DaimlerChrysler Aerospace Group

99

99

98

97

96

US $

€

€

€

€

9,255

9,191

8,770

7,816

6,674

Germany

2,721

2,702

2,604

2,207

2,123

EU without Germany

4,643

4,611

4,126

3,806

3,064

North America

1,460

1,450

1,496

1,239

917

Other Markets

431

428

544

564

570

2,019

2,005

2,047

2,233

1,882

735

730

623

284

25

60

60

547

4

615

46,10745,85843,521

44,936

Germany

42,771

42,52539,93541,263Foreign

3,336

3,333

3,586

3,673

Amounts in millions

DaimlerChrysler Aerospace 1999

Revenues

Research and Development

Operating Profit(Contribution to the DaimlerChrysler Group)

Net Income

Employees (at Year-End)

Annual Report 1999

DAE_Umschlag_Aussen.p65

103.03.2000, 16:19 Uhr

DaimlerChrysler Aerospace Group

99

99

98

97

96

US $

€

€

€

€

9,255

9,191

8,770

7,816

6,674

Germany

2,721

2,702

2,604

2,207

2,123

EU without Germany

4,643

4,611

4,126

3,806

3,064

North America

1,460

1,450

1,496

1,239

917

Other Markets

431

428

544

564

570

2,019

2,005

2,047

2,233

1,882

735

730

623

284

25

60

60

547

4

615

46,10745,85843,521

44,936

Germany

42,771

42,52539,93541,263Foreign

3,336

3,333

3,586

3,673

Amounts in millions

DaimlerChrysler Aerospace 1999

Revenues

Research and Development

Operating Profit(Contribution to the DaimlerChrysler Group)

Net Income

Employees (at Year-End)

Annual Report 1999

DAE_Umschlag_Aussen.p65

103.03.2000, 16:19 Uhr

● Mercedes-Benz Passenger Cars
& smartCOMMERCIAL AIRCRAFT● Chrysler Group
Chrysler ®
Jeep®
Dodge®
Plymouth®

Revenues
Incoming Orders

SATELLITES
99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

3,363

3,340

2,962

Revenues

461

458

645

5,179

Incoming Orders

527

523

609

240

R&D Expenses

430

427

532

1,455

1,652

4,134

R&D Expenses

267

Employees (Dec. 31)● Commercial Vehicles
Mercedes-Benz ®
Freightliner ®
Sterling ®
Setra ®
Thomas Built Buses®

16,754

99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

710

705

680

Revenues

Incoming Orders

1,736

1,724

1,729

744

Incoming Orders

1,566

1,555

2,059

122

R&D Expenses

495

492

460

8,266

9,109

1,275

R&D Expenses

131

Employees (Dec. 31)● Commercial Aircraft
Helicopters
Military AircraftSpace Infrastructure
Satellites
Defense and Civil Systems
Aero Engines

OCTOBER. October 14: Signing of theCompany by seven European nations forthe development and production of theEuropean military transporter A400M.

Deutsche Lufthansa AG, the airline withthe largest Airbus fleet to date, as the150th Airbus aircraft. May 18, 30 years
ago: a Franco-German government
agreement creates the basis for starting
the Airbus program. 1,000th test flight ofa Eurofighter prototype.

contract on the merger of Dasa andAerospatiale Matra and formation of EADS.
October 15: Agreement on the foundationof the Franco-UK-German spacetechnology joint venture called Astrium.

thus exceeding the original lifetime of
ERS-1 by three times. Delivery start:
hand-over of the first EC 155 to theFederal Border Guard.
APRIL. 1,000th aircraft of the A320 family

is taken over by Air France. Program
launch for A318, the smallest Airbus. The
U.S.-German experimental aircraft X-31 isstarted for the new vector technology program. Delivery of the first Tornado
reconnaissance pod from series
production.

JUNE. Maiden flight of BK 117 C-2.

Eurocopter delivers the 100th EC 135 andthe 500th Super Puma/Cougar. Sealing of
the series production contract for theFranco-German military helicopter Tiger.
AUGUST. Nortel Dasa is involved in alarge order for development of a digital
mobile radio communication network forDeutsche Bahn AG.

Successful first flight of MAW Taurus
missile. Agreement on the formation of athree-nation company for the developmentof the European satellite navigation
system Galileo signed.
DECEMBER. December 2: The Spanish

CASA becomes a foundation member of
EADS. ESA's X-ray satellite XMM, built
under the lead of Dasa, is launched into
orbit by the first commercial flight ofAriane 5.

4,065

MILITARY AIRCRAFT

Employees (Dec. 31)

AERO ENGINES
99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

1,085

1,077

957

Revenues

1,754

1,742

1,660

2,702

Incoming Orders

1,559

1,548

2,594

217

R&D Expenses

138

137

153

6,875

6,633

833

R&D Expenses

MAY. 2,000th Airbus is taken over by

130
4,052

Incoming Orders

JANUARY. Foundation of Airbus Military

1,266* According to our stake in Eurocopter
consolidated at 40%.

Revenues

MILESTONES 1999

MARCH. 40,000th earth orbit by ERS-1,

16,195

Employees (Dec. 31)

DEFENSE AND CIVIL SYSTEMS

Revenues● Other Businesses
Rail Systems
Automotive Electronics
MTU/Diesel Engines

265

HELICOPTERS*● Services (debis)
Financial Services
IT Services● Aerospace

4,105

227

Employees (Dec. 31)

827
225
6,308

5,913

Employees (Dec. 31)

DaimlerChrysler Aerospace AG
RK/L
SPACE INFRASTRUCTURE
99

99

98

Mio. $

Mio. €

Mio. €

Revenues

596

592

582

Incoming Orders

384

381

532

R&D Expenses

310

308

321

2,098

1,990

Employees (Dec. 31)

DaimlerChrysler Aerospace AG
81663 Munich
Germany
http://www.dasa.com

The 1999 annual report is published both in German andin English. Furthermore the DaimlerChrysler annual report
can be requested by contacting:Phone/Fax: (+49) 7 11/17-9 22 87
This annual report was printed on environmentally friendly
paper bleached without of use of chlorine.

DAE_Umschlag_Innen.p65

102.03.2000, 15:06 Uhr

● Mercedes-Benz Passenger Cars
& smartCOMMERCIAL AIRCRAFT● Chrysler Group
Chrysler ®
Jeep®
Dodge®
Plymouth®

Revenues
Incoming Orders

SATELLITES
99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

3,363

3,340

2,962

Revenues

461

458

645

5,179

Incoming Orders

527

523

609

240

R&D Expenses

430

427

532

1,455

1,652

4,134

R&D Expenses

267

Employees (Dec. 31)● Commercial Vehicles
Mercedes-Benz ®
Freightliner ®
Sterling ®
Setra ®
Thomas Built Buses®

16,754

99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

710

705

680

Revenues

Incoming Orders

1,736

1,724

1,729

744

Incoming Orders

1,566

1,555

2,059

122

R&D Expenses

495

492

460

8,266

9,109

1,275

R&D Expenses

131

Employees (Dec. 31)● Commercial Aircraft
Helicopters
Military AircraftSpace Infrastructure
Satellites
Defense and Civil Systems
Aero Engines

OCTOBER. October 14: Signing of theCompany by seven European nations forthe development and production of theEuropean military transporter A400M.

Deutsche Lufthansa AG, the airline withthe largest Airbus fleet to date, as the150th Airbus aircraft. May 18, 30 years
ago: a Franco-German government
agreement creates the basis for starting
the Airbus program. 1,000th test flight ofa Eurofighter prototype.

contract on the merger of Dasa andAerospatiale Matra and formation of EADS.
October 15: Agreement on the foundationof the Franco-UK-German spacetechnology joint venture called Astrium.

thus exceeding the original lifetime of
ERS-1 by three times. Delivery start:
hand-over of the first EC 155 to theFederal Border Guard.
APRIL. 1,000th aircraft of the A320 family

is taken over by Air France. Program
launch for A318, the smallest Airbus. The
U.S.-German experimental aircraft X-31 isstarted for the new vector technology program. Delivery of the first Tornado
reconnaissance pod from series
production.

JUNE. Maiden flight of BK 117 C-2.

Eurocopter delivers the 100th EC 135 andthe 500th Super Puma/Cougar. Sealing of
the series production contract for theFranco-German military helicopter Tiger.
AUGUST. Nortel Dasa is involved in alarge order for development of a digital
mobile radio communication network forDeutsche Bahn AG.

Successful first flight of MAW Taurus
missile. Agreement on the formation of athree-nation company for the developmentof the European satellite navigation
system Galileo signed.
DECEMBER. December 2: The Spanish

CASA becomes a foundation member of
EADS. ESA's X-ray satellite XMM, built
under the lead of Dasa, is launched into
orbit by the first commercial flight ofAriane 5.

4,065

MILITARY AIRCRAFT

Employees (Dec. 31)

AERO ENGINES
99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

1,085

1,077

957

Revenues

1,754

1,742

1,660

2,702

Incoming Orders

1,559

1,548

2,594

217

R&D Expenses

138

137

153

6,875

6,633

833

R&D Expenses

MAY. 2,000th Airbus is taken over by

130
4,052

Incoming Orders

JANUARY. Foundation of Airbus Military

1,266* According to our stake in Eurocopter
consolidated at 40%.

Revenues

MILESTONES 1999

MARCH. 40,000th earth orbit by ERS-1,

16,195

Employees (Dec. 31)

DEFENSE AND CIVIL SYSTEMS

Revenues● Other Businesses
Rail Systems
Automotive Electronics
MTU/Diesel Engines

265

HELICOPTERS*● Services (debis)
Financial Services
IT Services● Aerospace

4,105

227

Employees (Dec. 31)

827
225
6,308

5,913

Employees (Dec. 31)

DaimlerChrysler Aerospace AG
RK/L
SPACE INFRASTRUCTURE
99

99

98

Mio. $

Mio. €

Mio. €

Revenues

596

592

582

Incoming Orders

384

381

532

R&D Expenses

310

308

321

2,098

1,990

Employees (Dec. 31)

DaimlerChrysler Aerospace AG
81663 Munich
Germany
http://www.dasa.com

The 1999 annual report is published both in German andin English. Furthermore the DaimlerChrysler annual report
can be requested by contacting:Phone/Fax: (+49) 7 11/17-9 22 87
This annual report was printed on environmentally friendly
paper bleached without of use of chlorine.

DAE_Umschlag_Innen.p65

102.03.2000, 15:06 Uhr

DaimlerChrysler Aerospace is engaged in the fields of aeronautics,
astronautics, defense and civil systems as well as propulsion systems. In
these various disciplines, future technologies are being developed in orderto master the challenges of the 21st century and to remain competitive on
the global market tomorrow as well as today. The key to achieving this iscommitment and the realization of integral solutions for humanity and its
environment, is the capability to cooperate in worldwide partnerships, isthe creative ability to transform ideas and technical possibilities into
market-oriented products, and finally, is the resolution to think not only
for today but above all for tomorrow.

New Values by
European Dimensions

Letter from the President andChief Executive Officer 2
Business Review 4Outlook 6

Operating Profit

Revenues

in millions of €in billions of €Employees

1000

10

50000

800

8

40000

600

6

30000

400

4

20000

200

2

10000

96

97

98

99

96

97

98

99

Operating Activities 8
Human Resources 34
Principal Companies of theDaimlerChrysler Aerospace Group 37
Analysis of the Economic Situation 38

96

97

98

99

Consolidated Financial Statements 42
Auditor’s Report 64
Consolidated Financial Statementsof the DaimlerChrysler Group 65
Members of the Supervisory Board 66
Report of the Supervisory Board 67
Marketing Companies andRepresentative Offices 68
Addresses of the Business Units 70

DAE_S001-001.p65

103.03.2000, 8:30 Uhr

L E T T E R

LETTER FROM THE PRESIDENT

A N D

2

F R O MC H I E F

T H E

P R E S I D E N T

E X E C U T I V E

DaimlerChrysler Aerospace, its employees and its
shareholders can be proud of what has been achieved during
the 10-year history of the company. 1999 was a further highly
successful year underlining Dasa's position as one of theworld's most successful aerospace companies. In a generally
favorable economic atmosphere, Dasa was again able tosurpass the peak figures of the previous year with respect torevenues and operating profit. The volume of incoming orders
laid well above revenues despite the pressures of increasing
competition.
The market success of the Airbus family has played a vital rolein this success. 476 confirmed orders meant that, for the firsttime, we were able to meet and indeed exceed our goal of a
50% share of the world market. A total of 294 aircraft weredelivered and the new models A318 and A340-500/-600 haveconsiderably improved our market position. Preliminary workon the new mega-airliner A3XX was continued with vigor
during 1999. To cope with our extensive order backlog andmeet the changing needs of the market, we also continue toincrease production capacity.

O F F I C E R

In the helicopter sector, we have been able to further
strengthen our position in the civil and military markets,
which have shown recovery. The order for the first series
production batch of the Franco-German Tiger combat
helicopter was a particular highlight in the year 1999.
In the Military Aircraft business unit, the positive developmentof the past few years continued in 1999. Series productionbuild-up and flight testing of Eurofighter are on schedule.
Important milestones have also been reached in the
campaigns to export Eurofighter to Greece and Norway.
Our space activities reached a new climax in December 1999
with the first commercial launch of the European launcher
Ariane 5, which successfully transported the scientific X-ray
satellite XMM into space. We have also taken an important
step in the space field as far as corporate policy is concerned.
The agreement on the formation of the trilateral spacecompany Astrium has put European cooperation in the spaceindustry on a globally competitive footing.
Growth at our engine subsidiary MTU München was foundedparticularly on extensive growth in the maintenance business,
which we intend to further develop as part of an ambitious

DAE_S002-003.p65

2

DR. RER. POL.

DR.-ING.

WERNER

DR. JUR.

MANFRED BISCHOFFGUSTAV HUMBERTHEINZMANN

HARTWIG KNITTER

President and Chief
Executive Officer(until March 15, 2000)

Commercial Aircraft,
Member of theBoard of Management

Defense and Civil Systems
Member of theBoard of Management

Human Resources,
Member of theBoard of Management

03.03.2000, 8:29 Uhr

In the defense sector, where further cuts in the federal budget
could not be offset by increased export activity, the necessary
structural changes have been begun following theconcentration process which has taken place over the past
years. Nevertheless, the defense sector is well equipped to
face the future with such modern products as the standoff
missile Taurus and the reconnaissance, command andcommunication systems successfully deployed in Kosovo.
Nortel Dasa, active in the civil telecommunication systems
sector, was able to report double digit growth rates.
The past business year was not only financially but also
strategically the most successful in the history ofDaimlerChrysler Aerospace. 1999 was the year which saw thecompany advance well into the age of European industrial
structures, a development that is being clearly felt in all areasof business. With our long-standing partners Aerospatiale
Matra from France and CASA from Spain we have agreed toform the European Aeronautic Defence and Space Company,
EADS. In doing so, we are setting up the first leading transnational aerospace company in Europe and the world's thirdlargest company in our sector. We have thus laid thefoundations for a successful future in the globally competitive
world of the 21st century.
Dasa’s financial strength and the strategic far-sightedness of
our parent company DaimlerChrysler AG have enabled us toplay such a decisive role in European restructuring andthus to consistently pursue our strategic goals. The successful
corporate policy followed in the past years has given
our company a solid base on which to build new European
structures and create further profitable growth.

3

Munich, February 2000

Dr. Manfred Bischoff

DR. RER. POL

RAINERJOSEF

ALOYSIUS

DR.-ING.

KLAUS ENSSLIN

HERTRICH

KIND

RAUEN

KARL-HEINZ HARTMANN

Satellites

Aero Engines(until March 31, 2000)

Space Infrastructure

Military Aircraft(until Dec. 31, 1999)

Military Aircraft(since Feb. 1, 2000)

President and Chief
Executive Officer(from March 15, 2000)

DAE_S002-003.p65

303.03.2000, 8:29 Uhr

LETTER FROM THE PRESIDENT

expansion strategy with joint ventures the world over. The
focus of development was the PW6000 engine for the new
Airbus A318.

B

U

S

I

N

E

S

S

R

E

V

I

E

W

Profitability improved◆ Operating profit reached a new record level of €730 (1998: €623) million◆ Revenues increased by 5% to €9.2 billion◆ Airbus deliveries rose by 28% to 294 aircraft

BUSINESS REVIEW◆ With €9.9 (1998: €13.9) billion, incoming orders once again reached a high level

4

OPERATING PROFIT FURTHER IMPROVED. Compared with the

INVESTMENT AND R&D EXPENDITURE AT A HIGH LEVEL.

excellent result for the previous year, the operating profit
rose by €107 million to €730 million. Continued improvement in efficiency in the past played a decisive role in thispositive development. Higher business volumes for commercial aircraft and the continually rising exchange rate of the
US dollar as against the Euro also had a favorable effect.

Investment in capital assets increased in 1999 to €336
(1998: €326) million. Focus remained on the expansion of
production capacity in the Airbus program. Expenditure
on research and development (R&D) reached previous year’slevel of € 2.0 billion. R&D expenditure channeled into
projects that we carry out for third parties decreased by 8%
to €1.5 (1998: €1.7) billion due to lower incoming orders in
the Satellite business unit while R&D expenditure financedout of our resources increased by 25% to €458 (1998: €367)
million. The Airbus program as well as the military aircraft
sector registered an above-average growth.

This excellent result was achieved despite new strain on
Defense and Civil Systems which resulted from economies
in the German defense budget. In this context, structuralprovisions amounting to €34 million were made which areincluded in the result.

EADS AND ASTRIUM CREATE A COMPETITIVE STRUCTURE
REVENUES INCREASED BY €421 MILLION. We were able to

FOR THE EUROPEAN AEROSPACE INDUSTRY IN THE INTERNA-

increase revenues by 5% to €9.2 billion in 1999. This increase was driven by substantial successes in the Commercial Aircraft business unit. Particularly Airbus deliveries,
which rose by 28% to 294 aircraft, as well as the favorable
rate of the US dollar had a positive effect. The Military Aircraft business unit also made a gratifying contribution to
growth. The other business units all registered slight upward growth, with the exception of Satellites, where there
was a decline in revenues due to the changed order structures which call for a lower share of subcontractor services.

TIONAL ARENA. On 14 October we joined with our French

partners in signing the contract regulating the merger ofDasa and Aerospatiale-Matra to form the European Aeronautic
Defence and Space Company (EADS), the third-largest aerospace company worldwide. Negotiations on our Spanish
partner CASA joining EADS were successfully concludedin December 1999. This means that we have achieved ourmost important goal in the year under review - the creationof a viable bedrock for the future of the European aerospaceindustry. EADS has excellent growth and profit prospects
which the new joint venture will exploit.

RECORD LEVELS OF 1998 FOLLOWED BY FEWER INCOMING
ORDERS. With a value of €9.9 (1998: €13.9) billion, incom-

ing orders once again reached an unexpected high level
although it remained below the record of the previous yearthat was characterized by orders for Eurofighter and Airbus
aircraft. Budgetary constraints delayed government agencies
from placing firm orders and this was the main reason for a
reduced volume of orders in the Defense and Civil Systems
business unit. The order for the first volume batch of Tiger
military helicopters impacted on incoming orders in the
Helicopter business unit with double-digit growth.

DAE_S004-005.p65

4The contractual agreement regulating the consolidation of
the space activities of Dasa and Matra Marconi Space (MMS)
to form Astrium, the largest space company in Europe, wasanother groundbreaking step for the future.
POSITIVE RESULT IN COMMERCIAL AIRCRAFT. Airbus deliver-

ies rose considerably and as a consequence revenues in theCommercial Aircraft business unit rose by 13%. Incoming
orders fell back cyclically after a run of record years. However,the significant increase in the Airbus market share of purchase orders once again generated a high level of incoming

03.03.2000, 8:42 Uhr

99

99

98

Amounts in millions

US $

€

€

DaimlerChrysler Aerospace

9,255

9,191

8,770

Commercial Aircraft

3,363

3,340

2,962

710

705

680

Helicopters1)
Military Aircraft

99

99

98

Amounts in millions

US $

€

€

DaimlerChrysler Aerospace

9,955

9,886

13,866

Commercial Aircraft

4,134

4,105

5,179

Helicopters1)

1,275

1,266

744

1,085

1,077

957

Military Aircraft

833

827

2,702

Space Infrastructure

596

592

582

Space Infrastructure

384

381

532

Satellites

461

458

645

Satellites

527

523

609

Defense and Civil Systems

1,736

1,724

1,729

Defense and Civil Systems

1,566

1,555

2,059

Aero Engines

1,754

1,742

1,660

Aero Engines

1,559

1,548

2,594

1) According to our stake in Eurocopter consolidated at 40%.

1) According to our stake in Eurocopter consolidated at 40%.

orders for 1999 at €4.1 (1998: €5.2) billion. The order backlog of 1,445 (1998: 1,309) aircraft gave the Airbus Consortium the parameters for gradually increasing production
capacity by 23% to 355 aircraft a year until 2002.

In preparation of the foundation of the Astrium Group thebusiness activities of the two business units will be contributed to Astrium Deutschland GmbH with retroactive
effect from 1 January 2000. This new enterprise will join
forces with Astrium UK and Astrium France to form thefuture Astrium Group.

HELICOPTERS IN ESTABLISHED MARKET POSITION. The Euro-

copter Group was able to further extend its market leadership. Revenues increased by 4% to €705 (1998: €680) million
in accordance with our stake of 40%. The contract governing
the first volume batch in the Tiger program increased incoming
orders by 70%.
MILITARY AIRCRAFT ON AN UPWARD TREND. The programs

Eurofighter and Tornado were the main performers when
it came to revenues in the Military Aircraft business unit.
An order for upgrading the Greek fleet of Phantom aircraft
was booked in 1998 and production of Airbus components
increased in the year under review. These two factors playeda significant part in fuelling growth and revenues rose overall by 13% to €1.1 (1998: €1.0) billion. Following on from thebig orders booked in 1998, incoming orders were substantially lower in 1999 at €0.8 (1998: €2.7) billion, as was to be
expected.
SPACE INFRASTRUCTURE AND SATELLITES ON A SOLID FOUNDATION. Revenues rose by 2% to reach €592 (1998: €582)

million in the Space Infrastructure business unit. The
commercial success of the European launcher Ariane andour substantial involvement in the Columbus space lab werethe main factors in driving up revenues. Incoming orders
considerably dropped below previous year's figures due topostponement in orders.
A significant drop in the share of subcontractor services inoverall performance was a key factor in the sharp decline inrevenues experienced by the Satellites business unit. They
went down by 29% to €458 million. This trend was also responsible for the 14% drop in incoming orders. Utilization of
capacity in the business unit was well throughout the year.

DAE_S004-005.p65

Incoming Orders

5

BUSINESS REVIEWRevenues

5

FOCUSING DEFENSE ENGINEERING ON CORE BUSINESS.

Strategic reorientation of the Defense and Civil Systems
business unit once again led to parts of the business, suchas Elekluft GmbH, being sold in 1999. Even so, revenues
reached previous year's level of €1.7 billion. Calculated on
a comparative basis revenues increased by 10%. Incoming
orders in the year under review were 24% lower than in
1998. Aside from the structural changes, this development
mainly reflected a new round of cuts in government budgets.
NEW COOPERATIVE VENTURES IN THE AERO ENGINE BUSINESS. The ongoing increase in maintenance business andthe favorable rate of the US dollar have driven up revenues
in the Aero Engine business unit by 5% to €1.74 (1998:€1.66) billion. Following on from two big orders booked in
1998, the 1999 incoming orders at €1.5 (1998: €2.6) billion
was in line with our expectations. With new joint ventures
we expand our international presence and product range inengine maintenance.
CREATION OF AROUND 1,000 NEW JOBS. 1999 saw an in-crease in human resources on the basis of full order books
in aircraft and engine construction. At the end of 1999
the number of employees had increased to 46,107 (1998:
45,858). Defense and Civil Systems were particularly
affected by structural changes and once these adjustments
are taken into account we took on around 1,000 additional
employees.

