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Mercedes Benz Smart

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					              & smart
      Mercedes-Benz
   Passenger Cars




                                  Worldwide Market
                                  Position Strengthened
                              s   Operating profit adjusted for one-time effects rose 6% to €2.9 billion
                              s   Sales increased 7% to 1.15 million vehicles
                              s   More than 200,000 units sold for the first time in the US
                              s   New C-Class extremely successful
                              s   More than 100,000 smarts sold

                                                                       00          00         99
                                    amounts in millions               US $          €          €

                                    Operating Profit                2,014       2,145      2,703
                                    Operating Profit Adjusted       2,698       2,874      2,703
                                    Revenues                       41,026      43,700     38,100
                                    Investments in Property,
                                    Plant and Equipment             1,968       2,096      2,228
                                                                    2,104       2,241      2,043
                                    R&D
                                                                             1,161,601 1,097,142
                                    Production
                                                                             1,154,861 1,080,267
                                    Sales (Units)
                                                                              100,893     99,459
                                    Employees (Dec. 31)

26 MERCEDES-BENZ PASSENGER CARS & SMART
WORLD LEADER IN PREMIUM PASSENGER CARS.             MIXED MARKET DEVELOPMENTS.        Conditions in       Advanced technology
The Mercedes-Benz Passenger Cars & smart            the key markets and market segments for the
                                                                                                          ensures extraordinary
division is the world’s leading manufacturer of     Mercedes-Benz Passenger Cars & smart division
premium passenger cars. Our products attract        were mixed. Due to a significant market               dynamism and driving
customers through their innovative engineering,     downturn in Germany, new registrations of
                                                                                                          enjoyment: The new C-Class
safety, comfort, emotional appeal and pioneering    passenger cars in Western Europe did not quite
design. Our brand recognition is high; in 2000      equal the high level of the previous year. Sales in   model family with the
the Interbrand rating agency named Mercedes-        the upper-end segment of the North American
                                                                                                          sedan, the sport coupe and
Benz as the top premium automobile brand            market surpassed the high figure for 1999, and
worldwide. In addition to our constant quest for    the market situation slightly improved in South       the station wagon.
technical and aesthetic excellence, we also give    America and Japan. Strong growth was recorded
high priority to the future development of the      in the emerging markets of Asia and in Eastern
business. The design of Mercedes-Benz cars aims     Europe.
to give visible, trend-setting shape to our
innovative strengths, while continuing the great    RECORD SALES, REVENUES AND OPERATING
tradition of the brand through timeless detail      PROFIT.  The Mercedes-Benz Passenger Cars &
solutions that are unmistakably Mercedes-Benz.      smart division was able to significantly increase
This unique balance is the reason why design is     unit sales and revenues in nearly all important
one of many decisive arguments for purchasing a     markets in 2000. Revenues set a new record of
Mercedes-Benz car.                                  €43.7 billion (1999: €38.1 billion). Worldwide
                                                    unit sales of passenger cars, SUVs and smart City
The smart brand stands for a highly emotive,        coupes rose to 1,154,900 (1999: 1,080,300).
individual and unique product that has already      Adjusted for one-time effects, operating profit
established itself as market leader in the micro-   increased by 6% to a new high of €2.9 billion.
car segment in several European countries.          However, including the one-time effect of
                                                    establishing an accrual for recycling end-of-life
                                                    vehicles in the EU and one-time costs associated
                                                    with repositioning of the smart brand, operating
                                                    profit was below the high level of the previous
                                                    year. (see pp. 56-57)
                                                                                        MERCEDES-BENZ PASSENGER CARS & SMART      27
                          RECORD YEAR FOR MERCEDES-BENZ.        The             NEW MERCEDES-BENZ TECHNOLOGY CENTER. In
                          Mercedes-Benz brand sold a record 1,052,700           order to reduce time to market for our product
                          passenger cars in 2000 (+5%). The biggest             innovations, we have restructured our business
                          contributors to this growth were the M-Class,         systems in development, production, purchasing
                          the S-Class and the C-Class, but the E-Class and      and sales and we have more closely integrated
                          the A-Class also performed well in the market.        the individual stages of the value-added chain.
                          With a worldwide market share of 53%, the             All functions within the various vehicle projects
                          S-Class sedan was again by far the number one         are now concentrated at one location – the new
                          vehicle in its segment.                               Mercedes-Benz Technology Center (MTC) in
                                                                                Sindelfingen. The new structure will enable us to
                          Sales of Mercedes-Benz passenger cars in Western      bring new products to the mass production stage
                          Europe rose 4%. In Germany in particular, we          in less time, with lower costs, and at an even
                          significantly outperformed the general market         higher level of quality than before.
                          trend and recorded large increases. As a result,
                          our market share in the comparable segment            GREATER FLEXIBILITY IN PRODUCTION.         We have
                          increased to 15.4% in Western Europe (1999:           also introduced the globally-uniform Mercedes-Benz
                          14.4%) and to 24.3% in Germany (1999: 21.6%).         Production System (MPS) as a means of ensuring
                          With sales of 205,600 units (+9%) we also sold        that the high production engineering and quality
                          more than 200,000 passenger cars in the US for        standards demanded by the Mercedes-Benz brand
                          the first time and increased our market share in      are met at all locations. Our goal here is to achieve
                          the premium segment to 7.6% (1999: 7.4%). This        best-practice leadership in core processes
                          was accomplished despite the fact that the new        carried out under comparable conditions. It was
                          C-Class was not launched in the US until the end      the use of MPS that allowed us to reach the tar-
                          of September. In Japan, where the new C-Class         geted daily production rate for the new C-Class
                          was not introduced until the last quarter of 2000,    sedan at the Sindelfingen and Bremen plants in
                          registrations of new Mercedes-Benz vehicles           half the time needed for the predecessor model.
                          failed to reach the previous year’s extraordinarily
                          high level, falling 4% to 48,500. However, sales
                          developed positively in the emerging markets of
                          Asia, South America and Eastern Europe as well
                          as in Australia and the Middle East.

