibility that IT disturbances will arise and have a negative impact on the Group’s business processes. IT risks are not allocated to the segments of the Daimler Group because there are no segment-specific differences with regard to the types of risk in the IT risk portfolio.

Personnel risks. Daimler’s success is highly dependent on our employees and their expertise. Competition for highly qualified staff and management is still very intense in the industry and the regions in which we operate. Our future success also depends on the magnitude to which we succeed over the long term in recruiting, integrating and retaining executives, engineers and other specialists. Our human resources instruments take such personnel risks into consideration, while contributing towards the recruitment and retention of staff with high potential and expertise and ensuring transparency with regard to our resources. One focus of our human resources management is on the targeted personnel development and further training of our workforce. Our employees benefit for example from the range of courses offered by the Daimler Corporate Academy and from the transparency created by LEAD, our uniform worldwide performance and potential management system. Because of demographic developments, the Group has to cope with changes relating to an aging workforce and has to secure a sufficient number of qualified young persons with the potential to become the next generation of highly skilled specialists and executives. We address this issue by taking appropriate measures in the area of generation management. There is no segment-specific assessment of the human resources risk because the described risks are not related to any specific business segment but are valid for all segments. If this risk materializes, depending on the size of the personnel shortage, an impact on the Group’s activities and thus also on the earnings of the Daimler Group is to be expected.

As described above, our employees constitute great potential for the Daimler Group. With their ideas and suggestions, they are involved in the respective activities and working processes and thus contribute considerably to our improvements and innovations.

To support this process, the Daimler Group has established an ideas management system through which employees can submit ideas and suggestions for improvements. The processing of the information received by this system and the integration of ideas in an assessment process carried out by experts and persons in charge of the respective processes is supported by the established IT system “idee.com.” This is intended to ensure the systematic and sustained promotion of our employees’ ideas and suggestions for improvement.

Furthermore, workgroups create processes and instruments to produce new business ideas and to establish cross-departmental cooperation. In this context, an online community exists in the area of business innovation to which suggestions for discussions can be submitted, which all employees can assess and develop further.

Risks and opportunities related to equity interests and joint ventures. Cooperation with partners in joint ventures and associated companies is of increasing importance for Daimler to utilize additional growth opportunities, and also against the background of increasing national regulations, particularly in the emerging markets. The successful implementation of cooperation with other companies is also of key importance to realize cost advantages and to combat the competitive pressure in the automotive industry.

Daimler generally bears a proportionate share of the risks and opportunities of its joint ventures and associated companies in growth markets. In the relevant regions, the increasing relevance of cooperation with partners in joint ventures, associated companies and cooperations therefore increases the potential risks and opportunities, because the factors that have a negative impact on those companies’ profitability also reduce the Group’s earnings in proportion to the ownership interest.

The possible risks include negative financial developments for the equity interests of the Daimler Group. If cooperations (joint ventures) do not develop as desired or if the development of companies does not meet expectations, growth targets can be negatively impacted. Risks exist in connection with equity interests in the segments Mercedes-Benz Cars and Daimler Trucks. The cases involved are subject to a continuous monitoring process so that a company can be quickly supported if required and its profitability can be protected.

The development of production facilities and joint ventures in the Chinese market is exposed to risks. Efficient production processes are established to deal with and reduce those risks. Furthermore, dependencies between contracting parties and possible changes in the framework conditions in China, in which the danger of increased costs is inherent, must be included in the local decision processes.

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