03.03.2000, 8:42 Uhr

O

U

T

L

O

O

K

Consolidation to form EADS◆ EADS - the future is a European one◆ Further increase in revenues to be expected◆ Incoming orders to once again reach a high level above revenues◆ Restructuring program adjusts capacities in defense engineering until 2002

OUTLOOK◆ More than €2 billion a year to be invested in research and development until 2002ESTABLISHMENT AND FLOATATION OF EADS. Together with
our European partners, we agreed in the fourth quarter of1999 to merge the business activities of Dasa, Aerospatiale
Matra and Construcciones Aeronauticas (Casa). The newcompany will operate under the name of European Aeronautic
Defence and Space Company (EADS).

6

The activities of DaimlerChrysler Aerospace AG and its
subsidiaries will be contributed to the new company EADS,
with the exception of MTU Munich, its subsidiaries andTemic. The new company will start operation in summer
2000 after completion of public approval procedures,
approval by the respective supervisory bodies and after thenecessary legal and capital arrangements have been made.
We will sell a considerable number of EADS shares, i.e. 34.43%,
on the stock market. To ensure continuity and to consolidate
initial commitment, the remaining 65.57% of the shares will
be held by a holding company. DaimlerChrysler and a
French holding company pooling the shares of the Frenchstate (50%), Lagadère (37%) and French private institutions(13%) will have equal shares in EADS (45.75%) in the holding company. The remaining 8.5% will be held by SEPI, aholding company owned by the Spanish state. This structure
will make DaimlerChrysler the largest partner in EADS witha share of about 30%.
The new company will be a joint-stock company under Dutch
law. Operative business will be managed from dual headquarters in Paris and Munich (Ottobrunn). EADS will consistof five business units: Airbus, Military Transport Aircraft,
Aeronautics, Space Systems and Defence & Civil Systems.
The business structure of EADS will be complemented by
the three central functions Strategy, Finance/Controllingand Marketing.

DAE_S006-007.p65

6EADS PROSPECTS. As Europe’s largest and the world’s thirdlargest company EADS will become an efficient aerospacecompany and an international benchmark. Cross-border integration of business segments will join forces and thus open
up considerable synergies that will generate additional profitable growth. The current structure and efficiency of Dasa
will provide an excellent basis.
EUROPEAN SPACE COMPANY ASTRIUM. After approval by the
EU cartel authorities and the respective supervisory bodies,
we will establish the Astrium Group in the first half of 2000.
With a workforce of more than 8,000 and revenues of €2.25
billion, Astrium will be the largest space company in Europe
and thus one of the leading companies in this sector worldwide. Astrium will be active in the fields of Earth observation,
telecommunications, science, launcher systems and space
infrastructure.
ENVIRONMENT WILL CHANGE. According to actual economic

forecasts, air traffic volume will continue to grow. This increase in air traffic volume can only be handled by a growing number of aircraft. Many airlines have already met thistrend by placing extensive orders. Thus the extremely highorder volume of the past years cannot be achieved any more.
So pressure on prices will continue to increase. In the helicopter market, restrained growth in the civil sector is compensated by increased demand for military helicoptersworldwide. The European military aircraft industry benefits
from the start of the Eurofighter series production and theunabated demand for the upgrade of older types of aircraft.
In the Space sector, reduced public budgets are to be expected for scientific and Earth observation satellites. A stabledevelopment, however, is expected in the other sectors.
Although commercial satellite business will benefit fromnew business opportunities due to the beginning globalization in this market, pricing and eliminatory competition
will increase at the same time. New cuts in public defense
spending require new structural measures and job reductions in the defense industry.

03.03.2000, 8:45 UhrWe expect a decline in new business in the engine sector
which, however, will be compensated by further growthin engine maintenance due to the growing fleets of aircraft.

Airbus aircraft
A 300

520

489

31

431

FURTHER PROFITABLE GROWTH TO BE EXPECTED. Disregard-

A 310

260

255

5

249

ing EADS establishment, Dasa expects a further increase inrevenues for the year 2000 which will be mainly achieved
through increased deliveries in the Commercial Aircraft sector. The Helicopter business unit is also expected to increase
revenues through the extension of its market position. We
also wish to open up growth potentials in the Military Aircraft sector through the series production of the Eurofighter
and additional maintenance business in Central and Eastern
Europe. Increased settlement of Eurofighter engine accounts,a growing market volume for support services and broadening of the product range in the maintenance sector are expected to also open up growth opportunities to the engine
business.

A300/310

780

744

36

680

A 318

120

-

120

-

A 319

583

206

377

206

A 320

1,287

792

495

786

A 321

312

144

168

144

Sustained strong competition and associated pricing pressure require further cost optimization in all the sectors. We
will thus continue already initiated programs and establish
appropriate programs in the future to secure and improve
the profitability of the company. In addition, new cuts in defense budget will force us to adjust capacities in the Defense
and Civil Systems business unit. A restructuring program
has been initiated to abolish gradually several hundred jobs
until 2002.
We are confident that the result achieved in the year 2000
will reach a similarly high level as in 1999. In order to beable to achieve this success, it is, however, indispensablethat the economic conditions are within the calculated limits.

A 318/319/320/321

2,302

1,142

1,160

1,136

A 330-200/-300

264

131

133

131

A340

287

171

116

170

A 330/340
Total

302

249

301

2,188

1,445

2,117

FUTURE SECURITY TO RANK HIGH. From 2000 to 2002, weplan to spend more than €2 billion per year on research anddevelopment. More than €1.6 billion a year will be channeled into projects carried out on behalf of third parties particularly by the Defense and Civil Systems, Space Infrastructure and Satellite business units. Research and development
spending financed out of our resources is planned to amountto more than €400 million a year. Almost 50% of this sum
will be spent on the development of new Airbus aircraft withmain focus on A3XX development. Investment in capital assets will amount to about €1.5 billion in the planning period.
This sum will be mainly used for extension investment in
the Airbus program.

THE YEAR 2000. The increase in incoming orders to be expected for the year 2000 will be substantially characterized
by the orders for logistic support within the Eurofighter
program secured by the Military Aircraft business unit aswell as by the series-production order for the military transport helicopter NH90 in the Helicopter sector. In the AeroEngine business unit, incoming orders will rise due to increased demand for maintenance. Postponement in orders
from 1999 will help the Space Infrastructure business unit
to exceed last year's low incoming orders in 2000. The
Defense and Civil Systems business unit will almost reachprevious year's very low level of incoming orders despite
the planned cuts in the German budget.

7

551
3,633

After the flood of new orders secured in the previous years,
fewer orders for commercial aircraft will be placed this year.
In this context, a well-filled backlog of orders for 1,445 aircraft must be taken into account. As far as the Satellite business unit is concerned, we expect that, as in the case of commercial aircraft, the change in order structure and associateddecline in order volume will be neutral in effect on capacity
utilization.

INCOMING ORDERS ONCE AGAIN HIGHER THAN REVENUES INDAE_S006-007.p65

Order Aircraft inbacklog
service03.03.2000, 8:45 Uhr

OUTLOOKIn the Satellite and Defense and Civil Systems business
units, we expect declining revenues in the year 2000 which
will be due to changed order structures and lower public
spending. Already contracted and new orders as well as intensified export activities will help to increase revenues inthe years to come. Following on increased revenues in theyear 2000, we expect declining revenues in the Space Infrastructure business unit, which will be due to the decreasing
market potential.

Orders Deliveries

as of December 31, 1999

7

Commercial Aircraft

COMMERCIAL AIRCRAFT

Deliveries on the Upswing

8

The decision was taken in early 1999:
the flight above the clouds shall becomea reality for the youngest and smallest
member of the Airbus family – the A318
in late 2001.

DAE_S008-011.p65

803.03.2000, 8:47 Uhr

99

99

98

US $

€

€

Revenues

3,363

3,340

2,962

Incoming Orders

4,134

4,105

5,179

R&D Expenses

267

265

240

16,754

16,195

Amounts in millions

Employees (Dec. 31)

Increased deliveries of 294 (1998: 229) aircraft pushed up revenues substantiallyby 13% in 1999. In line with expectations, three record years were followed by areduced number of orders for commercial aircraft, but Airbus neverthelessincoming orders meant that production rates could again be stepped up.

COMMERCIAL AIRCRAFT BUSINESS UNIT. The core businessof DaimlerChrysler Aerospace Airbus GmbH and its facilities
and subsidiaries at sites in Hamburg, Bremen, Buxtehude,
Dresden, Laupheim, Nordenham, Stade and Varel is thedevelopment and production of medium and large transportand commercial airliners.
DaimlerChrysler Aerospace Airbus GmbH is one of the twomain partners in the Airbus Industrie GIE consortium with astake of 37.9%. The Airbus program accounts for more than
90% of business volume and is the main focus of this business
unit. Aircraft conversions and a range of civil and defense
programs account for the remaining 10%.
The plant in Hamburg has a key role in the Commercial
Aircraft business unit. The A321 and A319 Airbus models
are assembled at this plant and operations will be expanded
to include final assembly of the new A318. Moreover, theAirspares facility in Hamburg is the central spare parts store
supplying spares for all Airbus models worldwide.
DELIVERIES STEPPED UP. Revenues in the Commercial
Aircraft business unit experienced another steep rise during
1999, increasing by 13% to €3.3 (1998: €3.0) billion.
The strong growth in revenues was primarily attributable tosignificantly higher deliveries: the year under review saw
294 (1998: 229) aircraft delivered by Airbus Industrie tocustomers. This is 28% up on 1998 and it means that 32% of
all commercial airliners supplied worldwide were Airbus
models. At the end of 1999 a total of 2,117 Airbus airliners
were in worldwide service with 178 airline companies.

The Dresden plant specializes in converting used Airbus
passenger jets to freighters. This year the plant delivered its
25th converted A300B4 freighter to the customer.

DAE_S008-011.p65

903.03.2000, 8:47 Uhr

COMMERCIAL AIRCRAFT

succeeded in bumping up its market share to 55% (1998: 46%). The high level of9Airbus Industrie has already delivered 2,188 aircraft
worldwide, including Typ A330 aircraft (Photo left). An
additional 1,445 aircraft were ordered by the end of
1999. In its basic version, the A3XX will seat up to 555
passengers on routes of up to 14,200 km (7,700 km)

COMMERCIAL AIRCRAFT(photo right)

10

We delivered 13 converted freighters during the 1999 business year to bring the total number of freighters delivered tocustomers up to 68. Contracts for an additional 2 conversions
were also concluded in 1999.
The increased production rate resulted in a requirement fora fifth A300-600ST Beluga transport aircraft and we wereable to deliver the fuselage on schedule. This widebody transporter is produced by SATIC, a joint venture with our Airbus
partner Aerospatiale Matra.
INCOMING ORDERS CONTINUE AT A HIGH LEVEL. Like
revenues also order books contributed to a very positive
picture, with incoming orders once again attaining a highlevel at €4.1 (1998: 5.2) billion. After high order levels in previous years we originally anticipated a significant drop in purchase orders for aircraft. However, Airbus booked 476 (1998:
556) firm orders for Airbus models in 1999. These orders included 408 (1998: 437) airliners in the A318/A319/A320/
A321 family and 68 (1998: 87) airliners from the A330/A340
program. The figures include 120 orders for the A318 andCommercial Aircraftin billions of €

5
4
3
2
1

96

97

98

Incoming Orders
Revenues

DAE_S008-011.p65

1099

11 orders for the A340-500/600, currently still under development. The Airbus market share of firm orders for airliners
in the 100-plus seat category increased from 46 to 55%.
The current order backlog of the Airbus consortium now
stands at 1,445 (1998: 1,309) with a value of €13.4 billion.
This ensures that production facilities will be operating atfull capacity over the years to come.
The very favorable overall market position of the Airbus
program is primarily due to the modular principle ofcommonality within the A318/A319/A320/A321 single-aisle
family and the A330/A340 long-range family. This principle isinstrumental in permitting operators to use basically identicalcontrol and maintenance systems. Flight and maintenancepersonnel are interchangeable and operators can adopt a
more flexible approach to deploying the aircraft. Thisversatility is an extremely potent competitive advantage
in the international marketplace for airliners.
ANOTHER INCREASE IN PRODUCTION RATES. The extremely
high level of incoming orders, full order books and the
expectation that orders will continue at a good level haveencouraged the Airbus consortium to dedicate resources
towards further expansion of production capacity for theA318/A319/A320/A321 single-aisle program. In 2002 it will
be possible to build up to 24 aircraft a month in the program.
This means that up to 275 of these aircraft can be produced
and delivered to the customer each year. Overall, ourcommitment is to produce 355 aircraft of all Airbus models in
2002. This is equivalent to a growth rate of 23% bycomparison with 1999. As a result of this development we
expanded our labor force moderately by 559 during the year
under review.
RESEARCH AND DEVELOPMENT EXPENDITURE AT THE
FOREFRONT OF OUR MAJOR PROJECTS. We spent €265
(1998: 240) million on research and development in 1999.
This included €41 (1998: 82) million on projects carried out
for third parties. The self-funded R&D effort rose by 42% to€224 (1998: 158) million. Our development program focused on
the new A340-500/600 Airbus versions and the A318 as wellas the preparatory work for the A3XX and the A400M.

03.03.2000, 8:47 Uhr

AIRBUS FAMILY IS EXTENDED. The Airbus consortium decided

to go ahead with construction of the A318 in response to thebig demand for such an aircraft. This aircraft is derived fromthe A319 but is 4.5 frames shorter. It rounds off the lower
end of the Airbus program and allows airline companies toconvey 107 passengers in two class categories. The maiden
flight is scheduled for the close of 2001 and the first delivery
to a customer is planned for the last quarter of 2002.
We have also been continuing with planned development anddesign work on the four-engine A340-500 and A340-600
long-haul versions. The A340-500 will offer space for 313
passengers in three class categories and can operate over arange of 15,750 km (8,500 nm). The A340-600 can
accommodate 380 passengers in the three-class configuration
and will have a range of 13,900 km (7,500 nm). We have madea timely start in Hamburg on fitting out the front fuselage
section for the first A340-600 prototype and we aim to start
final assembly in April 2000. The maiden flight has beenplanned for January 2001 and the first deliveries arescheduled for 2002.

DAE_S008-011.p65

11

PREPARATORY WORK ON MAJOR PROJECTS AIRBUS A3XX
AND A400 M. In order to respond appropriately to the growthin future air traffic, the Airbus partners intend to develop
a widebody aircraft. The basic version of the A3XX will have
555 seats and a range of around 14,200 km (7,700 nm).
With the A3XX, Airbus is able for the first time to offer
airlines a complete aircraft family. Our objective is to use
the A3XX as a vehicle for direct access to the particularly
attractive top segment of the market and establish the Airbus
market share at 50% over the long term. The launch for the
A3XX program is planned for the end of 2000 with the A3XX
entering into service in 2005.

The A400M military transporter is another large-scale project.
In January 1999, we joined forces with Airbus Industrie,
Aerospatiale Matra, British Aerospace, Casa, Finmeccanica(Italy), Flabel (Belgium) and Tusas (Turkey) to establish theAirbus Military Company in order to develop this aircraft. The
A400M is intended to replace the Transall C160 and the
Hercules C130 that have now been in operation for decades.
The requirement for the A400M is estimated at 288 transporters in the seven participating countries, Germany,
France, Great Britain, Spain, Italy, Belgium and Turkey. The
aircraft is a four-engine turboprop and will be capable ofcarrying a payload weighing 20 metric tons over a range of
7,200 km. With the A400M, Airbus will for the first time offera military sector on the aircraft market, hence additionallyenhancing its competitiveness versus Boeing.

03.03.2000, 8:47 Uhr

COMMERCIAL AIRCRAFT

Besides these new programs a further initiative waslaunched as part of the Electronic Flight Control System(EFCS) program. The maiden flight of a VFW 614
technology demonstrator took off on 13 August 1999. This
technology program is directed towards developing andtesting innovative technologies for the deployment ofvarious new systems in future Airbus aircraft. The aim
is to maintain a substantial capability within the German
aviation industry for developing and expanding ourcommitment to high-tech solutions.

11Helicopters

Tiger Series Production approved
Following the launch of the series production
HELICOPTERSof the French-German military helicopter Tiger,delivery will start in 2002.

12

DAE_S012-013.p65

1203.03.2000, 8:49 Uhr

99

99

98

Amounts in millions *

US $

€

€

Revenues

710

705

680

Incoming Orders

1,275

1,266

744

R&D Expenses

131

130

122

4,052

4,065

Employees (Dec. 31)* According to our stake in Eurocopter, consolidated at 40%.

In 1999 we increased revenues to €705 million, in a gently growing commercial
market. A major contract for the Franco-German Tiger military helicopter took

HELICOPTERS

incoming orders to a record level of €1.3 billion.

MARKET POSITION EXPANDED. Eurocopter develops andbuilds a broad range of helicopters catering for around 85% ofmarket requirements. Activities are focused at four sites –Ottobrunn and Donauwörth in Germany and La Courneuve
and Marignane in France. The market for civil helicopters increased by about 5%, and the Eurocopter Group forged ahead
and increased its market share from 39% to 45%.
REVENUES AND INCOMING ORDERS ON THE UPSWING. The
business unit Helicopters increased revenues by 4% to €705
(1998: 680) million and in line with the stake held by Dasa
they comprise 40% of revenues for the Eurocopter Group.
The military share of revenues increased to 51% (1998:47%). Concluding the contract for the first batch of theFranco-German Tiger military helicopter increased incoming
orders by an impressive 70% to €1.3 billion (1998: 744 million). Expenditure on R&D increased by 7% to €130 (1998:

Helicopters122) million, particularly as a result of high outgoings forthe military programs that we are carrying out on behalf ofthird parties.
NEW PRODUCTS FOR THE COMMERCIAL MARKET. The latest
member to join the Eurocopter family is the EC120 Colibri, a
single-engine light civil helicopter. This helicopter is a fiveseater and is suitable for pilot training and rescue and surveillance missions. Official measurements by the ICAO (International Civil Aviation Organization) confirm that the EC120 Colibri
is the quietest helicopter in its class. Eurocopter has again
succeeded in setting new standards for flight characteristics,
price and design with another new and extremely successfulmodel: the EC135 light civil helicopter. A mere 18 months
after production was started up more than 100 helicoptershave been delivered to customers throughout the world. The
Super Puma, a helicopter in the 10-ton-class, remains withoutcompetition. The deicing system is a particular feature of thishelicopter that makes it ideal for offshore missions and rescue
operations under extreme conditions.

in billions of €PRODUCTION START-UP FOR THE TIGER. The contract for the

first production batch of the Franco-German Tiger helicopter
was signed in June. The first production run comprises 80
helicopters each for Germany and France. The two-seater Tiger is based on a modular concept and has been developed as aversatile helicopter for combat and support missions. It canalso be used for civil operations, including deployment as atransport helicopter on humanitarian missions.

1.25
1.0
0.75
0.5
0.25

96

97

98

Incoming Orders
Revenues

DAE_S012-013.p65

1399Development of the NH90 military transport helicopter wascontinued according to plan. This helicopter is equipped withglass cockpit, electronic flight control and the latest rotor technology. It is a joint project between the four countries Germany, France, Italy and the Netherlands. On May 31, the first
German prototype celebrated its maiden flight in Ottobrunn.

03.03.2000, 8:49 Uhr

13Military Aircraft

MILITARY AIRCRAFT

Eurofighter volume
production to begin

14

The first Eurofighter from series
production will make its first flightin the third quarter of 2001. The
production will run from 1998 to 2015.
During this phase 620 aircraft will be
manufactured for the four member states.

DAE_S014-017.p65

1403.03.2000, 8:51 Uhr

99

99

98

US $

€

€

1,085

1,077

957

Incoming Orders

833

827

2,702

R&D Expenses

227

225

217

6,308

5,913

Amounts in millions

Revenues

Employees (Dec. 31)

Getting volume production up and running have directed our activities within theEurofighter program as well as our export offensive. Revenues increased by 13% in1999 to more than one billion euros. The Tornado program generated the highest

MILITARY AIRCRAFT

sales after the Eurofighter.

OUR EXPERTISE IN MILITARY AIRCRAFT CONSTRUCTION. The
Military Aircraft business unit designs, develops, builds andprovides support for fighter, transport and mission aircraft.
Our capacities and expertise in integrating the most diverse
peripheral systems in military aircraft are also concentrated
in this unit. Areas of activity further include airborne
reconnaissance and guidance systems, trainer aircraft andtraining systems for the instruction of aircrews andtechnical staff. This business unit provides technical andlogistic support for airborne systems operated by the Bundeswehr and other NATO forces. We also develop and implement
programs for refit, extending service life and upgrades forthese partners.
SIGNIFICANT INCREASE IN REVENUES. Revenues in thebusiness unit rose during 1999 by 13% to €1,077 (1998:
957) million. Our Eurofighter and Tornado programs
contributed approximately half the revenues.

Incoming orders amounted to €827 (1998: 2,702) million.
In line with expectations, they remained below the record
levels achieved in 1998. The extraordinary increase lastyear resulted from orders for production investment and thefirst production batch in the Eurofighter program. The
significant increase in incoming orders for the Tornado
program formed the focus in 1999.
Expenditure on research and development went up by 4% to€225 (1998: 217) million. This included €179 (1998: 189)
million invested in projects under third-party contracts.
PRODUCTION LAUNCH IN THE EUROFIGHTER PROGRAM. The

Eurofighter is currently our most important program fromtechnological and commercial perspectives. We started the
production investment program in 1998 and received the
go-ahead for volume production. Getting production up and

DAE_S014-017.p65

1503.03.2000, 8:51 Uhr

15The German Tornado aircraft in the ECR version forelectronic warfare and reconnaissance are among
the required armament for Nato units in crisis missions(photo left). Mako (photo right) is our extensive concept ofa light attack aircraft and a high-performance trainer

MILITARY AIRCRAFT

aircraft of the fourth generation.

16

running then formed the focus of our activities during theyear under review. On 5 August 1999 we started building thefirst of 620 center fuselage sections in our Augsburg plant.
In the course of our ongoing test program we have upgraded
the avionics on the DA1 prototype, which has now also been
fitted with EJ200 production engines envisaged for theseries. The prototype was then put through its paces in agrueling test program in Sardinia during the fall of 1999.

UPGRADE PROGRAMS FOR TORNADO AND PHANTOM F-4.

Dasa's Military Aircraft business unit is responsible within the
consortium for European exports of the Eurofighter. In
November 1999 we started up concrete negotiations with
Norway on the delivery of 20 to 30 aircraft. A decisionon our bid may well be taken as early as the first half of theyear 2000. The Greek government has decided to startup exclusive negotiations with the Eurofighter Consortium
on the procurement of between 60 and 90 Eurofighters.

Advanced avionics software is essential for integrating state-ofthe-art aircraft components and system peripherals into Tornados, such as the Global Positioning System (GPS), the laser
gyro platform, the laser designator pod and the HARM III
antiradiation missile.

The upgrade program for Tornado aircraft operated by theGerman Luftwaffe involved integrating new avionics softwareand new avionics hardware in the fighter fleet. We conductedsuccessful flight tests on the new components in the course ofthis upgrade program during 1999. We were also involved in
upgrading the British fighter bomber fleet, focusing inparticular on the avionics software.

Experience gained from flying missions in the Kosovo conflicthave led to the implementation of adjustments in the
integrated precision weapons.
The first flight test was carried out according to schedule onan F-4E upgraded to the Peace Icarus 2000 Standard as the
upgrade program for the Greek fleet of Phantom F-4 aircraft
got underway on 28 April 1999. This permitted us to increasenavigation precision and the effectiveness of this weapon
system. Concurrently with the beginning of the test program,our partner Hellenic Aircraft Industries started work on
upgrading the remaining 36 aircraft.

Military Aircraftin billions of €

2.5
2.0

INTERNATIONAL SUPPORT SERVICES FOR THE MIG-29.