                          EXCELLENT LAUNCH FOR THE NEW C-CLASS.           The
                          new C-Class sedan was launched in Western
                          European markets in May 2000. The vehicle’s
                          distinctive features are a newly-developed
                          chassis, more powerful engines, an elegant
                          design, and a total of 20 innovations as standard.
                          Production of the new C-Class was rapidly
                          increased after its launch. As a result, we were
                          able to sell 147,900 new sedans by the end of the
                          year. To enable us to meet the strong demand for
                          the vehicle, we began producing a right-hand
                          drive version at a new plant in South Africa in
                          September 2000. The facility has an annual
                          capacity of up to 40,000 vehicles. In 2001, we will
                          also begin manufacturing up to 10,000 new C-                                       Open in style – from folding
                          Class vehicles annually in Brazil. Market launch
                          of the sport coupe and the new C-Class station                                     sunroof to fully convertible.
                          wagon is scheduled for spring 2001.                                                The smart convertible was

                                                                                                             developed from the City

                                                                                                             coupe and is available in two

                                                                                                             differently equipped versions.




28   MERCEDES-BENZ PASSENGER CARS & SMART
                                                                                                              Coupe driving culture at its

                                                                                                              most sophisticated:

                                                                                                              The Mercedes-Benz CL

                                                                                                              combines the most

                                                                                                              advanced technology

                                                                                                              available with exclusiveness

                                                                                                              as a standard feature.




We have also restructured our production facili-      the McLaren Mercedes Team finished second in
ties around the world to become more flexible,        the Constructors’ Championship. Mercedes-Benz
and are therefore better able to quickly adjust ca-   driver Bernd Schneider captured the Drivers’
pacities to fluctuations in the demand for particu-   Championship in the first year of the German
lar models.                                           Touring Car series and Mercedes-Benz was also
                                                      the top team.
MORE THAN 100,000 SMARTS SOLD.         The innova-
tive smart vehicle concept, combining fun and
                                                        Unit Sales 2000*)                  1,000    00 : 99
great utility with a compact yet comfortable and                                            Units      in %
safe interior, has proved itself in practice and is
becoming more and more popular. With sales of           Mercedes-Benz                      1,053       +5
102,100 vehicles (1999: 79,900), smart surpassed        of which: A-Class                   198        (4)
its target of 100,000 and now enjoys an excellent                   C-Class                 389       +10
position in the micro-car segment in Western
                                                                    of which: CLK             80       (4)
Europe. The smart cdi and the smart convertible
were particularly successful, selling 20,600 and                                SLK           52       (2)
16,900 units, respectively. The smart cdi is the                    E-Class                 247        +0
most competitively priced “three-liter car” in                      S-Class/SL              109       +10
Western Europe, and is now clearly the market
                                                                    M-Class                 106       +17
leader for such ultra fuel-efficient vehicles.
Germany is the most important market for smart                      G-Class                    4      (10)
cars, with sales of 47,400 units (+19%), followed       smart                               102       +28
by Italy with 25,900 (+35%). The smart was also
                                                        Mercedes-Benz and smart
introduced in the UK, Japan and Taiwan in 2000.         worldwide                          1,155       +7

SMART COUPE UNVEILED. In September 2000, de-            Europe                              802        +7
signers unveiled the smart roadster coupe at the        of which: Germany                   440        +6
Paris Auto Show. This sporty two-seater is based                    Western Europe
on the roadster that proved so popular when it                      (excluding Germany)     348        +7
was presented at the International Auto Show in
Frankfurt in September 1999. It is scheduled for        North America                       221        +4
market launch in 2003.                                  of which: US (retail sales)         206        +9
                                                        South America                         20      +22
SUCCESSFUL MOTOR SPORTS.      In Formula 1
                                                        Asia / Australia (excl. Japan)        52      +50
racing, which gave 88 hours exclusive worldwide
exposure to the McLaren Mercedes Team, Mika             Japan (new registrations)             49       (4)
Häkkinen took second place in the Drivers’ Cham-      *) Wholesale figures, unless
                                                        otherwise indicated,
pionship after a tremendously exciting duel.            including leased vehicles.
David Coulthard took third place in the series and

                                                                                          MERCEDES-BENZ PASSENGER CARS & SMART         29