1.5
1.0
0.5

96

97

98

Incoming Orders
Revenues

DAE_S014-017.p65

1699

Poland and Hungary joined NATO in March 1999. Bothcountries have MiG-29 aircraft that fail to come up to current
requirements of the Alliance and international aviation
authorities on communication, identification and navigation.
Military Aircraft provides a range of packages that can be
tailored to customers' requirements for upgrading theseaircraft. These options can meet minimum requirements orencompass more sophisticated upgrades to allow the aircraft
to remain in service until at least 2015.

03.03.2000, 8:51 Uhr

We concluded additional agreements on support and upgrade
services in Bulgaria and Rumania. The main thrust of future
growth potential for this kind of package is from countries incentral and southeast Europe.
ACTIVITIES IN TRANSPORT AND MISSION AIRCRAFT. From2000 we will be fitting the 86 aircraft in the German
Luftwaffe's C-160 Transall fleet with an Airborne Collision
Avoidance System (Acas). This provides the pilot with supportin avoiding airborne collisions with other aircraft. Tests on thissystem were completed in August 1999.

Military Aircraft has been implementing the upgrade program
Autonomous Navigation System/Flight Control System for the
Bundeswehr and this is due to be completed towards the endof 2000. We are now preparing for further upgrade programs
that focus mainly on improving self-protection systems andintercommunication systems for the C-160.
Our order for Radar System Improvement (RSIP) for the
Awacs early-warning fleet is due to be completed by the end of
the year 2000. We therefore achieved a significant successin being awarded the contract for the installation of the Acassystem and mid-term upgrade for the Awacs early-warning
fleet ahead of time.

DAE_S014-017.p65

17We have been fitting new navigation systems and night-visionequipment to improve the mission capability of the Germannavy's 18 marine Breguet 1150 Atlantic reconnaissanceaircraft since the start of 1999. A prototype of the Acassystem was installed in a test aircraft and the flight trial wasstarted up that is scheduled for completion by the beginning of
2000.
FUTURE AND TECHNOLOGY PROGRAMS. Capitalizing on the

successful German-American X-31 program, we have madepreparations in 1999 for carrying out further trials using theavailable experimental aircraft to investigate thrust vector
control starting in 2000. The new Vector program has been
designed to demonstrate flights with a reduced tail unit,
removed completely at a later stage, and extremely shorttakeoffs and landings. While the German and American
defense ministries signed cooperation contracts in 1999, there
is still a questionmark over Sweden participating as a thirdpartner.
The Mako Project focused on analyzing the market potential
and suitable industrial partners for cooperation on our modular concept for light fighter aircraft and high-performancetraining aircraft in the fourth generation. In November 1999
we signed a Memorandum of Understanding with the airforces of the United Arab Emirates as a basis for exploring
potential cooperation.

03.03.2000, 8:51 Uhr

MILITARY AIRCRAFT

To strengthen our capabilities in upgrading MiG-29 aircraft,
the Military Aircraft business unit signed a cooperationagreement with our Russian MiG-29 partners WPK Mapo and
Roswoorushenije in June 1999. Cooperation started in earnest
in August 1999 and now extends to aircraft maintenancealongside specialist upgrades.

17

Space Infrastructure

SPACE INFRASTRUCTURE

Ariane launch vehicles
successful again

18

During its first commercial flight on
December 10, 1999, Ariane 5 launched
the X-ray satellite XMM, developed
under our lead for ESA.

DAE_S018-021.p65

1803.03.2000, 8:54 Uhr

99

99

98

Amounts in millions

US $

€

€

Revenues

596

592

582

Incoming Orders

384

381

532

R&D Expenses

310

308

321

2,098

1,990

Employees (Dec. 31)

Activities in 1999 were focused on the development work for the international
space station and the evolution of the Ariane 5 launch vehicle. Following delayed
payload deliveries, the successful launch of 10 Ariane 4 and 5 could be booked at

special effects, incoming orders of €381 million were below last year’s level(1998: €532 million). The contract award for the automated transfer vehicle ATV
was of outstanding importance in this context.

SOLID LAUNCH POSITION FOR ASTRIUM. The Space

Infrastructure business unit is our center of competence forlaunch vehicles, propulsion systems, orbital systems and theutilization of orbital systems. Development and production are
performed at Bremen, Friedrichshafen, Lampoldshausen andOttobrunn.
REVENUES AT SATISFACTORY HIGH LEVEL. In the 1999 busi-

ness year, revenues rose by 2% to €592 (1998: 582) million.
As in the previous year, the programs for the evolution andproduction of the European Ariane launch vehicles and thespace laboratory Columbus contributed most to this result.
Columbus is being built under contract to ESA as Europe’s
share in the international space station ISS.
In 1999 we posted incoming orders of €381 (1998: 532)
million. One of the major orders was the contract award forthe automated transfer vehicle ATV. The decline is primarily
attributable to the high-volume orders placed for the Ariane
program in the previous year and to the postponement ofcontracts from the 1999 business year into 2000.
The research and development expenses of €308 million,
which mainly concerned projects commissioned by third
parties, remained virtually unchanged compared to theprevious year's figure of € 321 million. R&D activities
concentrated on the evolution of Ariane 5, our participation in
the Columbus space laboratory and the start of development
work on the unmanned transfer vehicle ATV.

DAE_S018-021.p65

1903.03.2000, 8:54 Uhr

SPACE INFRASTRUCTURE

the end of the year. Revenues were slightly above last year's level. On account of

19

The photo on the left shows the high-precision
measurement of a 1,200 liter satellite tank constructedby our company. The first of two Lower Body
Negative Pressure (LBNP) devices was delivered to
Nasa in 1999 and will be transported to ISS for

SPACE INFRASTRUCTURE

research purposes in the fall of 2000. (photo right)

20

PROPULSION AND TRANSPORTATION SYSTEMS – ORDERS
FOR ARIANE 5. The core business of the Propulsion andTransportation Systems unit are all activities related to theEuropean launch vehicles Ariane. In spite of delayed
payload deliveries, a total of 9 Ariane 4 and 1 Ariane 5
missions were successfully launched.
The European Space Agency ESA also awarded us the system
lead for the development of a more powerful cryogenic upperstage for the Ariane 5 booster. Additionally, we are involved in
the development of the thrust chamber for the new upperstage engine Vinci. We expect both projects to be a driving
force in the future development of the Ariane business.

development on a turbopump engine for use in a U.S.
launcher system and stepped up our developmental activities
in future-oriented technologies.
Under the terms of the national program for future reusable
space transportation systems, Astra, we will be the industrial lead partner on account of our system-leader experiencein the ESA study Festip (Future Space Transportation
Investigation Program). The objective of this program isto systematically secure and expand system capabilities
and key qualifications in order to be a competitive partner on
the market for tomorrow's technologies.
ORBITAL SYSTEMS AND OPERATION SHAPED BY ISS

Satellite propulsion systems constitute another focal point ofactivity. In 1999, we shipped the one thousandth type 10N
bipropellant thruster. We also received the production
contract for the monopropellant thrusters of another eightspacecraft for the global mobile communications network
Globalstar. Together with our American partner we continued

Space Infrastructure
in billions of €1.0

PROJECTS. In the Orbital Systems & Operation unit weconcentrated on advancing the industrialization of operations
and the commercial utilization of the ISS, on tapping newmarkets and processing ongoing contracts according to plan.

In May 1999, a resolution of the Ministerial Conference
provided the political prerequisites for industrializing
operations in the European part of the ISS. Consequently, atindustry level, we teamed up with Alenia, Matra Marconi
Space (MMS) and Aerospatiale, with Dasa as consortium
leader. This team will organize both the service and operations
tasks and the utilization of the space station.
Furthermore, the company Beos GmbH (Bremen Engineering
Operations Science) was successfully established as a space
operations and utilization center. Service can thus be started
at the beginning of 2000 and the first fixed order can beprocessed.

0.8
0.6
0.4
0.2

96

97

98

99

Incoming Orders
Revenues

DAE_S018-021.p65

2003.03.2000, 8:54 Uhr

Under ESA contract we have developed the fault tolerant
computer, FTC – the core of the data management system for
the Russian service module. As an adapted version of the
FTC will also be used in the transfer vehicle ATV, we havenegotiated a development contract with Matra Marconi Spaceand launched the corresponding work.

We are responsible for various development activities underthe ISS projects Columbus space laboratory and the unmanned transfer vehicle ATV (Automated Transfer Vehicle),and for work shares in the ISS robotic system European Robotic Arm. The ATV project was of particular importance inthis context. To ensure compliance with the production schedule, we were responsible for parts procurement and signed acontract with Aerospatiale Matra Lanceurs for the manufacture of the propulsion unit and its integration.

A technology demonstrator was built for a smaller but fastervariant of the FTC, designed for use outside space systems.
The underlying concept was successfully tested. Boeingawarded us the contract to test the system's suitability for theCTV (Crew Transfer Vehicle). These tests are planned for thespring of 2000. We also received a development contract from
DaimlerChrysler for a miniaturized and upgraded version of
the FTC for applications outside the space sector.

PAYLOADS- FACILITIES DEVELOPMENT FOR ISS UTILIZATIONPURSUED WITH EMPHASIS. As a competence center of world-

wide renown we deliver facilities for all fields of microgravity research and support the users in the performanceof their experiments.
In the 1999 business year, we delivered the lower body negative pressure device to Nasa as the first German facility for
the ISS. The material science lab, the fluid science lab andthe biolab are under production. Hardware development
for the ISS continues under the contracts for the protein
crystallization diagnostics facility and the modular cultivation
system. The development of a cardiovascular diagnostic
center for astronauts was started for the cardiolab. We arealso building the transportation and storage refrigeration
units for the food supply of the space station crews.

DAE_S018-021.p65

21

03.03.2000, 8:54 Uhr

SPACE INFRASTRUCTURE

In order to tap further business potential in the USA, we haveincreased our stake in the U.S. company Spacehab, Inc. andare now the largest shareholder with approximately 11%.
Among other things, Spacehab builds modules for Nasa
space transportation systems and is currently expanding its
operator services in view of the ISS program.

21

Satellites

SATELLITESFocusing on Commercial
Business Expansion

22

The last of four satellites in Cluster II
fleet was completed in November 1999.
By the summer of 2000, the four
satellites ordered by ESA will be launched
into orbit for research purposes.

DAE_S022-025.p65

2203.03.2000, 8:57 Uhr

99

99

98

Amounts in millions

US $

€

€

Revenues

461

458

645

Incoming Orders

527

523

609

R&D Expenses

430

427

532

1,455

1,652

Employees (Dec. 31)

In the Satellites business unit, the revenues of €458 (1998: 645) million were below
last year’s level as a result of structural changes. The incoming orders of €523
(1998: 609) million exceeded our expectations. Global market trends caused investors’ restraints, especially with planned new programs for telecommunications
constellations, and resulted in order delays. In 2000, expected orders from this
sector, and the policy shift in favor of satellite navigation will further raise the
SATELLITES

commercial share of revenues.

MARKETING INITIATIVES LAUNCHED. In the Satellites

business unit, Dornier Satellitensysteme GmbH (DSS) has
the system lead for the programs of the European Space
Agency (ESA) and the national agency, Deutsches Zentrum
für Luft- und Raumfahrt (DLR). DSS is Europe's leading
manufacturer in the fields of science and earth observation,and is the industrial prime contractor for almost all largescale programs performed or launched by ESA so far forthese applications.
Public budgets will rather decline in the medium to long term.
On account of these baseline conditions we can tap new
growth potential only by expanding our commercial satellite
business. Constellations - satellite networks for mobile
communications and multimedia applications – are offering
new opportunities. The same applies for navigation. In this
sector ESA and the European Commission have opted for thedevelopment of an autonomous, civil satellite system for
position finding, as complement to the American GPS (Global
Positioning System). The marketing initiatives launched by
the Satellites business unit have substantially contributed tothis decision-making process in Europe. Similar efforts werealso initiated in the security-policy sector, and were geared
towards reconnaissance and communications systems. Market
and customer requirements are also at the fore of a new
business development in earth observation. The manufacturingbusiness in the Satellites business unit is complemented
by telecommunication services which are concentrated under
the umbrella of the Telecommunication Operation andService unit.
TREND TOWARDS SMALLER PROJECTS. The revenues of
the Satellites business unit of €458 (1998: 645) million
remained below the level of last year. This decline isprimarily attributable to structural changes in the orders.
In the past, large-scale projects were predominant involving
extensive subcontractor shares, whereas the current

DAE_S022-025.p65

2303.03.2000, 8:57 Uhr

23

Under the terms of the Shuttle Radar Topography Mission(Srtm) conducted in February 2000, large areas of the
Earth were scanned in stereo by the X-SAR radar systemdeveloped by our company. The data obtained will be
used for generating a three-dimensional global map. On
the right is a model of the future European satellite

SATELLITES

navigation system Galileo in its first expansion stage.

24

tendency goes increasingly towards smaller, lower-revenue
projects with a higher company-own share. This is also adecisive factor for our continuing full capacity utilization.

the first successful milestone under the terms of the
ESA program Horizon 2000. Two further large-scale
projects in this program include Cluster II and Rosetta.

Incoming orders amounting to €523 (1998: 609) million
exceeded our expectations. The postponements in commercial
constellation programs as a result of a difficult market
environment have been more than compensated by our
stepped-up marketing efforts for other programs.

All tests were successfully completed on the four identical
Cluster spacecraft which will explore the interaction between
the Sun and the earth's magnetosphere. In summer 2000, they
will be launched from the Russian Cosmodrome in Baikonur.
Scientists expect a powerful solar eruption around that timeand hope to obtain new findings on the solar winds andparticle storms.

In 1999, the research and development expenditure of€427 (1998: 532) million mainly concerned ESA’s major
earth observation and science programs.
SATELLITE SYSTEMS FOR SCIENCE PROGRAMS. On December

10, 1999, Europe's largest spacecraft to date, the X-ray
satellite XMM (X-Ray Multi Mirror), was launched from thespace center in Kourou, French Guayana. It will trace
X-ray sources in space which, so far, could not be observed
from the earth. Developed under our system lead, this isSatellites
in billions of €1.0

In 1999, the main development phase was started for thescience program Rosetta, an international cometary mission
designed to explore the comet Wirtanen. The mission to comet
Wirtanen is planned for 2003, and the scientific community
expects to gather more information on the origin of the solar
system.
SATELLITE SYSTEMS FOR EARTH OBSERVATION. Following
the radar satellites ERS-1 and ERS-2, which are successfully inoperation, the follow-on program, Envisat-1, is also being
developed under the industrial lead of DSS on behalf of ESA.
This is Europe’s most challenging earth observation program
to date and the largest contract ever awarded to the German
satellite industry. After its planned launch in mid-2001 thespacecraft will gather data on the complex status parametersof the atmosphere, oceans, polar ice caps and landmasses.

0.8
0.6
0.4
0.2

96

97

98

Incoming Orders
Revenues

DAE_S022-025.p65

24

99

In 2000, 2003 and 2008, a second generation of weather
satellites will gradually replace the Meteosat spacecraft
currently in service. The new generation will offer a higher
resolution and more spectral regions. Under contract to
Alcatel Space, DSS is responsible for the power supply,
attitude and orbit control subsystems and the propulsion
system. The first flight unit has been shipped by the industry.
For commercial earth observation applications, small satellites
ideally complement the more science-oriented and thus highly
complex missions. DSS has successfully established the
Flexbus concept on the market. Competitive advantages canbe achieved with this concept which relies on proven03.03.2000, 10:56 Uhr

New satellites delivering data with a high spatial and thematic
resolution are expected to open new marketing opportunities
for geoinformation. DSS capitalizes on its extensive competence in radar instrumentation, especially in SAR (Synthetic
Aperture Radar). In cooperation with DLR (Deutsches
Zentrum für Luft- und Raumfahrt) and British partners, theproject InfoTerra/TerraSAR was launched as a guideline
concept for the commercialization of geoinformation. Primary
fields of application are cartography, agriculture and forestry, environmental protection, exploration, risk management and regional planning.
SATELLITE SYSTEMS FOR COMMUNICATIONS/NAVIGATION.

We rank among the leading suppliers worldwide for conventional, geostationary communications satellites subsystems such as solar arrays, attitude and orbit control, andantennas.
In the future, constellations will offer new marketing
opportunities for complete spacecraft platforms for mobile
communications, multimedia communications and navigation
applications. Our successful participation in the mobile
communications system Globalstar was the first step in thisdirection. Under this program, cost-cutting series-production
processes were implemented for the first time. The
experience gathered in this project will be transferred to thedesign of a new spacecraft bus which will be prepared for
future constellations.

existing American GPS (Global Positioning System) will beenhanced for civilian users through technical improvements.
Under an ESA contract, DSS will deliver ground stations forthe planned “European Geostationary Navigation Overlay
Service (EGNOS)”. In a second step, the autonomous
European satellite navigation system Galileo will be created onbehalf of ESA and the EU. In this context, phase A for the
space segment GalileoSat was completed.
MILITARY APPLICATION SYSTEMS. Up until now, no defense
budget contract has been awarded to German industry for asatellite system. For reconnaissance operations in the
security-policy domain, a new initiative was launched with theconcept study “SAR scope” under contract to the German
Procurement Agency (BWB). This radar system will be able toperform observations through a cloud cover and at night andto relay the data to a ground station.
TELECOMMUNICATION - OPERATION AND SERVICE. In late1999, the mobile communications operator Globalstar L.P., inwhich we hold a 2.3-percent share, started commercial
service. Together with Loral we hold 100 percent of the sharesin the Brazilian Globalstar service provider, Globalstar do Brasil, which also started commercial service in late 1999. The
investment in the Argentinean satellite provider NahuelSat
S.A. was raised to 21 percent. To expand business, especiallytowards North America, the procurement of a second satellite
is in preparation.

Navigation is emerging as a further field of application for thesatellite industry. In the future it will be an indispensable
element in modern traffic infrastructure and for fleet
management. In Europe, initially, the positioning quality of the

DAE_S022-025.p65

2503.03.2000, 10:56 Uhr

SATELLITES

components from other projects. Activities under Flexbus
are currently focused on two identical spacecraft developed
for the NASA mission Grace.

25Defense and Civil Systems
DEFENSE AND CIVIL SYSTEMS

Growth in a difficult
environment

26

KEPD 350 in the operational two-unit
configuration on a Tornado. We aredeveloping this standoff weapon system
for Tornado armament in cooperation
with the Swedish Bofors Missiles AB of the
Celsius group.

DAE_S026-029.p65

2603.03.2000, 8:59 Uhr

99

99

98

US $

€

€

Revenues

1,736

1,724

1,729

Incoming Orders

1,566

1,555

2,059

R&D Expenses

495

492

460

8,266

9,109

Amounts in millions

Employees (Dec. 31)

In 1999, revenues in the Defense and Civil Systems business unit increased byapproximately 10% after adjustments for structural changes. However, first effects(1998: 2.1) billion. Therefore, already in 1999, we decided to reduce personnel andto adapt the organization of the business unit again. Nortel Dasa recorded aparticularly positive development.

CORE COMPETENCIES OF THE BUSINESS UNIT. The Defense

and Civil Systems business unit is acting in the fields ofdefense electronics, missile systems and telecommunications.
Its range comprises radar technology, radio communications
and electronic warfare, as well as reconnaissance, command,
control and information systems. Furthermore, the corecompetencies include the system capability in the field of
missile systems and air defense, as well as products andservices for digital communication networks for companies
and public network operators.
The business unit has continued to adjust productdevelopment to the new market requirements. These include
developments for an integrated reconnaissance, command,
control and communication system and for precise standoff
missiles. With innovative product developments in the field ofdefense electronics and missile systems, we have achieved
important program milestones and strengthened ourcompetitive position.
FURTHER INCREASES IN REVENUES. In result of structuralchanges, such as the sale of CMS Inc. of the Airport Systems
unit and Elekluft GmbH, revenues reached €1.7 billion as in
the previous year. Adjusted for such structural changes
revenues increased of approximately 10% to which Nortel
Dasa has contributed a 53% growth rate in the field of telecommunications.
At €1.6 (1998: 2.1) billion, incoming orders were markedly
lower in comparison to the previous year’s level. The cuts inthe defense budget resulted in restrictive contract awarding
already in 1999. On the contrary, Nortel Dasa recorded a highgrowth in incoming orders by 38%.

DAE_S026-029.p65

2703.03.2000, 8:59 Uhr

DEFENSE AND CIVIL SYSTEMSof the cuts in the defense budget have been lower incoming orders of €1.6

27

The Polyphem missile (left) has in-flight controls operated
via a fiber-optic cabel. In the training simulator for the
air defense system Stinger: the two gunners are provided
with electronic spectacles for the virtual stereoscopic
representation of the complete combat scenario

DEFENSE AND CIVIL SYSTEMS

in accordance with the respective viewing direction.

28

Spending on research and development amounted to €492
(1998: 460) million, of which €409 (1998: 378) million were
accounted for by activities performed on behalf of third partiesand €83 (1998: 82) million for activities financed withcorporate funds. This development sum was used forfinancing future-oriented projects and process optimization.

Thus, we sold Elekluft GmbH and retained only its defense
activities. The relocation of the headquarters and the development capacities of LFK-Lenkflugkörpersysteme GmbH
from Ottobrunn to Unterschleißheim was a decisive step
towards concentrating our business activities on three core
locations.

STRUCTURAL IMPROVEMENTS WITHIN THE BUSINESS UNIT.

NEW TRENDS IN COMMAND CONTROL COMMUNICATIONS

In early 1999, a new market-oriented organization was
implemented whose aim is to optimally use the market
potential and speed up the growth in the export markets. At
the same time, new business processes were introduced forachieving a sustained improvement of the cost structure andthe optimization of cooperation across the locations. Furthermore, the average age and the qualification structure havebeen positively changed by our selective human resources
policy. We continued to concentrate on our core business.

INTELLIGENCE. The Kosovo mission clearly showed the need

Defense and Civil Systems
in billions of €for modernizing the reconnaissance, command, control andcommunication systems of the German armed forces to meetthe new tasks. However, the budget funds required forfinancing this modernization are missing. Thus, we had toperform capacity and structural adjustments, such as giving
up the Radio Communications unit.
The necessity of integrating the heterogeneous command andcontrol systems of the military services to a command andcontrol system intensified in 1999. We successfully continued
the definition and development activities in the projects
GeFüSys, Heros Batch 2, Field Trial 2000. In addition, wedelivered the Control and Reporting Center CRC-Schönewalde
to the German Air Force.
In the field of digital networks, we have intensified ouractivities. The development contract for the mobile tacticaltelecommunications network AutoKo 90 aims at ensuring
integrated communication with ISDNBw, ISDN Telekom and
SATCOMBw. Greece extended its available telecommunications network Hermes I by the digital Hermes II system.
The general challenge is to increasingly use “Commercial
Off-The-Shelf (Cots)” technologies, products and software formilitary systems.

2.5
2.0
1.5
1.0
0.5

96

97

98

99

ENCOURAGING UPWARD TRENDS IN AIRBORNE SYSTEMS.
Incoming Orders
Revenues

DAE_S026-029.p65

28With more than 200 missions, the reconnaissance drone
CL-289 contributed to successful conflict management in
Kosovo. Improvements referring to all-weather capability andreal-time data transfer of the system have already been ordered.
In addition, the debate on a national strategic, satellite-based
reconnaissance means (SAR scope) and the AGS (Alliance
Ground Surveillance) Nato project was intensified. A company

03.03.2000, 9:00 Uhr

An important order of the Airborne Systems unit was themodernization of the Phantom F4 onboard radars of the Greek
air force. Type certification was granted for the Tornado Self
Protection Jammer (TSPJ), thus completing the development
phase. The Federal Border Guard awarded us a contract for
supplying laser obstacle warning systems for helicopters (Hellas) and the Swiss air force decided in favor of our electronic
reconnaissance data evaluation and processing system.

Within the industrialization and series production of the
Tiger support helicopter, we received an order for 90 ATA(Anti Tank Armament) systems designed for the antitank
systems HOT and Trigat LR. Furthermore, we were awarded
series production of the missile warning system MILDS for
Tiger. Under the terms of the MAW Taurus KEPD 350
development program, successful and on-time completionof the first free flight was carried out in mid-1999.
We successfully demonstrated the warhead effectivity of the
Polyphem missile planned for the corvette K130. The
activities on a future European medium-range air-to-air missile(Euraam/Meteor) have been continued.

EXPORT SUCCESSES OF THE GROUND AND NAVAL SYSTEMS.

In 1999, we received the order for delivering mobile hospitals
to the United Arab Emirates. After Spain, Austria also decided
to procure our advanced foldable bridge. Additionally, we
handed over the shipborne radar system TRS-3D to the
Spanish navy.
The development contract of the artillery radar Cobra was
successfully concluded and the production contract was
fulfilled as scheduled. Furthermore, the corvette K130
definition activities were continued with both shipyard
consortia. In the field of security systems, operator andservice projects in the Nato, airport, depot and bank sector
were delivered.
BUDGET REDUCTIONS AFFECT THE MISSILE AND AIR
DEFENSE SYSTEMS. With innovative and production-standard
products, e.g. Polyphem, MAW Taurus and Trigat MR, theMissile and Air Defense Systems unit has taken a favorable
market position. The cuts in the defense budget, however,resulted in a restrictive placing of orders in 1999. Therefore,
we have developed alternative financing concepts for being
able to implement our future programs.

DAE_S026-029.p65

29

STRONG GROWTH OF NORTEL DASA. In 1999 our CanadianGerman joint venture also benefited from the booming
telecommunications market. Thus, compared to the previous
year’s level, Nortel Dasa increased its revenues by 53% and its
incoming orders by 38%. By merging with Bay Deutschland,
Nortel Dasa has a national leading competitive position now.

The development and expansion of the mobile radio
communication network E2 for Viag Interkom was a main
activity within the field of public network operators.
Furthermore, Nortel Dasa is responsible for the mobile radio
communication network GSM-Rail as the system supplier.
GSM-Rail is being implemented for Deutsche Bahn AG undercontract to Mannesmann Arcor and will ensure complete
handling of data and voice traffic of the railway.
In the field of business customers, Nortel Dasa could win the
new marketing partner DeTeWe, thus improving customer
access and service network. MilSatCom, a €50 million
contract for the military satellite communication systems of
the German armed forces was won in the field of Satellite
Communications.

03.03.2000, 9:00 Uhr

DEFENSE AND CIVIL SYSTEMS

consortium, with Dornier as a member, has agreed on aEuropean reconnaissance radar initiative Sostar (Stand-Off
Surveillance and Target Acquisition Radar).

29

Aero Engines

AERO ENGINES

Further growth in
Maintenance Business

30

The PW 2000 engine family program has
become an important performer both in
new sales and in the spare parts business.

DAE_S030-033.p65

3003.03.2000, 9:02 Uhr

99

99

98

US $

€

€

Revenues

1,754

1,742

1,660

Incoming Orders

1,559

1,548

2,594

R&D Expenses

138

137

153

6,875

6,633

Amounts in millions

Employees (Dec. 31)

In 1999, it was chiefly the growing after-sales business that increased revenues
to €1.7 billion. After the previous year’s flurry of big contract wins, 1999's incoming
orders, at €1.5 billion, expectedly fell short of the prior year’s level. The company
formed several joint ventures to sustain its expansion strategy and improve its com-

AERO ENGINES

petitiveness especially in the engine repair and overhaul (R&O) business.

BROAD LINE OF PRODUCTS AND SERVICES. The company's
Aero Engine business unit encompasses the development,
manufacturing and R&O activities of our subsidiary MTU
München and its affiliates MTU Maintenance Hannover,
MTU Maintenance Berlin-Brandenburg and MTU Maintenance Canada.

Germany's leading engine manufacturer, MTU Motoren- und
Turbinen-Union München GmbH cooperates with European,
U.S. and Japanese partners to design, manufacture andprovide service support for commercial and military aircraft
engines and aero-derivative industrial gas turbines. MTU
München also is the country's sole provider of military
aircraft engines.
MTU Maintenance Hannover and MTU Maintenance Canada
Ltd., the company's first affiliate in North America, focus
on the repair and overhaul of medium to large commercial
jet engines. It enriches its line of R&O products with technical and logistic consultation, support and training offeringsfor customers desiring to operate their own engine repair
facilities.
MTU Maintenance Berlin-Brandenburg repairs industrial
and marine gas turbines and smaller turbojet and turboshaft
engines.
REVENUES ON THE RISE. Growth in the repair and overhaul
business and the dollar's recent revival boosted the AeroEngine business unit's already healthy revenues another 5%
to €1.74 billion over the €1.66 billion achieved a year ago.

Unlike revenues incoming orders trailed behind last yearwith its windfall contract awards for the EJ200 (Eurofighter)and RB119 (Tornado), flattening out at a predictably lower
level.

DAE_S030-033.p65

3103.03.2000, 9:02 Uhr

31

The areas of responsibility of MTU Maintenance Hannoverand MTU Maintenance Canada include repair andoverhaul of commercial jet engines in the medium to large
power categories, e.g. the V 2500 engine (left).
However, the service offering of MTU Maintenance
Berlin-Brandenburg also includes industrial gas
turbines – an LM6000 is shown – and engines in the

AERO ENGINES

lower thrust and shaft horsepower categories.

32

Our research and development (R&D) expenditures totaled€137 (1998: 153) million. About two-thirds of these went
to projects we pursued under contracts from customers.
EJ200 (Eurofighter) development remained the dominant
R&D item. The focus of company-funded product development currently is on regional aircraft engines. Using
company and government funds we are also advancing
the development of innovative engine technologies tolower contamination, noise and fuel burn.
PROFITABILITY IMPROVEMENT EFFORT. When MTU Maintenance Canada Ltd. was formed in 1998, Canadian Airlines
spun off its entire engine repair and overhaul (R&O) effort
into the joint company, expanding our R&O product lineby the JT8D. We hope to still include the CFM56-3 andCFM56-5 engines in our R&O portfolio. These would tap asubstantial market for us, since there are several thousand
copies of these two engines flying.

An repair and overhaul contract on AlliedSignal's ASE40,
ASE50 and ASE120 turbines in the 0.5-15 MW range will
provide us with workload in the years ahead. A first ASE
turbine will visit the shop in 2000.
To strengthen our global market presence we signed anagreement with China Southern to float a R&O joint venture
in 2001. With AlliedSignal we launched Vericor Power
Systems to market industrial gas turbines. We also formeda joint ceramic coating company with Snecma in France.
WORLDWIDE COMMERCIAL AIRCRAFT ENGINE COOPERATIONS. On February 1, 1999, MTU was appointed Pratt &Whitney's supplier in the PW6000 engine program. Here,
we have developed the first prototype engine in record timeand have already begun tests. Our stake includes the design,
manufacture and assembly of the complete low-pressure
turbine. In its launch application, the PW6000 will power
the new Airbus Industrie A318.
We are partnering also in the PW4173, which is targeted at
Airbus Industrie's A330-200/300. Our share includes design
work for the low-pressure turbine and the manufacture ofhigh-pressure turbine nozzles and low-pressure turbine disks
and blades.

Aero Engines
in billions of €

2.5
2.0
1.5
1.0
0.5

96

97

98

99

Further mainstays of our business are joint activities we are
pursuing with Pratt & Whitney in the PW4084/90/98,
PW2000, PW300 and PW500 engine families. The PW2000’s
60% market share will provide us with a steady stream ofmanufacturing and after-sales service business. We expect
this engine to find a home on the Ilyushin IL-96 M/T passenger and cargo versions, which in 1999 won FAA certification
with the PW2000 and Western avionics.

Incoming Orders
Revenues

DAE_S030-033.p65

32

03.03.2000, 9:02 UhrOur spare parts business is to a large extent sustained also
by the General Electric CF6 engine program, in which wehave had a stake for over 25 years. The current CF6-80C
and CF6-80E versions are flying on Airbus A300, A310 and
A330, Boeing 747-400, 767 and MD-11 widebodies. In
spring 1999, an uprated version, designated CF6-80C, wasdelivered.
EUROPEAN COOPERATION ON MILITARY ENGINES. Jointlywith Rolls-Royce, FiatAvio and ITP, we are developing andmanufacturing the EJ200 engine to power Eurofighter. Ourdevelopment share includes the low- and high-pressure turbines, the electronic engine control, work on the high-pressure turbine, and engine assembly and test run activities.
Production approval is currently underway and 23 of theplanned 28 prototype engines have already been delivered.
In January 1999, we received production go-ahead for the
first, 363-engine tranche.

pleted. MTU's stake in the program is the technologicallysophisticated core engine including the combustor, highpressure turbine and some accessories. After we received
the production investment contract and long-lead item procurement was approved in 1998, we signed the procurement
contract for the first 320-engine batch in January 2000.
We have teamed with Snecma, FiatAvio and ITP to provide
the M138 turboprop to power the proposed A400M Western
European airlifter. The requirements of the participating
nations Germany, France, United Kingdom, Italy, Spain,
Turkey and Belgium are for totally 288 of the four-enginedtransports.
Together with FiatAvio and General Electric we are also
bidding for the engine to power the NH90 transport helicopters to be bought by the German services (Bundeswehr),
our entry being the T700/T6E. Including spare engines, theengine contract will cover more than 500 powerplants.
The T700/T6E has already been successfully tested on the
prototype of the NH90 helicopter in Agusta, Italy.

The RB199 was jointly developed and manufactured by
Rolls-Royce, MTU and FiatAvio to power the Tornado multirole combat aircraft. After the wind-down of the engine’s
production we are focusing mainly on the engine’s spareparts supply and technical and logistic support.
For the MTR390, which we jointly developed with Turbomeca and Rolls-Royce to power the Franco-German Tiger
military helicopter, the development phase has been com-

DAE_S030-033.p65

33

03.03.2000, 9:02 Uhr

AERO ENGINES

Of key significance to the company is also its cooperation
with Rolls-Royce, Pratt & Whitney, Japanese Aero Engines
Corporation and FiatAvio in IAE International Aero Engines
AG. In IAE we are jointly developing, manufacturing andmarketing the V2500 engine, which is powering Airbus
Industrie’s A319/A320/A321 and Boeing's MD-90. This
engine’s after-sales business is enjoying healthy growth.

33

Human Resources

More than 1,000 new jobs
HUMAN RESOURCES

Change processes require dialog: The open dialog between the
management and the employees is an elementary prerequisite for the
succesful implementation of change.

34

DAE_S034-036.p65

3403.03.2000, 9:03 Uhr

Full order books in the aircraft and engine sectors

Employees

allowed the creation of more than 1,000 new jobs in
1999. We will combat future fluctuations in manpower
requirement through flexible personnel policy

99

98

DaimlerChrysler Aerospace Group

46,10745,858Germany

42,771 42,525

Foreign

3,336

3,333

Salaried

28,581

28,692

Hourly paid

15,25014,937

Apprentices and Trainees

2,276

2,229

Commercial Aircraft

16,754

16,195

Helicopters

4,052

4,065

Military Aircraft

6,308

5,913

Space Infrastructure

2,098

1,990

Satellites

1,455

1,652

Defense and Civil Systems

8,266

9,109

Aero Engines

6,875

6,633

Headquarters

299

301

measures. In addition, we will secure our demand forhigh-qualified staff by continually developing ourtraining programs. Our trainee and management staff

human resources effort this year.

MORE THAN 1,000 NEW HIRES. The number of our employeesrose to 46,107 in 1999, from 45,858 a year ago. Factoringin structural changes during fiscal 1999, such as the sale ofElekluft GmbH with its 720 staff in the Defense and Civil
Systems business unit, new hires were in excess of 1000. The
employment growth was driven primarily by the ramp-up
in Airbus production, the production launching of theEurofighter and an increase in the support services weprovided in the Aero Engines business unit.

In contrast, the worse-than-expected decline in Defense andCivil Systems business compels us to adjust employment
downward by several hundred jobs in that business unit in
the planning period 2000 to 2002.
COMPETITIVENESS ENSURED BY FLEXIBLE RESPONSE TOMANPOWER REQUIREMENTS. To keep our company on its

profitable course, we added only a moderate number of permanent jobs to cope with the rising workload and shall absorb
future fluctuations with flexible employment practices. Fixedterm new hires, temporary contracts beyond normal working
hours, and a scheme allowing workers to accumulate or work
off plus or minus hours over longer periods are some of thetools that make us flexible and help us secure the jobs of ourpermanent staff.
Another flexible tool proved to be the part-time work scheme
for older staff that we put in place the year before. It has
found ready acceptance among the workforce. We were able
to keep the accompanying losses in income and pension to aminimum, and some 700 employees have since signed such
settlements. These give them the option of early retirement
and younger staff opportunities for promotion.

DAE_S034-036.p65

35Apart from these tools to flexibly control personnel capacities,
it is also the company's partially performance-linked pay
system that has become a cornerstone of our value-oriented
style of corporate management. Now that we've established avariable-pay system for our executive staff, we're seeking toextend it also to other strata of the company's workforce. The
system provides variable pay in the form of bonuses
recognizing the degree to which agreed goals were achieved
and of profit shares commensurate with the company's
earnings.
TRAINING AND JUNIOR STAFF DEVELOPMENT PUT DASAAMONG TOP EMPLOYERS. Our positive business prospects forthe years ahead had us hire even more apprentices andtrainees than we did last year under our training initiative. The
company was glad to accept practically all of last year’s batchof young people into permanent employment once they
completed their training periods.

Our training effort placed major emphasis on communicationand team skills. Additionally, we launched an instructor
qualifying program, improved our social pedagogic courses
and pushed such innovative approaches as apprentice-run
firms. Including new locations into our employee exchange
program helped us improve the international orientation of
our professional and vocational training effort.
Additionally our training effort is supplemented by an extensive young talent recruiting initiative. In 1999, we hired 800
university graduates fresh from school. That was 30% morethan the year before, with the proportion of information
technology graduates on the rise and by now representing
one third of our new hires.

03.03.2000, 9:04 Uhr

HUMAN RESOURCES

development programs were a central priority in our

35COLLEGE STUDENTS PREFER DASA. Dasa’s active presence at

TRAINEE AND MANAGEMENT PERSONNEL DEVELOPMENT

national and international universities the special events
it featured for interested students at the Le Bourget air show
and its integrated online job application scheme put it indirect contact with the most eligible graduates. This proactive
personnel marketing made German engineering students
vote Dasa one of the country's three most attractive employers.

EFFORT BOOSTED. In the year under review we accelerated

HUMAN RESOURCESQUALIFICATION OFFENSIVE IN ALL BUSINESS UNITS. In
1999, all business units intensified and systematized theircontinued education and personnel development effort.
A typical instance is the Space Academy of the company's
Satellites and Space Infrastructure units.

We’ve launched further forward-looking qualification offensives in the Defense and Civil Systems and the Aero Engines
business units. In our Commercial Aircraft and Military Aircraft units, preparations for further European integration of
the industry have been a key concern of our qualification
effort. We’ve systematically crafted development programs forthe many young talents that joined our company these last
few years. Our employees have participated an average 4 daysa year in training events. This shows what a powerful issue
lifelong learning is for a high-technology company like Dasa.

36

the past years' focused trainee and management development
effort. In order to fill gaps that would be appearing in special
management functions, we launched programs to recruit
new blood and give them practical experience as a guideline
for their future specific tasks. Our company’s pronouncedlyinternational orientation is also reflected in the national
composition of our trainee and junior staff groups. In Dasa’s
central trainee group, for example, half of the young people
are foreign nationals.
Under our management-personnel development planning
effort, some 1,500 candidates for junior management positions
have been screened in 1999 to identify our reservoir of talent
to fill challenging tasks down the road. Depending on thefindings of the assessment, the candidates are then leveraged
through cross-business-unit job rotations and interviews, andspecial qualification programs. Our junior talent fostering
effort is driven by the needs imposed by the international
nature of Dasa's emerging challenges. This is why in 1999 weformed a joint venture pool for internationally deployablecandidates.
HUMAN RESOURCE AND SOCIAL CONTRIBUTION EXPENSES.

In fiscal 1999, personnel expenditures and benefits amounted
to €3.0 billion, of which €2.3 billion went to wages andsalaries, €402 million to social security contributions and€249 million for pensions/retirements and relief
contributions.
In 1999, our staff was again privileged to buy up to 30
preferentially priced DaimlerChrysler employee shares perperson, an option exercised by totally 13,135 employees,
or 30.9% of the authorized group. The company's expenditures
for the purpose amounted to €3.5 million.

Employees
in thousands

75
60

Another substantial item in the Dasa group’s social
contribution account was company pensions. In 1999, 23,882
retired Dasa staff or their dependents received company
pensions in the total amount of €111 million.

45
30
15

96

97

98

99

A THANK-YOU TO OUR STAFF. The Board wishes to express its
thanks to all employees, the workers' delegates and thecompany officials in the various spokesmen committees fortheir trusting cooperation in a very successful year.

Other Business
Headquarters
Aero Engines
Defense and Civil Systems
Satellites
Space Infrastructure
Military Aircraft
Helicopters
Commercial Aircraft

DAE_S034-036.p65

3603.03.2000, 9:04 Uhr

P

R

I

N

C

I

P

A

L

D

A

I

M

L

E

R

C

H

C
R

O
Y

S

M

P

A

L

E

R

N

I

E

S

O

A

E

R

O

Ownership 1)
in %

F
S

T
P

H

A

C

Stockholders’Equity 2)

E
E

G

Revenues3)

Amounts in millions of €

R

O

U

P

Employees
at Year-End

99

98

99

98

2,147

2,221

1,772

12,562

10,994

DaimlerChrysler Aerospace AG, Münich
DaimlerChrysler Aerospace Airbus GmbH, Hamburg

100.0

616

3,440

2,970

15,073

14,645Elbe-Flugzeugwerke GmbH, Dresden

100.0

30

144

133

878

953

Aircabin GmbH, Laupheim

100.0

9

137

107

625

597

Dornier GmbH, Friedrichshafen )

57.6

205

334

347

1,901

1,933

Dornier Satellitensysteme GmbH, Munich

100.0

17

673

683

1,436

1,507

7

5

Eurocopter Holding S.A., Paris/France )

40.0

412

-

-

-

-

Eurocopter S.A., Marignane/France

75.0

632

1,139

1,179

5,984

6,198

Eurocopter Deutschland GmbH, Ottobrunn

100.0

107

462

451

3,406

3,206

MTU Motoren- und Turbinen-Union MünchenGmbH, Munich6)

100.0

124

1,340

1,359

5,201

5,169

MTU Maintenance Berlin-Brandenburg GmbH, Ludwigsfelde

100.0

48

74

66

380

347

MTU Maintenance Hannover GmbH, Langenhagen

100.0

15

304

260

948

907

MTU Maintenance Canada Ltd., Richmond/Canada8)

70.0

18

40

0

346

0

Bayern-Chemie, Gesellschaft für flugchemische
Antriebe mbH, Aschau/Inn4) 5)

50.0

11

22

50

264

256

LFK-Lenkflugkörpersysteme GmbH, Munich

70.0

6

295

348

1,220

1,230

Nortel Dasa Network Systems GmbH & Co. KG,
Friedrichshafen5)

50.0

95

528

351

1,107

953

TDA Armements S.A.S., Paris/France ) )

50.0

19

89

86

520

596

TDW - Gesellschaft für verteidigungstechnische
Wirksysteme mbH, Schrobenhausen

100.0

3

28

36

134

188

37.9

-

15,08512,002

1,710

1,645

4 5

Other affiliated companies
Airbus Industrie G.I.E., Toulouse/France

1) With reference to the respective parent company.
) Stockholders equity and year-end profit according to national results;
Stockholders equity converted with respective year-end exchange rates, profit with average yearly exchange rates.
3) Converted with averaged yearly exchange rates (local GAAP).
4) consolidated financial statement
5) proportionally consolidated
6) Ownership according to econimic attribution7) 87,5 % of the voting rights
8) For the periode from December 1 through December 31, 1998.
2

DAE_S037-037.p65

3703.03.2000, 9:06 Uhr

PRINCIPAL COMPANIESGroup Companies

37

A

N

A

L

Y

S

I

S

O

F

T

H

E

E

C

O

N

O

M

I

C

S I T U A T I O NEarnings again improved◆ Operating profit increased by 17% to €730 million
ANALYSIS OF THE ECONOMIC SITUATION◆ Revenues climbed to €9.2 (1998: 8.8) billion owing to booming Airbus deliveries

38

and favorable US dollar exchange rate
◆ Incoming orders, at €9.9 billion, again exceeded revenues

POSITIVE GLOBAL MARKET TREND. After a growth of only 2%

in 1998, caused by the financial turbulence in Asia and Latin
America, in the current reporting year global air traffic volumerose by 5% thus recapturing its previous growth rate. At 3%(1998: -1%), air freight traffic picked up appreciably, too.
Against this generally favorable background, aircraft manufacturers in the West increased their worldwide deliveries
by 15% to 914 aircraft in the 100-plus seat category. In contrast with this development, at 867 aircraft, orders worldwide in 1999 dropped appreciably from the whopping orders
experienced in the previous year (1998: 1,222). The growthin air traffic also benefited the global helicopter market,
which grew by 5%.
In the space business, global growth continued through 1999.
The rise in sales volume, however, was sustained entirely by
the growth in the commercial sector, where launch systems,
earth observation and communications/multimedia satellites
played an increasingly important role in the expanding business. Further growth opportunities for the European aerospace industry arose mainly in the military aircraft sector,
especially from the Eurofighter program and the continuing
strong modernization demand, as well as from the FrenchGerman Tiger helicopter program. Moreover, the consolidation trend in the industry continued to advance at a dynamic
pace in Europe.
EUROPEAN CONSOLIDATION. The merger of British Aerospaceand MarconiElectronic Systems to form Bae Systems in
the current reporting year led to a national consolidation in
England. This development of politically and economicallydesirable consolidations of the European Aerospace structures

DAE_S038-041.p65

38

climaxed in the last quarter of 1999 with the announcementof the impending merger of Dasa, Aerospatiale Matra andCasa into European Aeronautic Defense and Space Company(EADS). This is the first merger of European aerospace giants into a single corporate entity which will put Europe’s
aerospace industry on a solid financial and competitive base.
PECULIARITIES OF THE GERMAN MARKETPLACE. In Germany,

government spending policy resolutions and debates havedramatically aggravated the national budget situation. For
Dasa, the strongest impact has been on its Space Infrastructure and Defense and Civil Systems units.
FRIENDLY REVENUES TREND. In 1999, Dasa increased its
revenues by 5%, or €421 million, to €9.2 billion. A substantial part of the growth was in by the group's Commercial
Aircraft unit which, aided by the rise of the dollar, achieved
an above-avarage increase in revenues by 13% to €3.3 billion
by boosting aircraft and aircraft module deliveries under the
Airbus program. This pushed the business unit's share of
Dasa’s consolidated revenues from 33% to 36%. At €705
million, the revenues from the group’s 40% stake in the helicopter business were up slightly by 4% from €680 million
in the previous year.

Inreased billing under support programs and for Airbus
modules boosted Military Aircraft unit revenues by 13%, to€1,077 million. In our Satellites unit, revenues fell back to€458 million, from €645 million, owing to changed order
structures under constant capacity utilization. The Space
Infrastructure unit's revenues of €592 million slightly
exceeded the €582 million in the previous year, with the
Ariane and Columbus programs as the top earners.

03.03.2000, 9:07 Uhr

Incoming Orders
by Business Unitsin billions of €in billions of €

10

15

8

12

6

9

4

6

2

3

96

15

97

98

99

96

97

98

99

12

OthersOthers9

Verkehrsflugzeuge

North America

30Aeroengines

Hubschrauber

6

94

95

96

97

EU without
Germany
Milit rflugzeuge

Defense and Civil Systems

Raumfahrt Infrastruktur
Germany

Satellites

Satelliten

98

Verteidigung und Zivile Systeme

Space Infrastructure
Military Aircraft

Antriebe
brigesHelicopters
Commercial Aircraft

Cuts in defense spending and corporate divestitures kept
revenues at the Defense and Civil Systems unit flat at theprior year’s €1.7 billion level. Adjusted for structural changes,
however, revenues rose significantly by about 10%. The
main contributor here was Nortel Dasa's growth spurt in
telecommunication systems. The Aero Engines business
unit's revenues, buoyed by the unit's booming maintenancebusiness and a strong U.S. dollar, grew 5%, to €1.74 billion.
Foreign revenues rose by 5% to €6.5 billion, thus slightly
raising the export rate to 71% from 70% in the previous year.
Accelerated aircraft and module deliveries to Airbus Industrieswelled sales to EU customers by 12%, to €4.6 billion, contributing 50% to consolidated revenues versus 47% in theprevious year. Our joint ventures in the aero engines sector
turned North America, which accounts for 16% of consolidated revenues, into another focal point for our foreign operations. Revenues from military sales accounted for 31%
of total revenues, unchanged from the previous year’s level.
INCOMING ORDERS SURPASSED OUR EXPECTATIONSTHROUGH AIRBUS SUCCESS. At €9.9 (1998: €13.9) billion,

Dasa had fewer incoming orders than last year, which saw
an extraordinary wave of incoming orders and special influences. Thus, in the previous year, the Military Aircraft andAero Engines business units recorded new orders for the
production investment and first production tranche of theEurofighter. Subsequently, in the current year, incoming
orders by Military Aircraft fell predictably by 69%, to €827
million, and those in the AeroEngines business unit by 40%
to €1.5 billion.

DAE_S038-041.p65

39

After the unusual boom in the commercial aircraft market inprevious years, the Commercial Aircraft unit recorded
declined incoming orders. However, thanks to our superior
model mix and proactive marketing we achieved excellent
results in aircraft orders which, at €4.1 billion, helped raise
our market share to 55% (1998: 45%) or 476 (1998: 556)
aircraft, thus significantly surpassing our expectations.
In addition, our helicorpter business was awarded thecontract for the series production of the first units of theFrench-German Tiger military helicopter which boosted
our incoming orders by 70% to €1.3 billion.
The cuts in the defense budget had a noticeable effect.
Incoming orders in the Defense and Civil Systems business
unit slipped by 24%, to €1.6 billion due to canceled anddeferred contracts. The Satellites unit registered a 14% drop
in incoming orders, down to €523 million, caused by export
restrictions and bulk orders in the previous year. The 28%
decline of incoming orders in the Space Infrastructure unit,
to €381 million, was due to the ordering surge the year
before and a significant Ariane order being deferred to 2000.
PROFITS CONTINUE TO IMPROVE. In the current reporting
year, the income before financial income, income taxes, andminority interests totaled €657 (1998: €585 ) million. Thispushed DaimlerChrysler Aerospace’s prior-year record
operating profit up €107 million, to €730 million.

The continued rise in profits was largely achieved throughDasa’s efforts to continuously boost its efficiency andachieve lasting improvements in its cost structures. Further
positive influence was exercised by the record sales of theCommercial Aircraft business unit and the continued rise of
U.S. dollar exchange rate.

03.03.2000, 9:08 Uhr

ANALYSIS OF THE ECONOMIC SITUATION

hland

Revenues by Regions

39

Reconciliation to
Operating Profit

99

98

Amounts in millions€€

Income before financial income,income taxes and minority interests

657

585

+ Certain pension costs

146

143

+ Income from certain investments

(28)

(62)

+ Administrative charges

(51)

(32)

6

(11)

730

623

+ Other

ANALYSIS OF THE ECONOMIC SITUATION

Operating Profit

40

EXTRA CHARGES IN FINANCIAL INCOME AND INCOME TAX. In

the current reporting year, financial income fell by €361
million, to €-42 million versus €+319 million the year before.
The total figure includes Airbus Industrie's income frominvestments, at €-62 (1998: €-95 million). In addition, net
interest income fell €87 million, to €128 (1998: €215 million), owing to the lower liquidity resulting from the repayment of Airbus commitments to the state and falling interest
rates. The drop in other financial income, to €-166 (€+107
million), was attributable to the strong U.S. dollar. Apartfrom the expenses for provisions for risks from forward exchange contracts and currency options, expenses were also
incurred for the settlement of forward exchange contracts.
Income taxes, which totalled €550 (1998: €334 million),included €684 (€545 million) of charges for transfers of tax
profits from the German subsidiaries of DaimlerChrysler
under German corporate and trade tax legal agreements.
The increase in tax expenditures over the previous year is
attributable to the effects of the tax reform. The added tax
expenses resulted from write-ups from shares in affiliatedcompanies and participations that became necessary by theprovisions of the new tax law.
Net income dropped to €60 (€547 million year ago) due
mainly to the special tax effects and the drop in financial
income.
VALUE-BASED MANAGEMENT AT DASA. To ensure value-

based management and control across its various business
units, DaimlerChrysler has crafted a set of uniform control
tools to decentralize responsibility, create cross-unit visibility and foster capital market-oriented control of investments.

As in all other industrial businesses of the DaimlerChryslergroup, Dasa uses return on net assets (RONA) as a major
control tool. RONA is computed by relating operating profit
to net assets. To obtain net assets, non-interest-bearing
liabilities are deducted from assets. Dasa in 1999 again significantly overachieved its targeted hurdle rate of 15.5%.
BALANCE SHEET TOTAL FELL TO € 11.9 BILLION. In 1999, theDaimlerChrysler Aerospace group’s balance sheet total
slipped from €13.0 billion, to €11.9 billion. The drop resulted
most notably from the roughly €1.2 billion decrease in cash
and cash equivalents, to €4.2billion, which consisted mainlyof receivables from DaimlerChrysler AG, relating to thecentral finance and liquidity management.
Financial assets, which essentially include investments inaffiliated companies (DaimlerChrysler Dieselantriebe GbR,Friedrichshafen, at €570 million), participations, investments in associated companies and loans, grew by a total of€155 million, to €1.1 billion, owing to additional investments.
The €157 million growth in inventories, to €765 million, is
attributable to billing practices and was driven most notably
by the Military Aircraft unit.
The €229 million rise in trade receivables, to €1.6 billion,
was caused chiefly by an increase in deliveries made at
the end of the year. Other receivables and other assets decreased to €1.6 (€1.7 billion year ago). This decrease iscaused by partial write-down adjustments on repayments
to the German government capitalized in previous years,
relating to our Airbus deliveries.
EQUITY RATIO AT 26%. The group’s net equity decreasedby €837 million to €3.1 billion. This was due to the profit
transfer from DaimlerChrysler Aerospace AG overDaimlerChrysler Luft- und Raumfahrt Holding (DCLRH) to
DaimlerChrysler AG. The equity ratio dropped accordingly
from 31% to 26%. The ratio between non-current assets andequity fell from 173% to 126%.

The increase in other accruals, from €2.6 billion to €2.8 billion,
resulted chiefly from the rise in project- and personnelrelated provisions. Accrued pension liabilities grew to €2.8
billion, from €2.7 billion.
The excess of deferred tax assets, at €1.0 billion, remained
unchanged from the previous year.
FURTHER GROWTH IN CASH FLOW FROM OPERATING ACTIVITIES. In the year under review, the cash flow from operating
activities amounted to €808 (€658 million). Due to offsetting
positive effects, the company could compensate payments
for government funding for the Airbus program.

DAE_S038-041.p65

40

03.03.2000, 9:08 Uhr

The cash flow from financing activities in an amountof €-1.581 million resulted mainly from profit transfers
to DaimlerChrysler AG totalling €-1,691 million.
Cash and cash equivalent decreased by €1,261 million
to €4,169 million, from €5,430 million in the previous year,
mainly due to the significant increase in profit transfers.
EARLY RECOGNITION AND CONSISTENT MANAGEMENT OF
FUTURE RISKS. In view of the global operations of theDaimlerChrysler Aerospace Group's business units and theincreasingly intense competition in all markets, the business
units are subject to many risks which are inseparably connected with entrepreneurial activity. For the early recognition and assessment of existing risks and the formulation ofan appropriate response, we have developed and used effective control and monitoring systems. Among other things,
these include the use of Group-wide standard guidelines, theuse of reliable software, the selection and training of qualified personnel and constant checks by our internal auditors.

We are developing new products to sustain our future commercial achievements. But before we can harvest the opportunities residing in these new products, we necessarily mustbear the latent technical implementation and funding risks
generally associated with large-scale aerospace projects overlonger periods.
SUCCESSFUL YEAR 2000 CONVERSION. We have successfullycompleted the Y2K conversion of our information and communication systems. All of our computer systems, technicalfacilities and machinery in our plants, offices and spareparts centers continued to function properly after the end of
the year, so there were no significant disturbance or failures.
The project team that was responsible for Group-wide conversion and adaptation has now concluded its work and has
handed over responsibility for further system developments
to the appropriate functional departments. When carryingout the necessary system adaptations for a smooth transition
to the year 2000, it proved to be a great advantage that we
had already introduced the euro as our corporate currency
on January 1, 1999.

41

With a view to the requirements of the German Law on Business Monitoring and Transparency (KonTraG),we have integrated the Group’s early warning systems into a risk management system. The operating units continuously monitor
existing risks and regularly report on them to the Group’s
Board of Management against certain threshold values
agreed in the group's planning processes. This ensures that
the Group’s management recognizes significant risks in an
early stage and can initiate appropriate measures to deal
with them.
The Group does much of its business in foreign currencies
and alleviates the revenue risks from exchange rate fluctuations through purchases in the respective foreign currencies
and forward exchange contracts and currency options.
Additional uncertainties arise from further economic developments in those countries which are important for our businesses and in the future purchasing practices of government
procurement agencies. Particularly government procurement practices may lead to the postponement or curtailmentof contracts and the creation of associated cost risks. An additional risk consideration is that our attainment of projecttargets may also depend on our partners’ performance and on
price trends in hotly contested markets.

DAE_S038-041.p65

41

ANALYSIS OF THE ECONOMIC SITUATION

Expenditures for property, plant and equipment (€336
million) largely involved expansion investments and plantmodernization and made up a vital factor influencing the
cash flow from investing activities, which in 1999 amounted
to €-488 (1998: €-373 million).

03.03.2000, 9:08 Uhr

C O N S O L I DAT E D S TAT E M E N T S O F I N C O M E

Year ended December 31,
in millions of €

Note

1997

21

9,191

8,770

7,816

Cost of sales

4(7,663)(7,210)(6,664)

1,528

1,560

1,152

(643)

(872)

(1,110)

(458)

(367)

(316)

230

264

388

657

585

114

(42)

319

(250)

615

904

(136)

Selling, administrative and other expenses

4

Research and development
CONSOLIDATED STATEMENTS OF INCOME

1998

Revenues

Gross margin

42

1999

Other income

5

Income before financial income, income taxes and minority interests
Financial income (expense), net

6

Income (loss) before income taxes and minority interests
Income taxes

(550)

(334)

150

Minority interests

7

(5)

(23)

(10)

Net income

60

547

4

The accompanying notes are an integral part of these Consolidated
Financial Statements.
All 1998 and 1997 balances have been restated from Deutsche Marks into
euros using the Official Fixed Conversion Rate.

DAE_S042-047.p65

4203.03.2000, 9:09 Uhr

C O N S O L I DAT E D B A L A N C E S H E E T S

At December 31,
in millions of €

Note

1999

1998

Intangible assets

8

77

71

Property, plant and equipment, net

8

1,349

1,314

Investments and long-term financial assets

1,072

917

Fixed assets

2,498

2,302

Inventories

9

765

608

Trade receivables

10

1,559

1,330

Other receivables and other assets

11

1,612

1,735

55

21

4,169

5,430

8,160

9,124

1,252

1,516

24

28

11,934

12,970

Securities
Cash and cash equivalents

12

Non-fixed assets
Deferred taxes

7

Prepaid expenses
Total assets (thereof short-term 1999: €7,179; 1998: €8,224)

43

Liabilities and stockholders’ equity
Capital stock

460

446

Additional paid-in capital

1,539

1,542

Retained earnings

1,138

1,990

8

4

3,145

3,982

160

122

Accumulated other comprehensive income
Stockholders’ equity

13

Minority interests
Accrued liabilities

14

5,629

5,234

Financial liabilities

15

239

237

Trade liabilities

16

1,043

1,004

Other liabilities

17

1,480

1,848

2,762

3,089

225

531

13

12

Liabilities
Deferred taxes

7

Deferred income
Total liabilities (thereof short-term 1999: €4,138; 1998: €4,426)

8,789

8,988

Total liabilities and stockholders’ equity

11,934

12,970

The accompanying notes are an integral part of these Consolidated
Financial Statements.
All 1998 balances have been restated from Deutsche Marks into euros
using the Official Fixed Conversion Rate.

DAE_S042-047.p65

43

CONSOLIDATED BAL ANCE SHEETS

Assets03.03.2000, 9:09 Uhr

C O N S O L I DAT E D S TAT E M E N T S O F C A S H F L O W S

Year ended December 31,
in millions of €

1999

1998

Net income

60

547

4

Income applicable to minority interests

5

23

10

Depreciation and amortization of fixed assets

291

298

300

Deferred taxes

634

342

(183)

5

(5)

240

Results on disposals of fixed assets/businesses

(37)

(163)

(32)

Change in accrued liabilities

440

(141)

(170)

1997

CONSOLIDATED STATEMENTS OF CASH
INCOME
FLOWS

Adjustments to reconcile net income to net cash provided by operating activities:

44

Change in financial instruments

Change in other operating assets and liabilities:– inventories, net

(157)

155

60

– trade receivables

(240)

(332)

28

– trade liabilities

40

135

203

– other assets and liabilities

(233)

(201)

(192)

Cash provided by operating activities

808

658

268

– Purchases of property, plant and equipment

(336)

(326)

(254)

– Purchases of other fixed assets

(89)

(55)

(29)

49

89

82

Payments for acquisitions of businesses

(111)

(187)

(53)

Proceeds from disposals of businesses

19

82

73

86

(36)

(14)

(102)

–

–

Purchase of fixed assets:

Proceeds from disposals of fixed assets (without equipment on operating leases)

Acquisitions /disposals of securities and of similar financial assets
Loan
Change in cash from changes in consolidation
Cash used for investing activities
Change in financial liabilities
Dividends paid (including profit/loss transfer agreement)
Capital increase
Other
Cash used for financing activities
Effect of foreign exchange rate changes on cash and cash equivalents

(4)

60

–

(488)

(373)

(195)

2

(9)

6

(1,692)

(339)

(380)

104

–

–

5

(37)

11

(1,581)

(385)

(363)

–

(3)

–

(1,261)

(103)

(290)

At beginning of period

5,430

5,533

5,823

At end of period

4,169

5,430

5,533

Net decrease in cash and cash equivalents
Cash and cash equivalents

The accompanying notes are an integral part of these Consolidated
Financial Statements.
All 1998 and 1997 balances have been restated from Deutsche Marks into
euros using the Official Fixed Conversion Rate.

DAE_S042-047.p65

4403.03.2000, 9:10 UhrAccumulated
other comRetained prehensive
earnings1)
income2)

Capitalstock

Additional
paid-in
capital

446

1,542

1,216

1

3,205

Dividends (including profit transfer)3)

–

–

87

–

87

Net income

–

–

4

–

4

Other comprehensive income

–

–

2

3

5

in millions of €Balance at January 1, 1997

Total comprehensive income

9

Change in minority interests within DaimlerChrysler

–

–

11

–

11

446

1,542

1,320

4

3,312

Dividends (including profit transfer)3)

–

–

211

–

211

Net income

–

–

547

–

547

Other comprehensive loss

–

–

(4)

–

Balance at December 31, 1997

Total comprehensive income

(4)
543

Change in minority interests within DaimlerChrysler

–

–

(84)

–

(84)

446

1,542

1,990

4

3,982

–

–

104

–

104

Dividends (including profit transfer) )––(1,007)–(1,007)

Net income

–

–

60

–

60

Other comprehensive income

–

–

5

4

9

10

1

(14)

–

(3)

Balance at December 31, 1998

Capital increase3

Total comprehensive income
Change in minority interests within DaimlerChrysler
Other
Balance at December 31, 1999

69

4

(4)

–

–

–

460

1,539

1,138

8

3,145

1

) Retained earnings also comprises the pro rata portion of stockholders’ equity ofDaimlerChrysler subsidiaries, which are under the managerial control ofDaimlerChrysler Aerospace.
2) Accumulated other comprehensive income principally includes differences fromcurrency translation.
3) includes tax benefit/burden from DaimlerChrysler AG
The accompanying notes are an integral part of these Consolidated Financial Statements.
All 1998 and 1997 balances have been restated from Deutsche Marks into euro using the
Official Fixed Conversion Rate.

DAE_S042-047.p65

Total

45

03.03.2000, 9:10 Uhr

ANCE SHEETSCONSOLIDATED BALSTATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUIT YC O N S O L I D AT E D S TAT E M E N T S O F C H A N G E S I N S T O C K H O L D E R S ’ E Q U I T Y

45

C O N S O L I DAT E D F I X E D A S S E T S S C H E D U L E

Acquisition or Manufacturing Costs
Balance atJanuary 1,

CONSOLIDATED FIXEDSTATEMENTSASSETSOF
SCHEDULEINCOME

in millions of €

46

1999

Acquisitions/
Currency disposals ofchange businesses

Balance at
December 31,

Additions

Reclassifications

Disposals

1999

Other intangible assets

66

–

–

23

3

12

80

Goodwill

193

–

2

–

–

4

191

Intangible assets

259

–

2

23

3

16

271

2,355

–

(22)

29

23

29

2,356

Technical equipment and machinery

1,213

1

(8)

63

28

30

1,267

Other equipment, factory and office equipment

1,521

–

(24)

126

34

132

1,525

121

–

–

118

(88)

2

149

Property, plant and equipment

5,210

1

(54)

336

(3)

193

5,297

Investments in affiliated companies

751

–

1

35

(3)

1

783

Land, leasehold improvements and buildings
including buildings on land owned by others

Advance payments relating to plant andequipment and construction in progress

Loans to affiliated companies

7

–

(2)

–

–

1

4

Investments in associated companies

82

5

–

47

10

2

142

Investments in related companies

141

–

–

35

(7)

3

166

Loans to associated and related companies

53

–

–

12

–

–

65

Other loans

53

–

–

54

–

18

89

Investments and long-term financial assets

1,087

5

(1)

183

–

25

1,249

Consolidated fixed assets

6,556

6

(53)

542

–

234

6,817

1

) Currency translation changes with period end rates.

The accompanying notes are an integral part of these Consolidated
Financial Statements.
All 1998 balances have been restated from Deutsche Marks into euros
using the Official Fixed Conversion Rate.

DAE_S042-047.p65

46

03.03.2000, 9:10 UhrBook Value1)

Depreciation/Amortization
Balance atJanuary 1,
1999

DAE_S042-047.p65

Acquisitions/
Currency disposals ofchange businesses

Balance at Balance at Balance at
December 31, December 31, December 31,

Additions

Reclassifications

Disposals

1999

1999

1998

–

–

16

1

12

49

31

22

Other intangible assets

–

–

5

–

4

145

46

49

Goodwill

188

–

–

21

1

16

194

77

71

Intangible assets

1,539

–

(10)

61

(1)

20

1,569

787

816

Land, leasehold improvements and buildings
including buildings on land owned by others

3

–

–

–

–

–

3

1

4

Loans to affiliated companies

–

–

–

1

–

–

1

141

82

Investments in associated companies

ANCE
SHEETSCONSOLIDATED BALFIXEDASSETSSCHEDULE

44
144

39

–

–

–

3

2

40

126

102

Investments in related companies

47

1,079

–

(5)

66

–

30

1,110

157

134

Technical equipment and machinery

1,278

–

(23)

142

–

128

1,269

256

243

Other equipment, factory and office equipment

–

–

–

–

–

–

–

149

121

Advance payments relating to plant andequipment and construction in progress

3,896

–

(38)

269

(1)

178

3,948

1,349

1,314

Property, plant and equipment

84

–

8

–

(3)

–

89

694

667

Investments in affiliated companies

38

–

–

–

–

–

38

27

15

Loans to associated and related companies

6

–

–

–

–

–

6

83

47

Other loans
Investments and long-term financial assets

170

–

8

1

–

2

177

1,072

917

4,254

–

(30)

291

–

196

4,319

2,498

2,302

47

Consolidated fixed assets

03.03.2000, 9:10 Uhr

B A S I S O F P R E S E N TAT I O NBASIS OF PRESENTATION

1. S U M M A RY O F S I G N I F I CA N T AC C O U N T I N G P O L I C I E S

48

General – The consolidated financial statements of DaimlerChrysler Aerospace Aktiengesellschaft and subsidiaries (“Dasa” or
the “Group”) have been prepared in all material respects in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”); one of the exceptions is, that the Group has
accounted for certain joint ventures in accordance with the proportionate method of consolidation. In accordance with U.S. GAAP,
joint ventures are generally required to be accounted for using theequity method of accounting. The consolidated financial statements
and notes thereto do not contain all of the information required under U.S. GAAP. Therefore they should be considered in the context
of their incorporation in the consolidated financial statements ofDaimlerChrysler AG (“DCAG”), the Group’s principal shareholder.
All amounts herein are shown in millions of euro (“€”).
Consolidation – The consolidated financial statements include all of
the material subsidiaries under the legal or managerial control ofDaimlerChrysler Aerospace AG. Significant investments in which
Dasa has a 20% to 50% ownership (“associated companies”) are
generally accounted for using the equity method. For investments
in material joint ventures, Dasa uses the proportionate method of
consolidation (see Note 2). Other investments are accounted for atcost.
For business combinations accounted for under the purchase accounting method, all assets acquired and liabilities assumed arerecorded at fair value. An excess of the purchase price over the fairvalue of net assets acquired is capitalized as goodwill and amortized over the estimated period of benefit on a straight-line basis.
Differences carried as liabilities are subtracted from property,
plant and equipment.
The effects of intercompany transactions have been eliminated.
Certain prior year balances have been reclassified to conform with
the Group’s current year presentation.
Foreign Currencies – The assets and liabilities of foreign subsidiaries where the functional currency is other than the euro are generally translated using period-end exchange rates while the statements of income are translated using average exchange rates
during the period. Differences arising from the translation of assets and liabilities in comparison with the translation of the previous periods are included as a separate component of stockholders’equity.
Prior to December 31, 1998, Dasa prepared and reported its consolidated financial statements in Deutsche Marks (“DM”). With theintroduction of the euro on January 1, 1999, Dasa has presented
the accompanying consolidated financial statements in euro. Accordingly, the Deutsche Mark consolidated financial statements forprior periods have been restated into euro using the Official Fixed
Conversion Rate of €1 = DM 1.95583. Dasa’s 1998 and 1997 restated euro financial statements depict the same trends as would
have been presented if it had continued to present its consolidated

DAE_S048-065.p65

48

financial statements in Deutsche Marks. The Group’s consolidated
financial statements will, however, not be comparable to the eurofinancial statements of other companies that previously reported
their financial information in a currency other than Deutsche
Marks.
Revenue Recognition – Revenues are realized upon the transfer ofrisk or the rendering of a service. For long-term projects, revenues
are realized according to the percentage-of-completion method ascontractually agreed-upon milestones are reached or the work
progresses. Changes in profit rates are reflected in current earnings as identified. Contracts are reviewed for possible losses at
each reporting period and provisions for estimated losses oncontracts are recorded when identified.
Incentives applicable to performance on contracts are consideredin estimated profit rates and are recorded when there is sufficient
information to assess anticipated contract performance. Contract
penalties are charged to expense in the period it becomes probablethat the Group will be subject to the penalties.
Product-Related Expenses – Expenses for advertising and sales promotion and other sales-related expenses are charged to expense
as incurred. Provisions for warranties are made at the time therelated sale is recorded. Research and development funded by
the Group is expensed as incurred.
Income Taxes — Dasa has entered into a profit and loss sharing
agreement with DCAG under which the Group is required to remit
its pretax profits to DCAG and DCAG is required to purchase its
pretax losses. Both the pretax profits and losses subject to the
profit and loss sharing agreement are calculated according to theGerman commercial code (Handelsbilanz). The profits or losses of
Dasa are, accordingly, included in the combined income tax returnof DaimlerChrysler AG. For purposes of these consolidated financial statements, the Group’s income tax provisions have been
prepared as if it was a separate taxable entity.
Deferred income taxes are recorded in the consolidated financial
statements of Dasa in accordance with Statement of Financial Accounting Standards (“SFAS”) 109, “Accounting for Income Taxes.”
Deferred tax assets and liabilities reflect lower or higher future tax
liabilities that result for certain assets and liabilities from temporary valuation differences between their carrying amounts in the
U.S. GAAP balance sheet and the tax balance sheet. In addition,deferred taxes are recorded for losses carried forward from companies which are not included in the filing of the combined tax return of DCAG. For losses carried forward in connection with thegroup of companies that file a combined tax return with DCAG, deferred tax assets are recorded by DCAG. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply totaxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized inincome in the period that includes the enactment date.

03.03.2000, 9:25 Uhr

Intangible Assets – Purchased intangible assets, other than goodwill, are valued at acquisition cost and are generally amortizedover their respective useful lives (3 to 10 years) on a straight line
basis. Goodwill derived from acquisitions and consolidation is capitalized and amortized over 5 to 20 years. The Group periodicallyassesses the recoverability of its goodwill based upon projected
future cash flows.
Property, Plant and Equipment – Property, plant and equipment isvalued at acquisition or manufacturing costs less accumulated depreciation. Depreciation expense is recognized using the decliningbalance method until the straight-line method yields larger expenses. The costs of internally produced equipment and facilities
include all direct costs and allocable manufacturing overhead. The
following useful lives are assumed: buildings – 10 to 50 years; site
improvements - 8 to 20 years; technical equipment and machinery– 3 to 20 years; and other equipment, factory and office equipment – 2 to 10 years.
Impairment of Long-lived Assets – The Group reviews long-lived
assets to be held and used for impairment whenever events orchanges in circumstances indicate that the carrying amount of anasset may not be recoverable.
Leasing – The Group is a lessee of property, plant and equipment.
All leases that meet certain specified criteria intended to represent
situations where the substantive risks and rewards of ownershiphave been transferred to the lessee are accounted for as capitalleases. All other leases are accounted for as operating leases.
Non-fixed Assets – Non-fixed assets represent the Group’s inventories, receivables, securities and cash, including amounts to be realized in excess of one year. In the accompanying notes, the portionof assets and liabilities to be realized and settled in excess of one
year has been disclosed.
Inventories – Inventories are valued at the lower of acquisition or
manufacturing cost or market price. Manufacturing costs comprise
direct material and labor and applicable manufacturing overheads,
including depreciation charges.
Securities – Securities are accounted for at fair values, if readily determinable. Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income,net of applicable deferred income taxes. All other securities arerecorded at cost.

Cash and cash equivalents – Cash consists of cash on hand, cash inbank, checks, and fixed deposits having a maturity of threemonths or less. The Group considers amounts due from DCAG’s
cash management group as cash equivalents.
Financial Instruments – Dasa uses derivative financial instruments
only for hedging purposes. Financial instruments, including derivatives (currency futures and currency options), which are notdesignated as hedges of specific assets, liabilities, or firm commitments are marked to market and any resulting unrealized gains orlosses are recognized in income. If there is a direct connection between a derivative financial instrument and an underlying transaction and a derivative is so designated, a valuation unit is formed.
Once allocated, gains and losses from these valuation units, which
are used to manage currency risks of identifiable assets, liabilities,
or firm commitments, do not affect income until the underlying
transaction is realized (see Note 20d).
Accrued Liabilities – The valuation of pension liabilities is based
upon the projected unit credit method in accordance with SFAS 87,“Employers’ Accounting for Pensions.” An accrued liability fortaxes and other contingencies is recorded when an obligation to athird party has been incurred, the payment is probable and theamount can be reasonably estimated. The effects of accrued liabilities relating to personnel and social costs are valued at their netpresent value where appropriate.
Use of Estimates – The preparation of financial statements requires
management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent amounts at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
New Accounting Pronouncements – In June 1998, the Financial
Accounting Standards Board issued SFAS 133, “Accounting for
Derivative Instruments and Hedging Activities.” This Standard
requires companies to record derivatives on the balance sheet as
assets and liabilities, measured at fair value. Gains and losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether
it qualifies for hedge accounting. With the issuance of SFAS 137,
“Accounting for Derivative Instruments and Hedging Activities –Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133,” this Standard is effective
for fiscal years beginning after June 15, 2000. Dasa plans to adopt
SFAS 133 effective January 1, 2000. The new Standard will permit
the Group to apply hedge accounting for certain foreign currency
derivative contracts on qualifying forecasted transactions. Under
the Group’s current accounting policies such contracts are marked
to market with unrealized gains and losses impacting current
earnings. Accordingly, application of the new Standard in accounting for such foreign currency derivative contracts may result in
lower current period earnings volatility relating to the Group’s foreign currency risk management in periods of significant changes
in exchange rates.

(in millions of €)DAE_S048-065.p65

49

03.03.2000, 9:25 Uhr

BASIS OF PRESENTATION

Because deferred taxes assets anticipate potential future tax benefits, they are recorded in the consolidated financial statements of
Dasa only when the likelihood that the tax benefits will be realized
is more than 50%. A valuation allowance is recorded to reducedeferred tax assets to amounts which will more likely than not berealized.

49

BASIS OF PRESENTATION

2 . S C O P E O F C O N S O L I DAT I O N

50

Scope of Consolidation – In 1999 Dasa comprises 23 foreign anddomestic subsidiaries (1998: 21) and 13 joint venture companies(1998: 13); the latter are accounted for on a pro rata basis. During
1999, 6 subsidiaries were included in the consolidated financial
statements for the first time and a total of 4 subsidiaries left theconsolidated group. Significant effects of changes in the consolidated group on the consolidated balance sheets and the consolidated statements of income are explained further in the notes tothe consolidated financial statements. A total of 71 subsidiaries(“affiliated companies”) are not consolidated as their combined influence on the financial position, results of operations, and cash
flows of the Group is not material (1998: 69). The effect of suchnon-consolidated subsidiaries for all years presented to consolidated assets, revenues and net income of Dasa was less than 2%.
In addition, 2 (1998: 3) companies administering pension funds
whose assets are subject to restrictions have not been included in
the consolidated financial statements. The consolidated financial
statements include 64 associated companies (1998: 58). At December 31, 1999, 7 (1998: 6) associated companies are accounted for in
the consolidated financial statements using the equity method of
accounting. The remaining associated companies are accounted forat cost and are recorded under investments in related companies
as these companies are not material to the respective presentationof the financial position, results of operations or cash flows of theGroup.
Investments in Joint Ventures – The most material joint venture is
the Eurocopter Group consisting of Eurocopter Holding S.A. and its
6 (1998: 6) subsidiaries, in which Dasa holds a 40-percent interest.
The second partner of this joint venture operating in the helicopter
business is Aerospatiale Matra. In the business unit Defence andCivil Systems Dasa holds a 50-percent interest in Nortel Dasa Network Systems, a joint venture with Northern Telecom which is engaged in the development and production of telecommunication
networks. Furthermore Dasa has 50% investments in TDAArmements S.A.S and in Bayern Chemie GmbH, both in cooperation with Thomson-CSF. On January 1, 1998 Dasa sold its stake inZeiss-Eltro Optronic GmbH, which formerly was a joint venturewith Carl Zeiss, Oberkochen.
Dasa reports its 40% interest of the assets and liabilities, revenues
and expenses and cash flows in Eurocopter and its 50% interest in
3 other joint ventures by using the proportionate method of consolidation. The Group believes that such method of financial statement presentation, which is permitted by the regulations of theSeventh Directive of the European Community, better illustrates its
consolidated financial position, results of operations and cash
flows to the reader of the Group’s consolidated financial statements.

DAE_S048-065.p65

50

Under U.S. GAAP, Dasa’s investments in the joint ventures wererequired to be accounted for using the equity method of accounting. The differences in accounting treatment between the proportionate and equity methods would not have affected reported stockholders’ equity or net income of Dasa. Under the equity method of
accounting, Dasa’s net investments in joint ventures would be included within investments in the balance sheet and its share of the
net income or loss of the joint ventures together with the amortization of goodwill would be reported as a net amount in financial
income, net in the Group’s statement of income. Additionally,
Eurocopter and the other joint ventures would impact the Group’sreported cash flows only to the extent the Group received cash
dividends.
Summarized consolidated financial information of the joint
ventures follows. The amounts represent those used in the Dasa
consolidation.
Balance sheet information

At December 31,

Fixed assets
Non-fixed assets
Total assets

Stockholders’ equity

1999

1998

138

138

895

787

1,033

925

231

206

Minority interests

59

55

Accrued liabilities

319

254

Liabilities

424

410

1,033

925

Total liabilities and stockholders’ equity

Statement of income information

Year ended December 31,
1999

1998

1997

1,033

921

861

Income before financial income
and income taxes

45

36

–

Net income (loss)

25

31

(3)

Revenues

03.03.2000, 9:26 Uhr

Cash flow information

Year ended December 31,
1997

1999

1998

Operating activities

117

(14)

161

Investing acitivities

(15)

(9)

(40)

Financing activities

(14)

2

(22)

Change in cash

88

(21)

99

Cash at beginning of period

63

84

36

Cash at end of period

151

63

135

BASIS OF PRESENTATIONCash flows from:

3. ACQUISITIONS AND DISPOSITIONSIn 1998, Dasa acquired the German defense electronics activities
of Siemens AG (SI Sicherungstechnik GmbH & CoKG). The acquisition was accounted for under the purchase method of accounting
and as such all assets acquired and liabilities assumed were recorded at fair value. The excess of the purchase price over the fairvalue of net assets acquired of €48 was capitalized as goodwill andis being amortized over 15 years, the expected period of benefit.

51

In 1998, the Group sold 30% of its interests in LFK-Lenkflugkörpersysteme GmbH to Matra BAe Dynamics, resulting in a pretax
gain of €74. Dasa also disposed of 100% of its interests in CMS Inc.
to Primex Technologies Inc., resulting in a pretax gain of €58.

(in millions of €)DAE_S048-065.p65

51

03.03.2000, 9:26 Uhr

N O T E S T O T H E C O N S O L I DAT E D S TAT E M E N T S O F I N C O M E

NOTES TO THE CONSOLIDATED STATEMENTS OF INCOME

4. FUNCTIONAL COSTS AND OTHER EXPENSES

Cost of sales and other functional costs include cost of materials as
follows:

Number of employees of consolidated subsidiaries (annual
average):Year ended December 31,

1999

1998

1997

Hourly employees

13,461

12,76912,001

Salaried employees

25,66425,53225,030Year ended December 31,

1999

1998

1997

Cost of raw materials, supplies andresale products

2,623

2,609

1,909

Cost of purchased services

1,937

1,950

1,986

Expenses for materials

4,560

4,559

3,895

Selling, administrative and other expenses are comprised of thefollowing:

Year ended December 31,

1999

1998

1997

Selling expenses

310

333

285

Administration expenses

298

269

264

Other expenses

35

270

561

Selling, administrative andother expenses

643

872

1,110

52

Cost of sales and functional costs include other taxes of €14 (1998:€9; 1997: €34).
Other expenses primarily include charges not allocated to cost of
sales, selling or administrative expenses. In 1998, expenses
amounting to €229 (1997: €369) related to settlement payments forcommitments to the Federal Republic of Germany were recorded(see Note 19).
Personnel expenses included in the statements of income arecomprised of:Year ended December 31,

Wages and salaries
Social levies
Net periodic pensions cost(see Note 14 a)
Personnel expenses

1999

1998

1997

2,299

2,196

2,034

402

348

348

220

219

203

2,921

2,763

2,585

Trainees/apprentices

1,943

1,846

1,770

Employees (annual average)

41,06840,14738,801

In 1999, 12,019 persons (1998: 11,698 persons; 1997: 12,080 persons) were employed in joint venture companies. In 1999, the total
remuneration paid by Group companies to the members of theBoard of Management of DaimlerChrysler Aerospace AG amounted
to €5, and the remuneration paid to the members of the Supervisory Board of DaimlerChrysler Aerospace AG totaled €0.2.
5. OTHER INCOME

Other income includes gains on sales of property, plant and equipment (€21, €31 and €32 in 1999, 1998 and 1997, respectively),
gains on sales of companies (€30 and €132 in 1999 and 1998,
respectively), rental income (€36, €31 and €10 in 1999, 1998 and1997, respectively), and reductions in certain accruals (€16, €48
and €25 in 1999, 1998 and 1997, respectively). In 1999, other income also includes recoveries of previously written-off receivables
amounting to €61.
6. FINANCIAL INCOME, NET

1998

1997

Income (loss) from investments
thereof from affiliated companies €4(1998: €3; 1997: €(15))

16

13

(6)

Gains, net from disposals ofinvestments and shares in affiliatedand associated companies

20

22

20

Write-down of investments and sharesin affiliated companies

–

(10)

(9)

Income (loss) from companies included at equity

(40)

(28)

131

Income (loss) from investments, net

(4)

(3)

136

Other interest and similar income
thereof from affiliated companies€166 (1998: €250; 1997: €229)

196

287

256

Interest and similar expenses

(68)

(72)

(67)

Interest income, net

128

215

189

Realized and unrealized gains (losses)
on financial instruments

(169)

116

(592)

3

(9)

17

Other financial income (loss), net

(166)

107

(575)

Financial income (loss), net

(42)

319

(250)

Other, net

DAE_S048-065.p65

52

Year ended December 31,
1999

03.03.2000, 9:26 Uhr

Income (loss) before income taxes and minority interests
amounted to €615 (1998: €904; 1997: €(136) ), of which €585 was
generated by the Group’s operations in Germany (1998: €875;
1997: €(140)).

A reconciliation of income taxes determined using the German corporate tax rate of 42.2% plus the after federal tax benefit rate fortrade taxes of 9.3% for a combined statutory rate of 51.5% in 1999
(1998: 56%; 1997: 57%) is as follows:Year ended December 31,
1999

1998

1997

Expected (provision)/benefit forincome taxes

(317)

(506)

78

Effect of changes in German tax laws

(250)

–

(3)

Tax refund (additional-payment)for prior years

(15)

21

(1)

Equity-evaluation

(2)

27

32

Permanent differenceson consolidation items

10

44

6

Changes in valuation allowances ondeferred taxes

5

26

54

Permanent differences on investments

10

31

(18)

The provision (benefit) for income taxes consists of the following:
Year ended December 31,
1999

1998

1997

Current taxes
Germany

(98)

(11)

29

Foreign

14

3

4

Deferred taxes
Germany

633

347

(183)

Foreign

1(5)–

Income taxes

550

334

(150)

In 1999, the tax laws in Germany were changed, including a reduction in the retained corporate income tax rate from 45% to 40% anda broadening of the tax base. The effects of the changes in theGerman tax laws were recognized as a charge of €250 in the
consolidated statement of income in 1999.
German corporate tax law applies a different tax rate for undistributed and distributed earnings. Retained corporate income is initially subject to a federal corporate tax rate of 40% (1998 and 1997:45%) plus a solidarity surcharge of 5.5% (1998: 5.5%; 1997: 7.5%) on
the federal corporate taxes payable. Including the impact of thesurcharge, the effective federal corporate tax rate amounts to
42.2% (1998: 47.475%; 1997: 48.375%).
Upon distribution of retained earnings to stockholders, the corporate income tax rate on the earnings is adjusted to 30%, plus a solidarity surcharge of 5.5% (1998: 5.5%; 1997: 7.5%) on the distribution corporate tax of 30%, for a total of 31.65% (1998: 31.65%; 1997:
32.25%), by means of a refund on taxes previously paid. Upon distribution of retained earnings in the form of a dividend, stockholders who are taxpayers in Germany are entitled to a tax credit to
the amount of federal income taxes previously paid by the corporation.
For German companies, the deferred taxes for 1999 and 1998 were
calculated using effective corporate income tax rates of 42.2%
and 47.475%, respectively, plus the after federal tax benefit rate fortrade tax of 9.3% and 8.525%, respectively. The effect of the tax
rate reductions on year-end 1999 and 1997 deferred tax balances
are reflected in the reconciliations of 1999 and 1997 presented
below.

Other
Reported tax (provision)/benefit

9

23

2

(550)

(334)

150

53

Deferred income tax assets and liabilities are summarized asfollows:

December 31,

1999

1998

Intangible assets

25

33

Property, plant and equipment

96

109

Investments and long-term financial assets

53

47

Inventories

497

540

Net operating loss and tax credit carryforwards

142

284

Retirement plans

572

605

Other accrued liabilities

689

599

Liabilities

81

124

Deferred income

1

3

Total

2,156

2,344

Valuation allowances

(50)

(82)

Deferred tax assets

2,106

2,262

Receivables

1,064

1,271

Other

15

6

Deferred tax liabilities

1,079

1,277

Deferred tax assets, net

1,027

985

(in millions of €)DAE_S048-065.p65

53

NOTES TO THE CONSOLIDATED STATEMENTS OF INCOME

7. I N C O M E T A X E S

03.03.2000, 9:26 Uhr

NOTES TO THE CONSOLIDATED BAL ANCE SHEETSAt December 31, 1999, the Group had corporate tax net operating
losses (“NOLs”) and credit carryforwards amounting to €323
(1998: €600) and German trade tax NOLs amounting to €91 (1998:€56). The corporate tax NOLs and credit carryforwards mainly relate to losses of foreign and domestic non-Organschaft companies
and are partly limited in their use to the Group. The amount of theGroup’s deferred tax valuation allowances is based upon
management’s belief that it is more likely than not that not all of
the deferred tax assets will be realized. In future periods, depending upon the Group’s financial results, management’s estimate of
the amount of the deferred tax assets considered realizable may
change, and hence the valuation allowances may increase or decrease.
Net deferred income tax assets and liabilities in the consolidatedbalance sheets are as follows:

Deferred tax assets

December 31, 1999

December 31, 1998

thereof
Total non-current

thereof
Total non-current

1,252

1,225

1,516

1,443

Deferred tax liabilities

(225)

(1)

(531)

(6)

Deferred tax assets, net

1,027

1,224

985

1,437

54

DAE_S048-065.p65

5403.03.2000, 9:27 Uhr

N O T E S T O T H E C O N S O L I DAT E D B A L A N C E S H E E T S

11 . O T H E R R E C E I V A B L E S A N D O T H E R A S S E T S

EQUIPMENT, NET

At December 31,

Information with respect to changes in the Group’s intangible
assets and property, plant and equipment is presented in the Consolidated Fixed Assets Schedule included herein. Property, plantand equipment include buildings, technical equipment and otherequipment capitalized under capital lease agreements of €50(1998: €53; 1997: €56). Depreciation expense on assets undercapital lease arrangements was €3 (1998: €3; 1997: €1).

Receivables from affiliated companies
1

Receivables from related companies )Other assets

1

9. INVENTORIESAt December 31,
1999

1998

Raw materials and manufacturing supplies

340

346

Work in progress
thereof relating to long-term contracts andprograms in process €43 (1998: €143)

1,711

1,511

Finished goods, parts and products
held for resale

132

114

Advance payments to suppliers

289

197

2,472

2,168

Less: Advance payments received
thereof relating to long-term contracts andprograms in process €189 (1998: €291)

1999

1998

157

44

333

294

1,158

1,421

1,648

1,759

Allowance for doubtful accounts

(36)

(24)

Other receivables and other assets

1,612

1,735

) Related companies include entities which have a significant ownership in
Dasa or entities in which the Group holds a significant investment.

As of December 31, 1999, €811 of the other receivables and otherassets mature after more than one year (1998: €938). Other assets
at December 31, 1999, include €869 (1998: €962) of deferred
amounts related to settlement payments to the Federal Republicof Germany by DaimlerChrysler Aerospace Airbus GmbH.

12 . C A S H F L O W I N F O R M AT I O N

The following represents supplemental information with respect tocash flows from operating activities:(1,707)(1,560)765

608Year ended December 31,

Inventories

10 . T R A D E R E C E I VA B L E S

1998Receivables from sales of goods and services

1,261

1,149

Long-term contracts and programs, unbilled,
net of advance payments received

377

266

1,638

1,415

(79)

(85)

1,559

1,330

Trade receivables

1998

1997

Interest paid

47

8

26

Income taxes paid

113

65

24

At December 31,
1999

Allowance for doubtful accounts

1999

Cash and cash equivalents include €3,921 (1998: €5,302) of liquid
funds invested in DaimlerChrysler’s cash management group.

As of December 31, 1999, €217 of the trade receivables mature
after more than one year (1998: €63).

(in millions of €)DAE_S048-065.p65

55

03.03.2000, 9:27 Uhr

NOTES TO THE CONSOLIDATED BAL ANCE SHEETS

8 . I N TA N G I B L E A S S E T S A N D P R O P E R T Y, P L A N T A N D

55

13 . S T O C K H O L D E R S ’ E Q U I T Y

NOTES TO THE CONSOLIDATED BAL ANCE SHEETS

The capital stock of the Group is €460, consisting of 17,848,001
shares. Retained earnings include the pro rata portion of equity ofcertain DaimlerChrysler companies under the managerial controlof Dasa. In 1999 and 1998 such companies were Dasa Globalstar
Limited Partner Inc. and 0.01% (1998: 3.19%) of the shares of MTU
Motoren- und Turbinen–Union München GmbH.

56

Minority stockholders of Dornier GmbH have the right to exchange
their interests in Dornier for holdings of equal value inDaimlerChrysler Luft- und Raumfahrt Holding (“DCLRH”) or ordinary shares of DCAG and such options are exercisable at any time.

The following provides information with respect to the Group’s
pension plans, located principally in Germany. Since 1998 Dasa
has used the rates of the new Heubeck mortality tables for thevaluation of the German pension liabilities.
At December 31,

Projected benefit obligations at beginning of year

3,299

2,881

Service cost

74

76

Interest cost

192

186

–

7

Actuarial (gains) losses

(43)

190

Acquisitions and other

(36)

60

Benefits paid

Accrued liabilities are comprised of the following:

1998

Change in projected benefit obligations:

Plan amendments

14 . A C C R U E D L I A B I L I T I E S

1999Projected benefit obligations at end of year

(111)

(101)

3,375

3,299

At December 31,

Total

Retirement plans(see Note 14 a) andsimilar obligations

1999

1998

thereof> 1 year

thereof> 1 year

Total

2,781

2,687

2,653

2,584

Income and other taxes

78

39

44

2

Other accrued liabilities(see Note 14 b)

2,770

1,540

2,537

1,616

Accrued liabilities

5,629

4,266

5,234

4,202

Change in plan assets:
Fair value of plan assets at beginning of year

612

576

Actual return on plan assets

27

70

Benefits paid

(36)

(34)

603

612

Fair value of plan assets at end of year

At December 31, 1999, plan assets were invested in diversified
portfolios that consisted primarily of debt and equity securities.
Assets and income accruing from all pension trust and relief funds
are solely used to pay pension benefits.

a) Retirement plans
The Group provides pension benefits to substantially all of its
hourly and salaried employees. Plan benefits are principally based
upon years of service. Certain pension plans are based on salaryearned in the last year or on an average of the last three years of
employment while others are fixed plans depending on ranking(both salary level and position).

DAE_S048-065.p65

56

03.03.2000, 9:27 Uhr

The changes in these provisions are summarized as follows:

At December 31,

Exit
costs

Total
liabilities

Balance at January 1, 1997

256

42

298

(28)

Utilizations and transfers

(129)

(6)

(135)

(6)

Reductions

(20)

(5)

(25)

2,653

Additions

20

–

20

Balance at December 31, 1997

127

31

158

Utilizations and transfers

(52)

(9)

(61)

Reductions

(4)

(10)

(14)

Additions

20

3

23

1998

2,772

2,687

Unrecognized actuarial net losses(5)

Unrecognized prior service cost

(6)
2,761

Funded status1)

Net amount recognized1

Termination
benefits

1999) Difference between the projected benefit obligations and the fair value ofplan assets.

The weighted-average assumptions used in calculating the actuarial values of the retirement plans were as follows:
Weighted-average assumptions

1999

1998

1997

as of December 31:

in %

in %

in %

Discount rate

6.0

6.0

6.5

Expected return on plan assets

7.7

7.7

7.7

Rate of compensation increase

2.75

3.0

3.0

The components of the net periodic pension cost were as follows:

Service cost

1999

1998

1997

74

76

71

Interest cost

192

186

175

Expected return on plan assets

(46)

(43)

(43)

Net periodic pension cost

220

219

203

Balance at December 31, 1998

91

15

106

Utilizations and transfers

(23)

(2)

(25)

Reductions

(6)

–

(6)

Additions

41

4

45

Balance at December 31, 1999

103

17

120

In connection with the Group’s restructuring, provisions wererecorded for termination benefits of €41 (1998: €20; 1997: €20).
In connection with these restructuring efforts, the Group effected
workforce reductions of 308 employees (1998: 983; 1997: 1,180)
and paid termination benefits of €43 (1998: €126; 1997: €152),of which €43 (1998: €124; 1997: €152) were charged against
previously established accrued liabilities and other liabilities.
At December 31, 1999 the Group had liabilities for estimatedfuture terminations for approximately 698 employees.

b) Other accrued liabilities
Other accrued liabilities consisted of the following:
At December 31,
1999

1998

Accrued warranty costs and price risks

297

313

Accrued losses on uncompleted contracts

644

548

Restructuring

120

106

Accrued personnel and social costs

176

164

Other

1,533

1,406

Other accrued liabilities

2,770

2,537

Accruals for restructuring comprise certain employee termination
benefits and costs which are directly associated with reductions incapacities.

(in millions of €)DAE_S048-065.p65

57

03.03.2000, 9:27 Uhr

NOTES TO THE CONSOLIDATED BAL ANCE SHEETS

A reconciliation of the funded status to the amounts recognized in
the consolidated balance sheets is as follows:

57

NOTES TO THE CONSOLIDATED BAL ANCE SHEETS

15 . F I N A N C I A L L I A B I L I T I E S

58At December 31,
1999

1998

Liabilities to financial institutions

24

28

Liabilities to affiliated companies

20

13

Liabilities from capital lease andresidual value guarantees

64

Short-term financial liabilities(due within one year)

50

45

Liabilities to financial institutions
thereof due in more than five years:€14 (1998: €15)

14

25

Loans, other financial liabilities
thereof due in more than five years: €13

121

108

Liabilities from capital lease and residual value
guarantees
thereof due in more than five years: €26 (1998: €42)

54

59

Long-term financial liabilities

189

192

Financial liabilities

239

237

Weighted average interest rates for liabilities to financial
institutions are 6.2% (short-term) and 5.6% (long-term),
respectively, at December 31, 1999. Liabilities to financial
institutions mature in 2007 at the latest.

Aggregate amounts of financial liabilities maturing during thenext five years and thereafter are as follows:

Financial liabilities

2000

2001

2002

2003

2004

thereafter

50

6

114

5

11

53

At December 31, 1999

16 . T R A D E L I A B I L I T I E SAt December 31, 1998

Total

thereof> 1 year

thereof> 5 years

Total

thereof> 1 year

thereof> 5 years

Accounts payable

875

3

1

849

11

1

Accrued liabilities from long-term contracts
and programs

168

15

–

155

–

–

1,043

18

1

1,004

11

1

Trade liabilities

DAE_S048-065.p65

58

03.03.2000, 9:28 Uhr1 7. O T H E R L I A B I L I T I E SAt December 31, 1999
Total

thereof> 1 year

thereof> 5 years

At December 31, 1998
Total

thereof> 1 year

thereof> 5 years

Liabilities to affiliated companies

48

–

–

30

–

–

Liabilities to related companies

1,058

4

–

556

20

11

Other liabilities

374

8

3

1,262

8

2

Other liabilities

1,480

12

3

1,848

28

13

Liabilities to related companies are primarily obligations ofDaimlerChrysler Aerospace Airbus GmbH to Airbus Industrie
G.I.E., Toulouse.

from the redemption of general agreement commitments byDaimlerChrysler Aerospace Airbus GmbH. As of December 31,
1999 other liabilities include tax liabilities of €98 (1998: €52),
and social benefits of €78 (1998: €106).

OTHER NOTESOther liabilities at December 31, 1998, include the repayment-obligations of €895 to the Federal Republic of Germany, which arise

59

OTHER NOTES

18 . L I T I G AT I O N A N D C L A I M S

19 . C O M M I T M E N T S A N D C O N T I N G E N C I E S

Various legal actions, governmental investigations, proceedings
and other claims are pending or may be instituted or asserted in
the future against the Group. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictablewith assurance. It is reasonably possible that the final resolutionof some of these matters may require the Group to make expenditures, in excess of established reserves, over an extended periodof time and in a range of amounts that cannot be reasonably estimated. The term “reasonably possible” is used herein to meanthat the chance of a future transaction or event occurring is morethan remote but less than likely. Although the final resolutionof any such matters could have a material effect on the Group’s
consolidated operating results for the particular reporting period
in which an adjustment of the estimated reserve is recorded, theGroup believes that any resulting adjustment should not materiallyaffect its consolidated financial position.

Commitments and contingencies are presented at their contractual
values and include the following:
At December 31,

1999

Guarantees

1998

918

751

Contractual guarantees

91

157

Pledges of indebtedness of others

13

7

1,022

915

Total

(in millions of €)DAE_S048-065.p65

59

03.03.2000, 9:28 UhrContingent liabilities principally represent guarantees of indebtedness of non-consolidated affiliated companies and third parties,
contractual guarantees and commitments by Group companies as
to contractual performance by joint venture companies.
In connection with the development of aircraft, DaimlerChrysler
Aerospace Airbus GmbH (“DA”) is committed to Airbus Industrie toincur future development costs. At December 31, 1999, the remaining commitment not recorded in the financial statements aggregated €342.

OTHER NOTESAirbus Industrie G.I.E. (“Airbus consortium”) has given a performance guarantee to Agence Executive, the French government
agency overseeing Airbus. This performance guarantee has been
assumed by DA to the extent of its 37.9% participation in the
Airbus consortium.

60

At December 31, 1999, in connection with DA’s participation in the
Airbus consortium, DA was contingently liable related to the Airbus consortium’s irrevocable financing commitments in respect ofaircraft on order, including options, for delivery in the future. In
addition, DA was also contingently liable related to credit guarantees and participations in financing receivables of the Airbus consortium under certain customer finance programs. When entering
into such customer financing commitments, the Airbus consortium
has generally established a secured position in the aircraft being
financed. The Airbus consortium and DA believe that the estimatedfair value of the aircraft securing such commitments would substantially offset any potential losses from the commitments. Basedon experience, the probability of material losses from such customer financing commitments is considered remote.
DA’s obligations under the foregoing financing commitments of the
Airbus consortium are joint and several with its other partners in
the consortium. In the event that Airbus, despite the underlying
collateral, should be unable to honor its obligations, each consortium partner would be jointly and severally liable to third parties
without limitation. Between the consortium partners, the liability
is limited to each partner’s proportionate share in Airbus.
In 1989, the Group acquired Messerschmitt-Bölkow-Blohm GmbH(“MBB”) and thereby indirectly acquired DA (then known as
Deutsche Airbus GmbH) which was and continues to be the German participant in Airbus Industrie. In connection with the acquisition the Federal Republic of Germany undertook responsibility
for certain financial obligations of MBB and DA and agreed to provide certain ongoing limited financial assistance for development
programs and other items. Such undertakings, advances and assistance were to be repaid by DA on a contingent basis equal to 40%of the prior year’s pretax profit, as defined in the agreement with
the Government, beginning in 2001, and royalty payments basedon sales of aircraft.

During 1998 and 1997, DA settled the foregoing contingent obligations with the Federal Republic of Germany for payments of €895
and €716, respectively. The 1998 settlement, which resulted in thecomplete discharge of all remaining obligations to the German Federal Government, related to the Airbus A300/310 and A330/340
series aircraft as well as to financial support which was not connected with development costs, while the 1997 settlement related
to the A320 aircraft and its derivatives. Of the foregoing settlement payments, €229 and €369 were expensed in 1998 and 1997,
respectively. The remainder of the settlement payments were capitalized and are being amortized over those aircraft to be deliveredin the future to which the settlements related.
Total rentals under operating leases, charged as an expense in thestatement of income, amounted to €60 (1998: €67; 1997: €59).
Future lease payments under rental and lease agreements whichhave initial or remaining terms in excess of one year at December
31, 1999 are as follows:
Operatingleases

2000

60

2001

44

2002

39

2003

21

2004

21

thereafter43

2 0 . I N F O R M AT I O N A B O U T F I N A N C I A L I N S T R U M E N T S

As a consequence of the global nature of Dasa’s businesses, its
operations and its reported financial results and cash flows are exposed to the risks associated with fluctuations in foreign currency
exchange rates principally between the euro and the U.S. dollar.
The Group’s businesses are exposed to transaction risk wheneverrevenues are denominated in a currency other than the currency
in which the costs relating to those revenues are incurred. The
Group’s revenues resulting from the sale of aircraft and other aerospace related products are principally denominated in U.S. dollars
due to the requirements of the marketplace, but a substantial partof the manufacturing costs are denominated in euro.
a) Use of financial instruments
In the course of day-to-day financial management, Dasa uses financial instruments, such as forward exchange contracts and currency
options. Because of changes in currency exchange rates, the Groupmay be exposed to risks. Dasa uses derivative financial instruments to reduce such risks. Without the use of these instruments
the Group’s market risks would be higher.
Based on regulations issued by regulatory authorities for financial
institutions, the DaimlerChrysler-Group has established guidelines
for risk assessment procedures and controls for the use of financial instruments, including a clear segregation of duties withregard to operating financial activities and settlement, accounting
and controlling.

DAE_S048-065.p65

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03.03.2000, 9:28 Uhr

The notional amounts of derivative financial instruments are as
follows:

At December 31,

Currency contracts

1999

1998

5,442

5,483

Currency contracts include foreign exchange forward and option
contracts which are mainly utilized to hedge existing assets, liabilities and firm commitments (principally U.S. dollars). The objectiveof the Group’s hedging transactions is to reduce the market risk of
its foreign denominated future cash flows to exchange rate fluctuations. The Group has entered into currency contracts for a periodof one to five years.

The carrying amounts and fair values of the Group’s financial
instruments are as follows:
At December 31, 1999

At December 31, 1998

Carrying
amount

Fair
value

Carrying
amountFair
value

Financial assets

111

111

66

66

Securities

55

55

21

21

4,169

4,169

5,430

5,430

239

239

237

237

–

37

5

180

147

504

117

171

Balance Sheet
Financial Instruments:
Assets:Cash and cash
equivalents
Liabilities:
Financial liabilities
Derivative
Financial Instruments:
Assets:Currency contracts

The Group may be exposed to credit-related losses in the event of
non-performance by counterparties to financial instruments.
Counterparties to the Group’s financial instruments represent, ingeneral, international financial institutions. Dasa does not have asignificant exposure to any individual counterparty, based on therating of the counterparties performed by established rating agencies. The Group believes the overall credit risk related to utilized
derivatives is insignificant.
c) Fair value of financial instruments
The fair value of a financial instrument is the price at which one
party would assume the rights and/or duties of another party. Fairvalues of financial instruments have been determined with reference to available market information at the balance sheet date andthe valuation methodologies discussed below. Considering the variability of their value-determining factors, the fair values presented
herein may not be indicative of the amounts that the Group could
realize in a current market exchange.

Liabilities:
Currency contracts

Financial Liabilities – The carrying amount of the Group’s balancesheet financial liabilities is not materially different from fair value.
Currency Contracts – The fair value of forward foreign exchange
contracts is based on EZB-reference exchange rates that consider
forward premiums or discounts. Currency options are valued on
the basis of quoted market prices or on estimates based on option
pricing models.
d) Accounting for and reporting of derivative financial instruments
Financial instruments, including derivatives, purchased to offset
the Group’s exposure to identifiable and committed transactions
with currency risks are accounted for together with the underlying
business transactions (“hedge accounting”). Gains and losses on
forward contracts and options hedging firm foreign currency commitments are deferred off-balance sheet and are recognized as acomponent of the related transactions, when recorded (the “deferral method”).
In the event of an early termination of a currency exchange agreement designated as a hedge, the gain or loss continues to be deferred and is included in the settlement of the underlying transaction.

(in millions of €)DAE_S048-065.p65

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03.03.2000, 9:28 Uhr

OTHER NOTESb) Notional amounts and credit risk
The contract or notional amounts of derivative financial instruments shown below do not always represent amounts exchangedby the parties and, thus, are not necessarily a measure for the
exposure of the Group through its use of derivatives.

61

All other financial instruments, including derivatives, purchased tooffset the Group’s net exposure to currency risks, but which are
not designated as hedges of specific assets, liabilities or firm commitments are marked to market and any resulting unrealized gains
and losses are recognized currently in financial income, net.

■ Space Infrastructure — Space Infrastructure concentrates on

the development and production of orbital systems, including
programs involving space stations and the development of
new technologies and launcher systems.
■ Satellites — The Satellites business unit develops and manufac-

OTHER NOTES

Derivatives purchased by the Group under macro-hedging techniques, as well as those purchased to offset the Group’s exposure
to anticipated cash flows, do not generally meet the requirements
for applying hedge accounting and are, accordingly marked tomarket at each reporting period with unrealized gains and losses
recognized in financial income, net. At such time that the Group
meets the requirements for hedge accounting and designates thederivative financial instrument as a hedge of a committed transaction, subsequent unrealized gains and losses would be deferred
and recognized along with the effects of the underlying transaction.

62

tures satellite systems for science, earth observation, communication and security applications. These activities are mainly
concentrated at Dornier Satellitensysteme GmbH.
■ Defense and Civil Systems — The business unit Defense andCivil Systems combines the activities of Dasa as well as ofseveral subsidiaries and joint ventures in the fields of defense
electronics and missile systems, civil equipment systems andservices.
■ Aero Engines — The business unit Aero Engines is involved in

the development, production, sale and product support of
propulsion systems for aircraft and helicopters by MTU Motorenund Turbinen-Union München GmbH and its subsidiaries.
21. S E G M E N T R E P O R T I N G

The Group operates in 7 divisions; a description of the products
and services, from which each segment derives its revenues,
follows:■ Commercial Aircraft — The Commercial Aircraft business includes

the activities of DaimlerChrysler Aerospace Airbus GmbH andits subsidiaries, focused on the development, production andfinal assembly of passenger jets in the 100-plus seat category
and also of civil and military transport aircraft.
■ Helicopters — This business unit includes the development,

manufacture and sale of helicopters for military and civil applications by the Eurocopter Group. The product line comprises
single-engine light helicopters, as well as twin-engine light- andmedium-weight helicopters.

The Group’s management reporting and controlling systems aresubstantially the same as those described in the summary of significant accounting policies (U.S. GAAP). The Group measures theperformance of its operating segments through “Operating Profit.”
Segment Operating Profit is defined as income before financial income and income taxes included in the consolidated statement ofincome, modified to exclude certain pension costs and to include
certain financial income, net and administrative charges from
DCAG.
Sales and revenues related to transactions between segments are
generally recorded at prices that approximate third-party selling
prices. Revenues are allocated to countries based on the location of
the customer. Long-term assets are allocated based on the locationof the respective units. Capital expenditures represent thepurchase of property, plant and equipment.

■ Military Aircraft — The capacities and expertise of Dasa in thedesign, development, integration, production and support offighters as well as of military transport and mission aircraft areconcentrated in its Military Aircraft business unit.

DAE_S048-065.p65

6203.03.2000, 9:28 Uhr

Information with respect to the Group’s industry segments follows:

Commercial
AircraftHelicopters

Military
Aircraft

3,279

658

848

Space
Infrastructure

552

Satellites

Defenseand
Civil
Systems

Aero
Engines

Other/
Eliminations

Consolidated

446

1,655

1,740

13

9,191

1999
Revenues
Intersegment sales

61

47

229

40

12

69

2

(460)

–

Total revenues

3,340

705

1,077

592

458

1,724

1,742

(447)

9,191

Identifiable segment assets

4,150

775

1,134

471

536

1,654

2,179

1,035

11,934

Capital expenditures

151

24

35

10

5

50

53

8

336

Depreciation and amortization

115

26

30

11

9

50

37

12

290

2,870

638

765

526

629

1,687

1,655

–

8,770

Revenues
Intersegment sales

92

42

192

56

16

42

5

(445)

–

Total revenues

2,962

680

957

582

645

1,729

1,660

(445)

8,770

Identifiable segment assets

4,605

744

1,219

467

463

1,610

2,233

1,629

12,970Capital expenditures

137

47

34

12

7

50

35

4

326

Depreciation and amortization

102

20

27

10

10

73

33

14

289

2,393

577

665

527

726

1,415

1,513

–

7,816

40

43

181

38

15

38

2

(357)

–

Total revenues

2,433

620

846

565

741

1,453

1,515

(357)

7,816

Identifiable segment assets

1999
Revenues
Intersegment sales

3,679

653

1,169

418

394

1,540

1,990

1,331

11,174

Capital expenditures

118

23

19

11

9

40

33

2

255

Depreciation and amortization

121

27

27

10

10

53

37

15

300

A reconciliation from income before financial income, income taxes and minority interests to operating profit follows:

Income before financial income, income taxes
and minority interests

1999

1998

1997

657

585

114

146

143

132

Not allocated:
Certain pension costs
Allocated:
Income from certain investments

(28)

(62)

67

Administrative charges

(51)

(32)

(29)

Other
Consolidated operating profit

6

(11)

–

730

623

284

(in millions of €)DAE_S048-065.p65

63

03.03.2000, 9:28 Uhr

OTHER NOTES

1998

63

OtherEuropeanCountries

North
America

Latin
America

4,663

1,450

4,300

1,496
1,239

Revenues

Germany

1999

2,702

1998

2,604

1997

2,207

3,872

Asia

Other
Countries

Consolidated

71

267

38

9,191

91

245

34

8,770

245

208

45

7,816

INDEPENDENT AUDITORS’ REPORT

More than 90% of the long-term assets are located in Germany.

64

2 2 . F O R M AT I O N O F E A D S A N D A S T R I U M

In October 1999, DaimlerChrysler, the French Lagardère Groupand the French government agreed to merge their respective aerospace and defence activities into a new company. In December
1999, Sociedad Estatal de Participaciones Industriales (SEPI)
agreed to join the Franco-German alliance. The new corporation,
to be called European Aeronautic, Defence and Space Company(EADS), will be established through a merger of Aerospatiale
Matra S.A., Dasa and Construcciones Aeronauticas S.A. (CASA).
The transaction is expected to be completed in the first half of2000. Consummation of the merger is subject to various conditions, including among others, approval of certain governmental
authorities.

In October 1999, Dasa, Aerospatiale Matra and BAe Systems plc
signed a formation agreement for a tri-national European spacecompany to be named Astrium. Astrium is expected to combine
the space systems businesses of Dasa and Matra Marconi Space, ajoint venture of Aerospatiale Matra and BAe Systems, in the firsthalf of 2000. Consummation of the merger is subject to various
conditions, including among others, approval of certain governmental authorities.

INDEPENDENT AUDITORS’ REPORT

We have audited in accordance with German and United States
generally accepted auditing standards, the consolidated balance
sheets of DaimlerChrysler AG and subsidiaries (“DaimlerChrysler”)
as of December 31, 1999 and 1998, and the related consolidated
statements of income, cash flows and changes in stockholders’equity for each of the years in the three-year period ended December 31, 1999. DaimlerChrysler prepared its consolidated financial
statements in accordance with United States generally accepted
accounting principles (“U.S. GAAP”), with the exception of the useof the proportionate method of accounting for certain joint venturecompanies in 1998 and 1997 as discussed in Note 3 thereto. In ourreport dated February 14, 2000, we expressed an unqualified opinion, except as to the use of the proportionate method of accounting
for certain joint ventures in 1998 and 1997 as described above, onsuch DaimlerChrysler consolidated financial statements.
Our audit of DaimlerChrysler was conducted for the purpose offorming an opinion on the consolidated financial statements taken
as a whole. The information set forth in the accompanying consolidated balance sheets of DaimlerChrysler Aerospace Aktiengesellschaft and subsidiaries, a wholly-owned corporate unit of

DAE_S048-065.p65

64

DaimlerChrysler, as of December 31, 1999 and 1998 and therelated consolidated statements of income and cash flows for eachof the years then ended, is presented for purposes of additional
analysis and is not a required part of the consolidated financial
statements. Such information has been subjected to the auditing
procedures applied in the audit of the consolidated financial statements and, in our opinion, is fairly stated in all material respects,
in relation to the consolidated financial statements taken as awhole.
Munich, February 14, 2000
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

SchmidWirtschaftsprüfer

Dr. Dauner
Wirtschaftsprüfer

03.03.2000, 10:58 UhrCONSOLIDATED STATEMENTS OF INCOME

1999

1998

Revenues
Cost of sales
Gross margin

149,985(118,219)
31,766

131,782(103,666)
28,116

Selling, administrative and other expenses
Research and development
Other Income
Merger costs
Income before financial income, income taxes
and extraordinary items(17,532)(5,737)827-(16,229)(4,971)
1,099
(685)

9,324

7,330

Financial income, net
Income before income taxes
and extraordinary items

333

763

9,657

8,093

Total income taxes
Minority interests
Income before extraordinary items(4,533)(18)
5,106(3,014)
(130)
4,949

Extraordinary items, net of taxes
Net income

640
5,746

(129)
4,820

Earnings per share (in €)Basic earnings per share
Income before extraordinary items
Extraordinary items
Net income

5.09
0.64
5.73

5.16
(0.13)
5.03

Diluted earnings per share
Income before extraordinary items
Extraordinary items
Net income

5.06
0.63
5.69

5.04
(0.13)
4.91

CONSOLIDATED BALANCE SHEET

1999

1998

AssetsIntangible assets
Property, plant and equipment, net
Investments and Ing-term financial assets
Equipment on operating leases, net
Inventories
Receivables
Secureties
Cash and cash equivalents
Deferred taxes
Prepaid expenses
Total assets

2,823
36,434
3,942
27,24914,98560,146
8,969
9,099
3,806
7,214
174.667

2,561
29,532
2,851
14,662
11,79644,848
12,160
6,589
5,016
6,134
136,149

Liabilities and stockholders’ equity
Stockholders’ equity
Minority interest
Accrued Liabilities
Liabilities
Deferred taxes
Deferred income
Total liabilities and stockholders‘ equity

36,060650
37,69590,5605,192
4,510
174,667

30,367691
34,62962,5274,165
3,770
136,149

1999

1998

Net income
Depreciation and amortization ofequipment on operating lease
Depreciation and amortization of fixed assets
Change in deferred taxes
Change in financial instruments
Change in acrued liabilities
Change in Working Capital
Other
Cash provided by operating activities

5,746

4,820

3,315
6,035
2,402
247
4,001
(1,859)(1,864)18,023

1,972
5,359
1,959
(191)
1,419
1,497
(154)
16.681(19,336)(10,115)(10,245)(8,460)6,575
507(1,289)1,336(4,395)
3,719(8,369)(743)(32,110)

4,903
515
(857)
685
(4,617)
2,734(6,462)(1,641)(23,445)

Increase in equipment on operating leases
Purchase of other fixed assets
Proceeds from disposal ofequipment on operating lease
Proceeds from disposal of fixed assets
Payment for aquisition of businesses
Proceeds from disposal of businesses
Acquisition of securities (other than trading)
Proceeds from sale of securities (other than trading)
Additions to receivables of financial services
Change in other cash
Cash used for investment activities

65

Change in commercial paper borrowings andshort-term financial liabilities
Additions to long-term financial liabilities
Repayment of financial liabilities
Dividends paid
Proceeds from issuance of capital stock
Purchase of treasury stock
Proceeds from special distribution tax refund
Cash provided by financing activities

65

9,333
13,340(4,611)(2,378)164(86)
15,762

2,503
9,491(4,126)(6,454)
4,076
(169)
1,487
6,808

805

(397)

Effect of foreign exchange rate changes oncash and cash equivalents up to 3 months
Net increase in cash and cash equivalents
up to 3 months
Cash and cash equivalents (up to 3 months):
At beginning of the period
At end of period

2,480

(353)

6,281
8,761

6,634
6,281

RECONCILIATION TO OPERATING PROFIT

1999

1998

Income before financial income,income taxes and extraordinary items
Interest cost of pensions, net
Operating income from affiliated,associated and related companies
Gains on unallocated financial instruments
Gain on disposal of debitel shares
Miscellaneous
Operating Profit

9,324
379

7,330
688

17
2
1,140
150
11,012

(15)
(156)
746
8,593

OPERATING PROFIT BY SEGMENTS

1999

1998

Mercedes-Benz Passenger Cars & smart
Chrysler Group (Chrysler, Jeep®, Dodge, Plymouth)
Commercial Vehicles (Mercedes-Benz, Freightliner, Sterling,

2,703
5,051

1,993
4,255

Setra, Thomas Built Buses)

1,067
946
2,039
985
730
623
(399)
(130)
(179)(in millions(79)of €)11,012
8,593

Services
Aerospace
Other
Eliminations
DaimlerChrysler Group

(in millions of €)DAE_S048-065.p65

CONSOLIDATED STATEMENTS OF CASH FLOWFINANCIAL STATEMENTS DAIMLERCHRYSLER GROUPF I N A N C I A L S TAT E M E N T S DA I M L E R C H R Y S L E R G R O U P

03.03.2000, 10:58 UhrMEMBERS OF THE SUPERVISORY BOARD

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Jürgen E. Schrempp

Heinz Hawreliuk *Herbert Schmid *Stuttgart
Chairman of the Board ofManagement,
DaimlerChrysler AG
ChairmanFrankfurt/Main
Department Manager of theBoard of Management
Metal Workers' Union

MunichChairman of the Labor Council
MTU Motoren- und TurbinenUnion München GmbHHans-Olaf Henkel

Karl-Heinz Schmidt *ColognePresident of the National Association of German Industry (Incorporated Association) e.V.

Donauwörth
Chairman of the Labor Council
Eurocopter Deutschland GmbHPeter Zimmermann *BremenChairman of the Corporate
Labor Council,
DaimlerChrysler Aerospace AG
Deputy Chairman

Prof. Klaus-Dieter Vöhringer

Ottobrunn
Chairman of the Joint Labor Council DaimlerChrysler Aerospace AG

Stuttgart
Member of the Board ofManagement,
DaimlerChrysler AG

Prof. Dr. rer. nat. Reimar Lüst

Dr.-Ing. Hanns Arnt Vogels

Hamburg
Max-Planck-Institute for Meteorology

MunichManagement Consultant

Ingrid Lüllmann *Detlef Böhnert *Friedrichshafen
Chairman of the Joint Labor Council Nortel Dasa Network Systems
GmbH & Co. KG

Elke Eller-Braatz *Frankfurt/Main
Metal Workers' Union
Dept. Economics-TechnologyEnvironment

Dr. rer. pol. Eckhard Cordes

Stuttgart
Member of the Board ofManagement,
DaimlerChrysler AG

Dr. rer. pol. Eberhard Zinn
Heinz-Günter Meiners *UlmChairman of the Labor Council
Ulm Plant,
DaimlerChrysler Aerospace AG

MunichMember of the Board ofManagement,
Bayerische Landesbank
Clearing House

Dr. phil. Thomas Mirow

Senator of the Free and Hanseatic
City of Hamburg
State Minister of Economic Affaires

Harald Flassbeck *MunichFirst Authorized Representative ofMetal Workers' Union
Administration Munich

Personnel Committee:
Dr. rer. oec. Wolfgang Piller

MunichAttorney(since December 3, 1999)

Jürgen E. Schrempp
Dr. jur. Manfred Gentz
Ingrid LüllmannPeter Zimmermann

Dr. jur. Manfred Gentz

Stuttgart
Member of the Board ofManagement,
DaimlerChrysler AG

DAE_S066-067.p65

Hansheinrich Rosebrock *Hamburg
Member of the Labor Council

66* Elected by the employees

03.03.2000, 9:17 Uhr

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Supervisory Board and Board of Management jointly discussed
the situation of the Group, the strategic development of thedifferent business units as well as individual topics in the threemeetings held in the business year 1999.
The Supervisory Board has been informed in detail about thebusiness development and the economic situation of theGroup and its business units by the Board of Management
through business reviews given at the meetings and throughthe monthly reports submitted to them. Verbatim and written
reports were given on those topics that had not been discussed
individually during the meetings. In addition, the Chairman of
the Supervisory Board had regular conversations with theindividual members of the Board of Management in order to be
kept informed.
According to the rota, medium-term corporate planning(1999-2001) including investment, staff and profit planning,
was discussed during the Supervisory Board meeting held on
February 12, 1999.
At the meeting held on March 26, 1999, the 1998 financial
statements were discussed and approved.
The meeting held on December 3, 1999 focussed on mediumterm corporate planning (2000-2002), including investment,
staff and profit planning.
Individual topics being discussed by the Supervisory Board in
the business year 1999 comprised among other topics thestrategy within the scope of the consolidation of the European
aerospace industry, cooperation with Matra Marconi Space,current political development due to the change of government as well as the decision to establish the European Aeronautic, Defence and Space Company (EADS) together with
the French company Aerospatiale Matra and Casa of Spain.

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On December 3, 1999, Dr. Wolfgang Piller, successor to thelate Dr. h.c. Max Streibl, took up his position as a member of
the Supervisory Board of DaimlerChrysler Aerospace AG.
The financial statements of DaimlerChrysler Aerospace AG as
per December 31, 1999 according to the German balancing
requirements, the annual report as well as the accounting
principles used were verified by KPMG Deutsche TreuhandGesellschaft Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft, München, and found to be in accordance with thebooks and with the pertinent legal requirements. This also
applies to the consolidated financial statements according to
US-GAAP (generally accepted accounting principles),with the reservation of the quota consolidation used byDaimlerChrysler Aerospace, however, explicitly permitted by
the Securities and Exchange Commission (SEC), as well as tothe consolidated annual report.
These documents as well as the auditors' reports wereavailable to the Supervisory Board. They were discussed in thepresence of the auditors by the Supervisory Board and theBoard of Management in a joint meeting held on February 22,
2000. The Supervisory Board adopted the result of theexaminations made by the auditors and, as a result of its own
examinations, stated that it did not show any cause forquestioning. The Supervisory Board took notice of the 1999
consolidated financial statements and approved and thus
ratified the 1999 financial statements of DaimlerChrysler
Aerospace AG at its meeting on February 22, 2000.

Munich, February 2000
The Supervisory Board

Jürgen E. Schrempp
Chairman

DAE_S066-067.p65

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03.03.2000, 9:17 UhrREPORT OF THE SUPERVISORY BOARD

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MARKETING COMPANIES

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FranceMexicoSouth East Asia

DaimlerChrysler Aerospace
France S.A.S.
Gerd Runde, Paul Loewert
48, Avenue Victor Hugo
75116 Paris
Phone: 0033 1 45 00 30 49
Fax: 0033 1 45 00 01 32

DaimlerChrysler Aerospace
México S.A. de C.V.
Oficina México
Gabriel Carvallo Jiménez
Paseo de Tamarindos No. 400 B
5. Piso-Sección OrienteCol. Bosques de las Lomas
C.P. 05120 México D.F.
Phone: 0052 5 26 70 103
Fax: 0052 5 26 70 127

DaimlerChrysler Aerospace
South East Asia Pte. Ltd.
Manfred N. Wolff
3 Temasek Avenue # 27-01
Centennial Tower
Singapore 039190
Phone: 0065 849 8000
Fax: 0065 849 8490

Great Britain

DaimlerChrysler Aerospace (UK) Ltd.
Mercedes-Benz Centre
Robert Adams
Tongwell, Milton Keynes
MK 15 8BA
Phone: 0044 1908 24 51 80
Fax: 0044 1908 24 50 73
GreeceDaimlerChrysler Aerospace Hellas S.A.
Georgios Paterakis
124, Kifissias Avenue / 15th Floor
11526 Athens
Phone: 0030 1 698 38 71
Fax: 0030 1 698 38 70
Iberian Peninsula

DaimlerChrysler Aerospace Ibérica S.A.
Luis Ecenarro
Calle Santa Cruz de Marcenado 33-1°
28015 Madrid
Phone: 0034 91 540 04 32
Fax: 0034 91 547 00 19
Italy

DaimlerChrysler Aerospace Italia S.r.l.
Dr. Livio Sonzio
Via Panama n. 58, Int. 200198 Rome
Phone: 0039 06 853 535 15
Fax: 0039 06 841 622 6

DaimlerChrysler Aerospace Ibérica S.A.
Delegacao de Portugal
Hugo Damásio
Av. da Liberdade 245/4° G
1250 Lisbon
Phone: 00351 1 313 94 20
Fax: 00351 1 313 94 29

DaimlerChrysler Aerospace
South East Asia Pte. Ltd.
Representative Office Indonesia
Deutsche Bank Building
18th Floor, Suite: 801
Jl. Imam Bonjol No. 80
Jakarta 10310
Phone: 0062 21 316 1828
Fax: 0062 21 316 1827

P.R. China

Malaysia

DaimlerChrysler Aerospace AG
Norbert Graeber
2402, Landmark Building
8 North Dong San Huan Road
Chaoyang District
Beijing 100004
Phone: 0086 10 65 90 60 28
Fax: 0086 10 65 90 01 33

DaimlerChrysler Aerospace(Malaysia) Sdn Bhd
Danny Kong
No 607, Block A
Glomac Business Centre
No 10, Jalan SS6/1, Kelana Jaya
47301 Petaling Jaya, Selangor
Phone: 0060 3 704 92 00
Fax: 0060 3 704 90 87

Portugal

TurkeyDaimlerChrysler Aerospace Havacilikve Uzay Teknolojileri A.S.
Faruk Sidan
Sedat Simavi Sok. No. 58/1-406540 Cankaya-Ankara
Phone: 0090 312 4414 902
Fax: 0090 312 4414 906
United Arab Emirates

DaimlerChrysler Aerospace AG
Middle East Branch
Gerhard Labitsch
P.O. Box 70425
Abu Dhabi, U.A.E.
Phone: 00971 2 43 65 31
Fax: 00971 2 43 66 50

DAE_S068-069.p65

68Indonesia

ThailandDaimlerChrysler Aerospace (Thailand)
Wolf-Dieter Kesselheim
Unit 1203, 12th Floor
Ban Chang Glas Haus
1 Soi Sukhumvit 25
Sukhumvit Road
Klongtoey, Bangkok 10110
Phone: 0066 2 260 63 31
Fax: 0066 2 260 63 34

03.03.2000, 9:24 Uhr

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CroatiaJapan

DaimlerChrysler Aerospace AG
Representation Berlin
Wolf-Peter Denker
Potsdamer Platz 1
10785 Berlin
Phone: 0049 30 2594 1510
Fax: 0049 30 2594 1519

DaimlerChrysler Aerospace AG
Juana Deutschmann-Grund
Trg N.S. Zrinsjskog 1/IV
10000 Zagreb
Phone: 00385 1 481 2321
Fax: 00385 1 481 6877

DaimlerChrysler Aerospace AG Japan
Dr. Stefan Weingartner
c/o DaimlerChrysler Japan Co., Ltd.
Roppongi First Bldg.
9-9, Roppongi 1-chome
Minato-ku, Tokyo 106
Phone: 0081 3 55 72 71 37
Fax: 0081 3 55 72 71 93

Czech Republic

DaimlerChrysler Aerospace AG
Günter Dostal
Friedrich-Ebert-Allee 65
53113 Bonn
Phone: 0049 228 540 42 60
Fax: 0049 228 540 42 39

DaimlerChrysler Aerospace
Dr. Juraj Baläz
Bavorska 856
15541 Praha-Stodulky
Phone: 00420 2 2445 4220
Fax: 00420 2 2445 8514

DaimlerChrysler Aerospace AG
Karl Bross
Poststraße 856068 Koblenz
Phone: 0049 261 911 68 26
Fax: 0049 261 911 68 29

FranceKorea

DaimlerChrysler Aerospace AG
General Hong
Sam Sung Life Bldg. #1204
150, 2 KA; Taepyung-Ro, Chung-Ku
Seoul
Phone: 0082 2 755 96 37
Fax: 0082 2 755 96 57

DaimlerChrysler Aerospace AG
France S.A.S.
Gert Runde48, Avenue Victor Hugo
75116 Paris
Phone: 0033 1 4500 3049
Fax: 0033 1 4500 0132

PolandDaimlerChrysler Aerospace AG
Agnieszka Sliwinska
ILMET Business Center, Floor 16
Jana Pawla II, 1500-828 Warsaw
Phone: 0048 22 6977 177
Fax: 0048 22 6977 191

Office Brussels

DaimlerChrysler Aerospace AG
Hartmut Gutzeit
133, Rue Froissart, bte. 291040 Brussels
Phone: 0032 2 233 11 50
Fax: 0032 2 233 11 57
BrazilDaimlerChrysler Aerospace AG
Gerhard R. Kohlbacher
c/o Mercedes-Benz do Brasil
Av. Maria Coelho de Aguiar, 215,
bl. E, 2° and.
05805-000 Sao Paulo-SP
Phone: 0055 11 37 41 58 24
Fax: 0055 11 37 41 17 17Great Britain

DaimlerChrysler Aerospace AG
Andrew Raikes Hargreaves
The Economist Building
24 St. James's Street
London SW 1 A 1 HA
Phone: 0044 171 766 32 06
Fax: 0044 171 839 92 79

Slowenia

DaimlerChrysler Aerospace AG
Juana Deutschmann-Grund
Liaison Office Ljubljana
1000 Ljubljana, Baragova 5
Phone: 00386 61 1 88 37 97
Fax: 00386 61 1 88 37 99

Hungary

DaimlerChrysler Aerospace AG
Dasa Representative Office
Dr. Szabolcs Fazakas
Lövöház U. 30
H-1024 Budapest
Phone: 0036 1 3460303
Fax: 0036 1 3151423

South Africa

DaimlerChrysler Aerospace AG
Michael Wörfel
P.O. Box 3737
0001 Pretoria
Phone: 0027 12 677 1523
Fax: 0027 12 677 1744

CIS

DaimlerChrysler Aerospace AG
Günter-Joachim Michel
Mamonowskij Pereulok 4, Büro 7103001 Moscow
Phone: 0070 95 209 66 74
Fax: 0070 95 200 02 05

DAE_S068-069.p65

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India

DaimlerChrysler Corporate Office India
Bernd Adler
6 Rajdoot Harg
Chanakyapuri
New Delhi 110 021
Phone: 0091 11 410 49 59
Fax: 0091 11 410 52 26

USA

DaimlerChrysler Aerospaceof North America, Inc.
Dr. Manfred von Nordheim
Suite 700
1401 H Street, N.W.
Washington, D.C. 20005-2110
Phone: 001 202 408 56 00
Fax: 001 202 408 48 93

03.03.2000, 9:24 Uhr

REPRESENTATIVE OFFICES

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DaimlerChrysler Aerospace AG

Postfach 80 11 09
81663 Munich, Germany
Phone: 0049 89 607-0
Fax: 0049 89 607-26481

BUSINESS UNITS

Commercial Aircraft

70

DaimlerChrysler Aerospace
Airbus GmbH
Phone: 0049 40 74 37 0
Fax: 0049 40 73 44 22
Elbe Flugzeugwerke GmbH
Phone: 0049 351 5 65 31-80
Fax: 0049 351 5 65 31-02
Helicopters

Eurocopter S.A.
Phone: 0033 442 85 85 85
Fax: 0033 442 85 85 00
Eurocopter Deutschland GmbH
Phone: 0049 89 60 00-0
Fax: 0049 89 60 00-64 81
Military Aircraft

DaimlerChrysler Aerospace AG
Phone: 0049 89 607-0
Fax: 0049 89 607-2 64 81
Dornier Flugzeugwerft GmbH
Phone: 0049 8459 81-05
Fax: 0049 8459 81-6 40 85
Space Infrastructure

DaimlerChrysler Aerospace AG
Phone: 0049 421 539-0
Fax: 0049 421 539-44 00
Dornier GmbH
Phone: 0049 7545 8-00
Fax: 0049 7545 8-44 11

DAE_S070-070.p65

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Eurockot GmbH
Phone: 0049 421 539-65 01
Fax: 0049 421 539-65 00

LFK-Lenkflugkörpersysteme GmbH
Phone: 0049 89 3179-0
Fax: 0049 89 3179-2219

RST Rostock Raumfahrt- und Umweltschutz GmbH
Phone: 0049 381 56-0
Fax: 0049 381 56-2 02

Nortel Dasa Network Systems
GmbH & Co. KG
Phone: 0049 7545 96-0
Fax: 0049 7545 96-8111

Satellites

Sunda Solartechnik GmbH
Phone: 0049 7545 8 34 83
Fax: 0049 7545 8 29 25

Dornier Satellitensysteme GmbH
Phone: 0049 7545 8-01
Fax: 0049 7545 8-44 11
EurasSpace Gesellschaft für Raumfahrttechnik mbH
Phone: 0049 89 607-2 27 83
Fax: 0049 89 607-2 35 22

TDW Gesellschaft für verteidigungstechnische Wirksysteme mbH
Phone: 0049 8252 99-0
Fax: 0049 8252 99-65 27
Aero Engines

Jena-Optronik GmbH
Phone: 0049 3641 200 110
Fax: 0049 3641 200 222

MTU Motoren- und Turbinen-Union
München GmbH
Phone: 0049 89 14 89-0
Fax: 0049 89 15 02 62 1

Defense and Civil Systems

Dornier GmbH
Phone: 0049 7545 8-00
Fax: 0049 7545 8-44 11
DaimlerChrysler Aerospace AG
Phone: 0049 731 392-0
Fax: 0049 731 392-33 93
Bayern-Chemie Gesellschaft für flugchemische Antriebe mbH
Phone: 0049 8638 601-0
Fax: 0049 8639 601-3 99

MTU Maintenance
Berlin-Brandenburg GmbH
Phone: 0049 3378 824-00
Fax: 0049 3378 824-3 00
MTU Maintenance Hannover GmbH
Phone: 0049 511 7806-0
Fax: 0049 511 7806-1 11
MTU Maintenance Canada Ltd.
Phone: 001 604 276 4796
Fax: 001 604 276 4648

Eurobridge Mobile Brücken GbmH
Phone: 0049 7545 8-36 11
Fax: 0049 7545 8-90 90
Hagenuk Marinekommunikation GmbH
Phone: 0049 4347 714-0
Fax: 0049 4347 714-4 97

03.03.2000, 9:25 Uhr

● Mercedes-Benz Passenger Cars
& smartCOMMERCIAL AIRCRAFT● Chrysler Group
Chrysler ®
Jeep®
Dodge®
Plymouth®

Revenues
Incoming Orders

SATELLITES
99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

3,363

3,340

2,962

Revenues

461

458

645

5,179

Incoming Orders

527

523

609

240

R&D Expenses

430

427

532

1,455

1,652

4,134

R&D Expenses

267

Employees (Dec. 31)● Commercial Vehicles
Mercedes-Benz ®
Freightliner ®
Sterling ®
Setra ®
Thomas Built Buses®

16,754

99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

710

705

680

Revenues

Incoming Orders

1,736

1,724

1,729

744

Incoming Orders

1,566

1,555

2,059

122

R&D Expenses

495

492

460

8,266

9,109

1,275

R&D Expenses

131

Employees (Dec. 31)● Commercial Aircraft
Helicopters
Military AircraftSpace Infrastructure
Satellites
Defense and Civil Systems
Aero Engines

OCTOBER. October 14: Signing of theCompany by seven European nations forthe development and production of theEuropean military transporter A400M.

Deutsche Lufthansa AG, the airline withthe largest Airbus fleet to date, as the150th Airbus aircraft. May 18, 30 years
ago: a Franco-German government
agreement creates the basis for starting
the Airbus program. 1,000th test flight ofa Eurofighter prototype.

contract on the merger of Dasa andAerospatiale Matra and formation of EADS.
October 15: Agreement on the foundationof the Franco-UK-German spacetechnology joint venture called Astrium.

thus exceeding the original lifetime of
ERS-1 by three times. Delivery start:
hand-over of the first EC 155 to theFederal Border Guard.
APRIL. 1,000th aircraft of the A320 family

is taken over by Air France. Program
launch for A318, the smallest Airbus. The
U.S.-German experimental aircraft X-31 isstarted for the new vector technology program. Delivery of the first Tornado
reconnaissance pod from series
production.

JUNE. Maiden flight of BK 117 C-2.

Eurocopter delivers the 100th EC 135 andthe 500th Super Puma/Cougar. Sealing of
the series production contract for theFranco-German military helicopter Tiger.
AUGUST. Nortel Dasa is involved in alarge order for development of a digital
mobile radio communication network forDeutsche Bahn AG.

Successful first flight of MAW Taurus
missile. Agreement on the formation of athree-nation company for the developmentof the European satellite navigation
system Galileo signed.
DECEMBER. December 2: The Spanish

CASA becomes a foundation member of
EADS. ESA's X-ray satellite XMM, built
under the lead of Dasa, is launched into
orbit by the first commercial flight ofAriane 5.

4,065

MILITARY AIRCRAFT

Employees (Dec. 31)

AERO ENGINES
99

99

98

99

99

98

Mio. $

Mio. €

Mio. €

Mio. $

Mio. €

Mio. €

1,085

1,077

957

Revenues

1,754

1,742

1,660

2,702

Incoming Orders

1,559

1,548

2,594

217

R&D Expenses

138

137

153

6,875

6,633

833

R&D Expenses

MAY. 2,000th Airbus is taken over by

130
4,052

Incoming Orders

JANUARY. Foundation of Airbus Military

1,266* According to our stake in Eurocopter
consolidated at 40%.

Revenues

MILESTONES 1999

MARCH. 40,000th earth orbit by ERS-1,

16,195

Employees (Dec. 31)

DEFENSE AND CIVIL SYSTEMS

Revenues● Other Businesses
Rail Systems
Automotive Electronics
MTU/Diesel Engines

265

HELICOPTERS*● Services (debis)
Financial Services
IT Services● Aerospace

4,105

227

Employees (Dec. 31)

827
225
6,308

5,913

Employees (Dec. 31)

DaimlerChrysler Aerospace AG
RK/L
SPACE INFRASTRUCTURE
99

99

98

Mio. $

Mio. €

Mio. €

Revenues

596

592

582

Incoming Orders

384

381

532

R&D Expenses

310

308

321

2,098

1,990

Employees (Dec. 31)

DaimlerChrysler Aerospace AG
81663 Munich
Germany
http://www.dasa.com

The 1999 annual report is published both in German andin English. Furthermore the DaimlerChrysler annual report
can be requested by contacting:Phone/Fax: (+49) 7 11/17-9 22 87
This annual report was printed on environmentally friendly
paper bleached without of use of chlorine.

DAE_Umschlag_Innen.p65

102.03.2000, 15:06 Uhr

DaimlerChrysler Aerospace Group

99

99

98

97

96

US $

€

€

€

€

9,255

9,191

8,770

7,816

6,674

Germany

2,721

2,702

2,604

2,207

2,123

EU without Germany

4,643

4,611

4,126

3,806

3,064

North America

1,460

1,450

1,496

1,239

917

Other Markets

431

428

544

564

570

2,019

2,005

2,047

2,233

1,882

735

730

623

284

25

60

60

547

4

615

46,10745,85843,521

44,936

Germany

42,771

42,52539,93541,263Foreign

3,336

3,333

3,586

3,673

Amounts in millions

DaimlerChrysler Aerospace 1999

Revenues

Research and Development

Operating Profit(Contribution to the DaimlerChrysler Group)

Net Income

Employees (at Year-End)

Annual Report 1999

DAE_Umschlag_Aussen.p65

103.03.2000, 16:19 Uhr